If you know anything about modern economic theory, you’ve learned the names Milton Friedman and John Maynard Keynes—generally pitted against each other as representing the divide down the center in Western political economy. While more radical thinkers like F.A. Hayek and, of course, Marx and Engels, hold sway over a significant part of the population, when it comes to the entrenched two-party system in the U.S. and so-called moderate Democratic and Republican politicians, we can handily refer to Friedman and Keynes, respectively, as advocating on the one hand very little government intervention into free market affairs and, on the other, a significant, very visible, guiding hand.
Keynes “believed that governments have it in their power,” says Alain de Botton in his School of Life animated introduction above, “to solve some of the greatest ills of capitalism.” Rejecting both communism and “the utter wisdom of the unfettered free market,” Keynes sought to chart a middle way, theorizing capitalist economies planned through “judicious injections” of money and “wise regulations” to “smooth out the peaks and troughs to which all economies seem fatefully prone.” Keynes himself was not prone to many financial ups and downs. Born in 1883 in Cambridge to a “well-to-do academic family,” writes the BBC, his “father was an economist and a philosopher” and his mother “became the town’s first female mayor.” He “amassed a considerable personal fortune from the financial markets” between the wars and became a “board member of a number of companies.”
At the height of the economic crisis in 1930, Keynes published an essay titled “Economic Possibilities for Our Grandchildren,” in which he “outlined his belief that most economic problems could be overcome, and give way to an age where the chief challenge for human beings would be how to occupy their leisure time in conditions of mass prosperity.” His utopian outlook may have been partly conditioned by his position as “part of the British establishment.” But Keynes was a nuanced, creative thinker, a member of the Bloomsbury group—Virginia Woolf was one of his closest friends—who “recognized that good economics was as fundamental to well-being as good painting or literature, and in a deep sense not fundamentally different in its search for the wellsprings of fulfillment, and its attention to human error and blindness.”
Like Woolf, Keynes tended to view human well-being through a narrow class prism, with some of the ugly prejudices such a view entails. Yet his theory began by considering the needs of huge numbers of unemployed in Britain and the U.S. who should not have to live in precarity and poverty, he reasoned, until the market got around to correcting itself, if it happened to do so in their lifetimes. The interventionist theories Keynes elaborated in his General Theory of Employment, Interest and Money, his great work of 1936, led to his creation in 1944 of the IMF and the World Bank, two of the most controversial global institutions of the past half-century for what many see as their disastrous, coercive meddling in the economic affairs of poorer nations.
While deficit spending may be a de facto practice of every government administration, it is the theory of John Maynard Keynes that most attaches it philosophically to the center-left. And while it may be that more Keynesian stimulus spending, with government as the “primary shopper in the land,” as Peter Coy argued in 2014, is just what a sagging, stagnant world economy needs, the perpetual challenge, as de Botton points out, is the question of just “who should pay for the loans” governments issue, or the services it funds to buoy the citizenry. Few people, no matter how wealthy, seem to want to shoulder the burden, however light it may be for some, even if Keynes’ “multiplier effect” can be shown to raise all boats once it takes hold.
Everyday Economics: A New Course by Marginal Revolution University Where Students Create the Syllabus
A Short Course in Behavioral Economics
Josh Jones is a writer and musician based in Durham, NC. Follow him at @jdmagness
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