Editing John Maynard Keynes (section)

===Keynesian ascendancy 1939–79===
{{Main|Keynesian Revolution}}

From the end of the Great Depression to the mid-1970s, Keynes provided the main inspiration for economic policymakers in Europe, America and much of the rest of the world.<ref name="K rev. and critics">{{cite book|last=Fletcher|first=Gordon A.|title=Keynesian Revolution and Its Critics: Issues of Theory and Policy for the Monetary Production Economy|url=https://books.google.com/books?id=ZKawCwAAQBAJ&pg=PA88|edition=second|year=1989|publisher=Palgrave Macmillan UK|isbn=978-1-349-20108-2|pages=xix–xxi, 88, 189–191, 234–238, 256–261|access-date=10 May 2017|archive-date=15 June 2020|archive-url=https://web.archive.org/web/20200615091912/https://books.google.com/books?id=ZKawCwAAQBAJ&pg=PA88|url-status=live}}{{Page range too broad|date=January 2024}}</ref> While economists and policymakers had become increasingly won over to Keynes's way of thinking in the mid and late 1930s, it was only after the outbreak of World War II that governments started to borrow money for spending on a scale sufficient to eliminate unemployment. According to the economist [[John Kenneth Galbraith]] (then a US government official charged with controlling inflation), in the rebound of the economy from wartime spending, "one could not have had a better demonstration of the Keynesian ideas".<ref name="Heights1">{{cite AV media
 |people         = [[Daniel Yergin]], William Cran (writers; producer)
 |chapter        = Episode One: The Battle of Ideas; Ch. 6: Worldwide War
 |title          = Commanding Heights
 |url            = http://www.pbs.org/wgbh/commandingheights/lo/story/ch_menu.html
 |medium         = TV documentary series
 |publisher      = [[PBS]]
 |transcript     = ([Transcript at 7:00]: Onscreen title: "World War II, 1941")
 |date           = 2002
 |transcript-url = http://www.pbs.org/wgbh/commandingheights/shared/minitextlo/tr_show01.html#6
 |access-date    = 28 June 2009
 |archive-date   = 16 May 2011
 |archive-url    = https://web.archive.org/web/20110516015358/http://www.pbs.org/wgbh/commandingheights/shared/minitextlo/tr_show01.html
 |url-status     = dead
}}</ref>

The [[Keynesian Revolution]] was associated with the rise of [[social liberalism|modern liberalism]] in the West during the post-war period.<ref>{{cite book|last=Clark|first=Barry Stewart|title=Political Economy: A Comparative Approach|url=https://books.google.com/books?id=3wpiDzS45PsC&pg=PA101|year=1998|publisher=Greenwood Publishing Group|isbn=978-0-275-95869-5|page=101|quote=Modern liberalism was the dominant ideology in Western nations from the end of World War II until the early 1970s. Its appeal stemmed from not only the success of Keynesian economics in maintaining prosperity during that period, but also from the postwar revulsion towards any pure form of ideology.|access-date=10 May 2017|archive-date=15 June 2020|archive-url=https://web.archive.org/web/20200615062112/https://books.google.com/books?id=3wpiDzS45PsC&pg=PA101|url-status=live}}</ref> Keynesian ideas became so popular that some scholars point to Keynes as representing the ideals of modern liberalism, as Adam Smith represented the ideals of [[classical liberalism]].<ref>{{cite book|last=Wolfe|first=Alan|authorlink=Alan Wolfe|title=The Future of Liberalism|url=https://books.google.com/books?id=ZhqiXF0PsA8C&pg=PP1|year=2009|publisher=Alfred A. Knopf|isbn=978-0-307-26677-4|quote=If Adam Smith is the quintessential classical liberal, the twentieth-century British economist John Maynard Keynes, whose ideas paved the way for massive public works projects and countercyclical economic policies meant to soften the ups and downs of the business cycle, best represents the modern version.|access-date=10 May 2017|archive-date=15 June 2020|archive-url=https://web.archive.org/web/20200615041432/https://books.google.com/books?id=ZhqiXF0PsA8C&pg=PP1|url-status=live}}</ref> After the war, [[Winston Churchill]] attempted to check the rise of Keynesian policy-making in the United Kingdom and used rhetoric critical of the [[mixed economy]] in his [[1945 United Kingdom general election|1945 election]] campaign. Despite his popularity as a war hero, Churchill suffered a landslide defeat to [[Clement Attlee]], whose government's economic policy continued to be influenced by Keynes's ideas.{{r|Heights1}}

====Neo-Keynesian economics====
{{Main|Neo-Keynesian economics}}
[[Image:Islm.svg|thumb|right|[[Neo-Keynesian economics|Neo-Keynesian]] [[IS–LM model]] is used to analyse the effect of [[demand shock]]s on the economy.]]

