Question

Think back to August 6, 1945. The United States has just dropped an atomic weapon on the city of Hiroshima killing tens of thousands of Japanese and devastating the infrastructure. A Keynesian at that time might conclude that there is a silver lining in the destruction, as economic prosperity will result. Evaluate the logic of this claim in a few sentences

Answer 1

It was during 1939 when dark clouds of war were gathering over Europe, it was the same time during which Keynes saw it as an opportunity to prove his theory correct.

So in the given the backdrop, Keynesian economist asserts that free markets have no self-balancing mechanisms which can lead to full employment. And the most important attribute of Keynesian economics is that government intervention can stabilise the economy. In this way, Keynesian economists justify government intervention through public policies that aim to achieve full employment and price stability. So the claim that there is a silver lining in the destruction, which will lead to economic prosperity holds to extent that, there is scope for states intervention in the economy.