John Maynard Keynes

"Poland is an economic impossibility with no industry but Jew-baiting."

"I shall quote another economic source, one of particular significance—Keynes, the British diplomat and author of The Economic Consequenices of the Peace, who, on instructions from his government, took part in the Versailles peace negotiations, observed them on the spot from thc purely bourgeois point of view, studied the subject in detail, step by step, and took part in the conferences as an economist. He has arrived at conclusions which are more weighty, more striking and more instructive than any a Communist revolutionary could draw, because they are the conclusions of a well-known bourgeois and implacable enemy of Bolshevism, [...]"

"Why does Camelot lie in ruins? Intellectual error of monumental proportion has been made, and not exclusively by the politicians. Error also lies squarely with the economists. The "academic scribbler" who must bear substantial responsibility is Lord Keynes..."

"Keynes himself had in his day been known to make some fairly radical noises, for instance, calling for the complete elimination of that class of people who lived off other people's debts—"the euthanasia of the rentier," as he put it—though all he really meant by this was their elimination through a gradual reduction of interest rates. As in much of Keynesianism, this was much less radical than it first appeared. Actually, it was thoroughly in the great tradition of political economy, hearkening back to Adam Smith's ideal of a debtless utopia but especially David Ricardo's condemnation of landlords as parasites, their very existence inimical to economic growth."

"Whatever the number of hours that Maynard, no time was wasted. His mind worked quickly and he possessed to a high degree the power of concentration. He also worked steadily at home and was allowed to share his father’s study, a tribute to the son’s habitual quiet attention to the subject in hand, for the father was extremely sensitive to any kind of disturbance."

"Neo-classical economics also considered other factors which influence the development of the national economy, e.g., the growth of population, changes in consumer preferences, and technical progress. Technical progress, however, is treated as a phenomenon outside the field of economics, influencing the process of economic development only by chance, and not being involved with it organically. Keynes' theory did not fundamentally change any of the views which concern the mechanism of economic development. According to Keynes, the division between accumulation and consumption is also determined on the basis of a marginal psychological calculation. But in his theory, another factor is taken into account, namely, the tendency for capital owners to hold back a certain part of their incomes in a liquid form i.e., as money and other means of payment. This introduces certain complications, since besides the decision as to what part of the income should be allocated for consumption and what part for accumulation, a third consideration is brought in, namely, what is to be done with accumulated wealth: should it be saved or invested, or should it be retained in a monetary form. The great differences in the division of incomes in the capitalist system in principle accelerate economic development. However, according to Keynes, complications arise since some of the capital owners hold back money in a liquid form. Part of the labour force and of the productive capacity are thus made to lie idle, and the productive forces of society are squandered."

"No one embodied the Cambridge spirit of culture, fun, and public duty so much as Maynard Keynes. No one was more brilliant or charming. No economist in this century influenced politicians or the course of economics more."

"For Keynes unemployment could never be a "natural" disaster, like an earthquake or a flood. He knew that it is a failure of social and economic organization, a failure by society and social institutions to achieve a desirable goal. Quite simply, when millions of people are out of work, we have failed to organize our society so that full employment is secured. And being a problem of social organization, there must be a solution if only society is willing to take the steps necessary. This doesn't mean that either finding or implementing a solution will be easy. Our society and our economy are complicated institutions, linking a multitude of firms and people at home and abroad, each with their own goals and their ways of doing things. Moreover, achieving full employment may conflict with other goals we consider to be important. But it is irrational simply to accept unemployment, as if it were a fact of nature. Unemployment is our failure. At the very least, we must spell out clearly the choices that must be made if we are to attain full employment."

"I conclude that Keynes’s political bequest has done far more harm than his economic bequest and this for two reasons. First, whatever the economic analysis, benevolent dictatorship is likely sooner or later to lead to a totalitarian society. Second, Keynes’s economic theories appealed to a group far broader than economists primarily because of their link to his political approach."

"Did Keynes create a sense of hope? Oh, unquestionably. There was this breath of hope and optimism, and I came back from Cambridge to find a whole group of people here who had also read The General Theory."

