The Essential Keynes - Softcover

Keynes, John Maynard

Softcover

ISBN 10: 1846148138 ISBN 13: 9781846148132

Publisher: Penguin Classics, 2016

Synopsis

The essential writings of the 20th century’s most influential economist, collected in one volume

Today, John Maynard Keynes is best remembered for his pioneering development of macroeconomics, and for his advocacy of active fiscal and monetary government policy. This uniquely comprehensive selection of his work, edited by Keynes’s award-winning biographer Robert Skidelsky, aims to make his work more accessible to both students of economics and the general reader. All of Keynes’s major economic work is included, yet the selection goes beyond pure economics. Here too are Keynes’s essential writings on philosophy, social theory and policy, and his futurist vision of a world without work. As Robert Skidelsky writes in his introduction: “People talk of the need for a new Keynes. But the old Keynes still has superlative wisdom to offer for a new age.”

For more than sixty-five years, Penguin has been the leading publisher of classic literature in the English-speaking world. With more than 1,500 titles, Penguin Classics represents a global bookshelf of the best works throughout history and across genres and disciplines. Readers trust the series to provide authoritative texts enhanced by introductions and notes by distinguished scholars and contemporary authors, as well as up-to-date translations by award-winning translators.

About this title

About the Author:

John Maynard Keynes (1883–1946) is widely considered to have been the most influential economist of the 20th century. His key books include The Economic Consequences of the Peace (1919); A Treatise on Probability (1921); A Tract on Monetary Reform (1923); A Treatise on Money (1930); and his magnum opus, the General Theory of Employment, Interest, and Money (1936).
 
Robert Skidelsky is Emeritus Professor of Political Economy at the University of Warwick, England, and a member of the House of Lords. His three-volume biography of Keynes received numerous awards, including the Lionel Gelber Prize and the Council on Foreign Relations Prize.

Excerpt. © Reprinted by permission. All rights reserved.:

PENGUIN CLASSICS

THE ESSENTIAL KEYNES

JOHN MAYNARD KEYNES (1883–1946) is widely considered to have been the most influential economist of the twentieth century. His key books include The Economic Consequences of the Peace (1919); A Treatise on Probability (1921); A Tract on Monetary Reform (1923); A Treatise on Money (1930); and his magnum opus, The General Theory of Employment, Interest and Money (1936).

ROBERT SKIDELSKY is Emeritus Professor of Political Economy at Warwick. His three-volume biography of Keynes received numerous awards, including the Lionel Gelber Prize and the Council on Foreign Relations Prize.

John Maynard Keynes

------------------------------

THE ESSENTIAL KEYNES

Edited and with an Introduction by
ROBERT SKIDELSKY

One: THE PHILOSOPHER

Two: THE SOCIAL PHILOSOPHER

Three: THE ECONOMIST

Four: THE POLICY-MAKER

Five: THE ESSAYIST

‘Economics is a very dangerous science’

        John Maynard Keynes,
     ‘Thomas Robert Malthus’

Preface

I have arranged the selected material in such a way as to help the reader rather than for strict consistency. Almost all the excerpts are taken from The Collected Writings of John Maynard Keynes, published in thirty volumes between 1971 and 1989. They are numbered sequentially and are identified by the volume number (CW, 10), title and date of original publication. The page numbers of the volumes of the Collected Writings from which they are taken are included in square brackets, marking the end of the page they refer to. I have grouped together some excerpts under the following topics: The Great Depression, Policies for the Slump, The New Deal and Full Employment Policy. Those readers who want a quick education in Keynes as an analyst of, and policy-maker for, slumps should turn to excerpts 18, 28–31 and 33.

This collection would not have been possible but for the magnificent Collected Writings. Elizabeth Johnson was the first editor; she was succeeded by Donald Moggridge. I would like to thank the Royal Economic Society for permission to publish excerpts from these volumes; King’s College, Cambridge for permission to publish excerpts 1, 2, and 3 from the unpublished papers of J. M. Keynes; Paul Davidson, Meghnad Desai, Geoff Harcourt, Pete Mills and Rod O’Donnell, for their comments on sections of the draft; King’s College archivist Patricia McGuire in helping me locate some handwritten notes in the Keynes Papers; and my impeccable copy editor, David Watson. My research assistant Pete Mills was invaluable in downloading the material I selected from the electronic edition of the Collected Writings.

