John Maynard Keynes

[[File:Lopokova and Keynes 1920s cropped.jpg|thumb|right|165px|John Maynard Keynes.]]
{{cquote|The ideas of economists and political philosophers, both when they are right and when they are wrong, are more powerful than is commonly understood.<br>Indeed the world is ruled by little else. Practical men, who believe themselves to be quite exempt from any intellectual influence, are usually the slaves of some defunct economist.|||Keynes}}
{{economics}}
'''John Maynard Keynes, Baron Keynes''' {{lived|1883|1946}} was a [[United Kingdom|British]] [[economic]] theorist and [[philosopher]] whose work dominated pre- and post-[[World War II]] economic theory, during which it reached its maximum expression. He was variously described as an [[agnostic]]<ref>''The Cambridge Apostles, 1820-1914: Liberalism, Imagination, and Friendship in British Intellectual and Professional Life'' by WIlliam C. Lubenow (2007) Cambridge University Press. ISBN 052103728X.</ref> or [[atheist]].<ref>"A Personal View" by Austin Robinson. In: ''Essays on John Maynard Keynes'', edited by Milo Keynes (1975) Cambridge University Press. ISBN 0521205344. Pages 9-23.</ref>{{rp|11}} He served as the head of the British Eugenics Society from 1937 to 1944.<ref>[https://www.ncbi.nlm.nih.gov/pmc/articles/PMC2986310/pdf/eugenrev00247-0048.pdf The Galton Lecture, 1946: Presentation of the Society's Gold Medal] (1946) ''The Eugenics Review'' 38(1):39-41.</ref>

Keynesianism is in contrast with the [[Austrian school]] of [[Friedrich August von Hayek]] and [[Ludwig von Mises]], the [[Chicago school|Chicago]]/[[monetarist]] associated with [[Milton Friedman]], and the {{wpl|new classical school}} associated with {{wpl|Robert E. Lucas}}. The last two schools, that strongly advocate for [[free market]], came to be dominant in the 1970s and 1980s, after the {{wpl|1973 oil crisis}}, but Keynesianism managed to survived these turbulent years and a remains a major force in mainstream macroeconomic thought under the {{wpl|New Keynesian school}}.

==Economic theory==
Broadly speaking, Keynesian economics calls for higher marginal [[tax]] rates during "boom" periods, both to dampen [[Roaring Twenties|economic extravagance]] and to build up a "nest egg," or "rainy day fund," and to then use those funds for public spending during "bust" periods, in order to buffer the [[Working class|working]] and middle classes from the disasters wrought by the "[[Plutonomy|masters of the universe]]" and their [[money]] games.<ref>[http://theweek.com//article/index/256972/why-do-keynesians-prefer-government-spending-over-private-spending Why do Keynesians prefer government spending over private spending?], ''The Week''</ref>

Because of his focus on tax reductions for the [[poor]] and middle class, and an increase in [[government]] spending on infrastructure, some Austrian school economists consider him akin to a [[socialist]], but in reality he was not an advocate for the abolition of private property, but of a "subtle" control of it and effectively how to ''save'' the market from the outcomes of its own excesses.<ref group=note>His book ''The General Theory of Employment, Interest, and Money'' was written during the [[Great Depression]], after all.</ref> In his personal politics, Keynes wasn't a socialist either, eschewing the [[Labour Party]] in favour of the pro-[[capitalist]] [[Liberal Democrats|Liberal Party]]. However, because the application of his theory has become strongly associated with the [[social democracy|social democratic]]<ref group=note>Like Keynes, Social Democrats have generally advocated a "controlled" or [[Social market economy|"social" market economy]] (at least since WWII) and Keynesian economics were popular among pretty much all non-[[communist]] European governments, whether left or right, between roughly 1945 and 1979.</ref> "[[welfare state]]", hardcore [[wingnut]]s are bound to use the "[[Red-baiting|communist]]" label at all times though it's misguided at best. [[Libertarians]] may prefer the softer-sounding "statist".

More "intellectual" right-wingers{{who}} have a more sophisticated [[strawman]] to attack Keynes with — to them, the word "Keynesian" means "Spend shitloads of money for no reason and never stop!" This could possibly be applied to Keynes''ian'' economists, highlighting the differences between Keynes' economics and Keynesian economics,<ref>[http://community.middlebury.edu/~colander/articles/was_keynes_keynesian.pdf Was Keynes a Keynesian or a Lernerian?], AEA</ref> yet even then most Keynesian theorists ask for a return to balanced budgets (i.e. cutting spending) after a return to sustained growth ([[Reagan#A sterling record of fiscal conservatism|some]] [[George W. Bush|conservatives]] appear to have a problem with this).

