Smith vs. Keynes: The Battle for Economic Supremacy Let’s Get Ready to Ruuuuuuuuumble! VS

Tasks, Conditions, Standards TASK: You will be able to: compare and contrast Keynesian and classical economics. analyze the historical context of both theories. critique the flaws of either approach. CONDITION: Given a classroom environment with highly motivated students who are ready to learn.

Tasks, Conditions, Standards D.12.6 Use economic concepts to analyze historical and contemporary questions about economic development in the United States and the world D.12.12 Compare and contrast how values and beliefs, such as economic freedom, economic efficiency, equity, full employment, price stability, security, and growth, influence decisions in different economic systems CCSS.ELA-LITERACY.RH.11-12.2 Determine the central ideas or information of a primary or secondary source; provide an accurate summary that makes clear the relationships among the key details and ideas. CCSS.ELA-LITERACY.RH.11-12.8 Evaluate an author's premises, claims, and evidence by corroborating or challenging them with other information.

Smith: the Father Wrote “Wealth of Nations” in 1776 Death of Mercantilism Advocated for Laissez-Faire system of government Belief in the “Invisible Hand”

Keynes: The (Prodigal) Son Active during the 1920s and 1930s Advocated for active government intervention in the economy Countercyclical monetary policy Economies that run on debt GDP Growth!!!

Application Today Smith keynes Classical or “monetarist” policy Austerity: raise taxes, reduce government spending to reduce deficits Common in Europe, but not popular Also seen in the United States Known as “Keynesian” economic policy Countercyclical: reduce government spending during growth, increase during recession Tendency to create or increase massive government debt Usually includes “stimulus”

Check On Learning For each example, determine if the action is classical or Keynesian. In 2009, Greece closes down its state-owned television stations to try to reduce government spending. The government of France buys 20,000 wheels of French cheese in a bid to prop up the stinky cheese industry during a downturn.

Check On Learning The United States Congress passes tax cuts that leave an extra $500 in each taxpayer’s pocket during a recession. Wisconsin raises sales tax to 14% and cuts all funding for public schools to balance the budget. The Federal Reserve sells an extra $30 billion worth of bonds during a period of sustained economic growth.

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