 |
| John M. Keynes Remix by Andrew DeWitt via Pixlr.com |
Lets go way back... perhaps to Aristotle. This is what he has to say about the subject (from his book Politics) (thanks to wiki for this quote!):
"Property should be in a certain sense common, but, as a general rule, private; for, when everyone has a distinct interest, men will not complain of one another, and they will make more progress, because every one will be attending to his own business... And further, there is the greatest pleasure in doing a kindness or service to friends or guests or companions, which can only be rendered when a man has private property. These advantages are lost by excessive unification of the state."
So... we have an idea of public property and private property. Well, there must be some way to designate what is public and what is private and when. Also, who gets to decide. Perhaps deciding is a bit on the political side of things, but politics and economics are not too far apart. Now what?
Well, with the rise of kingdoms, especially the First, Second and Third estates, we get a sense of what property is or isn't the Church's, the Throne's and the People's respectively. There is commerce and there begins to be supply-and-demand specifically among the merchants of the Third estate. This is true of the Middle ages where guilds began to form and people moved towards a specialized labor society. If certain goods and services are only available from certain people, there begins to be competition and supply and demand try to balance each other out.
Of course, people always want to be on the upper end, and get money for in-demand goods. This is where mercantilism comes in. Like a classmate (Rhett Ferrin) mentioned in class, people wanted Gold, especially the Kings! With the rise of America, trade routes began to form that allowed traders to constantly sell and desired product in exchange for a product that would be desired elsewhere.
Enter: Adam Smith - Father of Economics. What role did he play? He helped design capitalism, but also he thought about the role the government should play. Governments ought to build infrastructure that will allow for the free flow of trade, create a currency that will make trade possible, and avoid supporting monopolies that would cost consumers.
Now we have capitalism and a clearly defined boundaries of the government's role in the economy (see Rhett Ferrin's blog post about this... its great.) The invisible hand has full reign and we find ourselves in the 19th Century.
Marx then rights his Communist Manifesto. In the manifesto, Marx argues that the government should have large control of the economy. So much so that it makes sure that everybody gets an equal share and there is a collective (community) ownership. Now we are starting to get ideas that Government can really sink its teeth into controlling the economy and it would be a good thing.
Even though Marx's ideas don't take immediate effect, they do pave the way for ideas like Keynesian economics to pop up.
So what set the stage for Keynes? Well, certainly the combination of past ideas, but also the world that he lived in. He saw WWI and its effects, but most importantly, the great depression. If the invisible hand is supposed to work, it didn't seem like it during the great depresssion. At this time Keynes comes up with his ideas that there needs to some intervention by the government in the economy. Not quite as drastic as communism, and certainly not curtailed like capitalism, Keynes argued that the government can go into debt, put money into the economy, provide jobs, and lower interest rates to spark the economy.
Do the ideas work? Its hard to say... but because of ideas from Keynesian economics, we have some of the great public works such as the Hoover Dam. In 2008 there has begun to be a return to Keynesian economics. Whether these methods are consistently effective remains to be seen and is continually disputed.