The idea that the economy is driven by aggregate demand rebutted the then orthodox Say's Law. Free market-oriented economists argued that the market will always return to equilibrium and reach employment in the long run and that the government should do nothing lest it lengthen the natural return to equilibrium or [[Slippery slope|enact programs that would lead to socialism]]. Keynes' reply to this was essentially "In the long run, we are all dead."<ref group=note>Libertarians often take this out of context to mean that Keynes was denigrating the idea of saving money, which is a misinterpretation at best and a [[quote mining|quote mine]] at worst.</ref> Keynes simply argued that too much savings at one time would create the [[paradox]] of thrift — money hoarding by everyone at the same time due to low consumer confidence became a negative feedback loop and made recessions even worse.

==Economic Schools==
{{cquote|Rival doctrines to Keynesianism have come and gone over: [...] [[monetarism]], {{wpl|New Classical economics}}, [[supply-side economics]], and others. But only one survived. The competitors to Keynesian economics all either fell of their own weight (e.g., monetarism) or saw their most useful aspects incorporated into the Keynesian tradition (e.g., rational expectations.)|||Alan S. Blinder<ref name=Blinder/>{{rp|5}}}}

There are 3 main economic schools dedicated to Keynes, even if modern mainstream Keynesian economics differs in many ways from the theory originated by Keynes himself.<ref name=Blinder>{{Cite book |last=Blinder |first=Alan S. |title=A monetary and fiscal history of the United States, 1961-2021 |date=2022 |publisher=Princeton University Press |isbn=978-0-691-23838-8 |location=Princeton Oxford}}</ref>{{rp|5}}<ref>{{Cite web |title=John Maynard Keynes |url=https://www.econlib.org/library/Enc/bios/Keynes.html |access-date=2025-03-03 |website=Econlib |language=en-US}}</ref>

===Neo-Keynesianism===
[[File:Paul_Samuelson.jpg|thumb|200px|right|Economist {{wpl|Paul Samuelson}}, one of the most recognizable faces of Keynesianism in the Post-War America.]]
Neo-Keynesianism was the result of combining classical economics and Keynes' ideas. This combination is known as the {{wpl|Neoclassical synthesis}}. Neo-Keynesianism combined the aspects of Keynesian economics in the short run (such as sticky prices and wages) and neoclassical economics in the long run (such as markets will reach equilibrium and [[homo economicus]]). Eventually, the neo-Keynesians attempted to account for inflation with the creation of the [[Phillips curve]]. Other important models for Neo-Keynesianism include the IS-LM model by {{wpl|John Hicks}}, which is used to derive the relationship between fiscal policy and [[monetary policy]] and the AD–AS model, that illustrates how aggregate demand (AD) and aggregate supply (AS) interact to determine output and inflation,. 

Market failures were an important feature of neo-Keynesianism. For example imperfect competition due to [[monopoly|monopolies]] or sticky wages and prices may lead to the economy not reaching full employment.

Neo-Keynesianism eventually came under attack from Monetarism and the New Classical school. Eventually, the monetarists and the new classicals were able to prove that in the long run, there is no relation between inflation and unemployment due to stagflation in the 1970s (ie. the Philips curve is flat). The inability of Neo-Keynesians to explain stagflation,<ref>https://www.hetwebsite.net/het/schools/synthesis.htm</ref> along with the {{wpl|Lucas critique}}, that argues that economic policies based on historical correlations are unreliable because policy changes alter the underlying behavior of economic agents, eventually lead to the demise of neo-Keynesianism.

===New Keynesianism===
{{wpl|New Keynesianism}} was the result of trying to integrate the 1970s monetarist and New Classical critiques into neo-Keynesianism. Like neo-Keynesianism, New Keynesianism maintains that the economy is Keynesian in the short run and neoclassical in the long run. Just like neo-Keynesianism emerged from the the teachings of Keynes and the classical economists, New Keynesianism combined with New classical economics in the 1980s and 1990s to create the {{wpl|new neoclassical synthesis}}, which became part of mainstream economics and is often taught in textbooks today. The new neoclassical synthesis differs from the original neoclassical synthesis by adding {{wpl|Rational expectations}} and the {{wpl|Real business-cycle theory}}. Additionally, the New keynesian school puts a larger emphasis on {{wpl|microfoundations}} and it uses its own version of the DSGE model, in which some neo-Keynesian assumptions are dropped (eg. No assumptions for price stickiness in the short term).

While some New Keynesians such as [[Paul Krugman]] [[Brad DeLong]] are often known for being on the left of the center, others such as {{wpl|Greg Mankiw}} are more [[conservative]], while some such as {{wpl|Larry Summers}} remain on the [[Centrism|center]].

