Keynes entered the University of Cambridge in October 1902. Here, he quickly established himself as a pioneer of King's College with the help of the ascendancy that he had achieved over his contemporaries by a general affability and a pronounced talent for the management of student societies. He blossomed as a polemical orator, becoming president of the University Union Society, the undergraduate counterpart of the House of Commons. Gradually, as he came under the influence of Alfred Marshall, the leading Cambridge economist, his interest in mathematics waned and he turned to politics and economics.
The Selected Few
Keynes was introduced to an important circle of writers and artists at Cambridge, where he blended effortlessly into the idealistic atmosphere of the 'higher sodomy'. The group attained its most rarefied form in the secret society known as the Cambridge Apostles, to which he was almost immediately elected. Among its members were Leonard and Virginia Woolf, the painter Duncan Grant and the art critic Clive Bell, Lytton Strachey, a senior of Keynes who inducted the young man into the exclusive private club known simply as 'the Society'. Throughout his life, Keynes was to cherish the affection and influence of this tribe of free souls.
Early Career
After graduating from Cambridge, in August 1906, he was second among the 10 selected for civil service examination and entered the India Office in Whitehall. His experience there formed the basis of his first major work, a definitive example of pre-World War I Indian finance and currency, which established him as an economist. As a reorganization at the economics department, Cambridge, an opportunity opened up for Keynes. Keynes resigned his position with government and went back to Cambridge, where he taught economics with great success till 1915.
As a teacher he was unique and inspired great devotion. His success as a teacher could be credited to the fact that he adored youth. At the time of World War I, Keynes was called back to the UK Treasury, where he looked after the economic management of the war. His special responsibility covered relations with allies and the conservation of England's scant supply of foreign currencies.
He excelled at his job and the influence he gained earned him position with the British delegation to the Versailles Peace Conference in 1918. The outcome of the conference was not, however, to Keynes' likings. On his return to England, Keynes resigned from the Treasury and turned bitterly to writing out his thoughts on the peace process.
Attacking the leading political figures, Keynes translated personal distress into public protest and published Economic Consequences of the Peace in 1919, denouncing the Treaty of Versailles. The permanent importance of this polemical essay lies in its economic analysis of the excessive weight of reparations upon the German economy and the corresponding lack of probability that they ever would be paid. What guaranteed the book general success were the blistering sketches of Woodrow Wilson, Clemenceau, and Keynes' old chief, Lloyd George. As a consequence, in some Whitehall circles, Keynes remained to the end of his life a man not quite to be trusted, an iconoclast perfectly willing to rock any boat into which he had imprudently been invited.
Keynes entered the University of Cambridge in October 1902. Here, he quickly established himself as a pioneer of King's College with the help of the ascendancy that he had achieved over his contemporaries by a general affability and a pronounced talent for the management of student societies. He blossomed as a polemical orator, becoming president of the University Union Society, the undergraduate counterpart of the House of Commons. Gradually, as he came under the influence of Alfred Marshall, the leading Cambridge economist, his interest in mathematics waned and he turned to politics and economics.
The Selected Few
Keynes was introduced to an important circle of writers and artists at Cambridge, where he blended effortlessly into the idealistic atmosphere of the 'higher sodomy'. The group attained its most rarefied form in the secret society known as the Cambridge Apostles, to which he was almost immediately elected. Among its members were Leonard and Virginia Woolf, the painter Duncan Grant and the art critic Clive Bell, Lytton Strachey, a senior of Keynes who inducted the young man into the exclusive private club known simply as 'the Society'. Throughout his life, Keynes was to cherish the affection and influence of this tribe of free souls.
Keynes and The Great Depression
Keynes' response to the economic tragedies of the 1930s altered his public reputation and swept him to permanent fame. Politicians and economists were universally bewildered by events and sworn on reliance in traditional policies, with a few noteworthy exceptions. Conventional economic wisdom held against mounting contrary evidence. The evidence that showed that time and nature would restore prosperity if government did not try to manipulate the economy. After all, the unemployed could always get job if they only were willing to work for lower wages. Businessmen could always restore their sales by the parallel strategy of slashing their prices. A few of the weaker brethren would indubitably be wiped out in the process. Nevertheless, if all groups accepted the discipline of competitive adjustment, soon recovery, prosperity, and higher wages would return. Unfortunately, the remedy worked nowhere. In the US, Franklin Roosevelt's 1932 landslide presidential victory over Herbert Hoover attested to the political bankruptcy of laissez-faire. New explanations and new policies were urgently needed. These Keynes supplied.
