Now I want to look into Keynesian economic theory since it has had the most influence in shaping the plan for dealing with the great recession in the US and the UK. Keynesian economics is highlighted by its emphasis on measuring, monitoring and policy responses by the public sector, including monetary policy actions by the central bank and fiscal policy actions by the government to stabilize output over the business cycle. It discounts the possibility that the private sector will make decisions that support the greater good of the economy. The theories forming the basis of Keynesian economics were first presented in The General Theory of Employment, Interest and Money, published in 1936. Richard Posner has written a good summary of the book in the New Republic. His article is titled "How I Became a Keynesian" and it is recommended for inquiring minds seeking more knowledge of the man whose economic theory is leading us somewhere, fast.
Richard Posner summarizes Keynesian Theory very briefly in his article. He writes "Keynes's theory, and its application to our current economic plight, is best understood if one bears in mind one historical fact and three claims that he made in the book. The historical fact is that England, between 1919 and 1939, experienced persistent high unemployment--never less than 10 percent, and 15 percent in 1935, when Keynes was completing his book. Explaining the persistence of unemployment was the major task that Keynes set himself. Though he famously declared that "in the long run, we are dead," he tried to solve a problem that, already when he wrote, had had a pretty long run.
The three claims are, first, that consumption is the "sole end and object of all economic activity," because all productive activity is designed to satisfy consumer demand either in the present or in the future. "Consumption" is not in the title of the book, however, because the only thing that interested Keynes about it was how much of their income people allocated to it--the more the better, as we will see. The second claim is the importance (and the deleterious effect) of hoarding. People do not save just to be able to make a specific future expenditure; they may also be hedging against uncertainty. And the third claim, related to the second, is that uncertainty--in the sense of a risk that, unlike the risk of losing at roulette, cannot be calculated--is a pervasive feature of the economic environment, particularly with respect to projects intended to satisfy future consumption."
Posner is fairly supportive of Keynesian Theory. In a grossly unfair counter, here is a link to an article written by Michael Shedlock (Mish) that dismantles every point of view that is not his, ie: the Austrian School. Mish goes into great length in this article and provides a lot of links to deepen his perspective. Inquiring minds will find a lot of fodder here. Mish has titled his article "Is Debt Deflation Just Beginning?"