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If you’ve been at a quizbowl tournament in the last five years and your team missed a tossup about an economist, the chances are that your coach has told you next time to guess Milton Friedman or John Maynard Keynes. Particularly in recent years, Keynes has become a popular toss-up in the quizbowl world. Keynes is best known as an economist who believed that government fiscal policy was the key to a strong economy, particularly encouraging government spending to increase demand during times when unemployment is particularly high. He was also, however, an active member of the Bloomsbury Group, and a great supporter of the arts in England as well.
By analyzing questions, you can see patterns emerge, patterns that will help you answer questions. Qwiz5 is all about those patterns. In each installment of Qwiz5, we take an answer line and look at five of its most common clues. Here we explore five clues that will help you answer a tossup on John Maynard Keynes.
DEFICIT SPENDING
Keynes believed that occasionally a situation called a glut would arise in the economy, where demand fell behind supply of goods due to overproduction or to a lack of money triggered by a high unemployment rate. Keynes argued that the solution to this situation, and to keeping an economy growing steadily as well, was for governments to spend more, shifting money to the population which then would reenter the economy as spending. This spending often needed to be deficit spending, or spending more than the country actually made, on the theory that the economy will expand due to the spending enough to pay off that deficit. This concept is also sometimes called pump priming.
THE ECONOMIC CONSEQUENCES OF THE PEACE
Keynes wrote several important books, but two in particular stand out. The first, The Economic Consequences of the Peace, argued that the Treaty of Versailles and the huge reparations it set on Germany would cause great damage to the German economy, which would then impact the global economy. In his book, Keynes painted a picture of a starving Germany reduced to “servitude for a generation,” provoking revolution and dissent.
THE GENERAL THEORY OF EMPLOYMENT, INTEREST, AND MONEY In The General Theory, Keynes argued against the traditional idea of Say’s Law, which says supply creates demand. Rather, he claimed, it is demand that powers the economy, and that only through increasing investment and consumption could you create higher employment or income. Keynes attributed this in part to the idea of price stickiness--the concept that workers may not always act in a way that an economist would judge as rational in making wage demands.
AGGREGATE DEMAND Aggregate Demand, and its counterpart, Aggregate Supply, were also critical to Keynes’ General Theory. Aggregate demand is essentially the total amount of spending within the economy; Keynes said that when this spending drops, it can start an unemployment cycle that will result in recession or depression. To fight this, Keynes says, a country must spend freely, which will once again cause demand to meet supply and create jobs and economic growth.
KENESIAN CROSS The Keynesian Cross is a diagram that shows aggregate income plotted against total spending, and identifies an equilibrium point between income and spending where the lines for spending and supply cross. This diagram is considered one of the most important in microeconomic theory today, as it represents the interaction of all the forces Keynes identified as playing a role in maintaining a country’s economy.
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Quizbowl is about learning, not rote memorization, so we encourage you to use this as a springboard for further reading rather than as an endpoint. Here are a few things to check out:
* In 1928, Keynes wrote an essay entitled “Economic Possibilities for Our Grandchildren,” in which he theorizes life in the 2020s. Where was he right and where was he wrong? The New Yorker breaks it down.
* How did Keynes contribute to the Treaty of Versailles? Read more about his role in the peace conference that ended WWI in this article from the Australian Financial Review.
* Keynes’ economic policies are frequently mentioned as being a major inspiration for President Barack Obama’s own policies during his administration. NPR explored that link in an episode of Planet Money. Listen below:
* If you’re still fuzzy on what that Keynesian Cross is all about, you’re not alone, but fear not--the brave folks at Khan Academy are always ready with a helpful video to explain further:
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