Analysis of the Keynesian theory of state regulation of the economy

Nesenenko Pavlо
Doctor of Economics, Associate Professor of General Economic Theory and Economic Policy Department, Odessa National Economic University, Ukraine, e-mail: nppod@ukr.net, ORCID ID: https://orcid.org/0000-0001-6399-3511

Dergunov Iryna
Postgraduate Student of General Economic Theory and Economic Policy Department, Odessa National Economic University, Ukraine, e-mail: ikarhapoltseva@gmail.com, ORCID ID: https://orcid.org/0009-0000-4976-3920

Cite this article:

Nesenenko, P., & Dergunov, I. (2024). Analysis of the Keynesian theory of state regulation of the economy [Analiz Keinsianskoi teorii derzhavnoho rehuliuvannia ekonomiky], Socio-economic research bulletin; Vìsnik socìal’no-ekonomìčnih doslìdžen’ (ISSN 2313-4569), Odessa National Economic University, Odessa, No. 1-2 (88-89), pp. 9–19.

Abstract

The article considers the peculiarities and postulates of the Keynesian theory of state regulation of the economy. The main theoretical postulates on which the theory founded by J. M. Keynes during the Great Depression of the 30s of last century is based are analyzed. It has been demonstrated that the main categories considered by this theory are income, savings, investment and consumption. One of the priority provisions of Keynesianism regarding the fact that the economic recession, fear and uncertainty it generates among companies and investors, will tend to be self-fulfilling and can lead to a long period of suppression of economic activity and the growth of unemployment is considered. The study of the Keynesian concept of state regulation, which clearly demonstrates that J. M. Keynes expanded the analysis of economic phenomena and moved to the macroeconomic level of studying the issue, is substantiated. A refined criticism of Keynesian opponents is clarified, who argue that enterprises responding to economic stimulus and will tend to return the economy to equilibrium if the government doesn’t stop them from doing so by intervening in prices and wages and giving the impression that the market is self-regulating. Thus, the integrity of the concept of the Keynesian economic school, which was formed in the 30s and 40s of the last century, but the relevance of its main postulates is being actively rethought by scientists and political figures of today, is investigated. The events that shook the world economy during the global financial crisis of 2007-2009 and the global Covid-19 pandemic, which has gripped the world since 2019, are analyzed. The statement that there is a need for state intervention in the economy is substantiated, because the market’s inability to self-regulate in such critical conditions leads to global crisis phenomena and shifts. It is proposed to rely on the postulates of the Keynesian concept of state regulation of the economy in synthesis with existing problems of the global economy in the conditions of the variability of modern markets.

Keywords

Keynesian theory; effective demand; income; savings; investments; consumption; suppression of economic activity; macroeconomic level; global financial crisis; state intervention in the economy; failure of the market to self-regulate.

JEL classification: E120; E200; E210; DOI:https://doi.org/10.33987/vsed.1-2(88-89).2024.9-19

UD classification: 330.834:338.246.025.2

This work is licensed under a Creative Commons Attribution 4.0 International License. To view a copy of this license, visit http://creativecommons.org/licenses/by/4.0/

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