Because Keynesian economics is so reliant on budget deficits during recessionary periods, further opposition to the use of repeated Keynesian policy has arisen in recent years. This has caused economists to come up with alternative methods of recessionary fiscal and monetary policy. Some of these theories expand further on the ideas of Keynes, while others are more contrarian in their methods to fighting financial crisis.
Post-Keynesian: This school of economic thinking has its origins in the 1970s and was founded by economists Alfred Eichner and Jan Kregel. Post-Keynesian theory is based on the law of effective demand (competitive market has no natural tendency towards full-employment). Several of the ideas that make up this school are tweaks to the original ideas of John Maynard Keynes and are still being debated on heavily by many Keynesian economists today.
Austrian economist Friedrich Hayek.
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Austrian Economics: The Austrian school of economics, in many ways, is the polar opposite of the ideas made popular by Keynes in the early twentieth century. One such stark difference is the belief in supply side economics, as opposed to the Keynesian belief of demand side. Austrian economics was founded during the nineteenth century in Austria by Carl Menger and was popularized again in the mid-late twentieth century by Friedrich Hayek. Austrian economists claim to have predicted the 2008 financial crisis because of their belief that increasing national debts and lower interest rates would cause bubbles that would burst and bring on financial catastrophe. This is why Austrian economists tend to vehemently oppose government action in the economy and are instead in favor of individual consumer choice.
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Image depicting what a possible U.S “trillion dollar coin” could look like.
Modern Monetary Theory: Modern Monetary Theory (MMT) is a newer macroeconomic theory that goes further than traditional Keynesian economic thinking by stating that modern economies that can produce their own currency can essentially pay for anything they wish to without worrying about the national debt or bankruptcy because of the unlimited ability to restore funds. This theory has become popular among left-wing politicians and economists because it solves the issue of the expanding national debt, while giving the government the luxury of not being forced to cut spending on one program to increase spending for another. It will be interesting to see where Modern Monetary Theory goes as its popularity grows in the economic world.
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