Economic Theories

Paper Summary:

This paper examines Adam Smith's classical economic theory and John Maynard Keynes' macroeconomics theory. The paper explains how they differ and how they both influenced modern economic theory.

From the Paper:

"Keynesian economics emerged primarily during the Depression era when it was found that classical theories of macroeconomics were no longer serving the policymakers. Economists who had previously stayed loyal to the classical model suddenly found themselves at a loss as their theories failed to explain the persistent depression of 1930s. Classical theories of macroeconomics were mainly concerned with the behavior of the markets. They were grounded in the assumption that people always behaved rationally and thus if markets were left to function on their own without any intervention from governments, it would start behaving perfectly in due course of time. The only intervention made by the government should be in the area of removing interventions. It was an interesting concept as classical economists saw limited role of government in running of markets and felt that government should only try to remove imperfections from markets in order to let them function according to natural and rational laws. Classical model came into being with Adam Smith's Magnus opus An Inquiry into the Nature and Causes of Wealth of Nations (1776)."

More papers on Economic Theories:

• Term Paper # 140477 : "Economic Theories"
• Comparison Essay # 27214 : "Economic Theories of Adam Smith, Karl Marx, John Maynard Keynes and Frederick Engles"
• Analytical Essay # 117749 : "Karl Marx's Economic Theories"

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