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John
Maynard Keynes (1883-1946) was without question the most
influential economist of the twentieth century. His most important
work, The General Theory of Employment, Interest, and
Money, was published in 1936, and it was widely perceived
as offering plausible explanations and solutions for the
Great Depression.
Keynes'
economic analysis was highly complex and subtle.
It suggested that capitalism is vulnerable to instability caused
by insufficient consumer demand. He emphasized the reluctance
of workers to accept reductions in nominal wages, preventing
free market adjustments to unemployment Keynes also suggested
the possibility of a "liquidity trap," which could prevent market
forces from restoring full employment. Based on these and other
perceived defects in the capitalist system, Keynes suggested
government intervention in the economy, and modern politicians
have accepted and applied Keynesian ideas with great enthusiasm.
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