"Prior to the publication of Keynes's General Theory, mainstream economic thought held that a state of general equilibrium existed in the economy: because the needs of consumers are always greater than the capacity of the producers to satisfy those needs, everything that is produced will eventually be consumed once the appropriate price is found for it. This perception is reflected in Say's Law and in the writing of David Ricardo, which state that individuals produce so that they can either consume what they have manufactured or sell their output so that they can buy someone else's output. This argument rests upon the assumption that if a surplus of goods or services exists, they would naturally drop in price to the point where they would be consumed.
Keynes's theory overturned the mainstream thought of the time and brought about a greater awareness of structural inadequacies: problems such as unemployment, for example, are not viewed as a result of moral deficiencies like laziness, but rather result from imbalances in demand and whether the economy was expanding or contracting. Keynes argued that because there was no guarantee that the goods that individuals produce would be met with demand, unemployment was a natural consequence especially in the instance of an economy undergoing contraction.
He saw the economy as unable to maintain itself at full employment and believed that it was necessary for the government to step in and put under-utilised savings to work through government spending. Thus, according to Keynesian theory, some individually rational microeconomic-level actions such as not investing savings in the goods and services produced by the economy, if taken collectively by a large proportion of individuals and firms, can lead to outcomes wherein the economy operates below its potential output and growth rate.
Prior to Keynes, a situation in which aggregate demand for goods and services did not meet supply was referred to by classical economists as a general glut, although there was disagreement among them as to whether a general glut was possible. Keynes argued that when a glut occurred, it was the over-reaction of producers and the laying off of workers that led to a fall in demand and perpetuated the problem. Keynesians therefore advocate an active stabilization policy to reduce the amplitude of the business cycle, which they rank among the most serious of economic problems. According to the theory, government spending can be used to increase aggregate demand, thus increasing economic activity, reducing unemployment and deflation."
http://en.wikipedia.org/wiki/Keynesian_economics
"New Keynesian economics is a school of contemporary macroeconomics that strives to provide microeconomic foundations for Keynesian economics. It developed partly as a response to criticisms of Keynesian macroeconomics by adherents of New Classical macroeconomics.
Two main assumptions define the New Keynesian approach to macroeconomics. Like the New Classical approach, New Keynesian macroeconomic analysis usually assumes that households and firms have rational expectations. But the two schools differ in that New Keynesian analysis usually assumes a variety of market failures. In particular,
New Keynesians assume that there is imperfect competition in price and wage setting to help explain why prices and wages can become "sticky", which means they do not adjust instantaneously to changes in economic conditions.
Wage and price stickiness, and the other market failures present in New Keynesian models, imply that the economy may fail to attain full employment. Therefore, New Keynesians argue that macroeconomic stabilization by the government (using fiscal policy) or by the central bank (using monetary policy) can lead to a more efficient macroeconomic outcome than a laissez faire policy would."
http://en.wikipedia.org/wiki/New_Keynesian_economics
1. "Thus, according to Keynesian theory, some individually rational microeconomic-level actions such as not investing savings in the goods and services produced by the economy, if taken collectively by a large proportion of individuals and firms, can lead to outcomes wherein the economy operates below its potential output and growth rate."
2. Keynesian theory says nothing about "spend those taxed monies on pretty much anything, no matter how pointless", it allows for people to make those decisions. People are not perfect, but your statement assumes all people working in government are corrupt, which you probably actually believe but fortunately isn't the case in reality. Which is ironic considering we know what corporations do without regulation, buy politicians and federal elections thereby effectively lowering all their own taxes, and increasing economic inequality. That's what happens every time, and that's what you support.
3. "Keynes's theory overturned the mainstream thought of the time and brought about a greater awareness of structural inadequacies: problems such as unemployment, for example, are not viewed as a result of moral deficiencies like laziness, but rather result from imbalances in demand and whether the economy was expanding or contracting. Keynes argued that because there was no guarantee that the goods that individuals produce would be met with demand, unemployment was a natural consequence especially in the instance of an economy undergoing contraction.
He saw the economy as unable to maintain itself at full employment and believed that it was necessary for the government to step in and put under-utilised savings to work through government spending. "
4. "Thus, according to Keynesian theory, some individually rational microeconomic-level actions such as not investing savings in the goods and services produced by the economy, if taken collectively by a large proportion of individuals and firms, can lead to outcomes wherein the economy operates below its potential output and growth rate."
"To Keynes, excessive saving, i.e. saving beyond planned investment, was a serious problem, encouraging recession or even depression. Excessive saving results if investment falls, perhaps due to falling consumer demand, over-investment in earlier years, or pessimistic business expectations, and if saving does not immediately fall in step, the economy would decline."
You're ignoring the rate at which the rich have gotten richer. You assume coincidence when I've provided valid evidence and rational arguments some of the smartest economists alive today have demonstrated effectively. There's a reason New Keynesian economics is resurging, because it's a rational way to effectively stabilize the economy the same way we did after WW2. It doesn't steal money from citizens, it suggests changing fiscal policy and monetary policy.
Keynes published The General Theory of Employment, Interest and Money in 1936, and was used effectively to grow our economy out of the Great Depression and enjoy economic growth throughout the 1950's-1970's until Herbert Stein, economic advisor to Nixon, mentioned supply side economics in 1976.
Sure, I'm the one that's ignorant..
