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

2. 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.

3. 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 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 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 Evaluate an author's premises, claims, and evidence by corroborating or challenging them with other information.

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

5. 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!!!

6. 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”

7. 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.

8. 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.

9. Questions?