His enduring triumph was his composition in the early 1930s, the period of unemployment and depression. Conventional economics could not cope with the extraordinary events. This unemployment crisis inspired his two great works, A Treatise on Money first major work which indicated the direction his ideas were taking away from the conventional approach, published in 1930 and the revolutionary General Theory of Employment, Interest and Money his most important work giving the culmination of his ideas, published in 1935-36. He argued that full employment was not an automatic condition, expounded a new theory of the rate of interest, and set out the principles underlying the flow of income and expenditure, and denied the Treasury view that unemployment was incurable. His views on a planned economy influenced Roosevelt's 'New Deal' administration
The central message of his theory is readily translated into two powerful propositions :
He outrightly declared the existing theory of unemployment nonsense. In depression, according to Keynes, there was no wage so low that it could eliminate unemployment. Accordingly, it was wicked to blame the unemployed for their plight. The second proposition proposed an alternative explanation about the origins of unemployment and depression. This centered upon aggregate demand i.e. the total spending of consumers, business investors, and public agencies. When aggregate demand was low, sales and jobs suffered. When it was high, everyone gained.
From these generalities there flowed a powerful and comprehensive view of economic behavior. Because consumers were not spending due to their low income, they were not the source of business cycle fluctuations. The dynamic factors were business investors and government. As their markets become saturated, businesses reduce their investments, setting in motion a dangerous cycle : less investment, fewer jobs, less consumption and even less reason for business to invest.
In an extremely short period of time, Keynes convinced most of his professional colleagues of his economic beliefs. During World War II and afterwards, one Western democracy after another affirmed its new commitment to maintain high employment. In the United States the Employment Act of 1946 formally imposed upon presidents and congresses the duty of maintaining prosperity.
The General Theory
The General Theory of Employment, Interest and Money was Keynes' last major written work, which threw economists into two violently opposed camps. In it, he had insisted that the contemporary world is ruled by little other than the ideas of economists and political philosophers. Though a book written for the professionals, it has its light moments. More than any other book by Keynes, the work was a final work and far from a complete break with his earlier writing. Keynes, unlike Darwin, Newton, and even Marshall, was not one to hold back. As soon as he thought he had something to say, it was made available to the world by way of the printed words.
Each succeeding work, built on the contributions of earlier ones, included admissions of earlier errors and confusions; and new contributions were added to the distilled products of earlier works. In this sense, the General Theory reflected 30 years of thinking, pervading and writing.
The Later Phase
Overstrained by wartime exertion, at the age of 54, in 1937, he suffered a serious heart attack, which was to limit his activities in the next nine years. Two year later, though not completely recovered, he returned to teaching at Cambridge, wrote three influential articles on war finance entitled How to Pay for the War, published in 1940, in which he urged that a portion of every wage career's pay should automatically be invested in government bonds; and also insisted that the trade unions could accomplish little by insisting on wages rise with the cost of living, when in fact the supply of consumable goods had to decline. Here, Keynes not only proposed compulsory savings as the instrument of policy for reconciling the need of incentive and the avoidance of inflation, but he also developed the concept of the inflationary gap. The inflationary gap has become an indispensable tool of planners both in capitalist and in non-capitalist countries. However, by his How to Pay for the War, he served once again with the Treasury as an advisor.
Keynes turned his thoughts to the design of international financial institutions to limit the spread of depression. In 1942, he was made a Baron, and two years later he headed the British delegation to the United Nations Monetary and Financial Conference, the Bretton Woods Conference in 1944, where he played a prominent part. But the institutions that resulted from the conference, the International Monetary Fund and the World Bank bear much stronger marks of the orthodox theories of the United States Treasury of that time rather than of Keynes' thinking.
His last major public service was his brilliant negotiation in the autumn and early winter of 1945 of multi-billion dollar loan granted by the United States to England. He was a member of the Count of the Bank of England and was known as Lord Keynes of Litton, a peer of the realm. In the old Bloomsbury tradition of disrespect for the conventional, he wryly commented, "I am not sure which of us is being made an honest woman - the Old Lady (as the Bank of England is popularly known) or me." The worry was groundless. Keynes' old enemies had by then capitulated to one of country's supreme intellects. Keynes could not take up the excessive stress. Unfortunately, despite the longevity of his parents, Keynes died on April 21, 1946, at the age of 63.
