Life And Achievements Of John Maynard Keynes

John Maynard Keynes was the British economist. He profoundly influenced the theory and practice of modern macroeconomics. He was considered one of the major economists of the 20th century. These days, he is enjoying a comeback. [1] His works are the basis for the school of Keynesian economics and others various offshoots. Additionally, Keynes wasn’t just an economist. He is also known as a director of the Bank of England, a director of the British Eugenics Society, an art collector, a part of the Bloomsbury Group of intellectuals, a philosopher, a writer and a private investor. I suppose that Keynes is one of the major economists who ever lived. Even now his theories are working. One of many examples of these words is an article under the title “Keynes Was Right” that was published by Paul Krugmannot in “The New York Times” magazine at the end of 2011. Author confirms that Keynes’s advices are every bit as valid now as it was 75 years ago. [3] It is also should be mentioned, that Keynes attracted considerable criticism from a lot of economists in different times.

John Maynard Keynes was born on the 5th of June, 1883 in Cambridge, England in an upper-middle-class family. His father was an economist and a lecturer at the Cambridge University and his mother was the social reformer and the first female Mayor of Cambridge in 1932. Keynes had a sister Margaret Neville and a brother Geoffrey Keynes. They were born in 1885 and 1887 respectively. He received the earliest education at home. Further, he attended The Perse School nursery in 1890 and St Faith’s preparatory school in 1892. Teachers in St Faith’s preparatory school characterized him very positively. “His academic performance is uneven. He is recognized to be quick at arithmetic and algebra. His large vocabulary is also noted. He is criticized for carelessness,” they told. [4] In 1897 he won a scholarship to Eton College. It was a hard competition. Keynes ranks was tenth out of twenty overall and he was the first in mathematics. His studying there was very successful. As a result, he won Eton’s Junior Mathematical Prize (1898), Eton’s Senior Mathematical Prize and the Richards English Essay Prize (1900), Eton’s principal mathematical prize (1901) and the Chamberlayne Prize (1902). At the end of Keynes’s studying in Eton College he was placed the first in mathematics, history and for English essay. In 1902 he won a scholarship to King’s College where he was hardly influenced by the economist Alfred Marshall (one of fathers of Neoclassical school of economics), who prompted Keynes to shift his academic interests from mathematics and the classics to politics and economics. [5] In 1904 he received a first class B.A. in mathematics. After that Keynes continued to involve himself with the university over the next two years. He received M.A. in 1909.

The carrier of Keynes started in October 1906, as a clerk in the India Office. For a first time he was satisfied by his work but in two years he became bored of his work. “I’m thoroughly sick of this place and would like to resign. Now the novelty has worn off I’m bored nine-tenths of the time and rather unreasonably irritated the other tenth whenever I can’t have my own way,” Keynes wrote at September 1907. So, he decided to come back to the Cambridge University and started his work on probability theory. It’s important that “He first appeared in print as a professional economist in 1909. His first professional article, ‘Recent Economic Event in India’ was dealt with the impact upon India of the worldwide depression and financial disturbances of 1907-8, with particular emphasis upon a monetary phenomenon, the mechanism of rupee issue.” Other interesting fact is that “From this article up to 1935 he wrote extensively on economic matters, addressing both professional and the public, with special emphasis on problems in monetary economics; even his substantial contributions to international economics dealt largely with the financial and monetary aspects.” [6] In 1911 Keynes became the editor of the Economic Journal. The first major work on economics was finished in 1913. It was his first book “Indian Currency and Finance”. This book greatly influenced his further life, because he was appointed to the Royal Commission on Indian Currency and Finance.

During the years of the World War I Keynes started working in the Treasury. “He studied relations with allies and recommended means of conserving Britain’s supply of foreign currencies.” [5] In the 1917 he achieved the key position in the Britain Treasury. This year Keynes was appointed Companion of the Order of the Bath for his wartime work. In two years Keynes was appointed as financial representative for the Treasury to the 1919 Versailles peace conference. Keynes was interested in protection German people from high compensation payments. He thought that these payments could heart not just Germany’s economy but the whole world economy. Unfortunately, these payments were appointed even despite his best efforts. Keynes wrote to Prime Minister David Lloyd George:

I ought to let you know that on Saturday I am slipping away from this scene of nightmare. I can do no more good here. I’ve gone on hoping even through these last dreadful weeks that you’d find some way to make of the Treaty a just and expedient document. But now it’s apparently too late. The battle is lost.

