TODAY IS THE BIRTHDAY OF J.M.KEYNES
John Maynard Keynes, 1st Baron Keynes,(5 June 1883 – 21 April 1946)
was a British
economist
whose ideas have fundamentally affected the theory and practice of modern
macroeconomics,
and informed the economic policies of governments. He built on and greatly
refined earlier work on the causes of
business
cycles, and is widely considered to be one of the founders of modern
macroeconomics and the most influential economist of the 20th century. His
ideas are the basis for the
school of thought known as
Keynesian economics, and its various offshoots.
In the 1930s, Keynes spearheaded
a revolution in economic thinking,
overturning the older ideas of
neoclassical economics that held that
free markets
would, in the short to medium term, automatically provide full employment, as
long as workers were flexible in their wage demands. Keynes instead argued that
aggregate
demand determined the overall level of economic activity, and that
inadequate aggregate demand could lead to prolonged periods of high
unemployment.
According to Keynesian economics, state intervention was necessary to moderate
"boom and bust" cycles of economic activity. He advocated the use of
fiscal
and
monetary
measures to mitigate the adverse effects of economic
recessions
and
depressions. Following the outbreak of
World War II,
Keynes's ideas concerning economic policy were adopted by leading Western
economies. In 1942, Keynes was awarded a
hereditary
peerage as Baron Keynes of Tilton in the County of Sussex. Keynes
died in 1946, but during the 1950s and 1960s the success of Keynesian economics
resulted in almost all capitalist governments adopting its policy
recommendations.
Keynes's influence waned in the 1970s, partly as a result of problems that
began to afflict the
Anglo-American economies from the start of the
decade, and partly because of critiques from
Milton
Friedman and other economists who were pessimistic about the ability
of governments to regulate the business cycle with fiscal policy. However, the
advent of the global
financial crisis of 2007–08 caused a
resurgence in Keynesian thought. Keynesian
economics provided the theoretical underpinning for economic policies
undertaken in response to the crisis by President
George W.
Bush of the United States, Prime Minister
Gordon Brown
of the United Kingdom, and other heads of governments.
In 1999,
Time magazine included Keynes in their list of the
100 most
important and influential people of the 20th century, commenting
that: "His radical idea that governments should spend money they don't
have may have saved capitalism." He has been described by
The Economist
as "Britain's most famous 20th-century economist." In addition to
being an economist, Keynes was also a civil servant, a director of the
Bank of
England, a part of the
Bloomsbury
Group of intellectuals, a patron of the arts and an art collector, a
director of the
British Eugenics Society, an advisor to several
charitable trusts, a successful private investor, a writer, a philosopher, and
a farmer.
John Maynard Keynes was born in
Cambridge,
Cambridgeshire,
England,
to an upper-middle-class family. His father,
John Neville Keynes, was an economist and a
lecturer in
moral sciences at the University of Cambridge
and his mother
Florence Ada Keynes a local social reformer.
Keynes was the first born, and was followed by two more children – Margaret
Neville Keynes in 1885 and
Geoffrey
Keynes in 1887. Geoffrey became a surgeon and Margaret married the
Nobel Prize-winning physiologist
Archibald
Hill. At the age of five and a half, in January 1889, Keynes started
at the Kindergarten of the
Perse School for Girls for five mornings a
week. He quickly showed a talent for arithmetic, but his health was poor
leading to several long absences. He was tutored at home by a governess,
Beatrice Mackintosh, and his mother. At eight and a half, in January 1892, he
started as a day pupil at
St Faith's preparatory school. By 1894 Keynes
was top of his class and excelling at mathematics. In 1896 St Faith's
headmaster, Ralph Goodchild, wrote that Keynes was "head and shoulders
above all the other boys in the school" and was confident that Keynes
could get a scholarship to Eton.
Keynes won a scholarship to
Eton College
in 1897, where he displayed talent in a wide range of subjects, particularly
mathematics,
classics
and history. At Eton, Keynes experienced the first "love of his life"
in Dan Macmillan, older brother of the future Prime Minister
Harold
Macmillan. Despite his middle-class background, Keynes mixed easily
with upper-class pupils. In 1902 Keynes left Eton for
King's College, Cambridge after receiving
a scholarship for this also to study mathematics.
Alfred
Marshall begged Keynes to become an economist, although Keynes's own
inclinations drew him towards philosophy – especially the ethical system of
G. E. Moore.
Keynes joined the
Pitt Club and was an active member of the
semi-secretive
Cambridge Apostles society, a debating club
largely reserved for the brightest students. Like many members, Keynes retained
a bond to the club after graduating and continued to attend occasional meetings
throughout his life. Before leaving Cambridge, Keynes became the President of
the
Cambridge Union Society and
Cambridge University Liberal Club.
In May 1904 he received a first class B.A. in mathematics. Aside from a few
months spent on holidays with family and friends, Keynes continued to involve
himself with the university over the next two years. He took part in debates,
further studied philosophy and attended economics lectures informally as a
graduate student. He also studied for his 1905
Tripos and 1906
civil service exams.
Keynes's Civil Service career began in October 1906, as a clerk in the
India Office.
