KEYNES, JOHN MAYNARD. - English economist, b. in Cambridge on 5 June 1883, d. in London on 21 Apr. 1946. He became known as early as 1912 by directing the Economic Journal, then became professor of economic subjects at the University of Cambridge and was called to be part of an economic commission for the finances of India (1913); during the First World War, he held important ministerial posts, which he also retained at the subsequent Peace Conference.
In his works: The economic consequence of the peace (London 1919; Italian trans., Milan 1920); A revision of the Treaty (London 1922; Italian trans., Milan 1922), he criticizes the foreseeable tragic economic consequences of the Treaty of Versailles; there follow: A tract on monetary reform (London 1923; Italian trans., Milan 1925); A short view of Russia (London 1925), and, most importantly, The general theory of employment interest and money (ibid. 1936). In this last work, difficult because of its new terminology and the disconnectedness of its arguments, the pre-eminence hitherto recognized as belonging to the problems of distribution is transferred to those of income and employment. Scholars and polemicists, developing K.'s views on the "cycles of depression" concerning unemployment and, more broadly, on the relations between interest, savings and investments, created the economic theory known as Keynesianism.
The revolutionary character of the theory is, in truth, far smaller than the Keynesians assert and than K. himself at first wanted to suggest; very notable, on the other hand, is the progress in the methods of investigation and of representation of phenomena. The work, written during the English crisis of 1932-35, reflects its vicissitudes, recognizing in the maneuvers of economic policy a preponderant importance over the positive conquests of applied economic science.
Unlike the opinion of the classics, the formation of savings is not seen in correlation with the rate of interest: the low cost of money facilitates new investments, increases work and incomes, hence savings, and vice versa (this was already in the Turgot of the Réflexions sur la formation et la distribution des richesses [Limoges 1766], where the rate of interest is compared to a sea level which, rising and falling, submerges great expanses of territory or restores them to cultivation). The major problem of the economy would therefore be that of fixing the most advantageous rate of interest: called the equilibrium rate, since to it, and to the corresponding discount rate, the general equilibrium of prices is linked.
This rate will evidently be fixed by the great banks, as the Swedish economist K. Wicksell had already expressed himself, whose ideas on monetary interest K. had accepted in his Treatise on Money (London 1930). Modifying however, in part, this opinion, taking account of the many criticisms (especially Hawtrey's) and drawing inspiration from a line of studies that arose in Italy (v. HALLESISMO), K. examined more deeply the real aspects of dynamic equilibrium, concluding that the rate of interest, although it does not determine savings, nevertheless influences their distribution between liquid forms and productive investments. The equilibrium rate, tending toward zero, would therefore permit maximum employment through a maximum of investments, especially in instrumental and not in consumer goods.
K. is however of the opinion that the passage from one position of equilibrium to another, by filling the deficiency of capitalization, cannot be brought about by the spontaneous reaction of savers, that is, by automatism in the liberal sense; the formation of savings and the transformation of liquid forms into new productive investments must therefore be stimulated and guided by the State, by means of a general policy of low interest integrated with public works, direct industrial participations, nationalizations, control of monetary circulation (the Keynesians willingly allude to wise and timely inflationary measures) whenever a gap between savings and investments heralds a new depressive cycle.
K., while inspiring with such views the Report of the British experts or Bretton Woods, drafted in 1943 under his direction, allowed wide borrowing from the formal part of the aforementioned Italian line of studies, which intends instead to solve the same problems by purely technical means, eliminating the obstacles that stand in the way of an intense capitalization of savings. Such are above all the risks of loss, of immobilization and of devaluation, against which the insurance contract and technical-juridical improvements in capitalization contracts are effective, conferring on investment securities maximum marketability and unalterability of value (v. also SICUREZZA SOCIALE).
The polemic over Keynesianism is therefore between the advocates of economic policy carried to extremes and the defenders of traditional economics: both far from any truly new economic technique
Bibliography16 works
Mario Baronci