"As many of Keynes' disciples would now admit, his theories had two important weaknesses when applied in postwar Britain. They ignored the economic impact of social institutions, particularly the trade unions; in fact Keynesian policies were unlikely to work in Britain without strict control of incomes... And they ignored the outside world... [T]he fundamental Keynesian concept of demand management had become unreliable. Keynes believed that a government could maintain full employment of a country's productive capacity without creating inflation, by increasing or reducing the demand for its output, through adjusting taxes or government spending. But it had become impossible to discover with any accuracy how much additional demand the government should inject into the economy so as to produce full employment... Keynes was right in saying that adequate demand is a necessary condition for full employment; but, given the inadequacy of the information available and the uncertainty about how people will use their money, fine tuning of demand is not possible."

"Keynes was unmistakably a man formed by the previous century. In the first place, and like so many of the best economists of the earlier generations, from Adam Smith to John Stuart Mill, Keynes was primarily a philosopher who happened to deal in economic data. He might just as well have been a philosopher had the circumstances positioned him differently; indeed, in his Cambridge years, he wrote some properly philosophical papers, albeit with a mathematical bent. As an economist, Keynes always saw himself responding to the nineteenth-century tradition in economic reasoning. Alfred Marshall and the economists who followed J. S. Mill had assumed that the default condition of markets, and therefore of the capitalist economy at large, was stability. Thus instabilities—whether economic depression, or distorted markets, or government interference—were to be expected as part of the natural order of economic and political life; but they did not need to be theorized as part of the necessary nature of economic activity itself. Even before the First World War, Keynes was beginning to write against this assumption; after the war, he did little else. Over time he came to the position that the default condition of a capitalist economy could not be understood in the absence of instability and the inevitably accompanying inefficiencies. The classical economic assumption, that equilibrium and rational outcomes were the norm, instability and unpredictability the exception, were now reversed. Moreover, in Keynes’s emerging theory, whatever it was that caused instability could not be addressed from within a theory which was unable to take that instability into account. The basic innovation here is comparable to the Gödelian paradox: as we might put it today, you cannot expect systems to resolve themselves without intervention. Thus, not only do markets not self-regulate according to a hypothetically invisible hand, they actually accumulate self-destructive distortions over time. Keynes’s point is an elegantly symmetrical bookend to Adam Smith's claim in The Theory of Moral Sentiments. Smith argued that capitalism does not in itself generate the values that make its success possible; it inherits them from the pre-capitalist or non-capitalist world, or else borrows them (so to speak) from the language of religion or ethics. Values such as trust, faith, belief in the reliability of contracts, assumptions that the future will keep faith with past commitments and so on have nothing to do with the logic of markets per se, but they are necessary for their functioning. To this Keynes added the argument that capitalism does not generate the social conditions necessary for its own sustenance."

"Now I’m not saying that Keynes was right about everything, that we should treat The General Theory as a sort of secular bible - the way that Marxists treat Das Kapital. But the essential truth of Keynes’s big idea - that even the most productive economy can fail if consumers and investors spend too little, that the pursuit of sound money and balanced budgets is sometimes (not always!) folly rather than wisdom - is as evident in today’s world as it was in the 1930s. And in these dangerous days, we ignore or reject that idea at the world economy’s peril."

"It was only by the crisis of 1929-1930 which shook the capitalist economy of the whole world to its very foundations and the long depression following it that bourgeois economists were forced to interest themselves in problems of this kind. Then, John Maynard Keynes produced his famous theory of employment which dealt with mass unemployment and economic stagnation as tendencies inherent in the modern capitalist system which the state ought to counteract by an appropriate policy of intervention. Partly under the influence of Keynes, partly independently of him, and in some cases even earlier, economic theories betraying similarities to the Marxist theory of reproduction and accumulation began to appear."

"The great service of Keynes to recent history is that we now know, in the way that governments did not know in the 1930s, how full employment can be maintained."

