John Maynard Keynes

John Maynard Keynes (5 June 1883 - 21 April 1946) was a British economist. His ideas were highly influential, making him one of the founding fathers of modern theoretical macroeconomics. Breaking with the neoclassical orthodoxy of his era, Keynes argued that macroeconomic relationships differ from their microeconomic counterparts. He went on to advocate government intervention into markets and proposed a demand-driven model for money. His theories formed the basis of what came to be known as Keynesian economics. Keynes rejected socialism--he did not want government to own or even control industry, but rather he wanted the government to optimize the economy though its "fiscal policies," that is, taxes and spending. He was a lifelong member of the British Liberal Party, which held few seats in Parliament after 1920.

His ideas on dealing with an economy in deep recession or depression attracted increased attention in 2008-9, as the worldwide Recession of 2008 proved increasingly resistant to solutions.

"When the facts change, I change my mind. What do you do, sir?" [1]

Biography

Keynes was born in Cambridge, and went on to attend Eton College where he excelled in mathematics, classics, and history. In 1902 he entered King's College, Cambridge to read for a degree in mathematics, however, due to his interest in politics he found himself increasingly drawn toward economics. It was at Cambridge that he found himself under the tutelage of Alfred Marshall and A.C. Pigou. Keynes accepted an economics lectureship at Cambridge funded personally by Marshall. Soon thereafter he took a leave of absence to work for the British Treasury, an institution in which his expertise was frequently called upon during the First World War. Indeed, at the end of the war, Keynes was selected to be the Treasury's principal representative at the Paris Peace Conference of 1919. The subsequent Treaty of Versailles precipitated Keynes' resignation from the Treasury, as he felt it was draconian in its treatment of Germany.

He returned to Cambridge. His The Economic Consequences of Peace in 1920 was a highly influential slashing attack on the economic disasters that he said would be caused by the Versailles Treaty. He furthered these ideas in 1922's A Revision of the Treaty, in which he argued that the reparations that Germany was being forced to pay would lead to the collapse of the German economy. In 1923, the German economy entered a period of hyperinflation, in the eyes of many validating Keynes' critique. As the decade progressed, Keynes found himself becoming increasingly involved in the political process. First supporting the Liberal Party's 1929 "Election Manifesto", and later as an advisor to Ramsay MacDonald's Labour government.

Keynes' magnum opus appeared in 1936, The General Theory of Employment, Interest, and Money. Largely a reaction to the high unemployment that had characterised post-war Britain, the book was among the most revolutionary works of modern economics, signaling a paradigm shift within modern economic thought. As the era went on his prestige and celebrity grew, in 1942 he was made a lord, and was Britain's representative at the 1944 Bretton Woods Conference. He died of myocardial infarction (heart attack) in 1946.

Keynesian Economics

Keynesianism centres around the concept of total spending within an economy, what Keynes terms aggregate demand and its effect upon output and inflation. In the eyes of Keynesians, the free market does not necessarily tend toward full employment. Periods such as this were witnessed in the 1930's during the Great Depression, and in the eyes of Keynes could only be solved by increasing the level of expenditure within the economy. In order to do this Keynes advocated increasing government expenditure, frequently in the form of deficit spending, in order to extricate the economy from recession. At the same time Keynes argued that if expenditure within the economy was too high and the economy was at full employment then this would inevitably lead to inflation, as such in periods such as this Keynes advocated tax increases, and a reduction in government expenditure in order to "deflate" the economy.

As is evident, Keynesian thinking went on to influence the fiscal policy of many governments, as well as influencing a generation of economists. That being said, Keynes was not without his critics, most notably Friedrich von Hayek, whose critiques of Keynesian theory went on to form the basis of the Supply-side, monetarist, and Austrian School's objections to Keynesianism.

Criticism of Keynes and Keynesian Economics

Although Keynes was not a socialist, he ridiculed businessmen and was criticized by conservatives both during the Bretton Woods Conference and afterwards for his pro big government stance. His policies about expanded government intervention were criticized for infringing on free markets. Liberatrian opponents to Keynes argue that in the long run the invisible hand of the markets would correct any problem that would arise. Keynes responded by noting, "In the long run, we are all dead."

Further reading

• Felix, David. Keynes: A Critical Life (1999) online edition
• Hutt, W. H. Keynesianism--Retrospect and Prospect: A Critical Restatement of Basic Economic Principles (1963) an attack on his theories by a conservative economist. online edition
• Keynes, Milo, ed. Essays on John Maynard Keynes, (1975)
• Harrod, Roy. The Life of John Maynard Keynes, (1951)
• Moggridge, D. E. Maynard Keynes: An Economist's Biography (1995) online edition
• Patinkin, Don. "Keynes, John Maynard", in The New Palgrave: A Dictionary of Economics, v. 2, 1987, pp. 19-41.
• Skidelsky, Robert. John Maynard Keynes: Hopes Betrayed 1883-1920, (1992), the standard scholarly biography
  • John Maynard Keynes: The Economist as Saviour 1920-1937, (1994)
  • John Maynard Keynes: Fighting for Britain 1937-1946 (2001)

External Links

• John Maynard Keynes Biography from The Concise Encyclopedia of Economics
• J.M. Keynes, The Economic Consequences of Peace
• J.M. Keynes The General Theory of Employment, Interest, and Money