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Chapter 7: Trumponomics

KEYNES and the GREAT DEPRESSION

In his book, The General Theory of Employment,
Interest, and Money, 1936, John Maynard Keynes
argued the Austrian viewpoint was true in the special
case but not in the general case. Thus, he included the
word general in the title.
Because Keynes believed the economy was
tending toward a less than full employment equilibrium
in the 1930’s, he favored managing demand to shift the
economy to a full employment equilibrium. His remedy
was to sell government securities (bonds) and increase
government spending.
Notice that the goal is not just full employment,
the goal is to position the economy so that it is tending
toward full employment. According to Keynes, once the
economy is in full-employment equilibrium, there is
little need for stimulus policies. Politicians, however,
liked the idea of discretionary spending so much that
they have overdosed on the concept. If Keynes were
alive today, he probably would not be a Keynesian.

THE EMPLOYMENT ACT OF 1946
The Employment Act of 1946 gave the
government the responsibility of promoting maximum
employment, production, and purchasing power by way
of its fiscal policies. Keynes argued that fiscal policies
may be necessary to bring about full employment.
Therefore, the president was required to submit an
annual report to Congress stating current levels of

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