As a consequence, he resigned from the Treasury. The analysis of the Treaty appeared in his book “The Economic Consequences of the Peace” (1919). In 1921 Keynes returned to his working on his dissertation on probability. As a result, “A Treatise on Probability” was published. Further, he wrote an obituary for his former tutor Alfred Marshall in 1924. Marshall’s widow was full of appreciation for this great book.

Although Keynes continued to teach at Cambridge University he also contributed a great number of articles to various newspapers and magazines. In 1923 he became chairman of the Liberal journal, The Nation and used it as a vehicle to attack the economic policies of Stanley Baldwin and his Conservative Government. As Chancellor of the Exchequer, Winston Churchill came under attack for his decision to return Britain to the gold standard. Consequently, this led to negative effect on British industry. As a result, the gold standard was cancelled in 1931.

The most important book written by Keynes is “The General Theory of Employment, Interest and Money” (1936). In this book he concluded that classical economics rested on a fundamental error. With this work he improved economic theory by representing how unemployment could occur unwittingly. He also assumed that “the lack of demand for goods and rising unemployment could be countered by increased government expenditure to stimulate the economy. His views on the planned economy influenced President Franklin D. Roosevelt and was a factor in the introduction of the New Deal and the economic policies of Britain’s post-war Labour Government.”[7] He defined three types of unemployment: temporary, voluntary, compulsory. Furthermore, the demand, not supply, determines level of economic activity and that governments needed to step in to prevent persistent underemployment. Keynes believed that classical theory was useful just in definite time frames in the 19th century while his own theory being the general one. This book represented concepts such as the principle of effective demand, the marginal efficiency of capital, the consumption function, liquidity preference and the multiplier. My favourite phrase from this book is “Practical men, who believe themselves to be quite exempt from any intellectual influence, are usually the slave of some defunct economist.”[8] Further, this book and other his works were formalized in terms of formal mathematical models and mixed with neo-classical economics. The main fact is that Neo-Keynesian economics were created in the 1940s. As a result of this process the Philips curve was created. This curve shows the relationship between unemployment and inflation.

During the World War II Keynes published a small but influential book “How to pay for the War” (1940). John Maynard Keynes mentioned that wartime expenditures should be financed by higher taxation. He supposed that this type of policy should be more efficient than deficit spending which could be the cause of an increasing inflation.

During the 1942 Manchester University made Keynes Honorary Doctor of Laws and later he was given a title of Baron Keynes of Tilton. This title brought him a seat in the House of Lords. Keynes decided to choose a seat with the Liberal Party.

In the middle of 1944 Keynes participated in negotiation that established Bretton Woods system. He was protecting the British interests. He proposed to use the new world currency, that he called bancor. Furthermore, he supposed that new global institutions like the World Central Bank and the International Clearing Union should be created. These institutions were invented by him to avoid large trade deficits or surpluses. As a result, the World Bank and International Monetary Fund were created, but they rather reflected American vision. After the end of the World War II, Keynes continued to represent the United Kingdom in the post-war international negotiations.

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.

Until the end of 1950s his approach was used by the majority of developed countries. Additionally, next two decades were extremely successful for these countries. They experienced high growth of economies and very low unemployment. Furthermore, this period of time was called as Golden Age of Capitalism.

To conclude, John Maynard Keynes hardly influenced all modern economics. During his life, he achieved fame as the world’s foremost economist. He wrote a lot of influential works. It’s also should be mentioned that Keynes’s works influenced the process of studying economics in the majority of the universities nowadays. Economic models that has been created with respect to his works, are still working. Additionally, Keynes’s theories are very vital, even when disputed. It’s also a fact that theory of capitalism was improved by him. Besides, now people are living in the countries, which economies are driven with the help of Keynes’s theories. It’s clearly seen that his impact on today’s life is hardly to underestimate.