John Maynard Keynes

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John Maynard Keynes (1933)

John Maynard Keynes, 1st Baron Keynes [ keɪnz ] (born June 5, 1883 in Cambridge , † April 21, 1946 in Tilton near Firle, East Sussex ) was a British economist , politician and mathematician . He is one of the most important economists of the 20th century and is the namesake of Keynesianism . His ideas still influence economic and political theories to this day.


Origin and education

Keynes was born the son of Professor of Political Economy , John Neville Keynes , and his wife Florence Ada Keynes (née Brown). His father attached great importance to a good education and the motivation of his children. John Maynard's younger brother Geoffrey Keynes later became a noted doctor.

He attended the renowned Eton College from 1897 . Then he studied at King's College of Cambridge University , where he received a scholarship thanks to its excellent university degree. Keynes studied mathematics , philosophy and history , but also economics , as far as it belonged to the subject of mathematics. He was a student of Alfred Marshall and a college friend of Arthur Cecil Pigou . Along with other outstanding students, he was a member of the elite Cambridge Apostles debating club . In 1905 Keynes took the final exam in mathematics.

Civil service and teaching post

After graduating, Keynes went to London to enter the civil service. Since he was not accepted in the Treasury , the British Treasury, despite very good results in the entrance examination, he took a position in the India Office in 1906 , the Ministry responsible for British India . Since the workload there was very little, Keynes used the time to write his doctoral thesis on probability theory: A Treatise on Probability . It was developed by logicians and basic mathematical researchers , u. a. Bertrand Russell and Alfred North Whitehead , highly praised and recognized as the first systematic exposition of the logic of probability. It was published in 1921.

After completing his doctoral thesis in 1908, Keynes left the India Office. Mediated by his teacher Alfred Marshall, he accepted an unpaid teaching position at King's College. His father supported him financially during this time. The following year Keynes received a position as a paid lecturer (Fellow) in economics at King's College. He was very skeptical of the way neoclassical economists used mathematics to refine economic theories. In fact, Keynes uses far fewer mathematical formulations in his theories than most of his colleagues.

46 Gordon Square, London: Keynes lived in this house from 1916 to 1946.

After the First World War, Keynes was a member of the British delegation to the Versailles treaty negotiations as a representative of the British Treasury . Shortly before the conclusion of the negotiations, he resigned from his post in the delegation in protest against the terms of the treaty that were to be imposed on Germany, and in 1919 wrote the sensational book The Economic Consequences of the Peace , with which he criticized the reparations payments imposed on Germany as economically nonsensical. They would both destabilize international economic relations and carry greater social explosives for Germany with them.

From 1920 until his death he taught at King's College, Cambridge University. His General Theory of Employment, Interest and Money of 1936 changed macroeconomics profoundly and is often cited as the most influential work of economics of the 20th century. Shaped by the global economic crisis , Keynes tried with this book to convince his colleagues of the necessity of a fundamentally new macroeconomic economic theory, as a consequence of which the state, in contrast to the laissez-faire market economy, plays a decisive role in economic policy. His ideas laid the foundation of today's Keynesianism and have since been further developed by economists of this school.

In addition to his teaching activities, as Chancellor of the Exchequer of King's College, he succeeded in increasing the foundation's assets sevenfold from £ 30,000 to over £ 200,000 through clever investment.

Keynes advised politics all his life. So he was u. a. active member of the Liberal Party of England. Keynes was the British chief negotiator in the Bretton Woods negotiations in 1944. His aim was to establish a fixed rate system between the currencies, but without taking over the rigidity of the gold standard. Among other things, he proposed an International Clearing Union and an international clearing unit called Bancor , which would not have given the US dollar any supremacy as an international clearing and payment means. With the proposal of the international payments union, however , he could not prevail against the US position, represented by Harry Dexter White .

