by Frank Shostak
Mises.org
Whenever there are signs that the economy is likely to fall into an economic slump most experts advise that the central bank and the government should embark on loose monetary and fiscal policies to counter the possible economic recession. In this sense, most experts are following the ideas of the English economist John Maynard Keynes.
Briefly, John Maynard Keynes held that one could not have complete trust in a market economy, which is inherently unstable. If left free, the market economy could lead to self-destruction. Hence, there is the need for governments and central banks to manage the economy.
Successful management in the Keynesian framework is achieved by influencing overall spending in an economy. It is spending that generates income. Spending by one individual becomes income for another individual according to Keynes. Hence, the more that is spent the better thing are going to be. What drives the economy, then, is spending.