ECO 202 Essay

ECO 202 Essay - Michael Klatsky Professor Orphee...

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Michael Klatsky Professor Orphee Macroeconomics Dec, 12 th 2007 A comparison of Classical and Keynesian Economics Our economy has its up and downs. When the economy takes a downward spiral, economists have two distinct words that define the downward trend; recession and depression. A recession is generally defined as negative growth in a country’s GDP for two or more consecutive quarters. Many economists do not agree that this is the entire definition of a recession, and consider the meaning to include: any significant decline in economic activity spread across the economy, lasting more than a few months. A recession is generally not considered the worst form of negative economic growth, for a much worse form exists: a depression, when the recession is especially severe or last a really long period of time. The difference is best described by newspaper columnist Sidney J. Harris: a recession is when you lose your job; a depression is when I lose mine. Economists have long debated on how to alleviate the decline of economic activity, and have developed two trains of thought on how to do with the problem. One ideology of how to invigorate the economy is to let it be. This method probably got its origins is the French revolutionary idea of laizez-faire, meaning the governing bodies should not regulate the economy in any way, shape or form. This ideology is better known to students of economics as Classical Economics . The opposing view is that when the economy is not doing well, the government should do all it can to invigorate the economy and bring it back to its feet. This includes spending money the government may not have, introducing jobs for people that accomplish nothing but lower unemployment statistics, and increase purchasing. It is the responsibility of the government to introduce new markets, jobs and money when the economy is taking a turn for the worst. The general theory of classical economics defines the government’s role as a non- participant in the economy. By not participating in the economy, business owners can freely do business without exorbitant government oversight that makes trade impossible. In the middle ages, a lord would control everything in his domain; if a serf has the sudden desire to sell lanterns or socks, he could not do so without explicit permission from the lord. If in the rare case the lord granted him permission to engage in business under his domain, the lord would almost certainly demand an unreasonable tax for the great act of kindness he has done for the serf. This is the extreme case. In many more modern situations, government meddling leads to specific agendas to influence political leaders, who in turn regulate the economy with agendas other the best interests of the people in mind. Many have made a case for George Bush’s case for the war in Iraq to be influenced by the profits that companies such as Halliburton, USA will gain if such a war plan is put into action. We are only human, and not even a single one of us are perfect and infallible;
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This note was uploaded on 04/21/2008 for the course ECO 202 taught by Professor Orphee during the Fall '08 term at SUNY Rockland.

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ECO 202 Essay - Michael Klatsky Professor Orphee...

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