Capitalist Revolutionary: John Maynard Keynes
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The Great Recession of 2008 restored John Maynard Keynes to prominence. After decades when the Keynesian revolution seemed to have been forgotten, the great British theorist was suddenly everywhere. The New York Times asked, “What would Keynes have done?” The Financial Times wrote of “the undeniable shift to Keynes.” Le Monde pronounced the economic collapse Keynes’s “revenge.” Two years later, following bank bailouts and Tea Party fundamentalism, Keynesian principles once again seemed misguided or irrelevant to a public focused on ballooning budget deficits. In this readable account, Backhouse and Bateman elaborate the misinformation and caricature that have led to Keynes’s repeated resurrection and interment since his death in 1946.
Keynes’s engagement with social and moral philosophy and his membership in the Bloomsbury Group of artists and writers helped to shape his manner of theorizing. Though trained as a mathematician, he designed models based on how specific kinds of people (such as investors and consumers) actually behave—an approach that runs counter to the idealized agents favored by economists at the end of the century.
Keynes wanted to create a revolution in the way the world thought about economic problems, but he was more open-minded about capitalism than is commonly believed. He saw capitalism as essential to a society’s well-being but also morally flawed, and he sought a corrective for its main defect: the failure to stabilize investment. Keynes’s nuanced views, the authors suggest, offer an alternative to the polarized rhetoric often evoked by the word “capitalism” in today’s political debates.
closer to their ideas of incremental change and limited government intervention than it was to his own vision of activist interest-rate policy in the Treatise. As his ideas swung back toward the traditional Cambridge theory of the trade cycle, with its emphasis on the expectations of the future, the extent of his activism moved back toward the more subtle Cambridge approach to economic policy. Wartime Inﬂation and Planning for Peace In The General Theory, Keynes had developed the tools he needed
even so well as we have for many decades past.6 This statement is particularly important because he makes it clear that he was not making it for the ﬁ rst time. This attitude, of seeing his new theory as being provisional and of limited applicability, is consistent with his reactions to economists who, immediately after The General Theory was published, wrote to him about their adaptations and interpretations of the theory he had presented in the book. In virtually every case, he generously
mathematics, some of the most important ideas were not captured in the mathematics itself. He wrote of causing a revolution in economic theory, but his revolution lay in his efforts to articulate clearly a general conception of how a capitalist economy worked, not in the mathematical details of his theory. He proposed a theory, yet encouraged his followers to develop it in different ways that were not Keynes’s Ambiguous Revolution 125 necessarily compatible with each other. He loved to shock
Keynes used those models for diagnostic purposes, or the different ethical approach he took to evaluating economic problems such as longterm unemployment. Other Apostles in Keynes’s generation came to hold many of the same values and concerns as he did. In order to better understand the way that he weighed the social and political costs of unemployment, for instance, one could look to the way that other Apostles of his generation wrote about its costs. One could look to E. M. Forster’s novel
to which Keynes turned in the 1930s. And Austrians, including Ludwig von Mises and Friedrich Hayek (who in the 1970s was to be a strong inﬂuence on Margaret Thatcher and Ronald Reagan), argued that the cycle was caused by overexpansionary monetary policy leading to unsustainable booms that would inevitably collapse into recession. In the United States, the need of the newly established Federal Reserve System to develop operating rules led to a proliferation of work on monetary policy and the 24