What are the criticisms of Keynesian economics?

In the 1970s, there was a period of stagflation i.e. higher inflation and higher unemployment which led to heavy criticism of Keynesian economics. Keynesian economics leans toward a centrally planned economy; it eliminates the effects of market forces on decision making thereby implying that Government knows what is best for the economy. You can read about the Monetary System – Types of Monetary System (Commodity, Commodity-Based, Fiat Money) in the given link.

Increasing a budget deficit in a recession was advocated by Keynesian economics. However, it is argued this causes crowding out.

Further readings:

  1. National Institution for Transforming India (NITI Aayog) – A Brief Overview
  2. Monetary Policy – Objectives, Roles and Instruments (UPSC Indian Economy)

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