Social status

Lopokova and Keynes in the 1920s

Keynes' large circle of friends also included the famous Bloomsbury Group with Virginia Woolf , Leonard Woolf , Lytton Strachey , James Strachey , Vanessa Bell , Clive Bell , Roger Fry , Rupert Brooke and above all the painter Duncan Grant , with Keynes from 1908 to 1915 had a love affair. He lived with some of the aforementioned in a jointly rented house in the London borough of Bloomsbury (Brunswick Square 38). His book on the Treaty of Versailles was also written between August and September 1919 in the Charleston country house , which Vanessa Bell and Duncan Grant had leased.

Keynes was one of the liberal members of the British Eugenics Society and its director from 1937 to 1944. For the thus recognizable support for eugenics , Keynes was later sharply criticized; In 2010, New Statesman referred to the generally very large influence of eugenics advocates in Great Britain at that time and that in addition to the right , several formerly more leftists such as Keynes adhered to the idea.

In 1925 he married the Russian ballet dancer Lydia Lopokova , but most of his Bloomsbury friends did not accept her as a member of their circle of friends. The wedding was a social event. Vogue published a full-page photo with the signature: "The marriage of the most brilliant English economist to the most popular Russian dancer is a beautiful symbol of the interdependence of art and science." In 1935 he financially supported the founding of the Cambridge Arts Theater . In the same year he was elected to the American Academy of Arts and Sciences . Since 1929 he was a member ( fellow ) of the British Academy .

Tilton House (2017)

Bertrand Russell called Keynes the most intelligent person he had ever met. In 1942, four years before his death, Keynes was ennobled as Baron Keynes of Tilton in the County of Sussex and received a seat in the House of Lords . In April 1946, Lord Keynes died of heart failure. Since he had remained childless, his hereditary title of nobility expired with his death.

Keynes' basic economic policy position

Keynes described the gold standard in 1923 as a barbaric relic and feared that the return to the gold standard to the pre-war parities would endanger the economy and jobs in all countries, which he repeatedly warned against. In contrast to the classics, Keynes was convinced that a deflationary policy by the central banks would not automatically lower prices and wages, but would instead cause high unemployment for this purpose . Scarce money makes sense to end a boom , but should not be used to exacerbate a deflationary depression. In 1930 Keynes warned that even if nominal wages and prices were lowered to pre-war levels, economic problems would not be over because deflation increased the real burden of debt with the value of money.

The Great Depression was for Keynes the result of a wrong macroeconomic control on a global level, not a failure or fundamental error of the market order as his foreword to the 1931 published essays in Persuasion can be found. Keynes compared himself to Kassandra because he was more successful with the prophecies of his essays about his misfortune than with his attempt to convince and prevent the deflationary policy by returning to the gold standard. Keynes saw himself as a representative of a market economy with its individual freedoms, a liberal who had finally discovered the macroeconomic connections, and agreed to the theses and criticism of him by representatives of economic liberalism such as Friedrich Hayek , with whom Keynes was on friendly terms until the end, not to.

His demands for competent control of macroeconomics by the government and a monetary and financial policy overcoming the crisis had nothing in common with state planning as in the Soviet Union or Italy (under Benito Mussolini ). Keynes had ridiculed Mussolini in 1923 when he wanted to increase the purchasing power of the lira because Mussolini could not have imagined the consequences of such a deflationary policy. Keynes rejected Italian fascism on fundamental principles. Rather, he wanted to implement his reforms within the framework of the liberal democracy of Great Britain, also to avert the danger of a socialist revolution . Many times he emphasized the need for political tolerance and constructive criticism . Keynes wanted, however, instead of laissez-faire liberalism, a fundamentally new form of economy and achieve this through macroeconomic politics and democratic evolution .

Keynes proposed a state control related to the economy as a whole, trying to keep the general level of economic production and activity at an optimal level (we would say today: global control ). This should tackle the problems that an individual cannot solve without affecting the freedom and independence of individuals . In individual economic questions he is inclined to support the private decision, initiative and company as much as possible. During the Great Depression, he advocated more “national self-sufficiency” and less international interdependencies, so that Great Britain, without being dependent on the global financial market, can lower the interest rate as much as is necessary for sufficiently high investments.

