Question

How did John Maynard Keynes define economics?

Short answer

John Maynard Keynes defined economics as "the science of thinking in terms of models joined to the art of choosing models which are relevant to the contemporary world." This definition emphasizes the importance of using both scientific and artistic approaches in analyzing economic phenomena, with mathematical models as the basis for understanding complex processes while considering the specific real-life contexts in which they are applied.

Step-by-step solution

Introduce John Maynard Keynes

John Maynard Keynes was a British economist who greatly influenced modern economic theory. He is best known for his work on macroeconomics, which focuses on the performance of the overall economy, including inflation, unemployment, and economic growth.

Present Keynes' Definition of Economics

According to Keynes, economics is the study of how societies organize and distribute their resources to meet their needs and wants. In his book "The General Theory of Employment, Interest, and Money," Keynes succinctly defined economics as "the science of thinking in terms of models joined to the art of choosing models which are relevant to the contemporary world."

Break Down the Definition

Keynes' definition of economics can be understood in two parts: 1. "The science of thinking in terms of models": This means that economics is a scientific discipline that uses mathematical models to describe and analyze economic phenomena. Models help economists to simplify complex economic processes and make predictions about the future. 2. "The art of choosing models which are relevant to the contemporary world": This part of the definition highlights the importance of selecting appropriate models that accurately represent the current conditions and challenges faced by modern societies. An economist's choice of model must consider the specific context in which it will be applied to ensure that the conclusions drawn from the model are relevant and useful.

Explain the Importance of Keynes' Definition

Keynes' definition of economics highlights the importance of using both scientific and artistic approaches in the study of how societies manage their resources. By combining rigorous mathematical analysis with a practical understanding of the real-world context, economists can develop more accurate and relevant insights into the functioning of economies and the most effective policies for promoting economic growth and stability.