John Keynes, an English economist, journalist and financier, was best known for his revolutionary economic theories. The Keynession economics on the causes of prolonged unemployment was considered his masterpiece. Keynes was a man who as an editor, writer, financier, and investor, teacher, administrator, and public servant, accomplished as much in each of these fields. He was also in close contact with contemporary artists, the world of ballet and theater.
Educated at Eton and later in 1902, he won a scholarship to King's College, Cambridge in mathematics. His extracurricular activities of all kinds included dramatics and athletics. His proficiency in sports is also notable.
1909 The Recent Economic Events in India
1911 Principal Averages and Laws of Error, which Lead to Them
Influence of Parental Alcoholism
1912 The Foreign Trade of the UK at Prices of 1900
1913 Indian Currency and Finance
1914 The Prospects of Money
War and the Financial System
The City of London and the Bank of England
1915 The Economics of War in Germany
1919 The Economic Consequences of the Peace
1921 A Treatise on Probability
1922 Revision of the Treaty
The Inflation of Currency as a Method of Taxation
1923 A Tract on Monetary Reform
Some Aspects of Commodity Markets
Population and Unemployment
The Measure of Deflation
Currency Policy and Unemployment
1924 Does Unemployment Need a Drastic Remedy ?
Monetary Reform
A Comment on Professor Cannan
1926 Laissez-Faire and Communism
1927 A Note on Economy
A Model form for Statements of International Balances.
1929 A Rejoinder to Ohlin's The Reparation Problem
1930 A Treatise on Money
1931 The Problem of Unemployment
Essays in Persuasion
1932 The World Economic Outlook
The Prospects of the Sterling Exchange
The Dilemma of Modern Socialism
The World's Economic Crisis and the Way of Escape
Saving and Usury
A Note on the Long-term Rate of Interest in Relation to the Conversion Scheme
1933 A Monetary Theory of Production
The Means to Prosperity
National Self-sufficiency
The Multiplier
Essays in Biography
1935 The Future of the Foreign Exchange
1936 The Supply of Gold
General Theory of Employment, Interest and Money
1937 The General Theory of Employment
The Theory of the Rate of Interest
Some Economic Consequences of a Declining Population
1938 Comments on Mr. Robertson
Storage and Security
On the Distribution of Income and the Propensity to Consume
An Abstract of a Treatise on Human Nature
1939 The Process of Capital Formation
Relative Movements of Real Wages and Output
The Income and Fiscal Potential of Great Britain
1940 The Concept of National Income : Supplementary Note
How to Pay For the War
1943 The Objective of International Price Stability
1946 The Balance of Payments of the United States
June 5, 1883 Birth of John Maynard Keynes.
1897-1901 Student at Eton.
1902-1905 Undergraduate at Cambridge.
1906-1908 Preparation for the Civil Service.
In the India Office.
1908 Lecturer in Economics at Cambridge and Fellow of King's College.
1909 Found the Political Economy Club.
1911 Became Editor of the British Economic Journal.
1913 Member of Royal Commission on Indian Finance and Currency.
1914-1919 Served in the British Treasury.
1917 Received a CB (Companion of the Bath), a rare honor for a temporary civil servant.
1919 Resigned from Treasury.
1920 Economic Advisor to the Provincial Insurance Company.
1922 Edited and Contributed to Reconstruction in Europe.
1925 Married Lydia Lopokova of the Diaghilev Russian Ballet.
1929-1930 Member of the Committee of Enquiry into Finance and Industry.
1930 Appointed member of Economic Advisory Council to report to the Cabinet.
1933-1934 Meetings with President Roosevelt on New Deal policies.
1935-1936 Building Cambridge Theatre.
1937 Suffered from serious heart attack.
1940-1946 Public service, inclusive of mobilization and conservation of dollar resources.
Advisor on fiscal policies.
Leadership in the new programs for international collaboration.
1942 Began work on Committee for Encouragement of Music and the Arts.
Became Lord Keynes of Tilton.
1944 Bretton Woods Conference.
Continuance of discussions of International Monetary Cooperation.
1945 Negotiations for the US Loan.
April 21, 1946 Death of Keynes.
Keynes' work was very varied and he wrote on any issues of the day he felt important. He was particularly critical of the amount of money demanded from Germany for war reparations after World War I and this prompted him to write a pamphlet.
The Economic Consequences of the Peace (1919)
In 1919, Keynes had presented in The Economic Consequences of the Peace, a lugubrious view of the future of 19th century capitalism. The system was in jeopardy; population was increasing at a rapid rate in the West, with the result that Europe had to pay much more dearly for its food and raw material.