His articles, Am I a Liberal? from 1925 and The End of Laissez-Faire from 1926 revealing.

Central Embassy of Keynes

The central message of his general theory is that the market economy system does not automatically tend towards full employment, even with flexible prices and wages, as Say's theorem claims. Rather, it can remain in a state of underemployment in the long term; In this case, the state (government and central bank ) should resort to financial and monetary policy measures in order to bring overall economic demand back to the level at which there is full employment . An important insight is that microeconomically sensible behavior in a macroeconomic context can be completely wrong (as an example, the savings paradox : If an individual saves more, his wealth and interest income increases. If all of them do this - without sufficient investment demand - the demand for goods decreases and thus production, employment and income, so that the total economic savings amount remains unchanged).

Macroeconomic policy is intended to influence demand, as this determines the level of production and employment, which is only limited by the available resources when there is full employment. The latter is the case to which the neoclassical theory refers in its macroeconomic statements, without making this limitation clear.

The aggregate demand is made up of private consumption, private investment (meaning more tangible investments) together, exports and government demand.

He countered objections that his theory only relates to the short-term view: “ In the long run we are all dead ” (German: “In the long term, we are all dead”).

Central building blocks of his analysis

Consumer function

One of the fundamental innovations of the Keynesian macro theory is its consumption function . She posits that changes in consumption are primarily caused by changes in actual disposable income. This doesn't sound particularly revolutionary, but it is when you consider that the neoclassical theory only analyzed what households would consume if they had achieved the income they wanted on the labor market (as the product of existing hourly wages and working hours). Keynes assumes a consumption rate of less than one (0 <c <1) and a falling marginal propensity to consume. This means that households do not spend their entire income, but save part of it, and that the share for consumer spending continues to decrease the higher the income becomes. The multiplier is based on this consumption function .

Investments and "Keynesian Uncertainty"

At Keynes, investments depend on the difference between the expected return and the market interest rates. For the expected return, the entrepreneur has to form expectations; a central element of Keynes' macroeconomic theory is ignorance about the future. Important texts on this are Chapter 12 of the General Theory and the article The General Theory of Employment from 1937. In the latter, he succinctly formulates that one simply doesn't know anything about the future (“We simply do not know.”). In this way, he is in sharp contrast to the neoclassical, which claims that future events can be calculated - for example in the form of probability distributions . Keynes argues that over the lifetime of a long-term investment (say, a car factory), the profits are simply not predictable. This is the main reason for the volatility of the investment . Therefore he contrasts the neoclassical concept of risk (the spread of the expected distribution around the expected value) with the idea of uncertainty , which indicates whether we can say anything about the future at all. He concludes from this that the neoclassical assumption of rational decisions by agents that optimize benefits cannot be upheld.

The market will only come to equilibrium in the long run. But as Keynes also says: “In the long run we are all dead.” With which he would like to point out general market risk (uncertainty), because in practice this is a promise that cannot be kept, and in this respect the state may have to “step in” and intervene to bring the market into a desirable balance.

Economy and crisis: Investments determine savings and income

At Keynes, the total savings are dominated by the total investment. The investment is therefore always identical to the real savings. An increase in interest rates will diminish the investment and must reduce income to such an extent that savings are reduced to the same extent as the investment. For Keynes, the saving is a function of the level of income, from which it follows that a decrease in the savings identical to the investment must force a corresponding decrease in income. The multiplier ensures that small fluctuations in investment lead to large fluctuations in income and employment; income will therefore decrease by a far greater amount than investment. Typically, the crisis begins with a sudden and violent collapse in the economy, because the rise in interest rates during the upswing does not initially inhibit business, but if the market mood changes, it hits the sale of goods with sudden and devastating force.

With this explanation for business cycle and crisis Keynes stepped into a revolutionary contrast to the classics in economic theory. These had always taught that a lack of saving is the cause of a lack of capital, too high interest rates and a decline in investments, so that saving and renouncing consumption should be particularly encouraged in order to overcome a crisis. According to Keynes, however, a higher savings rate because of the multiplier must lead to an even more painful decline in incomes in the crisis, because savings are determined by the investment and not the other way around. His findings are therefore still in radical contrast to the economic and political demands of the neoclassics, which, according to the Keynesians, aggravate the crises.

