John Maynard Keynes, Economist
John Maynard Keynes and Keynesian Economics
John Maynard Keynes was the most influential economist of the 20th Century. Keynes' economic theories were devised during the period from the end of World War One, the Great Depression and World War Two. He was born in Cambridge, England, but influenced economic policies in USA, UK and all of the capitalist world. Keynesian economics was popular until the 1970s when the new economic theory of Monetarism became popular. Keynesian economics is back in fashion again now as the world economy again battles with recession and even depression.
Keynes wrote several renowned works including, The General Theory of Employment, Interest and Money, written during the Great Depression in the 1930s, which challenged the conventional free market wisdom of the time.
John Maynard Keynes
John Maynard Keynes
Some of John Maynard Keynes' classic publications
Who Was John Maynard Keynes?
The Most Influential Economist of the 20th Century
John Maynard Keynes (1883-1946) was born in Cambridge, England and educated at Eton College and King's College, Cambridge University (the second best university in the world). His father, John Neville Keynes (1852-1949) was a mathematician and moral scientist, also studied at Cambridge University and later became a fellow of Pembroke College, Cambridge. His younger brother became Sir Geoffrey Keynes, an eminent surgeon and biographer, who married Margaret Elizabeth Darwin, granddaughter of Charles Darwin (also a Cambridge man) and his younger sister Margaret married A. V. Hill, a physiologist who won the Nobel Prize in 1922. A well connected family.
John Maynard Keynes joined the civil service after graduating from Cambridge in 1906, but found the work boring and returned to King's College in 1909, to teach economics. He lived in the college for the rest of his life.
Keynes was a brilliant scholar and a member of the Bloomsbury Group. He was openly homosexual as a young man (which was illegal at the time) but married a ballerina, Lydia Lopokova.
What is Keynesian Economics?
What is Keynsian Economics?
Keynesian economics is often simplified by politicians to little more than adjusting the economy by tweaking interest rates, but there is a bit more it it than that. It does however include the use of monetary policy actions by central banks and fiscal policy actions by governments to stabilise economic output.
Keynesian economics was the main economic model used during the Great Depression, World War II, and the economic expansion that followed only losing favour during stagflation in the 1970s. The global financial crisis from 2008 (and still going strong) has made Keynesian economics popular again. Keynes' solution to the Great Depression was to stimulate the economy with a reduction in interest rates and government investment in infrastructure. The investment injects income causing more spending in the rest of the economy, stimulating production and investment and the total increase in economic activity is a multiple of the original investment.
One important consideration of this stimulus is to take it away when things start to overheat: To "Take the Punchbowl away when the party gets started". Which was what was forgotten in the lead-up to the current financial crisis. Now extreme austerity measures are being imposed on almost everyone in society, while still stimulating the banks, resulting in a revolting disparity between the majority and the overpaid and overvalued bankers and company senior executives who have benefited so much. The rich have got far richer at the expense of everyone else. If Keynesian economics had been followed more wisely this situation should not have occurred.
The General Theory of Economics
The multiplier Effect
Keynes described a multiplier effect for the stimulus applied to the economy:
The Multiplier depends on a person's marginal propensity to consume (MPC)
If someone is given an additional Â£1,000 of income and he has an MPC or 0.8 he will spend Â£800 (and save Â£200) If the person who receives that money in payment also has an MPC of 0.8 he will spend Â£640 and the person who receives that will spend Â£512 .... etc. so the multiplier effect results in a lot more than just Â£1,000 flowing through the economy.
Keynes versus Hayek: The Clash That Defined Modern Economics - by Nicholas Wapshot
This book was recommended by Matthew Partridge in a book review: "Keynes versus Hayek: who was right?", in MoneyWeek magazine. Contrasting the theories of these two contemporary economists who also worked together on air-raid duty during World War II. Keynes's theory involved trying to tame the business cycle by boosting demand during slumps by reducing taxes and borrowing money for public spending, whereas Hayek thought attempts to fine-tune the business cycle were futile.
Published by W W Norton and Company
Daniel Kahneman - Nobel Laureate in Economics - Thinking fast and Slow
Daniel Kahneman was awarded the Nobel Prize in Economics in 2002 and is the Eugene Higgins Professor of Psychology at Princeton University and Emeritus Professor of Public Affairs at Woodrow Wilson School of Public and International Affairs.
Kahneman's recent book, Thinking Fast and Slow looks at the way our minds work in all aspects of our lives, but in particular when dealing with the way we think when taking financial decisions: How we analyse risk and reward. The book explains the two systems that control how we think and make choices: One system is fast, intuitive and emotional and the other slower and more logical. This book could change the way in which you make financial decisions for the better.
BBC Documentary: Masters of Money
Stephanie Flanders: BBC Economics editor
Stephanie Flanders's documentary: "Masters of Money" is broadcast on BBC Two from 17 September 2012 and covers the work of three economic thinkers Friedrich Hayek, Karl Marx and Keynes. The TV series was made for the BBC with help from the Open University