Pre- Keynesian Economics: Which theory is usually applied?
Before the introduction of Keynesian economics, economists usually applied the classical theory of economics. Classical economic theory encouraged the Laissez-faire economics. According to this idea, in a free market, the laws of supply and demand control the business cycle. The expansion of businesses helps the economy. Instead of focusing on consumers, the government should prioritize businesses, and its total function should be limited.
But Keynesian economics emphasized that government spending on infrastructure, unemployment insurance, and education results in an increase in consumer demand. Government spending is required to keep the labor force at full capacity.