Keynes at this time was especially impressed by the threat to savings and maldistribution of pre-war days. Not being fearful of excessive savings at all times and under all conditions, he in 1919, devoted much space to the fearful effects of galloping inflation on savings in war-torn Europe. It had made possible the accumulation and economic progress of the 19th century.
Keynes' vision revealed the embryo of his maturity theory. It remained only to conceptualize this vision in his theory. A few years after the publication of The Economic Consequences of the Peace, Keynes defended his position against criticism by Beveridge, admitting that the terms of trade had temporarily turned in favor of Britain, but also maintained that the decline in the volume of British exports itself was a symptom of excessive population.
Keynes' main contribution, which established him as an economist, was to raise and dispose of the issue of the transfer problem.
A Treatise on Probability (1921)
In 1920, Keynes began to prepare his Treatise on Probability for publication, the work that he completed in 1911. However it was published in 1921, and was considered the most important of his work as far as mathematical archive was concerned. In this work, he argued that classical theory of probability had a logical relation and so it was objective. A statement involving probability relations had a truth-value, independent of people's opinions. Keynes' work caused something of a stir, arousing the young Cantabrigian Logician, Franck P Ramsey, who is 1926, published a paper Truth and Probability arguing against Keynes.
Other important ideas discussed by Keynes in Treatise on Probability is that probability relations form only a partially ordered set in the sense that two probabilities could not necessarily always be compared. Keynes also argued that probability was a basic concept, which could not be reduced to other concepts.
Keynes made a fortune speculating in international currencies and wrote Treatise on Probability, a work that demonstrated unusual capacity in the rarified atmosphere of mathematical logic.
With the worldwide slump, post 1929 period, Keynes set himself to the task of explaining and of coming up with new methods to control trade-cycles. As a result two book were produced : A Treatise on Money and The General Theory of Employment, Interest and Money.
I do not know, which makes a man more conservative...to know nothing but the present, or nothing but the past.
A study of the history of opinion is a necessary preliminary to the emancipation of the mind.
The difficulty lies, not in the new ideas, but in escaping from the old ones which ramify…into every corner of our minds.
For myself I am absolutely and completely desolated. It is utterly unbearable to see day by day the youths going away, first to boredom and discomfort, and then to slaughter.
I am not sure which of us is being made an honest woman - the Old Lady (as the Bank of England is popularly known) or me.
I believe myself to be writing a book on economic theory which will largely revolutionize…not, I suppose, at once, but in the course of the next ten years…the way the world thinks about economic problems
Those, who are strongly wedded to what I shall call 'the classical theory', will fluctuate, I expect, between a belief that I am quite wrong and a belief that I am saying nothing new. It is for others to determine if either of these on the third alternative is right.
There are the Trade-Unionists, once the oppressed, now the tyrants, whose selfish and sectional pretensions need to be bravely opposed.
I am sure that the power of vested interests is vastly exaggerated compared with the gradual encroachments of ideas.
There is no harm in being sometimes wrong - especially if one is promptly found out.
Civilization is a tradition of the past, a miraculous construction made by our fathers of which they know the vulnerability better than we do.
We certainly live in a barbarous age; but our objects should be to emerge from it, and if there is a new weapon forged for that purpose we have no right to overlook it.
New forums and modes spring from the fruitful minds of individuals.
It is ideas, not vested interests, which are dangerous for good or evil.
Keynes emerged as a very successful investor, with the investment of the funds of his insurance company (he had done remarkably well with the investment of King's College, with one college fund of £30,000 (rising to £380,000 in 13 years), was due to his theory of investment. In 1936, Keynes reported over 15 years of his stewardship for the National Mutual Life Assurance Company.
Overall, his assets grew from £58,000 to £506,000 (about $2,500,000) during 1924-1937, which was remarkable in history of British tax rates. This was all because he had the vision to see the future of interest rates imbued with optimism, studying the individual company and commodities in order to select proper securities for purchase.
In World War II, his great achievements were in the international field; he was the main architect of the International Monetary Fund, and he negotiated endlessly on commercial policy, on the financing of British needs by the United States, the disposition of international commodities, and the Anglo-American Post-War Loan.
His accomplishment during the years 1937-1946 was the great influence on British financial policy. Serving for years as the chief architect of International Monetary Cooperation, he almost single-handedly achieved the British loan of 1946.
