Background

Keynes was born on June 5, 1883 in Cambridge, England, to an upper-middle-class family. The son of John Neville Keynes, registrar of the University of Cambridge and eminent logician and economist. Maynard's mother, a charming and talented woman, was onetime mayor of Cambridge.

Education

Keynes won a scholarship to Eton, where he distinguished himself academically and made many friends among the more intellectual members of the British upper classes. The influence of these worldly companions, mixed with that of his home and Cambridge, made Keynes high-thinking, a little austere, and self-confident in intellectual matters as may be seen in some of his later attitudes. He entered King's College, Cambridge, also on a scholarship, and took his degree in mathematics in 1905.

Career

Keynes began a career in the civil service, where he was assigned to the India Office from 1906 to 1909. There he acquired an intimate knowledge of the government service and an interest in Indian currency and finance that was to bear fruit a few years later. In 1909 Keynes was elected fellow of King's College and returned to Cambridge. In 1911 he was chosen, in spite of his youth and inexperience, as editor of the Economic Journal, the publication of the Royal Economic Society and one of the leading professional journals. From that time until 1945 his duties were carried out with outstanding promptness and efficiency.

In 1913 his first book, Indian Currency and Finance, was published shortly after he was appointed to the Royal Commission on Indian Currency and Finance. His book has been referred to as the best in the English language on the gold exchange standard. With the outbreak of World War I Keynes entered the Treasury, first as an unofficial and unpaid assistant. Before the end of the war he held a position equivalent to an assistant secretary and was largely responsible for handling Interallied finances.

At the conclusion of the war Keynes went to the Paris Conference as principal representative of the Treasury and deputy for the chancellor of the Exchequer on the Supreme Economic Council. It soon became apparent to him that the economic terms of the treaty and particularly the reparations settlement were impossible of fulfillment. He resigned in June 1919 and set forth his case in The Economic Consequences of the Peace (1919). Although the book aroused tremendous controversy, subsequent events have demonstrated the substantial correctness of his position. Having left the public service, Keynes returned to Cambridge as second bursar of King's College. In 1921 he assumed the first of a number of important company directorships. He published A Treatise on Probability and, a year later, A Revision of the Treaty, a sequel to The Economic Consequences. In 1923 his Tract on Monetary Reform appeared.

Keynes's Treatise on Money, a two-volume work that generations of students have found full of brilliant insights but incomprehensible as a whole, was published in 1930. Finally, in 1936, came Keynes's General Theory of Employment, Interest and Money, a book that not only revolutionized economic theory but also had a direct impact on the lives of a large proportion of the world's population.

With the beginning of World War II, Keynes again entered the public service. In July 1940 he was asked to serve as adviser to the chancellor of the Exchequer, and he was soon after elected to the Court of the Bank of England. Through his work, national income and expenditure accounts were developed and utilized in the preparation of wartime budgets. In addition to internal finance, he had special responsibility for intergovernmental finance, lend-lease, and mutual aid. This work required that he become a sort of special envoy to Washington and Ottawa in particular. In the closing days of the war, Keynes played a major role in negotiating the United States loan to Great Britain and in the establishment of the International Monetary Fund and the Bank for Reconstruction and Development.

Keynes died of a heart attack on Easter Sunday, April 21, 1946, shortly after having returned from the inaugural meetings of the International Monetary Fund and the World Bank in Savannah, Georgia.

Achievements

• Keynes is widely considered to be one of the most influential economists of the 20th century and the founder of modern macroeconomics theory. His ideas are the basis for the school of thought known as Keynesian economics, and its various offshoots. He revolutionized economic theory and policy by linking employment and income to public and private expenditure. He is also known for his role in the creation of new international monetary institutions in World War II.
  
  Time magazine included Keynes among its Most Important People of the Century in 1999.

Works

More photos

• book

  • Indian Currency and Finance

    (Indian Currency and Finance is an overview of the rupee, ...)

    1913
  • The Economic Consequences of the Peace 1919
  • A Treatise on Probability 1921
  • A Revision of the Treaty 1922
  • A Treatise on Money: Two Volumes Complete in One 1930
  • Essays In Persuasion 1931
  • The Great Slump of 1930 eBook: John Maynard Keynes: Kindle Store 1931
  • The General Theory of Employment, Interest, and Money 1936
  • How to Pay for the War; a Radical Plan for the Chancellor of the Exchequer 1940

Politics

Keynes was a lifelong member of the Liberal Party, which until the 1920s had been one of the two main political parties in the United Kingdom. He had helped campaign for the Liberals at elections from about 1906, yet he always refused to run for office himself.

