Guest Lecture on John Maynard Keynes
A few short Keynes quotes:
John Maynard Keynes: The proposals are simply another move in the game, by which the players at any rate are no longer taken in. Mr. Lloyd George feels that he is making progress (perhaps he is) when he succeeds in persuading M. Briand to agree with him that 2 plus 2 does not make 12 but only 8; M. Briand hopes that, being eloquent, he may after all be able in the French Chamber to make a good enough song about 8 to defeat M. Poincare as to how much better it would be for France if 2 plus 2 made 12...
Our desire to hold money as a store of wealth is a barometer of the degree of our distrust of our own calculations and conventions concerning the future.... The possession of actual money lulls our disquietude; and the premium which we require to part with money is the measure of the degree of our disquietude...
In our present confusion of aims is there enough clear-sighted public spirit left to preserve the balanced and complicated organization by which we live? Communism is discredited by events; socialism, in its old-fashioned interpretation, no longer interests the world; capitalism has lost its self-confidence. Unless men are united by a common aim or moved by objective principles, each one’s hand will be against the rest and the unregulated pursuit of individual advantage may soon destroy the whole. There has been no common purpose lately between nations or between classes, except for war...
There is a respectable and influential body of opinion which… fulminates alike against devaluations and levies, on the ground that they infringe the untouchable sacredness of contract.... Yet such persons, by overlooking one of the greatest of all social principles, namely the fundamental distinction between the right of the individual to repudiate contract and the right of the State to control vested interest, are the worst enemies of what they seek to preserve. For nothing can preserve the integrity of contract between individuals except a discretionary authority in the State to revise what has become intolerable. The powers of uninterrupted usury are great. If the accreations of vested interest were to grow without mitigation for many generations, half the population would be no better than slaves to the other half.... The absolutists of contract... are the real parents of revolution...
The more I spend my thoughts on these matters, the more alarmed I become at seeing you and others in authority attacking the problems of the changed post-war world with... unmodified pre-war views and ideas. To close the mind to the idea of revolutionary improvements in the control of money and credit is to sow the seeds of the downfall of individualistic capitalism. Do not be the Louis XVI of the monetary revolution.... I am told by a good many friends that I have become a sort of disreputable figure in some quarters because I do not agree with the maxims of City pundits. But you know I ought not to be considered so really! I seek to improve the machinery of society not overturn it...
For me, brought up in a free air undarkened by the horrors of religion, and with nothing to be afraid of, Red Russia holds too much which is detestable. Comfort and habits let us be ready to forgo, but I am not ready for a creed which does not care how much it destroys the liberty and security of daily life, which uses deliberately the weapons of persecution, destruction, and individual life. How can I admire a policy which finds a characteristic expression in spending millions to suborn spies in every family and group at home, and to stir up trouble abroad?... How can I accept a doctrine which sets up as its bible, above and beyond criticism, an obsolete economic textbook which I know to be not only scientifically erroneous but without interest or application for the modern world? How can I adopt a creed which, preferring the mud to the fish, exalts the boorish proletariat above the bourgeoisie and intelligentsia who, with whatever faults, are the quality of life and surely carry the seeds of human advancement? Even if we need a religion, how can we find it in the turbid rubbish of Red bookshops? It is hard for an intelligent, decent, educated son of western Europe to find his ideals here, unless he has first undergone some strange and horrid process of conversion which has changed all his values...
If we aim deliberately at the impoverishment of Central Europe, vengeance, I dare predict, will not limp. Nothing can then delay for very long that final civil war between the forces of Reaction and the despairing convulsions of Revolution, before which the horrors of the late German war will fade into nothing, and which will destroy, whoever is victor, the civilization and the progress of our generation.... In one way only can we influence these hidden currents–by setting in motion those forces of instruction and imagination which change opinion. The assertion of truth, the unveiling of illusion, the dissipation of hate, the enlargement and instruction of men’s hearts and minds, must be the means...
