Historians From England

"Keynes is very helpful about the economics of the New Party. He says that he would, without question, vote for it. The attitude of the Labour Party on...Free Trade, has disgusted him. He feels that our Party may really do an immense amount of good and that our programme is more sound and certainly more daring than that which any other party can advance."

"A criticism of Keynes and Hayek would have to begin by pointing out the fact that in their theoretical systems there is no place for the uncertainty factor and anticipations. … It is good proof of Keynes’ intuitive genius that he reaches practical results that in many respects are very much superior to his deficient statements of certain theoretical problems."

"Fascism entirely agrees with Mr. Maynard Keynes, despite the latter's prominent position as a Liberal. In fact, Mr. Keynes' excellent little book, The End of Laissez-Faire (1926) might, so far as it goes, serve as a useful introduction to fascist economics. There is scarcely anything to object to in it and there is much to applaud."

"Have you read Keynes on the Economic Consequences of the Peace Conference? I think it is important as giving in a clear and definite form the criticism of a Liberal-minded man who saw the proceedings from the inside... I can not help thinking that it really gives the scheme of a bold Liberal policy in foreign affairs. Aim, the re-integration of Europe, both political and economic. Method, the correction of the Versailles settlement by the L[eague] of N[ations.] [I]t gives us a real fighting policy which has the further advantage of being right."

"The background of my economic thinking was first developed by a study of Keynes—more in conversation with him than in reading his early writings, for he did not write General Theory until the thirties. ... I sent the [Mosley] Memorandum to Keynes for his comments...Keynes then 'with Mosley's permission, showed it to Hubert Henderson, they both agreed "it was a very able document and illuminating"'. Keynes supported me throughout this period, and even later went so far as to say to Harold Nicolson he would have voted for the New Party. My own memories of this brilliant and charming person with the gentle manner and razor-keen intelligence, consist mostly of lunches in his house."

"I have concentrated thus far on one aspect of achievement: the creation of a theory or theories, which in some form pass into the standard usage of economists. But with Keynes, and with other economists, theories were not the whole story. Keynes was also an applied economist using the existing body of theory in conjunction with the available facts of the world to try to shape certain outcomes, be they the international monetary system in 1931–2 or 1941–6, or the financial policy of the British Government in 1915, 1929–33 or 1940–6. And shape them he did with some success through various forms of private and public persuasion. How he did so and why he did so are also subjects for historians of economics, not to mention biographers, who may in the process of writing a biography have acquired additional perspectives."

"Victorian changes in the University had brought his parents to Cambridge. The further transition from the last Victorian reforms of the 1880s to the modern state-supported institution that emerged after the First World War encompassed both Neville and Maynard Keynes’s connections with the administration of the University. For this reason it is necessary to provide some institutional background against which the Keyneses’ lives and times can be set."

"There is a paradox in Keynes's fall in esteem. With respect to our economy, Keynes set out to explain two main problems: why our economy was given to fluctuations and whether it was possible to achieve a closer approximation of full employment than had been achieved thitherto. Keynes's answer to the policy question was that government expenditures and tax receipts could serve as a steering wheel, and that one requisite for such a steering wheel to be effective is that government be a bigger part of the economy than it was before the Great Depression. Our success since World War II in avoiding anything more severe than the recession of 1981-82 has been due in large part to the effects of our much bigger government."

"Keynes believed that the policy implications of his theory were profound; not only did the theory point to ways in which a closer approximation to full employment can be sustained, but he envisaged that continuing full employment combined with an emphasis on consumption and public goods would lead to an egalitarian change in income distribution. The rentier income of the capitalist would disappear and the upper tail of the income distribution would be snipped off by taxation. He believed that both measures to raise the consumption function and the socialization of investment were necessary to sustain full employment and were desirable as social goals."

"Keynes is misunderstood by modern Platonists, who keep trying to find his Truth, keep trying to stuff him into a stable Platonic theory. Right from the beginning Platonic thinkers like Friedrich Hayek and J. R. Hicks could not grasp his method. (...) The very title of the General Theory embodies this sophistic tactic."

"I guess no one will be surprised that the story of Keynes’ life and thought makes me think about the “rhetoric” of economics. My thought is this: Keynes was a Sophist, not a Platonist. To read him as a Platonist, as economists mostly have, makes him nearly impossible to understand."

