John Maynard Keynes (Great Thinkers in Economics)

This book looks at the life of Keynes leading up to the writing of his seminal General Theory , examines the General Theory in detail, and explores how it differs from classical theory. The impact of Keynes’s work on the economy postwar and up to the present day is also assessed.

Introduction:

In economics you cannot convict your opponent of error, you can only convince him of it. And even if you are right you cannot convince him … if his head is already filled with contrary notions.

— Attributed to John Maynard Keynes

The purpose of this book is to convince the reader, whether an intelligent layperson, a student of economics, or even a professional economist, that what passes as the conventional economic wisdom espoused by the talking heads on television or written about in the mass media and mainstream professional economics journals is not applicable to the world in which we live. I hope to demonstrate that the revolutionary economic analysis of John Maynard Keynes, the greatest thinker in economics in the 20th century, is the most apt description of our market-oriented, money-using entrepreneurial economy.

The less the reader has been exposed to traditional economic analysis, the less his/her head is filled with what Harvard Professor John Kenneth Galbraith described as the “conventional wisdom” and “innocent frauds” of orthodox economists. Consequently, convincing the lay reader of how a monetary economy really operates will be an easier task for me than convincing an economics student, while the hardest task will be convincing the professional economist who professes the conventional wisdom by rote. Accordingly, although I have tried to provide a clear exposition, I have found it necessary occasionally to introduce technical jargon and tools into the discussion in order to jog the minds of students and their professors. The most difficult of these technical discourses I have relegated to the appendix to chapter 6. I suggest that the lay reader can readily skip this appendix without loss.

The first three chapters of this book briefly describe Keynes’s early development into a traditional orthodox economist, and how the economic realities of World War I and its aftermath convinced Keynes that the economics that he taught and practiced was deficient. Chapters 4 through 6 describe how, after more than a decade of thought, Keynes was able to differentiate his analysis from classical economic theory. Chapter 7 summarizes Keynes’s view of the economic system in which we live. The lay reader will find the discussion in chapter 7 so obviously correct that he/she will be amazed to learn that mainstream professional economists do not accept this description and analysis.

Chapters 8–10 develop Keynes’s analysis to solve the economic problems of the 21st-century global economy. Chapter 11 deals with the problem of inflation and explains how Keynes’s analysis leads to recommendations for fighting inflation that differ dramatically from the innocent fraud perpetrated by central bankers who claim to be able to inflation-target. Finally, chapter 12 explains how the anticommunist (McCarthyism) witch hunt immediately after World War II, plus the mathematization of the discipline of economics, led to obfuscation as to what was Keynes’s revolutionary theory, and why it has not become the handmaiden of all professional economists.

Hopefully, when enough people have read this book, Keynes’s analysis will again affect economists and government policymakers’ thoughts, and we will make strides toward eliminating the major faults of the economic system in which we live, namely, the inability to provide jobs for all who are willing, able, and capable of working and the growing inequalities of incomes and wealth that have affected both the developed and less developed nations of our globalized economy.

Contents:

• An Introduction to Keynes and His Revolutionary Views
• How the Great War and Its Aftermath Affected Keynes’s Thinking
• Keynes’s Middle Way: Liberalism is Truly a New Way
• The Before and After of Keynes’s General Theory
• The Conceptual Difference between Keynes’s General Theory and Classical Theory – Savings and Liquidity
• Further Differentiating Keynes’s Aggregate Demand Function
• The Importance of Money, Contracts, and Liquid Financial Markets
• World War II and the Postwar Open Economies System
• Classical Trade Theory versus Keynes’s General Theory of International Trade and International Payments
• Reforming the World’s Money
• Inflation
• Keynes’s Revolution: The Evidence Showing Who Killed Cock Robin
• The Great Financial Crisis of 2008–2009