"I can tell you — I was helping when Britain was trying to get a loan from the United States immediately after the war, and I was talking to one of Keynes's assistants. And Keynes came in the room and walked over to us and the man I was talking to us said, "This is Coase, who is helping us with the statistics. I don't think you know him." And Keynes said, "No, I don't." And walked off. And that's my life with Keynes."

"Keynes did not believe that political freedom and economic efficiency, for which he hoped, would suffice to bring about a better world. It was also necessary to guarantee social justice. The problem of articulating between these various ends is far from being satisfactorily resolved. In his tireless search for a solution to this challenge, Keynes figures among the great humanists and social thinkers whose work merit closer understanding and meditation. For Keynes, the problems of poverty, inequality, unemployment and economic crises are neither exogenous accidents nor punishments for excess, but rather the result of a poorly organized society and human error. It is these up to individuals united in the polis to attenuate or end them by carrying out major reforms. Are such reforms possible within the context of the capitalist economies known to us today? Keynes believed or at least hoped they were. The setting up of the Welfare State seemed to prove him right, but the tide has turned and his diagnosis of capitalism's state of health, put forward now more than half a century ago, is more relevant than ever. No one can claim to know what the future holds. It is up to us, however, to construct it. This is perhaps the main message of John Maynard Keynes."

"Keynes was chief economic adviser to the British government and largely responsible for keeping the British economy afloat at a time when more than half of our gross national product, and all of our foreign exchange, was being spent on the war. ...I was lucky to be present at one of his rare appearances in Cambridge, when he gave a lecture with the title "Newton, the Man." …Four years later he died of heart failure, precipitated by overwork and the hardships of crossing the Atlantic repeatedly in slow propeller-driven airplanes under wartime conditions."

"We're all Keynesians now."

"John Maynard Keynes (1883–1946) is the latest in a line of great British economists who had a profound influence on the discipline of economics. (...) In listing “the” classic of each of these great economists, historians will cite the General Theory as Keynes’s pathbreaking contribution. Yet, in my opinion, Keynes would belong in this line even if the General Theory had never been published. Indeed, I am one of a small minority of professional economists who regard his Tract on Monetary Reform (1923), not the General Theory, as his best book in economics. Even after sixty-five years, it is not only well worth reading but continues to have a major influence on economic policy."

"For handling problems such as those facing the British or French treasuries during the war, there are no miracle men. Either current earnings from exports, salable assets, loans or credits... or gold exist for paying foreign suppliers, in which case the officials are a success. Or these assets do not exist, in which case those involved are a failure. However, nothing comes so easily to the press and public mind as the vision of financial genius. Both wish to believe that... there are individuals of transcendental insight and power, men who can make something out of nothing. In Britain during the war (and after) the popular imagination settled on the thirty-one-year-old (in 1914) Treasury official, John Maynard Keynes. His papers of the period, recently published, suggest that he was a hard-working, competent and resourceful man who matched resources to payments with attention and skill and who extended his mind to the similar problems of the French and the Russians. That was all."

"Keynes was quite frequently in Washington during the war on some negotiating mission. Anybody who's had experience with diplomatic negotiating matters knows that it's an exercise in idleness. You're waiting for instructions from your government, you're waiting for the others to be instructed; you're waiting for a meeting. Keynes filled in those times by moving into the American meeting. By this time there was a sizable group of younger people, of whom I was one, who were devoted to his ideas ― a much larger group, as he has said, in Washington than he had in London. His vanity was not above being touched by this effect, so he brought around him a group of younger Washington people for discussion of wartime policy, and I was naturally in that group."

"I believe that the future historian of economic thought will regard the assistance rendered by Keynes on the road of progress as far more important than that of his revered master, Alfred Marshall. He seems, to my judgment, to stand rather in the same class as Adam Smith and Ricardo."