"Mr. Keynes, whose famous book [The Economic Consequences of the Peace] is a remarkable example of a generous attitude to a defeated enemy. Indeed, it may be regarded as characteristically English in that lack of emotional balance which made it so very fair to our enemies and so harsh to our allies and ourselves."

"I think that if you went in for the Tripos, merely re-reading Economics in the ten days before it, you would probably get a first class: & that if you did not, you wd not injure your position, since it wd.. be known that you had had very little time free for economics."

"I integrate the insights of Keynesian and classical theories. Although Keynes’s General Theory provides the foundation for much of our current understanding of economic fluctuations, it is important to remember that classical economics provides the right answers to many fundamental questions. In this book I incorporate many of the contributions of the classical economists before Keynes and the new classical economists of the past several decades. Substantial coverage is given, for example, to the loanable-funds theory of the interest rate, the quantity theory of money, and the problem of time inconsistency. At the same time, I recognize that many of the ideas of Keynes and the new Keynesians are necessary for understanding economic fluctuations. Substantial coverage is given also to the IS–LM model of aggregate demand, the short-run tradeoff between inflation and unemployment, and modern models of business cycle dynamics."

"Which brings us to a third group of macroeconomists: those who fall into neither the pro- nor the anti-Keynes camp. I count myself among the ambivalent. We credit both sides with making legitimate points, yet we watch with incredulity as the combatants take their enthusiasm or detestation too far. Keynes was a creative thinker and keen observer of economic events, but he left us with more hard questions than compelling answers."

"If you were going to turn to only one economist to understand the problems facing the economy, there is little doubt that the economist would be John Maynard Keynes. Although Keynes died more than a half-century ago, his diagnosis of recessions and depressions remains the foundation of modern macroeconomics. His insights go a long way toward explaining the challenges we now confront."

"The historical balance sheet of Keynesian policy is clear. The most extensive experiment, Roosevelt’s New Deal in the United States during the 1930s, ended in failure."

"The publication of Keynes's The Economic Consequences of the Peace at the end of 1919 and its wide circulation had serious effects. It did much to injure the authority of Lloyd George, and weaken rather than strengthen his efforts to deal with the reparations question by stages. Its account of the way in which President Wilson had been outmanoeuvred in Paris seriously undermined his position in America at a crucial time. Finally, it did much to create throughout Britain and the Commonwealth—and even the United States—a kind of guilt complex about the Germans, which has never been wholly effaced and which was to prove the source of disaster. The legend of the "Carthaginian Peace" did infinite harm both in Germany and in Britain. When all is said and done about reparations and the folly of the promises given by some politicians and the estimates made by leading bankers and "experts", it is almost comical to recall the facts. Over the years Germany actually paid £1,000 million. To meet this she borrowed from the outside world £1,500 million. In a word, it was Germany who received the indemnity, largely from America."

"Maynard Keynes was fully committed to the idea that a system of capitalism and liberal democracy was workable, but his image of workability was not that of a machine that could be set into operation and then left to run on its own. For Keynes, workability meant a continued application of open-minded intelligence and decency to the diagnosis of new situations and to the modification of institutions to deal with them. This view of society and of the role of economic ideas in society is hard to see amid the complications and confusions of Keynes's theoretical writings."

"[Keynes] was much too mercurial and impulsive a counsellor for a great emergency. He dashed at conclusions with acrobatic ease. It made things no better that he rushed into opposite conclusions with the same agility. He is an entertaining economist whose bright but shallow dissertations on finance and political economy, when not taken seriously, always provide a source of innocent merriment to his readers. But the Chancellor of the Exchequer, not being specially gifted with a sense of humour, sought not amusement but guidance in this rather whimsical edition of Walter Bagehot, and thus he was led astray at a critical moment. Mr. Keynes was for the first time lifted by the Chancellor of the Exchequer into the rocking-chair of a pundit, and it was thought that his very signature appended to a financial document would carry weight. It seems rather absurd when now not even his friends—least of all his friends—have any longer the slightest faith in his judgments on finance."

"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, [...]"

"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."

"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."

"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."

"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."

"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."

"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, 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."

"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."

"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."

"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."

"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."

"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."

"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."

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

"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."

"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."

"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."

"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."

"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."

"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."

"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."

"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."

"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."

"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 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."

"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'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 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."

"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."