Deficit spending

The deficit spending called for by Keynes to overcome the crises is the monetary side of his business cycle theory. Just as investment is identical to saving in real terms, so is accumulation of financial assets and debt. Therefore, the excessive saving of money in times of crisis must force a corresponding borrowing, and the mechanism for this is again the worsening of the crisis, whereby the incomes from which money can be saved fall and at the same time, the falling incomes are forced into a higher debt. With its budget deficit, the state enables the private sector to accumulate financial assets accordingly and prevents the collapse of the economy, with which private savings of money would otherwise have been brought into line with private debt. It was not until much later that Wolfgang Stützel explained with his balance mechanics the monetary mechanism, how, if necessary, revenue surpluses force the corresponding expenditure surpluses and why this leads to a slump in the economy .

In his open letter to President Franklin Delano Roosevelt in December 1933, Keynes wrote that the economy could either be stimulated by increasing private spending by saving private individuals less money on their current income, or by cutting interest rates to encourage firms to get more employment or the state must create more income through credit creation. At the low point of a crisis, however, only the state can give the impetus to overcome the crisis through deficit spending .

Demand for liquid funds (cash management)

Another important innovation is Keynes' analysis of cash management.

With it Keynes tried to explain why economic operators keep part of their financial assets in forms that bring no interest (cash, sight deposits ). For this "preference for liquidity", referred to in English as the "liquidity preference" and commonly used in economics today as the "liquidity preference", Keynes names four reasons ("motives"):

  1. Income motive for bridging the time between income and expenditure of income
  2. Business motive for bridging the time between buying and selling a product
  3. Precautionary motive: Provision for unforeseeable expenses
  4. Speculative motive based on the expectation of more favorable future opportunities to invest money.

Income motive and business motive together Keynes also calls the transaction motive ("transactions motive"). The resulting cash management is only dependent on income, but the others also and above all on the interest rate . The classical theory only considered the transaction register, while Keynes shows the dependence of money holding on the interest rate.

Keynes explains the interest rate by the above-mentioned demand for cash management and the amount of money available, which in the “General Theory” (1936) is treated as being controlled by the central bank. As a result, the interest rate is no longer a variable that - as in neoclassical theory - can adjust investments to savings. A well-known interpretation of Keynes' view of the macroeconomic equilibrium problem was provided by his colleague John R. Hicks in the following year.

Fonts (selection)