As a lifelong pacifist he had initially favored peaceful containment of Nazi Germany, yet he began to advocate a forceful resolution while many conservatives were still arguing for appeasement. After the war started he roundly criticised the Left for losing their nerve to confront Hitler.

Views

Keynes disagreed with both the labor market analysis and the goods market analysis of the classicists. He argued that changes in money wage rates do not result in corresponding changes in real wages because of their impact on the incomes and, therefore, on the expenditures of wage earners. Lower money wages, he argued, would force lower demand for goods and services and therefore lower their prices. Real wages would be unchanged. With respect to the product market, Keynes held that saving is a function of the level of income rather than of the rate of interest.

There is no reason to believe that the amount that investors will be willing to invest (determined, according to Keynes, by the rate of interest and by the expectations about the future held by potential investors) will turn out to be equal to the amounts that savers wish to save out of a full employment level of income. Where savers wish to save more than investors wish to invest, part of current output will go unsold. This will lead producers to cut back on current output and therefore on employment and income. As income falls, saving will fall. Income will keep on falling until savers are willing to save no more than investors wish to invest.

Since the system, as Keynes saw it, does not tend to seek full employment when left to itself, it is necessary for policymakers to do so. Basically, two possibilities exist: monetary authorities may induce investors to invest the desired amounts through their control over the rate of interest, or fiscal authorities may close the gap between investment and full employment levels of saving with government expenditures. Keynes was somewhat pessimistic about the ability of monetary authorities to bring about the necessary changes in private investment expenditures. Under some circumstances, the central bank can drive interest rates down by increasing the money supply. The public, finding itself with more money than it wishes to hold, will attempt to convert it into interest-earning assets. This will drive the prices of securities up and, consequently, interest rates down.

Once the interest rate is driven down to a level at which the public believes that it must rise again, holding securities entails the risk of taking a capital loss. Under these circumstances, the public will not convert additional money balances into securities, and the interest rate will not be driven down any further. This floor on interest rates is known as the liquidity trap and represents a severe limitation on the central bank's ability to stimulate private investment.

Keynes also saw another and perhaps more serious limitation to monetary policy. Private investors, he maintained, make their decisions not only on the basis of the interest rate but also on the basis of their expectations about costs and demand for their product in the future. All of these expectations are lumped together for convenience's sake into what he called the marginal efficiency of capital. The important thing about the marginal efficiency of capital is that it is based, not upon known facts, but upon expectations about the future which must, of necessity, be very uncertain. The uncertainty means that the marginal efficiency is likely to be very unstable. Keynes regarded it as entirely possible that the marginal efficiency of capital could be so low that even a rate of interest of zero would not be sufficient to stimulate a full employment level of investment.

Thus, although in later years he was less pessimistic about the usefulness of monetary policy, Keynes was inclined to believe that fiscal policy would have to bear the main part of the burden of assuring full employment.

Further, he was inclined to believe that in mature economies, such as those of the United States and western Europe, high levels of income had led the public to save large proportions of their income, while the factors that had historically provided expanding investment opportunities were disappearing.

Keynes was also a firm supporter of women's rights. He was an outspoken campaigner for reform of the law on homosexuality.

Membership

Keynes was elected a fellow of King's College (1909).

Personality

On a personal level, Keynes's charm was such that he was generally well received wherever he went – even those who found themselves on the wrong side of his occasionally sharp tongue rarely bore a grudge.

His early romantic and sexual relationships were exclusively with men.

Quotes from others about the person

• Economist Friedrich Hayek was Keynes's most prominent contemporary critic, with sharply opposing views on the economy, he wrote: "He was the one really great man I ever knew, and for whom I had unbounded admiration. The world will be a very much poorer place without him."
  
  Bertrand Russell: "Keynes's intellect was the sharpest and clearest that I have ever known. When I argued with him, I felt that I took my life in my hands, and I seldom emerged without feeling something of a fool."
  
  The Economist has described Keynes as "Britain's most famous 20th-century economist."

Interests

• He was a collector of rare books and fine art, and also became an active patron of the theater.

Connections

In 1925 Keynes married Lydia Lopokova, a Russian ballerina, who was as outstanding a person in her own way as he was in his. They had no children, and his wife died in 1981.

Father:

John Neville Keynes

Mother:

Florence Ada Keynes

Spouse:

Lydia Lopokova

Brother:

Sir Geoffrey Langdon Keynes

Sister:

Margaret Neville Keynes

Collegue :

Paul Krugman

References

• John Maynard Keynes: 1883-1946: Economist, Philosopher, Statesman
• Universal Man: The Lives of John Maynard Keynes
• John Maynard Keynes
• Keynes's Way to Wealth: Timeless Investment Lessons from The Great Economist