The notion that Keynesianism, Even in theory, Let alone in implementation in an economy alike is not sound, Is nonsense. There are a few basic reasons for this, One would be the differences between Adam Smith and John Keynes, Who had entirely different theories on how the equilibrium worked. Adam Smith, And many lasses fire thinkers today alike, Believed that unemployment arose as a result of stagnant aggregate demand. He believed that if those who created products were faced with stifling regulations and what not, That effect their ability to produce, This would result in higher unemployment. Which in some cases can be true, But fundamentally is not. It has become clear since the Great Depression that recessions, Specifically unemployment arose as aggregate demand stagnated. With demand so low, Suppliers saw no point in providing goods to then sell because so few people had the money to buy them. THIS is the true cause of unemployment, As well as private sector deficits. Keynesianism states that the government must do what it can to correct aggregate demand, Since it is what supply is fueled by--which is much more than sound. It's logical. Now, As a matter of implementation, Two instances in which Keynesian policies came into mind is the correction of the Great Depression, In which the New deal was implemented, As well as the 2008 recession, In which the ARRA was implemented. Both of which were incredibly effective in combating the recession.
Many people have argued that economic surpluses and deficit reduction is needed during recessions. However, doing this takes money out of the economy and therefore stifles growth. Investing in our economy, as during the Great Depression and Great Recession, is a far better method, as it creates jobs, growth and prosperity, the objective of all sane policy makers. Extra taxpayer money from prosperity ultimately pushes down the deficit as well, but deficits aren't important. It is a proven fact that growth is far more important. We need to preserve jobs and essential public services, as small deficits, even seemingly large ones, are actually not very important.
Keynesian Economics is a sound theory, but I don't think it fully explains modern economics. Keynesian economists tend to advocate a certain amount of central planning and government meddling in the economy. This may theoretically be good, but, very often, theory does not pan out in practice, and the end result ends up being corrupt or otherwise flawed. So, I believe it is also a theory that should be regarded with some skepticism when actually implemented by imperfect human beings.
A lot of the Keynesian theory makes logical sense even if at first glance it seems a little bold. The Keynesian theory is an economical theory and it is true that you have to spend money in order to make money. If everyone saved all their money and never spent it, we would all be very poor. Yet, as the Keynesian theory emphasis, if I spend money and then you spend money, economically we will begin to grow.
Keynesian economics are creating bigger and bigger distortions in modern global economy. It brought the end of the popularity of laissez-faire. Today's macro looks horrible. Every nation is in tremendous debt; the government is streching it's hand to every possible corner; government spending to GDP used to be around 10% to 5% in the age of laissez-faire, Today, Basically every developed nation other than some still considerably free market ones (Ireland, Australia, New Zealand) has the government spending to GDP around 40% to 50%.
In Australia, we had a Centre-Right (*shudder*) government under John Howard. Now, even though I am no fan of his government or his policies, he at least spent his entire time as PM eliminating national debt. This shoud be a priority for international governments.
Lower government debt means lower interest, more projected fiscal disposal year in, year out. It keeps the IMF happy as well. It also means that (unless you are in the US government) that you can get your government bonds upgraded to AAA, which we managed.
Keynesianism doesn't work. The big problem in Australia today is that neither government is willing to tackle the issue of enormous government debt. If this continues, we will have a whole load of angry debt collectors asking us for the money back. This means wars, crises, and enormous problems if left unattended. If it didn't work during the days of the Roman Empire, why would it work now?
Unless we learn from history, we are doomed to repeat our own mistakes.
Keynesian argument serves only to inefficiently allocate resources that don't really exist in the first place. There are only three ways to finance stimulus (tax, printing money and borrowing) and each either a)replaces cash in one area of the economy by displacing it from its' natural, original sector b)creates money out of thin air or c)injects money that requires maintenance through debt over following decades, leading to net leakages of sometimes five/six/more times the size of principal debt, effectively reducing domestic economic wealth by the same/more than was created during the stimulus.
Keynesianism advocates deficit spending in order to stimulate the economy. The theory is that putting money in consumers hands will lead to more demand from spending power and therefore more production. The problem is that in order to give wealth to the consumers, it must first be transferred out of the economy first (inevitably the producers). You're taking wealth from one part of the economy and putting it in another part. The net effect is virtually nil. Keynesianism has never worked and never will work.
It allows for too much government intervention into the system when they intervene too much already as it is. If a company isn't having success, like GM wasn't for example a few years ago, why should they be able to bail them out for? If a business fails, it fails, the government shouldn't be allowed to step in and fix their mess for them. Yet this is really what the Keynesian theory allows for, and I think it is wrong. So no I don't think Keynesian Economics is a sound theory, it opens the door for far too much meddling by government.