John Maynard Keynes

I

Introduction

John Maynard Keynes (1883-1946), British economist, one of the most influential economists of the 20th century. His ideas profoundly influenced the economic policies of most non-Communist governments after World War II (1939-1945). The approach to economic policy based on his theories is known as Keynesianism or Keynesian economics.

II

Early Years and Education

Keynes was born on June 5, 1883, in Cambridge, England. His father, John Neville Keynes, was a logician and economist and for 15 years chief administrator (registrar) at the University of Cambridge. His mother, Florence Ada, was one of an early generation of women students at Cambridge, a pioneer in social welfare, mayor of Cambridge, and a writer. The younger Keynes, who was called Maynard, won a scholarship to Eton College, where he distinguished himself academically and made many friends among the more intellectual members of the British upper classes.

Keynes entered King’s College, Cambridge, also on a scholarship, and took his degree in mathematics in 1905. At the university he became a close friend of members of an intellectual group led by writer Lytton Strachey. Brilliant, witty, somewhat skeptical, but earnest in purpose and thought, these friends drew him into wider realms of speculation than prevailed either in academic Cambridge society or among the sophisticated Eton aristocracy. This group of intellectuals, who became known as the Bloomsbury Group, was also deeply interested in the fine arts, and this opened a new interest for Keynes that stayed with him throughout his life.

After obtaining his degree, Keynes studied economics for a year, with the help of Cambridge economists Alfred Marshall and A. C. Pigou, in preparation for the civil service examination. In 1906, after taking the exam, he began his career in the India Office of the British government.

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Keynes spent his spare time, and even some office time, working on the theory of probability for submission as a dissertation for a King’s College fellowship. He won the fellowship in 1908. The dissertation was afterwards enlarged and published in 1921 as A Treatise on Probability. His aim was to give a more modern and systematic substructure to the theory of probability, which would be to some extent analogous with the work done for deduction and mathematics by Bertrand Russell and Alfred North Whitehead in Principia Mathematica (1910). Keynes’s treatise proved to be a work of vast erudition.

III

Early Work in Economics

Keynes was bored at the India Office, and in 1908 he resigned to take up his fellowship at King’s College, Cambridge. At the request of Alfred Marshall he began to teach on the economics faculty. Following his work on probability, he wrote Indian Currency and Finance (1913), drawing in part on knowledge acquired at the India Office. This was a pioneering work, and many people who could not accept some of his later doctrines liked to cite it as his best work. Just before the book appeared, he was asked to be secretary of a royal commission on Indian finance and currency under the chairmanship of Austen Chamberlain, who later became British foreign secretary.

IV

World War I and the Peace Conference

Keynes was asked to work for the British treasury shortly after the outbreak of World War I in 1914. He rose rapidly to a position of great importance and before the end of the war was in overall charge of foreign-exchange arrangements.

After the war Keynes served as the British treasury delegate at the Paris Peace Conference and through this experience underwent the main crisis of his life. He was passionately opposed to British (and Allied) policy at the conference. Keynes held that, on the moral plane, the peace treaty (see Treaty of Versailles) should show magnanimity to the fallen foe and that, on the economic plane, the demands for reparation were fantastically impractical and that unsuccessful attempts to enforce them would lead to the ruin of Europe. He resigned his position in June 1919 in a biting letter to British prime minister David Lloyd George. This resignation made it unlikely that Keynes would be employed again officially for a considerable time.

Within three months Keynes published a devastating attack on the Versailles treaty settlements: The Economic Consequences of the Peace (1919). In it he correctly predicted that the staggering reparations levied against Germany would goad that country into economic nationalism and a resurgence of militarism. In addition to its remorseless economic argument against the reparations, this book contained vivid and brilliant character sketches. It was quickly recognized as a masterpiece of polemical writing and became one of the best-selling books ever composed on a topic in economics. Keynes achieved worldwide fame through it.

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