Last night I had to give the Princess [Elizabeth Bibesco, Prime Minister Asquith’s daughter] her long promised dinner, theatre, and tete-a-tete. She groped me in the stalls without the least concealment from the company and when the lights went up it turned out that her neighbor on the other side was my friend Mr. Cockerell of the Fitzwilliam Museum--which ought to be very good for my reputation...
While some part of the investment which was going on in the world at large was doubtless ill judged and unfruitful, there can, I think, be no doubt that the world was enormously enriched by the constructions of the quinquennium from 1925 to 1929; its wealth increased in these five years by as much as in any other ten or twenty years of its history.... Doubtless, as was inevitable in a period of such rapid changes, the rate of growth of some individual commodities [over 1924-1929] could not always be in just the appropriate relation to that of others. But, on the whole, I see little sign of any serious want of balance such as is alleged by some authorities. The rates of growth [of different sectors]seem to me, looking back, to have been in as good a balance as one could have expected them to be. A few more quinquennia of equal activity might, indeed, have brought us near to the economic Eldorado where all our reasonable economic needs would be satisfied.... It seems an extraordinary imbecility that this wonderful outburst of productive energy [over 1924-1929] should be the prelude to impoverishment and depression. Some austere and puritanical souls regard it both as an inevitable and a desirable nemesis on so much overexpansion, as they call it; a nemesis on man's speculative spirit. It would, they feel, be a victory for the mammon of unrighteousness if so much prosperity was not subsequently balanced by universal bankruptcy. We need, they say, what they politely call a 'prolonged liquidation' to put us right. The liquidation, they tell us, is not yet complete. But in time it will be. And when sufficient time has elapsed for the completion of the liquidation, all will be well with us again. I do not take this view. I find the explanation of the current business losses, of the reduction in output, and of the unemployment which necessarily ensues on this not in the high level of investment which was proceeding up to the spring of 1929, but in the subsequent cessation of this investment. I see no hope of a recovery except in a revival of the high level of investment. And I do not understand how universal bankruptcy can do any good or bring us nearer to prosperity...
We leave Saving to the private investor, and we encourage him to place his savings mainly in titles to money. We leave the responsibility for setting Production in motion to the business man, who is mainly influenced by the profits he expected to accrue to himself in terms of money. Those who are not in favor of drastic changes in the existing organization of society believe that these arrangements, being in accord with human nature, have great advantages. But they cannot work properly if the money, which they assume as a stable measuring-rod, is undependable. Unemployment, the precarious life of the worker, the disappointment of expectation, the sudden loss of savings, the excessive windfalls to individuals, the speculator, the profiteer--all proceed, in large measure, from the instability of the standard of value...
What is the charm to awaken the sleeping beauty, to scale the mountain of glass without sliding back? If every Treasury were to discover in its vaults a large cache of gold proportioned in size to the scale of its economic life, would that not work the charm? Why should not that cache be devised? We have long printed gold nationally. Why should we not print it internationally? No reason at all, unless our hands are palsied and our wits dull...
Progress is a soiled creed black with coal dust and gunpowder; but we have not discarded it. We believe and disbelieve, and mingle faith with doubt…. We today are the most creedless of men. Every one of our religious and political constructions is moth-eaten. Our official religions have about as much practical influence on us as the monarchy or the Lord Mayor’s coach. But we no longer substitute for them the militant scepticism of Voltaire and Hume, or the humanitarian optimism of Bentham and Comte and Mill, or the far-fetched abstractions of Hegel. Our newest Spinoza [Wittgenstein] gives us frozen comfort: 'We feel that even if all possible questions of knowledge be answered, our problems of life are still not touched at all. But in that event there is obviously no question left; and just this is the answer...'
Some readings:
http://econ161.berkeley.edu/Economists/keynes.html
http://econ161.berkeley.edu/Econ_Articles/Reviews/skidelsky12.html
http://www.j-bradford-delong.net/Econ_Articles/Reviews/skidelsky_jel.html
http://delong.typepad.com/delong_economics_only/2007/03/a_review_of_key.html
http://www.j-bradford-delong.net/movable_type/2004-2_archives/000604.html