List of Abbreviations

CW The Collected Writings of John Maynard Keynes

EB Essays in Biography

ECC ‘The Economic Consequences of Mr Churchill’

ECP The Economic Consequences of the Peace

EP Essays in Persuasion

EPG ‘Economic Possibilities for our Grandchildren’

GT The General Theory of Employment, Interest and Money

JMK John Maynard Keynes

KP Keynes Papers, King’s College, Cambridge

ICU International Clearing Union

QTM Quantity Theory of Money

RT A Revision of the Treaty

TMR A Tract on Monetary Reform

TM A Treatise on Money

TP A Treatise on Probability

Introduction

‘Keynes’s ideas will live so long as the world has need of them’

Robert Skidelsky

I

There are hardly any single-volume selections of Keynes writings, and no comprehensive ones.1 This selection aims to make them much more accessible to both students of economics and the general reader perplexed and confused by the war of economists which broke out afresh with the economic collapse of 2008. By this time Keynes’s star had long been in eclipse. A new orthodoxy had arisen which cut economics off from the rest of life, claimed that market economies were naturally stable, and that the only macro-economic task of government was to maintain sound money. Robert Lucas, the high priest of the new classical economics, is said to have told his students at Chicago University, ‘We need spend only ten minutes on Keynes; we know it doesn’t work.’ The things which worked were unimpeded markets.

Keynes had set out to destroy the argument of ‘classical’ economics that a competitive market economy would always ensure full use of potential resources. He invented almost singlehandedly a new branch of economics, macro-economics, to show why this was not true, and to justify active fiscal and monetary policy. The task of overturning orthodox theory seemed all the more urgent in the wake of the Great Depression of 1929–33. The result was The General Theory of Employment, Interest and Money, whose publication in 1936 is conventionally taken to be the start of the Keynesian Revolution. Its main policy fruit was the commitment, till the mid-1970s, by most Western governments, to maintain high and stable levels of employment. The charge that Keynes failed to provide secure micro-foundations for his macro-theory, as well as the contentious implications of that theory for the role of state, led to the view that Keynesian theory was flawed and Keynesian policy led to inflation.

So when the world economy collapsed in 2008–9 the only thing most younger economists, policy-makers and businessmen knew about Keynes was that one did not need to know anything about him. He had largely vanished from their textbooks, briefings and indeed from their consciousness. This left them unprepared for the catastrophic nature of the economic collapse. Today macro-economics is disabled. We are still struggling experimentally with the aftermath of the banking collapse. People talk of the need for a new Keynes. But the old Keynes still has superlative wisdom to offer for a new age.

Students and others are hungry for clues to the riddle of economic life. There have been many books about Keynes, including a rather massive one of my own. But Keynes’s own writings are largely unavailable. The purpose of this single-volume Keynes reader – I have called it The Essential Keynes – is to give the reader a flavour of the quality of Keynes’s mind, style and range, and his approach to ethical, theoretical and practical problems which, so far from having vanished, clamour for a contemporary answer. Keynes is known, if at all, only as the creator of a short-run theory of fiscal stabilization. This was the fiscal tool which emerged from the ferment of ideas in his day. But it was in his explorations of the problem of capitalist instability, and his futurist vision of a world without work, that many today will find their inspiration. My hope is that the selections I have chosen, which include some writings never before published, will provide both meat for the student and food for a wider public. Above all, this book provides readers with the opportunity to acquaint themselves with one of the most remarkable thinkers and characters of the twentieth century.

II

John Maynard Keynes was born at 6 Harvey Road, Cambridge, England on 5 June 1883 into an academic family. He was the eldest son of John Neville Keynes, a logician and economist, and Florence Ada Brown, the daughter of a Congregational divine. He had an outstandingly successful school career at Eton College, which was followed by an equally glittering undergraduate one at King’s College, Cambridge, where he gained a first-class honours degree in Mathematics, wrote papers on the medieval theologian Peter Abelard and the Conservative political philosopher Edmund Burke and became president of the Cambridge Union and the University Liberal Club. Of crucial importance to his intellectual and moral formation was his election, in 1902, to the Cambridge Apostles, an exclusive ‘conversation’ society, where he fell under the influence of the philosopher G. E. Moore, and which brought him the friendship of the subversive biographer Lytton Strachey. Moore’s Principia Ethica remained his ‘religion under the surface’ for the rest of his life. It taught that the highest forms of civilized life were friendship, aesthetic enjoyments and the pursuit of truth. His economic activities were always in the service of these ethical goals. That is why he wanted the economic machine to work full blast till the material conditions for the ‘good life’ were achieved, at which point economists might retire in favour of philosophers.

In 1906 Keynes was placed second in the Civil Service Examination, his worst marks being in economics, which he had studied briefly under Alfred Marshall, professor of economics at Cambridge University. (He never got a degree in economics.) After two years in the India Office, in which he wrote a thesis on probability in his spare time, he started lecturing on monetary economics at Cambridge; in 1909 his thesis won him a fellowship at King’s College, which remained his academic home for the rest of his life. His membership of the Bloomsbury group, a commune of Cambridge-connected writers and painters who lived in the Bloomsbury district of London, dates from the start of his friendship with the painter Duncan Grant, Lytton Strachey’s cousin, in 1908. In 1913 he published his first book, Indian Currency and Finance, and served on the Royal Commission on Indian Finance and Currency. Cambridge and Bloomsbury formed the two fortresses of his spiritual life, from which radiated out his friendships, interests and activities in the great world of affairs.

