John Maynard Keynes (1883 - 1946)

Like many books of great importance, Keynes's The General Theory of Employment, Interest, and Money was a convoluted, almost incomprehensible tome. However, the ideas contained inside caused a revolution that changed the world.

Keynes' book was published in 1936, at the height of the Great Depression. The world was facing the biggest economic slump ever to have occured, employment was nearly nonexistent. The economists of that time, blindly following the laissez faire doctrine, maintained that nothing could be done. The economy, they chorused, would magically right itself. Employment, after all, was available to those who were willing to accept lower salaries; as low as the market demanded. The government would do well, they advised, to leave the economy alone.

Keynes, however, believed otherwise. The problem, he said, was aggregate demand. When the demand was high, laissez faire economics worked. When it was low, however, the economy would enter into a devastating spiral: the economy was bad, so people would spend less. Because people spent less, the economy would worsen, and because of that people would spend even less.

The only way out of this, Keynes preached, was increasing the aggregate demand. And the only institution that could increase this demand was the government. Keynes believed that to save the economy, the government had to spend a lot of money, never mind if it would incur a large public deficit.

Keynes quickly converted his fellow economists to his radically new ideas. By 1946, much of the world (those who were not communist) had embraced keynesian economics, and the US passed the Employment Act of 1946, affirming the commitment of the United States government to a high employment rate.

It was also in 1946 that Keynes, the most influential economist of the 20th century, died.


References:
Keynes, John Maynard, britannica.com
John Maynard Keynes, Time.com profile, http://www.time.com/time/time100/scientist/profile/keynes.html
John Maynard Keynes, upon being questioned by a reporter about changing his mind on an issue responded by saying,
  • When the facts change, I change my mind -- what do you do, sir?
The reporter promptly shut up.
It might seem campy, but Keynes has a lot to say about the significance economic policy (or long term lack thereof)
"In the long run we are all dead anyway." -- John Maynard Keynes, Tract on Monetary Reform, vol. 4, p. 65
Keynes is widely venerated though most students never actually read his work. Nobody had a greater impact on the study of economics in the 20th century, though in both quantitative and qualitative terms the subject still leaves a surprising amount to be desired (see caveats in previous writeups for sample weaknesses). Keynes played an interesting and influential role during and after the Second World War for Great Britain, whose economic greatness was only a fond memory in the immediate postwar period.

Economics remains best studied with hindsight-- observe the parade of failed economic predictions on CNN for the present state of economic prediction.

It should also be noted that Keynes's ideologies were abused in the 50's, 60's and 70's leaving many world governments including the US and Canada with massive debt. D'oh. While monetarism (Milton Friedman et al) seems prevalent, neokeynesianism really makes much more sense. He met with FDR in the 30's to discuss economics. FDR commented that Keynes had a great intellect, while Keynes commented FDR had beautiful hands. Also, it's been said that he wore women's underwear.

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