In the late 1930s and 1940s, economists (notably [[John Hicks]], [[Franco Modigliani]] and [[Paul Samuelson]]) attempted to interpret and formalise Keynes's writings in terms of formal [[mathematical model]]s. In what had become known as the [[neoclassical synthesis]], they combined Keynesian analysis with [[neoclassical economics]] to produce [[neo-Keynesian economics]], which came to dominate [[Mainstream economics|mainstream macroeconomic thought]] for the next 40 years.

By the 1950s, Keynesian policies were adopted by almost the entire developed world and similar measures for a [[mixed economy]] were used by many developing nations. By then, Keynes's views on the economy had become mainstream in the world's universities. Throughout the 1950s and 1960s, the developed and emerging free capitalist economies enjoyed exceptionally high growth and low unemployment.<ref>{{cite book |pages=115–128
|url=http://www.paecon.net/CRASH-1.pdf
|title=Crash: Why it happened and what to do about it |chapter=Reforming the world's international money
|access-date=5 April 2010 |date=2009
|editor= Edward Fullbrook |first=Paul|last= Davidson
|publisher= Real-world Economics Review |volume=1
|author-link=Paul Davidson (economist)
|archive-date=17 April 2021
|archive-url=https://web.archive.org/web/20210417183357/http://www.paecon.net/CRASH-1.pdf
|url-status=live
}}</ref><ref name="solution">{{cite book|last=Davidson|first=Paul|authorlink=Paul Davidson (economist)|title=The Keynes Solution: The Path to Global Economic Prosperity|url=https://books.google.com/books?id=E_abJgpEwJYC&pg=PP1|year=2009|publisher=St. Martin's Press|isbn=978-0-230-10101-2|access-date=10 May 2017|archive-date=15 June 2020|archive-url=https://web.archive.org/web/20200615082436/https://books.google.com/books?id=E_abJgpEwJYC&pg=PP1|url-status=live}}</ref> Professor Gordon Fletcher has written that the 1950s and 1960s, when Keynes's influence was at its peak, appear in retrospect as a [[Post–World War II economic expansion|golden age of capitalism]].<ref name="K rev. and critics"/>

In late 1965 ''[[Time (magazine)|Time]]'' magazine ran a cover article with a title comment from [[Milton Friedman]] (later echoed by US President [[Richard Nixon]]), "[[We are all Keynesians now]]". The article described the exceptionally favourable economic conditions then prevailing and reported that "Washington's economic managers scaled these heights by their adherence to Keynes's central theme: the modern capitalist economy does not automatically work at top efficiency, but can be raised to that level by the intervention and influence of the government." The article also states that Keynes was one of the three most important economists who ever lived, and that his ''[[The General Theory of Employment, Interest and Money|General Theory]]'' was more influential than the ''magna opera'' of other famous economists, such as [[Adam Smith]]'s ''[[The Wealth of Nations]]''.<ref>
{{cite magazine
| title= We Are All Keynesians Now
| access-date=13 November 2008
| url= http://www.time.com/time/magazine/article/0,9171,842353-5,00.htm
| archive-url= https://web.archive.org/web/20090325215049/http://www.time.com/time/magazine/article/0,9171,842353-5,00.htm
| url-status= dead
| archive-date= 25 March 2009
|magazine=Time
| date= 31 December 1965
|url-access=subscription
}}
</ref>

==== Multiplier ====
The concept of the multiplier was first developed by [[Richard Kahn, Baron Kahn|R. F. Kahn]]<ref>{{Cite journal|title=The Genesis of the Multiplier Theory|url=https://www.jstor.org/stable/2661731|journal=Oxford Economic Papers|year=1956|issn=0030-7653|pages=181–193|volume=8|issue=2|first=A. Ll.|last=Wright|doi=10.1093/oxfordjournals.oep.a042261|jstor=2661731|access-date=6 September 2021|archive-date=6 September 2021|archive-url=https://web.archive.org/web/20210906075746/https://www.jstor.org/stable/2661731|url-status=live}}</ref> in his article "The relation of home investment to unemployment"<ref>{{Cite journal|title=The Relation of Home Investment to Unemployment|url=https://www.jstor.org/stable/2223697|journal=The Economic Journal|year=1931|issn=0013-0133|pages=173–198|volume=41|issue=162|doi=10.2307/2223697|first=R. F.|last=Kahn|jstor=2223697|access-date=6 September 2021|archive-date=6 September 2021|archive-url=https://web.archive.org/web/20210906075924/https://www.jstor.org/stable/2223697|url-status=live}}</ref> in ''The Economic Journal'' of June 1931. The Kahn multiplier was the employment multiplier; Keynes took the idea from Kahn and formulated the investment multiplier.<ref>{{cite web
| url = https://www.investopedia.com/terms/i/investment-multiplier.asp
| title = What Does 'Investment Multiplier' Mean?
| website = Investopedia
| language = en
| access-date = 6 September 2021
| last1 = Fernando|last2= Boyle|first2=Michael J.
| archive-date = 6 September 2021
| archive-url = https://web.archive.org/web/20210906080544/https://www.investopedia.com/terms/i/investment-multiplier.asp
| url-status = live
}}</ref>