The Keynesian Revolution

The Keynesian Revolution refers to a major shift in economic thought initiated by John Maynard Keynes in the 1930s. Before him, economists believed that markets naturally balanced themselves, and government intervention was unnecessary. Keynes argued that during downturns, private demand drops, leading to unemployment and recession. He advocated for active government policies—like increased public spending and lower taxes—to stimulate demand and pull the economy out of recession. This approach changed economic policy worldwide, emphasizing the role of government in managing economic stability and growth, especially during times of economic crisis.