Keynes Simplified

Here is Robert Reich, Clinton's Secretary of Labor, writing a very simple overview of John Maynard Keynes, the economist. Here's a snippet. The whole is very well worth reading.

Keynes' basic idea was simple. In order to keep people fully employed, governments have to run deficits when the economy is slowing. That's because the private sector won't invest enough. As their markets become saturated, businesses reduce their investments, setting in motion a dangerous cycle: less investment, fewer jobs, less consumption and even less reason for business to invest. The economy may reach perfect balance, but at a cost of high unemployment and social misery. Better for governments to avoid the pain in the first place by taking up the slack.

Keynes had a hard sell, even in the depths of the Depression. Most economists of the era rejected his idea and favored balanced budgets. Most politicians didn't understand his idea to begin with. "Practical men, who believe themselves to be quite exempt from any intellectual influences, are usually the slaves of some defunct economist," Keynes wrote.