John Maynard Keynes (1883-1946)

The English economist John Maynard Keynes is regarded as the originator of modern macroeconomics.

In 1935 George Bernard Shaw received a letter from John Maynard Keynes in which Keynes asserted, “I believe myself to be writing a book on economic theory, which will largely revolutionize… the way the world thinks about economic problem”. And, in fact, Keynes’s The general theory of employment, interest and money (1936) did revolutionize economic analysis and established Keynes as one of the most influential economists of all time.

The son of an eminent English economist, Keynes was educated at Eton and Cambridge. While his early interests were in mathematics and probably theory, Keynes ultimately turned to economics.

Keynes was far more than an economist. He was an active, many-sided man who also played such diverse roles as principal representative of the Treasury at the World War I Paris Peace Conference, a director of the Bank of England, trustee of the National Gallery, editor of the Economic Journal. He also ran an investment company, organized the Camargo Ballet (his wife, Lydia Lopokova, was a renowned star of the Russian Imperial Ballet), and built the Art Theatre at Cambridge.

In addition Keynes found time to amass a $2 million personal fortune by speculating in stocks, international currencies, and commodities. He was also a leading figure in the “Bloomsbury Group”, an avantgarde of intellectual luminaries who greatly influenced the artistic and literally standard of England.

Most importantly, Keynes was a prolific scholar. His book encompassed such widely ranging topics as probably theory, monetary economics, and the economic consequences of the World War I peace treaty. His magnum opus, however, was the General Theory, which was described as “a work of profound obscurity, badly written and prematurely published”. Yet the General Theory attacked the classical economists’ contention that recession will automatically cure itself. Keynes’ analysis suggested that recession could easily spiral downward into a depression. Keynes claimed that modern capitalism contained no automatic mechanism which would propel the economy back towards full employment. The economy might languish for many years in depression, and the depression of the 1930s seemed to provide sufficient evidence that Keynes was right. His basic policy recommendation – a starting one in view of the balanced-budget sentiment at the time – was for government in these circumstances to increase its spending to include more production and put unemployed back to world.

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