© 2005 David Koeller.  All rights reserved.

Keynesian Economics

Keynesian Economics is an economic theory proposed by British economist John Maynard Keynes. His major work came in 1936 in "The General Theory of Employment and Economics." His ideas created a revolution in the world of economics called the Keynesian Revolution. He proposed the idea that governments use deficit spending in order to bring about economic recovery.

His theory of deficit spending was used for economic recovery of the United States during the Depression. Keynes said that the depression was more that but one phase in the business cycle that would improve with time. He claimed that the depression was an equilibrium at a very low level and would persist unless enough spending occurred to get the system going. His solution was to have funds come from either the private sector through traditional forms of investment or from the public sector in the form of aggressive government spending programs and sizable tax cuts(Winkler20).

Franklin Roosevelt used Keynes's theory in order to help the country recover from the Depression in some of his New Deal program. Roosevelt's "emergency expenditures" was a humanitarian spending for relief and public works made up the bulk of government expenditure's and deficit until was preparations began in 1940(Collin4).

Keynesian theory continued on to influence the government. It came into play in solving post-war employment, which resulted in the Employment Act of 1946. It institutionalized Keynesianism into the government bureaucracy(Collin13). Keynes's theory provided a solution for the depression that helped in the recovery of the United States(Collins2). Through his idea of deficit spending, enough money would be put into the economy that spending would occur and the recovery process would begin.


Collins, Robert M., The Response to Keynes 1929-1964. (New York; Columbia University Press, 1991).

Winkler, Allan M., Homefront USA: America during World War II. (Arlington Heights, IL; Harlan Daivdson, INC., 1986).

Edited, Researched and Written by: Amy L. Whittie
October 14, 1997

Text copyright 1997 by ThenAgain. All rights reserved.