"In order to understand the situation into which we have been led, it will be necessary to take a brief look at the intellectual sources of the full-employment policy of the "Keynesian" type. The development of Lord Keynes's theories started from the correct insight that the regular cause of extensive unemployment is real wages that are too high. The next step consisted in the proposition that a direct lowering of money wages could be brought about only by a struggle so painful and prolonged that it could not be contemplated. Hence he concluded that real wages must be lowered by the process of lowering the value of money. This is really the reasoning underlying the whole "full employment" policy, now so widely accepted. If labor insists on a level of money wages too high to allow of full employment, the supply of money must be so increased as to raise prices to a level where the real value of the prevailing money wages is no longer greater than the productivity of the workers seeking employment. In practice, this necessarily means that each separate union, in its attempt to overtake the value of money, will never cease to insist on further increases in money wages and that the aggregate effort of the unions will thus bring about progressive inflation."

"In summary, in my judgment, Keynes was a politician, but a politician whose constituency was not electoral but intellectual he had to be a scientist to be a politician. And he was a good enough scientist, with a strong enough sense of scientific integrity, and a strong enough aesthetic preference for truth, to recognize eventually that the social science he knew was not good enough to solve the problems he recognized as politically important and that he had to reform the science to make it politically relevant and useful. He was a scientific political economist. One can emphasize either the "scientific" or the "political" and which adjective one emphasizes depends on whether one is writing a political biography of the man himself or a history of economic thought but both adjectives are appropriate and both are necessary to characterize what the man was and what he contributed to British society and British social history."

"The same challenge—how to understand what had happened between the wars and prevent its recurrence—was confronted by John Maynard Keynes. The great English economist, born in 1883 (the same year as Schumpeter), grew up in a stable, confident, prosperous, and powerful Britain. And then, from his privileged perch at the Treasury and as a participant in the Versailles peace negotiations, he watched his world collapse, taking with it all the reassuring certainties of his culture and class. Keynes, too, would ask himself the question that Hayek and his Austrian colleagues had posed. But he offered a very different answer. Yes, Keynes acknowledged, the disintegration of late Victorian Europe was the defining experience of his lifetime. Indeed, the essence of his contributions to economic theory was his insistence upon uncertainty: in contrast to the confident nostrums of classical and neoclassical economics, Keynes would insist upon the essential unpredictability of human affairs. If there was a lesson to be drawn from depression, fascism, and war, it was this: uncertainty—elevated to the level of insecurity and collective fear—was the corrosive force that had threatened and might again threaten the liberal world."

"Keynes, it has been stressed, is not a radical. He wanted to reform capitalism in order to make it work better and to preserve it. How is it possible that any capitalist could object to a policy of the preservation of capitalism? The answer is that many capitalists are unaware of the precarious state of the system during a period of serious depression, and do not see the proper relationship between their own position and that of the system as a whole. It is inevitable that most of the effective measures listed in the full-employment legislation above will be strongly opposed by some group of the capitalist population."

"Keynes himself was very much interested in monetary policy. He was a specialist all his life in the theory of money and interest rates. But this approach fell out of fashion and people concentrated on fiscal policy. Then, when monetary policy came back into fashion, people concentrated on the money supply and other monetary aggregates, such as M1 and M2, rather than interest rates, but that was not the way to go about it. Fortunately, I think interest rate policy is more effective now."

"Keynes was no socialist – he came to save capitalism, not to bury it. And there’s a sense in which The General Theory was, given the time it was written, a conservative book."

"He was declaring that the trouble with the engine was not fundamental, that it was amenable to a technical fix. At a time when many of the world's intellectuals were convinced that capitalism was a failed system, that only by moving to a centrally planned economy could the West emerge from the Great Depression, Keynes was saying that capitalism was not doomed, that a very limited sort of intervention — intervention that would leave private property and private decision making intact — was all that was needed to make the system work. Confounding the skeptics, capitalism did survive; but although today's free-market enthusiasts may find this proposition hard to accept, that survival was basically on the terms Keynes suggested. World War II provided the jump start Keynes had been urging for years; but what restored faith in free markets was not just the recovery from the Depression but the assurance that macroeconomic intervention — cutting interest rates or increasing budget deficits to fight recessions — could keep a free-market economy more or less stable at more or less full employment. In effect, capitalism and its economists made a deal with the public: it will be okay to have free markets from now on, because we know enough to prevent any more Great Depressions."