Keynes’s advice to the UK Treasury helped to avert the collapse of the gold standard in the banking crisis of August 1914 which accompanied the outbreak of the First World War. From January 1915 to June 1919 he was a temporary civil servant at the Treasury, showing a notable ability to apply economic theory to the practical problems of war finance. He was against military conscription and would have been a conscientious objector had his Treasury work not exempted him from military service. When Lloyd George succeeded Asquith as prime minister in December 1916, Keynes, then aged thirty-four, became head of the Treasury’s new ‘A’ Division, set up to manage Britain’s external finance. He helped build up the whole system of inter-Allied purchases, while chafing at Britain’s growing dependence on American loans and the failure to arrange a compromise peace.

Keynes was chief Treasury representative at the Paris Peace Conference in 1919, where he tried unavailingly to limit Germany’s bill for reparations, and to promote an American loan for the reconstruction of Europe. His resignation from the Treasury on 5 June 1919 was followed by the publication, in December, of The Economic Consequences of the Peace, the book which first brought him international fame. A bitter polemic, informed by both economic argument and moral passion, against Lloyd George’s policy of trying to make Germany pay for the war ‘till the pips squeak’, it reflected his fears for the future of European civilization. Unless the Versailles Treaty were drastically revised, vengeance, he predicted, would follow.

In 1925 he took the lease of Tilton, a farmhouse in East Sussex, next door to Charleston, where Duncan Grant lived with the painter Vanessa Bell. This move coincided with his marriage to the Russian ballerina Lydia Lopokova, for whom his love and fascination never waned, who softened the edges of his astringency and who gave his life the emotional stability and regular routine for sustained intellectual effort. Thereafter, his life was divided between Cambridge, London, and East Sussex.

He was a spectacularly successful investment bursar of his college, King’s College, and despite some major reverses, made a small fortune for himself. He was worth £400,000 (£14 million, or $22 million in today’s values) when he died. In London, where he rented a house at 46 Gordon Square, he was, at various times, on the boards of five investment and insurance companies, the chief one being the National Mutual Life Assurance Company, which he chaired from 1921 to 1937. Between 1923 and 1931 he was chief proprietor and chairman of the board of the weekly journal the Nation and Athenaeum, contributing regular articles on financial and economic topics. He remained chairman of the board of the New Statesman and Nation when the two journals merged in 1931. Between 1911 and 1945 he edited the Economic Journal. In the 1920s his ideas on economic policy permeated Whitehall through monthly meetings of the Tuesday Club, a dining club started by his friend and stockbroker, Oswald Falk. In the 1930s, he sought to influence policy through his membership of the prime minister’s Economic Advisory Council.

In the 1920s the post-war European inflations, succeeded in Britain by heavy unemployment, formed the background to his two theoretical books A Tract on Monetary Reform (1923) and A Treatise on Money (1930), which dealt with the causes and consequences of monetary instability, and their remedies. These theoretical books chronicle Keynes’s ‘struggle to escape from the stranglehold of the Quantity Theory [of Money]...’2 They were punctuated by two notable polemical pamphlets, ‘The Economic Consequences of Mr Churchill’ (1925) and ‘Can Lloyd George Do It?’ (1929), the latter co-authored with Hubert Henderson. The first attacked Churchill’s decision, as chancellor of the exchequer, to put the pound back on the gold standard at an overvalued exchange rate against the dollar; the second was a plea for a large programme of public investment. Reconciled to Lloyd George in 1926, Keynes attempted to provide the Liberal Party with a social philosophy of the ‘middle way’ between individualism and state socialism, suitable for an inflexible industrial structure. Regulation of demand, he would later write, was the only way to maintain capitalism in conditions of freedom.

By this time Keynes was the most famous economist in the world, made so by his superb style and the audacity of his ideas. But he had not ‘revolutionized’ economics, and he himself felt that his theoretical work was incomplete. The Great Depression of 1929–32, together with technical flaws in A Treatise on Money, took Keynes back to the theoretical drawing board. What now seemed to be needed was not an explanation of Britain’s ‘special problem’ of heavy unemployment, or even of the business cycle, but an explanation of how plant and labour could remain unused for long periods in a world in which wants were far from being satisfied. He felt this to be both economically and morally inefficient. He drew inspiration from the ‘first Cambridge economist’, Thomas Robert Malthus, from whom he got the phrase, and possibly the idea of, ‘effective demand’. From the autumn of 1931 to the summer of 1935, Keynes worked on a new book of theory, initially entitled ‘The Monetary Theory of Production’. He was helped not just by older economists like Ralph Hawtrey and Dennis Robertson, but by Roy Harrod and a ‘Cambridge Circus’ of young disciples headed by Richard Kahn, his ‘fav...

About this edition

• Publisher: Penguin Classics
• Publication date: 2016
• ISBN 10: 1846148138
• ISBN 13: 9781846148132
• Binding: Paperback
• Number of pages: 592
• Editor: Skidelsky Robert