“Keynesian Economics could have been used to avoid the Great Depression”. What are the most compelling arguments for and against this statement? Paul Dalby

“Keynesian economics could have been used to avoid the Great Depression”. What are the most compelling arguments for and against this statement? What I have learnt about Keynesian economics in relation to the Great Depression Keynesian economics and the Great Depression

Why Did I choose to base my EPQ on Keynesian economics? General Interest in Economics and how it relates to politics Keynesian economics is a subject that I found particularly engaging when briefly acknowledging it during As-Level economics and being intrigued about it Its current relevance – Use in Great Recession It is very different from the majority of classical and neoclassical economics I intend to study Economics at university, and so I wanted to be able to challenge classical views with an alternate perspective Keynesian economics and the Great Depression

Why did I choose the Great Depression as the time setting of my EPQ Largest period of negative economic growth in history Its relevance to today – impact of the Great Recession on peoples lives similar to that of the Great Depression It was the time in which Keynes was becoming prevalent as an economist (general theory passed in 1936) Impact on the Future – How to stop a third banking sector meltdown causing economic collapse. Keynesian economics and the Great Depression

Resource Gathering – Background Knowledge The General theory of employment, money and interest – John Maynard Keynes Keynes – A Very Short Introduction - Robert Skidelsky Principles of Macroeconomics - Libby Rittenberg, Timothy Tregarthen I thought that these resources would be a good place for me to begin my research into Keynes by giving me a solid background on what his ideas were and some information about the man himself. These resources were used more for background knowledge than for quotable detail. 4. The Great Depression and the New Deal - A Very Short Introduction – Eric Rauchway This was used in order for me to analyse the period of the Great Depression in America and also to see the specific policies used by both Herbert Hoover and Franklin Delano Roosevelt in order to counter the Depression. Keynesian economics and the Great Depression

Resource Gathering – Argument sources 5. Economist Articles (see Appendix 2.1) 6. Debunking economics – Steve Keen 7. Lords of Finance: The Bankers who Broke the World – Liaquat Ahamed 8. On the Determination of the Public Debt - Robert J Barro 9. A Treatise on Political Economy – Jean Baptiste Say 5 was used in both These resources were used in order to create the foundations of my argument. Sources supporting the statement were 5, 6, 7 Sources criticising the statement were 5,8,9 Keynesian economics and the Great Depression

Key content concepts Keynesian Fiscal and Monetary Policies Keynesian Multiplier Effect Ricardian Equivalence Gold Standard Debate Disequilibrium Government approaches (Interventionist or Laissez Faire) Keynesian economics and the Great Depression

Keynesian Fiscal and Monetary Policies Keynesian Fiscal Policy High government spending – budget deficits to stimulate economy Keynesian Monetary policy Quantitative easing in periods of low inflation or deflation Keynesian economics and the Great Depression

Keynesian Multiplier Effect Government injects capital into the circular flow by increasing spending on government projects Capital flow round economy – first to labourers in the government project, then shop keepers etc. End result is a higher increase the the circular flow than original injection Professor Hazlitt – “strange concept of the multiplier” – The failure of the ‘New Economics’, Henry Hazlitt, Van Nostrand, 1959, 135 “There are, in fact, so many things wrong with the multiplier concept that it is hard to know were to begin in dealing with them” – Ibid., 139 Keynesian economics and the Great Depression

Ricardian Equivalence In 1979, Robert J Barro defined Ricardian Equivalence as “shifts between debt and tax finance for a given amount of public expenditure would have no first-order effect on the real interest rate, volume of private investment, etc.” – On the Determination of the Public Debt, Robert J Barro, The Journal of Political Economy, Volume 87, October 1979 Keynesian economics and the Great Depression

Gold Standard Debate Gold standard is where the amount of money in an economy is controlled by the amount of gold in a countries central bank. It was originally used to install confidence in a currency because theoretically paying $10 meant that you were giving the person that value of gold However by the 1930s this was no longer needed – Keynes and William Bryan Keynesian economics and the Great Depression

Disequilibrium Classical and neoclassical economics focusses almost exclusively on how to control an economy in equilibrium However it times of change, for example a recession or a time of high growth, much of an economy isn’t in equilibrium. Keynesian economics and the Great Depression

Government approaches (Interventionist or Laissez Faire) Hoover and preceding Republicans – Laissez Faire – lack of action Roosevelt and succeeding Democrats – More interventionist approach – alphabet agencies Keynesian economics and the Great Depression

Conclusions In essence there are two questions to answer, which are Could Keynesian economics have been used to avoid the Wall Street stock market crash Could Keynesian economics have been used to avoid a global depression. First is unlikely, Second is highly probable Keynesian economics and the Great Depression

The Learning Process of completing my EPQ What I learnt from the Extended Project Qualification process.