"John Maynard Keynes first raised the question of what can be done to stabilize the economy when it has fallen into a liquidity trap-when interest rates have fallen to a level below which they cannot be driven by further monetary expansion-and whether monetary policy can be effective at all under such circumstances. Long treated as a mere theoretical curiosity, Keynes's question now appears to be one of urgent practical importance, but one with which theorists have become unfamiliar."

"Keynes is largely responsible for elevating employment (and/or output) to a position as an explicit objective for policy. As I have emphasized, Keynes sought to change the basic perception of the economic process; he sought to bring employment, as such, onto center stage as a variable subject to direct manipulation. He sought to overthrow the classical model of market equilibrium in which employment is determined only as an emergent result or consequence of the interaction among the demand and supply choices made by market participants. Once again in this respect, Keynes was too persuasive. By elevating full employment to explicit consideration as a policy target, and thereby generating neglect of both monetary and market institutions, the Keynesian emphasis ensured the eventual stagflation that we experienced in the 1970s. The scenario might have been quite different if the Keynesian effort had been recognized for what it was rather than for what it was not."

"What do you think of J. M. Keynes's book? ... The condemnation of the work of the Conference as a whole is none too severe. I remember few cases in history where negotiators might have done so much good, and have done so much evil."

"In a book which gained a vast publicity, particularly in the United States, he exposed and denounced "a Carthaginian Peace." He showed in successive chapters of unanswerable good sense the monstrous character of the financial and economic clauses. On all these matters his opinion is good. Carried away, however, by his natural indignation at the economic terms which were to be solemnly enacted, lie wrapped the whole structure of the Peace Treaties in one common condemnation. His qualifications to speak on the economic aspects were indisputable; but on the other and vastly more important side of the problem he could judge no better than many others."

"The belief that monetary instability--inflation and deflation--is the principal, or at least a principal, cause of other economic evils; the hope that sound monetary principles can be identified and, when identified, would greatly diminish uncertainty and risk; the focus on the job of the public sector being to provide the private economy with a stable measuring-rod and a stable environment--all these are core ideas of whatever we choose to call monetarism. Keynes believed these ideas very, very strongly in the mid-1920s. And his Tract on Monetary Reform is a review of economic theory and a look at the economic problems of post-WWI Europe through this set of monetarist spectacles."

"Keynes’s central concerns for his own time ring true today. He was worried about the fragility of our collective prosperity, and the grave tensions between nationalism and the rootless cosmopolitan attitudes underpinning a peaceful and flourishing global society. He focused on how to organize our activities and use our prosperity to create a world fit for the good life. He sought to expose the bankruptcy of ascendant ideological nostrums: laissez-faire, spontaneous order, collective cooperation, central planning. And he thought deeply about the technocratic problems of economic management – and about the social, moral, and political disasters that would follow from failing to address them."

"I suddenly realized that Keynes and all the brilliant economic students in the room were interested in the behavior of commodities... while I was interested in the behavior of people."

"I was lucky to hear the economist John Maynard Keynes, a few years before his death, give a lecture about the physicist Isaac Newton. Keynes was at that time himself a legendary figure, gravely ill and carrying a heavy responsibility as economic adviser to Winston Churchill. He had snatched a few hours from his official duties to pursue his hobby of studying Newton's unpublished manuscripts. Newton had kept his early writings hidden away until the end of his life in a big box, where they remained until quite recently. Keynes was speaking in the same old building where Newton had lived and worked 270 years earlier. In an ancient, dark, cold room, draped with wartime blackout curtains, a small audience crowded around the patch of light under which the exhausted figure of Keynes was huddled. He spoke with passionate intensity, made even more impressive by the pallor of his face and the gloom of the surroundings."

"Keynes was a homosexual and had no intention of having children. We are not dead in the long run... our children are our progeny. It is the economic ideals of Keynes that have gotten us into the problems of today"

"We can say that around Keynes, around the economic interventionist policy perfected between 1930 and 1960, immediately before and after the war, all these interventions have brought about what we can call a crisis of liberalism, and this crisis manifests itself in a number of re-evaluations, re-appraisals, and new projects in the art of government which were formulated immediately before and after the war in Germany, and which are presently being formulated in America."