  • The Economic Consequences of the Peace. Macmillan, London 1919. (Digitized edition from 1920 under: urn : nbn: de: s2w-12189 )
    • in German as The economic consequences of the peace treaty. Translated by MJ Bonn and C. Brinkmann. Duncker & Humblot, Munich 1920 ( full text in Project Gutenberg ).
    • abridged new edition as War and Peace. The economic consequences of the Treaty of Versailles. Edited and with an introduction by Dorothea Hauser. Berenberg, Berlin 2006, ISBN 3-937834-12-5 (without the tables and individual provisions of the contract)
    • also abridged new edition as War and Peace. The economic consequences of the Treaty of Versailles. Newly translated by Joachim Kalka , edited and with an introduction by Dorothea Hauser, Berenberg, Berlin 2014, ISBN 978-3-937834-75-7 .
  • Treatise on Probability. 1921.
    • German: About probability. Joh. Ambr. Barth, Leipzig 1926.
  • A revision of the treaty - being a sequel to "The economic consequences of the peace" . Macmillan, London 1922. (Digitized edition from 1920 under: urn : nbn: de: s2w-12253 )
    • German: Revision of the peace treaty. A sequel to “The Economic Consequences of the Peace Treaty”. Duncker & Humblot, Munich / Leipzig 1922.
  • Tract on Monetary Reform. London 1923.
    • German: A treatise on currency reform. Duncker & Humblot, Munich 1924; 2nd edition ibid. Berlin 1997, ISBN 3-428-07384-3 .
  • The End of Laissez-Faire . 1926. (Digitized edition under: urn : nbn: de: s2w-12233 )
    • The end of laissez-faire. Ideas for connecting private and public economy. Duncker & Humblot, Munich 1926.
  • Treatise on Money. London 1930. (Digitized edition at: urn : nbn: de: s2w-12278 )
    • German: Of money. Duncker & Humblot, Munich / Leipzig 1932; 3rd edition ibid. Berlin 1983, ISBN 3-428-00756-5 .
  • Economic Possibilities for our Grandchildren. In: Nation and Athenaeum. October 1930; (PDF; 64 kB).
    • German: Economic opportunities for our grandchildren . Translation by Norbert Reuter. In: Norbert Reuter (ed.): Growth euphoria and distribution reality: economic policy models between yesterday and tomorrow . Marburg 2007, pp. 135-147; (PDF; 83 kB)
  • Essays in Persuasion Macmillan, London 1931. (Information about the book on the homepage of the Keynes Society .) (Digitized edition of the Popular Edition from 1933 at: urn : nbn: de: s2w-12243 )
  • The General Theory of Employment, Interest and Money. Mac Millan, London 1936. ( Homepage of the University of Adelaide ). (Digitized edition at: urn : nbn: de: s2w-12174 )
    • German: General theory of employment, interest and money. Translation by Fritz Waeger, Duncker & Humblot, Munich / Leipzig 1936; unchanged until 2006. 2006 Fritz Waeger's translation corrected and revised. by Jürgen Kromphardt and Stephanie Schneider, therefore from 2006 the improved 10th edition Berlin 2009, ISBN 978-3-428-12096-3 .
  • The General Theory of Employment . (PDF) In: Quarterly Journal of Economics , Vol. 51, No. 2, February 1937, pp. 209-223, JSTOR 1882087
  • Two memoirs - Dr. Melchior, a defeated enemy, and My early beliefs . AM Kelley, New York 1949.
    • German: friend and enemy. Two memories. With an introduction by Dorothea Hauser, translation by Joachim Kalka, Berenberg, Berlin 2004, ISBN 3-937834-00-1 . Review of the 2007 edition by Markus C. Kerber on the Europolis website
Collective editions
  • The Collected Writings of John Maynard Keynes. 30 volumes. Edited by Austin Robinson and Donald Moggridge. Cambridge University Press, 1971-1998.
  • Politic and economy. Men and problems. Selected treatises. Mohr (Siebeck), Tübingen 1956.
  • Harald Mattfeldt : Keynes. Annotated selection of works. VSA-Verlag, Hamburg 1985, ISBN 3-87975-297-4 .
  • On Air. The world economist at the microphone of the BBC. Compiled and translated by Michael Hein. Murmann, Hamburg 2008, ISBN 978-3-86774-026-5 .
  • John Maynard Keynes in the Economic Service : Collected Articles 1920-1932 .



Introductions to his theory of employment, interest and money

Criticism (see also Keynesianism )

