FEATURED ESSAYS 1. Modern Economic Theories 2. Pure Capitalism, Market Socialism... 3. The Creation Of The Universe 4. CRIMINAL MOTIVATION 5. Democracy In Ancient Greece 6. Sociology-an Overview 7. Origin Of Man 8. Consciousness, The Self, And Pers... 9. Don Quxiote 10. Counselors 11. Contemporary Social Theory 12. Origin Of The Solar System 13. Interview With Karl Marx 14. American Revolution

Modern Economic Theories


     Two controversial economic policies are Keynesian economics           
 and Supply Side economics. They represent opposite sides of the      
 economic policy spectrum and were introduced at opposite ends of the
 20th century, yet still are the most famous for their effects on
the economy of the United States when they were used.             


     The founder of Keynesian economic theory was John Maynard             
 Keynes. He made many great accomplishments during his time and        
 probably his greatest was what he did for America in its hour of need.
 During the 1920's, the U.S. experienced a stock market crash of     
 enormous proportions which crippled the economy for years. Keynes
knew that to recover as soon as possible, the government had to
intervene and put a decrease on taxes along with an increase in
spending. By putting more money into the economy and allowing
more Americans to keep what they earned, the economy soon
recovered and once again became prosperous. Keynes ideas were
very radical at the time, and Keynes was called a socialist in
disguise. Keynes was not a socialist, he just wanted to make sure
that the people had enough money to invest and help the economy
along.

     As far as stressing extremes, Keynesian economics pushed for a        
 “happy medium” where output and prices are constant, and there is no  
 surplus in supply, but also no deficit. Supply Side economics        
 emphasized the supply of goods and services. Supply Side economics  
 supports higher taxes and less government spending to help economy.
 Unfortunately, the Supply Side theory was applied in excess during
a period in which it was not completely necessary.                


     The Supply Side theory, also known as Reganomics, was                 
 initiated during the Regan administration. During the 1970's, the      
 state and local governments increased sales and excise taxes. These   
 taxes were passed from business to business and finally to the       
 customer, resulting in higher prices. Along with raised taxes for
the middle and lower classes, this effect was compounded because
there was little incentive to work if even more was going to be
taxed. People were also reluctant to put money into savings
accounts or stocks because the interest dividends were highly
taxed. There was also too much protection of business by the
government which was inefficient and this also ran up costs, and
one thing the Supply Side theory was quite good at was reinforcing
inflation.

     The two opposites of the Supply Side and Keynes' theories are         
 well matched theories, but it was the time of use that made them good 
 and bad. Keynes' theory was used during that aftermath of the Great  
 Depression, a catastrophe America will never forget and will never
be able to repay Keynes for the economic assistance in recovering
from it. The Supply Side theory was used after a long period of
prosperity, and although seeming to continue the practices of the
past administration, was the cause of a fearful
recession. The success of those or any economic theory is based on
the time at which it is implemented.