The Production Log Record of initial ideas Candidate proposal Planning review Mid-project review Project product review Presentation record The Learning Process of completing my EPQ

Initial Ideas My original aim for the final essay was an all encompassing economic critique of the Great Depression. In the first section of initial ides, “My idea(s) for topic/title”, I decided on a preliminary title of “The 1929 Great depression could have been avoided. What are the most compelling reasons for and against this?” It was too broad. “We therefore agreed that I should research more fully into a specific part of great depression economics.” I then made the decision to focus more closely on a far more niche section of economics I made my title more focussed as “Keynesian economics could have been used to avoid the Great Depression”. What are the most compelling arguments for and against this statement? Talk about learning Process of focusing in allowing a greater depth to the research, talk about Steve Keen lecture – and influenced me to choose a non mainstream economic theory The Learning Process of completing my EPQ

Candidate proposal The candidate proposal is the section in which I submitted my proposed title to both my supervisor and centre coordinator In this section I realised that it would be important for me to obtain additional resources, as was suggested by my supervisor. In this section I learnt about the importance of having high quality resources, and of being able to add the opinions of well know writers in their field to back up my own suggestions. The Learning Process of completing my EPQ

Planning review The Planning review was the stage in the process in which I realised the importance of planning for the long term in order to ensure that deadlines are met Appendix 1 was used to stipulate what I needed to do before the mid project review, and how I was planning on completing it. It also taught me the importance of having a contingency plan, and so I realised that it would be important for me to write a new plan, Appendix 1a, by the end of the Easter holidays in order to re-evaluate what I still needed to complete in time for the mid project review The Learning Process of completing my EPQ

Mid-project review The mid project review was the point in the EPQ at which I was in the best position to appraise the work which I had completed, and also strategize what I needed to do for the remainder of the EPQ I attached Appendix 2, detailing the plan which I had for the time between the mid- project review and the handing in of my first draft essay I also attached Appendix 2a after having spoken to my supervisor, which detailed exactly what the economist articles were. This was a big learning point, as it showed to me the need to be specific I then added appendix 3, updating what tasks I still needed to complete before the handing in of my first draft The Learning Process of completing my EPQ

Skills Learnt Planning Resource Gathering Researching Referencing Resource Evaluation Essay writing The Learning Process of completing my EPQ

Planning “Failing to plan is planning to fail” Importance of re – evaluation Importance of detail Importance of realism The Learning Process of completing my EPQ

Resource Gathering Researching Obtaining a high quantity of resources is easy, obtaining high quality is less simple Necessity to ensure that resources are from a reputable source / author Researching Only write relevant details Don’t copy out whole passages Write references at the same time Look up interesting terms which are in the research material The Learning Process of completing my EPQ

Referencing There are a number of good referencing systems – Harvard, Chicago, Vancouver etc. Choose a system early and stick with it “Practice makes perfect” It becomes easier the more reference are written Use referencing terms to quicken the process (Ibid.) The Learning Process of completing my EPQ

Resource Evaluation Source evaluation is important in order to establish any potential bias in the source It is important to research the individual author and the publisher Well know authors / publishers are likely to be more reliable If the author / publisher is not well known it is important to establish their credentials The Learning Process of completing my EPQ

Essay writing “Genius is making complex ideas simple, not simple ideas complex” – Albert Einstein It is important to write with high quality and in-depth analysis Good research is vital 5000 words may seem daunting, but is the minimum required to research a topic in depth The Learning Process of completing my EPQ

“Keynesian Economics could have been used to avoid the Great Depression”. What are the most compelling arguments for and against this statement? Paul Dalby