Economic Theories

Interference with the free working of this natural order will reduce the growth of wealth and misdirect resources. Overall between these two great minds we’ve gotten the foundations for many of our modern economic policies, social ideals, and governmental practices. The role of the government should be permissive, creating a legal defensive setup sufficient to allow individual action. Keynes wrote his book “The General Theory of Employment, Interest, and Money” in 1936 in response to the Great Depression. Smith’s beginning works’, opened the door for thought about these concepts which had never before been thought about, just taken for granted. ” Smith noticed that when a business would become successful, others would notice and enter into the same field. Keynes went on to expand Smith’s work and show how through a contrasting interpretations of the same events could be taken completely differently. ite both of the extravagance of government, and of the greatest errors of administration. Keynes felt that trends and fads could disrupt Smith’s ‘Invisible hand’ and lead it astray thus in the process ruining the stability of the economy. As a direct result, growing consumer demand was satisfied while competition controlled rising prices. The economy is always shifting, going through business cycles, recessions to expansions and so on, always changing. Adam Smith argued that an individual acting purely out of self interest would be a progressive force for the maximization of the total wealth of a nation. Keynesian economics covers this aspect as he had just gone through first hand the Great Depression. While Smith’s 1776 work of ‘The Wealth of Nations’ was written during a less stressful time in the economy, though over 200 years old, continues to be the keystone of a marvelous system of ideas. ” This is one of many instances in his book which reflects that human nature itself would propel an economy guided by each individuals “Invisible hand.