===Post-Keynesianism===
{{main|Post-Keynesian economics}}
A heterodox tradition, Post-Keynesianism differs quite a bit from the other Keynesian schools. Post-Keynesians believe that markets don't achieve equilibrium in the long run due to a lack of effective demand. The main model in Post-Keynesian economics is the Stock Flow Consistent model,<ref>http://www.bondeconomics.com/2013/08/what-are-stock-flow-consistent-sfc.html</ref> even if said model was originally devised by James Torbin, a neo-Keynesian economist.<ref>{{wpa|Stock-flow consistent model}}</ref>

Post-Keynesians often clashed with the neo-Keynesians, such as with the Cambridge Capital Controversy.<ref>https://www.hetwebsite.net/het/schools/cambridge.htm</ref> However, Post-Keynesianism eventually fell out of favor as the Neo-Keynesians went mainstream. Eventually the monetarists ended up being the main opponents of the neo-Keynesians, while the new classicals opposed the new Keynesians. Nonetheless, despite remaining a [[fringe]] school in the academia, new developments within the Post-Keynesian school, mainly the sub-school, [[Modern Monetary Theory]], caused the Post-Keynesianism to get more attention in the late 2010s and early 2020s.{{efn|For example, the American congresswoman [[Alexandria Ocasio-Cortez]] has stated Modern Monetary Theory should be "a larger part of our conversation" on economics.<ref>https://www.businessinsider.com/alexandria-ocasio-cortez-ommt-modern-monetary-theory-how-pay-for-policies-2019-1</ref>}}

==Political life==
Keynes attended the 1919 Paris Peace Conference as a member of the [[British]] treasury and estimated that the [[Treaty of Versailles|reparations]] imposed on [[Germany]] by the [[French]] and the British were on the order of ten times what it could ever hope to pay. He warned that the reparations would cause Germany's economy to collapse and possibly lead to political upheaval not just in Germany, but the entirety of [[Europe]]. He was roundly ignored, and then [[Adolf Hitler|guess what happened]]?

Keynes also debated openly in written correspondence with the [[Austrian School]] economist [[Friedrich Hayek]], who was also a member of the British [[Liberal_Party#British_Liberal_Party|Liberal Party]]. The debate has been immortalized in a [[music]] video [[rap]] battle.<ref>[http://www.youtube.com/watch?v=d0nERTFo-Sk Fear the Boom and Bust]</ref> His record was tarnished to some degree by the buttloads of money he lost in stocks in 1929, but he later became even richer playing the market during the Depression.<ref>[http://www.nber.org/chapters/c12860.pdf Keynes, King's and Endowment Asset Management], NBER</ref> Anyway, the idea that to be credible you must [[Omniscience|''at no point in time'']] lose money while gambling on the stock market is somewhat strange.

Keynes also sent a long open letter in 1933, published by the ''[[New York Times]]'', to [[Franklin Delano Roosevelt]] on the containing policy recommendations for tackling the [[Great Depression]]: chiefly counter-cyclical public spending.<ref>{{Cite web |title=Roosevelt and Keynes |url=https://www.futurelearn.com/info/courses/politics-of-economics/0/steps/30809 |access-date=2025-03-03 |website=FutureLearn |language=en-US}}</ref> In the next year, they met each other.<ref>{{Cite web |last=Chatham |first=Susan |title=LibGuides: ECON-431 Fiscal Policy in the US: Keynes & Roosevelt |url=https://courseguides.trincoll.edu/econ431/keynes-roosevelt#:~:text=John%20Maynard%20Keynes%20met%20Franklin,talk%20and%20liked%20him%20immensely.%E2%80%9D |access-date=2025-03-03 |website=courseguides.trincoll.edu |language=en}}</ref>

In 1939, Keynes had the option to enter Parliament as an independent MP with the University of Cambridge seat, with both the [[Labour Party]] and the [[Conservative Party]] agreeing that they would not field a candidate if Keynes chose to stand. He  ended up declining the invitation as he felt he would wield greater influence on events if he remained a free agent.<ref>{{wpa|John Maynard Keynes}}</ref>

Toward the end of World War II, he argued in favor of a world [[central bank]] and currency.{{cn}}

He died in 1946, pronouncing these last words: "I only wish I had drunk more champagne."<ref>[http://www.mapping.com/words.html Real Last Words From Famous People]</ref>

==Misrepresentation of Say's Law==
Keynes popularized a misrepresentation of Say's Law that has entered popular discourse.  Jean-Baptiste Say's original formulation meant that the total demand in an economy would never fall below or exceed supply.  This was then reformulated as "supply creates its own demand" by James Mill, though Keynes is most often associated with this re-statement of Say's Law.<ref>[http://web.archive.org/web/20120517190109/http://homepage.newschool.edu/~het/profiles/say.htm Jean-Baptiste Say], The New School</ref>

==See also== 
*[[John Kenneth Galbraith]]
*[[Post-Keynesian economics]]
*[[Social democracy]]
*[[Capitalism]]
*[[Economics]]

==External links==
*[http://www.econlib.org/library/Enc/bios/Keynes.html Keynes at EconLib]
*[http://www.conferenceboard.ca/economics/hot_eco_topics/default/14-01-24/we_are_all_keynesians_now_…_and_all_monetarists_too.aspx We Are All Keynesians Now… and All Monetarists, Too], Conference Board
*[http://keynesforkids.com/ Keynes for Kids]
*[http://www.tkc.com/resources/resources-pages/keynes.html A wingnut takes on Keynes' "anti-Christian homosexual economics"]
==Notes==
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==References==
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