John Maynard Keynes was a British economist who developed economic ideas which fundamentally changed the theory and practice of macroeconomics. His ideas were founded on the earlier works on business cycles and their causes. He refined all of the ideas of microeconomics and became the most influential economist to work in the 20th century. He developed what has become the basis of Keynesian economics school of thought.
5. Early Life
Keynes was the first born of John Neville Keynes and Florence Ada Keynes. He was born on June 5, 1883, to an upper-middle-class family residing in Cambridge, England. Keynes’s father lectured moral sciences at the University of Cambridge and was also an economist while his mother was a local social reformer. Keynes began his schooling at the Perse School for Girls in kindergarten, but his poor health meant he was out of school for periods of time. After being tutored by his mother and a governess, Keynes joined St. Faith's preparatory school where he excelled in mathematics. A scholarship led him to Eton College and subsequently to King's College to pursue mathematics. Keynes graduated with a first class Bachelors in mathematics in 1904.
From October 1906 to 1908, Keynes served as a clerk in the India Office. He returned to Cambridge to research on probability theory, initially funded by his father and another economist, Arthur Pigou. Keynes’s first professional economics article was published in the Economist Journal in 1909 where he would become editor in 1911. Keynes lectured and took pupils for tuition, and his first book was published in 1913 titled ‘Indian Currency and Finance.' Keynes then served in the Royal Commission on Indian Currency and Finance. After WWI, Keynes obtained a government position in the Treasury. Keynes’s success in the post saw him become the principal representative of the Treasury to the Versailles peace conference in 1919. However, Keynes resigned from the treasury in the view that the conclusion of the conference would be burdensome to Germans. In 1919, he published The Economics Consequences of the Peace which is regarded as his best and most influential book. He published subsequent academic works and also worked as a financial consultant.
3. Major Contributions
The ideas of Keynes gained prominence at the end of the Great Depression all the way to the mid-1970s, in what is called the Keynesian Revolution. Economic policymakers in America, Europe, and the rest of the world were inspired by his ideas. Keynes formulated various theories which formed the basis of Keynesian economics. Keynes pioneered the field of modern macroeconomics in his work ‘General Theory of Employment, Interest, and Money' where he articulated the government's role in dealing with economic depression. Keynes was also an important figure in agitating for the creation of an international currency regulation body and a world central bank, ideas which were realized as the International Monetary Fund and the World Bank. Other concepts credited to Keynes include the liquidity preference, deficit spending, spending multiplier, and the Aggregate Demand –Aggregate Supply (AD-AS) model.
Although Keynes had hoped that his strategies would influence the peace conference in Versailles, he found himself excluded from high-level sessions. Keynes wanted to ensure that the German compensation payments would not be so high to avoid burdening the country’s people and also limiting the nation’s ability to import goods thus affecting its economy. The place of Keynes and the Treasury in the conference was assumed by Lord Cunliffe and Lord Sumner, whom together were referred to as the Heavenly Twins due to the large compensation sums they intended to demand from Germany. Keynes’s attempts at exerting some influence in the sidelines bore no fruit. He drafted a plan at the end of the conference which among other measures would place the cost of the reconstruction of Europe to the US. This plan was not adopted leading to Keynes resignation from the Treasury on economic and moral grounds.
1. Death and Legacy
Keynes succumbed to a heart attack on April 21, 1946, leaving his wife Lydia Lopokova and no children. Keynes left an indelible mark in the field of economics, and he challenged traditional economic and political views. He assigned an active responsibility to the government especially in rectifying economic crises and influenced the policies of countries across the world. Keynes is identified as one of the most influential and recognized economists in history.