ABSTRACT
John Maynard Keynes’s ideas, presented in The General Theory of Employment Interest and Money, had a profound impact on further developments of both theory and practice in modern economics. The interpretations of Keynes’s ideas also spawned a vast literature and a new approach to economics—Keynesian economics. The core debate between Keynesians and more classically oriented economists revolves around the efficiency of the free market relative to government intervention and regulation. Those who follow the Keynesian school say that free-market outcomes are often inefficient and that active government policies, both fiscal and monetary, are required to correct them. The new classical school is based on neoclassical microfoundations. It holds the same belief that there is no need for stabilization policy. It assumes that people are rational about market conditions and that markets are not systematically wrong; free-market forces, they assert, deliver economic equilibrium through adjustments in prices and wages.