"There was nothing in these views to repel a student; or to make Keynes attractive. Keynes had nothing to offer those of us who had sat at the feet of Simons, Mints, Knight, and Viner."

"Keynes’s heritage was twofold—to technical economics and to politics. I have no doubt that Keynes’s bequest to technical economics was extremely beneficial, and that historians of economic thought will continue to regard him as one of the great economists of all time, in the direct line of succession to his famous British predecessors, Adam Smith, David Ricardo, J. S. Mill, Alfred Marshall, and W. Stanley Jevons.(...) The situation is very different with respect to Keynes’s bequest to politics, which has had far more influence on the shape of today’s world than his bequest to technical economics. In particular, it has contributed substantially to the proliferation of overgrown governments, increasingly concerned with every aspect of the daily lives of their citizens."

"I am a great admirer of Keynes. I think he was a great human being and a great economist. I don't agree with the particular hypothesis he offered about the Depression, but advances in every science come from people offering hypotheses that turn out to be wrong. No, I think Keynes's objective was to promote the well being of his countryman, of his fellow citizens and of the rest of the world."

"Keynes's views shocked orthodox sensibilities, then and now. The ideas that consumption is the goal of economic life, that savings could be pathological, that public-sector deficits are necessary and virtuous in a slump, that interest rates should be kept low have always conflicted with respectable banker and business views. Yet the Depression and World War II appeared to prove him right, and at the end of his life in 1946 his ideas were enshrined in national income accounts, at the root of the Bretton Woods monetary system, and ascendant in the academy. One group of followers – technically advocates of a “neoclassical synthesis” – rose to power, with ultimately unhappy consequences for the reputation of Keynesian theory. In the 1970s a counter-revolution got underway: monetarism, supply-side economics, rational expectations, deregulation. By the 2000s it was complete – just in time for the Great Crisis of 2007 to demonstrate, once again, the enduring relevance of his views."

"Keynes never sought to change the world out of any sense of personal dissatisfaction or discontent. Marx swore that the bourgeoisie would suffer for his poverty and his carbuncles. Keynes experienced neither poverty or boils. For him the world was excellent."

"By the autumn of 1936 Keynes had reached Harvard with tidal force, There had been no such excitement among the younger economists before; there has been none such since. Here was a solution to depression and unemployment, the most urgent problem of the time. It was also a conservative one. Keynes showed that the government, by offsetting the excess of savings -- the short fall in purchasing power -- could prop up the economy so that it functioned at or near full employment instead of at some painful and socially demoralizing level down below."

"In the field of policy Keynes had a keen sense of the realities of the situation. He was practical and a man of the world. He was a tremendous fighter, prepared to take on great odds, but he was not inclined to be a crusader for a merely Utopian aim."

"Whatever the final verdict on the General Theory, Keynes' greatness as an economist will not be questioned. His mental capacities had a far wider range than those usually found in professional economists. He was a logician, a great prose writer, a deep psychologist, a bibliophile, an esteemed connoisseur of painting; he had practical gifts of persuasion, political finesse, businesslike efficiency; he had personal gifts which made him have profound influence on those who came into direct contact with him."

"No one in our age was cleverer than Keynes nor made less attempt to conceal it."

"Keynes could be gross, crude, coarse, he had a Rabelaisian wit, an obsessive curiosity about sexual matters, and he often lacked refinement. He could be a show-off and a know-all. This emanated from his remarkably quick and piercing mind, his ability to ‘gut’ books in a few hours (not that this did not show now and then) and an insatiable curiosity about all manner of things. Keynes had the class and racial prejudices of his time, expressed in distasteful, often disgraceful terms to modern eyes and ears, yet rarely acted upon in his actual relationships. For at his core he was a deeply serious person, still a Victorian as well as an Edwardian, seeking for a philosophy by which to live in both private and public life."