He was a Scottish philosopher during the Enlightenment. (The Enlightenment was an 18th century philosophical movement in Europe that stressed the importance of reason in analysing and investigating.) He wrote 'An Enquiry into the Nature and Causes of The Wealth of Nations' published in 1776. His main economic ideas were:
A nation's wealth was the total value of its goods and services, not the value of its raw materials and precious metals. The value of these goods and services would be determined by the market, and therefore market forces. 'The Wealth of Nations' basically discredited mercantilism as an economic theory, and replaced it with capitalism - still the dominant global economic system today. Mercantilism - The economic theory that trade generates wealth and is stimulated by the accumulation of profitable balances, which a government should encourage by means of protectionism Capitalism - An economic and political system in which a country's trade and industry are controlled by private owners for profit, rather than by the state He stated that nations would gain wealth if they allowed free economic competitions for their citizens. He believed that workers' wages should also rise so that they could become consumers, thus creating demand.
Keynes was a British economist and one of the most influential of the 20th century. Following WW1, he published 'The Economic Consequences of the Peace' in which he criticised the excessive war reparations demanded from a defeated Germany and prophetically predicted that it would foster a desire for revenge among Germans. According to Keynes, Say’s Law is not true; that is, supply does not create its own demand. (Say’s Law – Supply creates its own demand)
Rather, according to Keynes, supply is capable of outstripping demand, with the result that goods remain unsold, and production and employment are correspondingly cut back. As a result, the solution to unemployment,...
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