Who is credited with the foundational ideas that underlie fiscal policy?

The foundational ideas that underlie fiscal policy are largely credited to John Maynard Keynes. His work, particularly during the Great Depression, emphasized the role of government intervention in the economy to manage demand and mitigate economic downturns. Keynes argued that during periods of economic recession, higher public spending and lower taxes could stimulate aggregate demand, thus promoting economic growth and reducing unemployment.

Keynesian economics established the importance of fiscal policy as a countercyclical tool, where governments could use deficit spending to jumpstart economic activity in times of need. This approach significantly influenced modern economic policies and laid the groundwork for how many governments implement fiscal measures today in response to economic fluctuations.

Other economists, such as Milton Friedman, brought forth important concepts related to monetary policy and the role of expectations in economics, but their contributions do not specifically define the framework for fiscal policy in the way that Keynes' work does. Adam Smith is foundational in classical economics and the idea of free markets, while Friedrich Hayek is associated with the Austrian school of economics, advocating for limited government intervention. Their ideas, while significant, do not directly establish the principles of fiscal policy that are heavily influenced by Keynesian thought.