The Keynesian Paradigm and Economic Policy

Abstract

Abstract. Keynesian macroeconomic theory and the new theory of the hitherto neglected branch of political science, public administration, which were both independently introduced at about the same time in the New Deal period of the 1930s, complemented each other. Keynesian theory, emphasizing government fiscal policy and deficit spending as counterdepression, full‐employment, and economic growth measures, became the generally accepted paradigm in economics and public finance. Public administration theory held that government agencies, motivated primarily by their own bureaucratic expansionary self‐interest, would bring about an equilibrium of national interest. This provided the justification for agency initiative in stimulating and supporting the demands of interest and pressure groups whose regulation required increased agency activity. The theories and their outcome reflected the continuing decline of classical liberalism.