Mentor Yourself: John Maynard Keynes, British Economist Who Revolutionized Economic Theory and Policy

John Maynard Keynes was a brilliant and outspoken economist. “[He] was educated at the finest British schools, Eton and then King’s College, Cambridge, becoming in his youth a part of the Bloomsbury Group, which consisted of a dozen privileged aesthetes, including Virginia Woolf, Lytton Strachey, and Clive Bell.” When he was in his mid-thirties, Keynes married a ballerina, Lydia Lopokova, and they remained together until his death from a heart attack on Easter Sunday, April 21, 1946.

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Name: John Maynard Keynes

Birth Date: June 1883 – April 1946

Job Functions: Economist

Fields: Economic Theory

Known For: The General Theory of Employment, Interest and Money; Helped to Establish the International Monetary Fund

John Maynard Keynes was the son of John Neville Keynes, registrar of the University of Cambridge and a brilliant logician and economist. Keynes was educated at Eton and King’s College Cambridge and began his career as a public servant. From 1906 to 1909, he was assigned to the India Office where he acquired a sound understanding of the government service. In 1909, Keynes was elected as fellow of King’s College and returned to Cambridge. In 1911, he was appointed editor of the prestigious Economic Journal, the publication of the Royal Economic Society, duties he carried out outstandingly until 1945.

When World War I started, Keynes held an unpaid position at the Treasury and was then made assistant secretary where he managed financing for the war. Keynes was the key Treasury representative at the signing of the Peace Treaty in Versailles in 1919. He felt that reparation demands by Germany was unreasonable and believed that Britain should not return to the prewar gold standard system. Keynes was ignored so he resigned that year and voiced his objections in The Economic Consequences of the Peace, which subsequently substantiated his position.

Keynes returned to King’s College where he held the position of second bursar. In 1921, he published A Treatise On Probability, and a year later, A Revision of the Treaty, and a sequel to The Economic Consequences of the Peace, and in 1923, he produced A Tract on Monetary Reform (Great Minds Series). In 1924, Keynes became first bursar, a position he held until his death in 1946. In that position, Keynes exhibited superb management, which made King’s College exceedingly rich.

In 1930, Keynes published a two-volume work, Treatise On Money V2: The Applied Theory Of Money (1930), but his seminal work, The General Theory of Employment, Interest and Money, which revolutionized economic theory appeared in 1936. This book is primarily a theoretical study rather than a practical policy document. Two main ideas make up Keynes’ theory:

1. Concept of Unemployment Equilibrium: Deficiencies in aggregate demand could cause the economy to settle into equilibria in unemployed labour.
2. Radical or Nonprobabilistic Uncertainty: Rational behaviour was based on factors other than calculable forecasts, therefore leading to suboptimal levels of private investment and aggregate demand.

At the time, The General Theory of Employment, Interest and Money was the most influential economic work since Adam Smith’s The Wealth of Nations, and the most influential in the twentieth century. According to Andrew Taylor in Books That Changed The World: The 50 Most Influential Books in Human History, “The traditional [economic] view was that governments should not try to intervene in the working of the financial markets, but the crisis of the First World War and the misery of poverty, unemployment and worldwide economic slump that followed led Keynes to consider ways in which taxation and adjustments to the supply of money in circulation might mitigate the effects in economic recession.”

At the onset of World War II in 1940, Keynes returned to public service as adviser to the Chancellor of the Exchequer, and he was soon after elected to the Court of the Bank of England, and was raised to the peerage as Baron Keynes of Tilton in 1942. 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.

John Maynard Keynes was a member of the Bloomsbury Group, a group of writers, intellectuals, philosophers and artists who held informal discussions in Bloomsbury, London throughout the 20th century. Other members were Virginia Woolf, EM Forster, Giles Lytton Strachey, Thoby Stephen (Virginia Woolf’s brother), Vanessa Stephen Bell, Clive Bell, Roger Fry, Duncan Grant, Desmond MacCarthy, Leonard Woolf, Mary MacCarthy, Adrian Stephen, Dora Carrington and Saxon Sydney-Turney.

For many years, Keynes collected fine art and rare books. He collected the writings of Sir Isaac Newton. In his later years, Keynes became a patron of the theatre, and in 1932, he became treasurer of Carmago Society, and in 1936 he founded and financed the Cambridge Arts Theatre.

John Maynard Keynes’ Steps to Success

• Actively participated in debates that occurred throughout the 1920s and 1930s among British economists such as D. H. Robertson, Richard F. Kahn, R. G. Hawtrey, and Joan Robinson.
• Accepted a position despite lack of experience. “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.”
• Wrote and offer advice on public economic issues.
• Throughout his life Keynes occupied a variety of influential posts.
• He had a range of jobs within the area of finance and economic theory to broaden his experience: Public servant, lecturer in economics, fellow of King’s College, editor of Economic Journal, assistant secretary at the Treasury, bursar at King’s College, treasurer of Carmago Society and was instrumental in designing and establishing the International Monetary System.
• During World War II (1939–1945), Keynes advised both English Prime Minister Winston Churchill and US President Franklin Roosevelt.
• John Maynard Keynes was knighted in 1942 – 1^st Baron of Tilton.
• One of the key players in revolutionizing modern thought on the workings of the free-trade marketplace and modern industrial capitalism.
• Keynes’ ideas informed a generation of economic thinkers and made him the best-known economist of the twentieth century.

Why John Maynard Keynes Contribution Matters

• His book, General Theory of Employment, Interest and Money, not only revolutionized economic theory, but also had a direct impact on the lives of a large proportion of the world’s population.
• “Unlike most economists before him, Keynes analyzed problems in the economy as if they were arithmetic and not social. He had little use for ideas that glorified either the businessman or the common worker.” Another differentiator is that Keynes advocated for the government to spend money in an economic downturn to stimulate the economy, while other economists and business leaders wanted the government to tighten its belt.

Lessons from John Maynard Keynes

• Stand up for what you believe in: At the signing of the Peace Treaty in Versailles in 1919, Keynes felt that reparation demands by Germany was unreasonable and believed that Britain should not return to the prewar gold standard system. He was ignored so he resigned that year and voiced his objections in The Economic Consequences of the Peace.
• Broaden you experience by working in a variety of paid and non-paid positions. Volunteer roles are a good way to broaden your experience.

Additional Reading

An Open Letter to President Roosevelt from John Maynard Keynes

Mr President: spend, spend, spend, The Guardian

Obama’s stimulus plan must include science By David Gross and Eric Kandel

Sources of Works Cited/Referenced

Encyclopedia of World Biography

Encyclopedia of Philosophy

New Dictionary of Scientific Biography

International Encyclopedia of the Social Sciences

American Decades: Primary Sources 1930 -1939

Books that Changed the World, Andrew Taylor

Encyclopedia of the Great Depression

Encyclopedia of European Social History

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