He enjoyed his work at first, but by 1908 had become bored and resigned his
position to return to Cambridge and work on
probability theory, at first privately funded
only by two
dons at the university – his father and the
economist
Arthur Pigou. In 1909 Keynes published his
first professional economics article in the
Economics Journal, about the
effect of a recent global economic downturn on India. Also in 1909, Keynes
accepted a lectureship in economics funded personally by
Alfred
Marshall. Keynes's earnings rose further as he began to take on
pupils for private tuition, and on being elected a fellow. In 1911 Keynes was
made editor of
The Economic Journal. By 1913 he had
published his first book,
Indian Currency and Finance. He was then
appointed to the
Royal Commission on Indian Currency and Finance
– the same topic as his book – where Keynes showed considerable talent at
applying economic theory to practical problems.
His written work was published under the name "J M Keynes", though
to his family and friends he was known as Maynard. (His father, John Neville
Keynes, was also always known by his middle name).
Publications
- 1913 Indian Currency and
Finance
- 1914 Ludwig von Mises's
Theorie des Geldes (EJ)
- 1915 The Economics of War
in Germany (EJ)
- 1919 The Economic Consequences of the
Peace
- 1921 A Treatise on Probability
- 1922 The Inflation of
Currency as a Method of Taxation (MGCRE)
- 1922 Revision of the
Treaty
- 1923 A Tract on Monetary
Reform
- 1925 Am I a Liberal?
(N&A)
- 1926 The End of
Laissez-Faire
- 1926 Laissez-Faire and
Communism
- 1930 A Treatise on Money
- 1930 Economic
Possibilities for our Grandchildren
- 1931 The End of the Gold
Standard (Sunday Express)
- 1931 Essays in Persuasion
- 1931 The Great Slump of
1930
- 1933 The Means to
Prosperity
- 1933 An Open Letter to
President Roosevelt (New York Times)
- 1936 The
General Theory of Employment, Interest and Money
- 1940 How to Pay for the
War: A radical plan for the Chancellor of the Exchequer
Throughout his life Keynes worked energetically for
the benefit both of the public and his friends—even when his health was poor he
laboured to sort out the finances of his old college, and at Bretton Woods, he worked to institute an international monetary system
that would be beneficial for the world economy. Keynes suffered a series of
heart attacks, which ultimately proved fatal, beginning during negotiations for
an Anglo-American loan in Savannah,
Georgia, where he was trying to secure favourable terms for the
United Kingdom from the United States, a process he described as "absolute
hell."A few weeks after returning from the United States,
Keynes died of a heart attack at Tilton, his farmhouse home near Firle, East Sussex,
England, on 21 April 1946 at the age of 62. Both of Keynes's parents outlived
him: father John Neville Keynes (1852–1949) by three years,
and mother Florence Ada Keynes (1861–1958) by twelve. Keynes's
brother Sir Geoffrey Keynes (1887–1982) was a distinguished
surgeon,
scholar and bibliophile. His nephews include Richard
Keynes (1919–2010) a physiologist;
and Quentin
Keynes (1921–2003), an adventurer and bibliophile. His widow, Lydia
Lopokova, died in 1981.
The Keynesian Revolution was associated with the rise of
modern
liberalism in the West during the post-war period. Keynesian ideas
became so popular that some scholars point to Keynes as representing the ideals
of modern liberalism, as Adam Smith represented the ideals of
classical liberalism.
After the war
Winston Churchill attempted to check the rise
of Keynesian policy-making in the United Kingdom, and used rhetoric critical of
the
mixed economy
in his
1945 election campaign.
Despite his popularity as a war hero Churchill suffered a landslide defeat to
Clement
Attlee whose government's economic policy continued to be influenced
by Keynes's ideas. By the 1950s, Keynesian policies were adopted by almost the
entire developed world and similar measures for a mixed economy were used by
many developing nations. By then, Keynes's views on the economy had become
mainstream in the world's universities. Throughout the 1950s and 1960s, the
developed and emerging free capitalist economies enjoyed exceptionally high
growth and low unemployment. Professor Gordon Fletcher has written that the
1950s and 1960s, when Keynes's influence was at its peak, appear in retrospect
as a
Golden Age of Capitalism.
[
Much of the recent discussion reflected Keynes's advocacy of international
coordination of fiscal or monetary stimulus, and of international economic
institutions such as the IMF and the World Bank, which many had argued should
be reformed as a "new Bretton Woods" even before the crises broke
out. IMF and United Nations economists advocated a coordinated international
approach to fiscal stimulus. Donald Markwel argued that in the absence of such
an international approach, there would be a risk of worsening international
relations and possibly even world war arising from similar economic factors to
those present during the depression of the 1930s. Among professional economists
the revival of Keynesian economics has been even more divisive. Although many
economists, such as
George Akerlof,
Paul Krugman,
Robert
Shiller, and
Joseph Stiglitz, support Keynesian stimulus,
others do not believe higher government spending will help the United States
economy recover from the
Great Recession. Some economists, such as
Robert Lucas,
questioned the theoretical basis for stimulus packages. Others, like
Robert Barro
and
Gary Becker,
say that the
empirical evidence for beneficial effects from
Keynesian stimulus does not exist. However, there is a growing academic
literature that shows that fiscal expansion helps an economy grow in the near
term, and that certain types of fiscal stimulus are particularly effective.