Web links

Commons : John Maynard Keynes  - Collection of Images, Videos and Audio Files


  1. ^ Bertrand Russell : Review: A Treatise on Probability. By John Maynard Keynes . In: Mathematical Association (ed.): Mathematical Gazette . 32, No. 300, July 1948, pp. 152-159. JSTOR 3609931 .
  2. ^ Ian Hacking: An introduction to Probability and Inductive Logic. Cambridge University Press 2006, ISBN 0-521-77501-9 , p. 144
  3. ^ Keynes: A Treatise on Probability. 1921
  4. According to Jürgen Kromphardt: The greatest economists - John Maynard Keynes . UTB-Lucius, Munich 2013, ISBN 978-3-8252-3794-3 . Pp. 13-17.
  5. Edward Fullbrook: The Rand Portcullis and PAE . In: Post-Autistic Economics Review. Issue 32, July 5, 2005
  6. Nikolaus Piper : How the world economist made millions. In: Süddeutsche Zeitung . February 25, 2008, accessed on September 27, 2010 (SZ series: Die große Speculanten (6)).
  7. The Myth of Bretton Woods. Never Mind The Markets. In: Tages-Anzeiger . 20th August 2014
  8. Pamela Todd: The World of Bloomsbury . Fischer Taschenbuch Verlag, Frankfurt am Main 2002, p. 42.
  9. Michael Haller, Martin Niggeschmidt (ed.): The myth of the decline of intelligence: From Galton to Sarrazin: The thought patterns and thinking errors of eugenics. Springer VS, Wiesbaden 2012, ISBN 978-3-531-18447-0 , p. 94
  10. The eugenics movement Britain wants to forget. In: New Statesman . December 9, 2010
  11. Hermione Lee : Virginia Woolf. One life. S. Fischer, Frankfurt 1999, ISBN 3-10-042502-2 , p. 616
  12. Manfred Reist: John M. Keynes: Economy for Peace ( Memento of March 7, 2004 in the Internet Archive ). In: A Mail. No. 2/3 2002
  13. ^ Deceased Fellows. British Academy, accessed June 18, 2020 .
  14. ^ John Maynard Keynes: The Return to the Gold Standard. In: Essays in Persuasion. WW Norton & Company, 1991, p. 208
  15. ^ John Maynard Keynes: The Economic Consequences of Mr. Churchill. In: Essays in Persuasion. WW Norton & Company, 1991, p. 259
  16. ^ John Maynard Keynes: The Great Slump of 1930. In: Essays in Persuasion. WW Norton & Company, 1991, pp. 138 f.
  17. ^ Keynes: Essays in Persuasion. 1931, Preface
  18. ^ Keynes v Hayek: Two economic giants go head to head. In: BBC . August 3, 2011
  19. John Maynard Keynes: Alternative Aims in Monetary Policy. Essays, 1923, pp. 190 f.
  20. See for example: National Self-Sufficiency. Pp. 243-256.
  21. ^ John Maynard Keynes: Collected Writings. Vol. 21, pp. 84-92
  22. National self-sufficiency. In: Schmoller's yearbook. 57th year, 1933, pp. 61–70. Reprinted in: Harald Mattfieldt: Keynes: Commented selection of works. VSA-Verlag, Hamburg 1985, pp. 152-161. Original in the Collected Writings. Vol. 21, pp. 233-246
  23. John Maynard Keynes: Am I a Liberal? In: Essays in Persuasion. WW Norton & Company, 1991, p. 312 ff.
  24. John Maynard Keynes: The End of Laissez-Faire . Hogarth Press, 1926
  25. ^ John Maynard Keynes: The General Theory of Employment. ( Memento from November 27, 2014 in the Internet Archive ) In: Quarterly Journal of Economics. Vol. 51, No. 2, February 1937, pp. 209–223 (PDF; 273 kB).
  26. Keynes: General Theory. 1936, p. 95
  27. Keynes: General Theory. 1936, p. 101
  28. Keynes: General Theory. 1936, p. 95
  29. Keynes: General Theory. 1936, p. 267
  30. ^ John Maynard Keynes: An Open Letter to President Roosevelt. 1936, 5.
  31. John Maynard Keynes: General Theory of Employment, Interest and Money . 6th unchanged edition. Duncker & Humblot, Berlin 1985, ISBN 3-428-00757-3
  32. ^ John R. Hicks: Mr. Keynes and the 'Classics': A Suggested Interpretation. In: Econometrica. 5 (2), April 1937, pp. 147-159.
  33. ^ Reinhard Blomert : economic book. Back to Keynes . In: Die Zeit , No. 10/2007.
  34. Olaf Storbeck: History of an economic classic - The Keynes Understander. Handelsblatt , May 11, 2009.
  35. (PDF)
  36. ^ Rudolf Walther: Philosopher and moralist as well as economist. In: Frankfurter Rundschau . March 5, 2010