John Mynard Keynes
John Mynard Keynes was one of the most influential economist of the 20th century. His works have strongly affected the development of macroeconomics and served as a foundation for the whole new school of economics, the Keynesian economics.
John Mynard Keynes was born on the 5th of June, 1883 in Cambridge, UK from John Neville Keynes, who was a lecturer at the University of Cambridge, and Florence Ada Keynes. Keynes obtained his first education in the Perse School and later in St. Faith’s Preparatory School. In 1897 he won a scholarship to join Eton College, the most prestigious boarding school in the country. He graduated from Eton in 1902 to join King’s College, where he received a scholarship to study mathematics. Although he finished his studies in King’s College in 1904 with a B.A. in mathematics, Keynes continued to attend classes and participated in the club activities of the university. He also returned to Cambridge in 1908 in order to continue working on his probability theory.
Keynes was married to Lydia Lopokova, a ballerina from Russia. Their marriage lasted for 21 years, however the couple did not have children. Lopkova outlived Keynes by 35 years and died in 1981. Keynes died at the age of 62 on April 21, 1946 after a series of heart attacks (Moggridge, 2005).
The contribution of Keynes into the development of economic theory is hard to overestimate. He is considered one of the most important economists in the history, together with Adam smith and Carl Marx. Keynes’s ideas were based on the assumption that government intervention was necessary to mitigate the impact of economic cycles. This theory has become particularly popular during the Great Depression, when governments resorted to higher level of protectionism due to the general disenchantment with the free economics.
One of the key works by Keynes was his book “General Theory of Employment, Interest and Money”. It challenges the common belief that economies return to full employment after the period of recession. In his works Keynes also suggested the nation’s income is comprised of investment and consumption. This compositions explain the vicious circle that is likely to form during the periods of economic downturns. As companies invest less due to the uncertainty in the economic environment, only limited economic growth becomes feasible. This situation leads to business downsizing and higher unemployment. As a result of this people decrease the level of their consumption, hence the income of businesses diminishes bringing the economy into the next cycle of recession. In order to reverse this trend governments should engage in deficit spending and to employ mechanisms to foster investment and consumption. Keynes has also made a significant contribution during the Bretton Woods negotiations. He advocated the establishment of central banks and strongly promoted international currency regulation. He also played an important role in the establishment of World Bank and International Monetary Fund.
The key elements of Keynesian economics have never lost their relevance, even though its basic assumptions faced significant criticism in the 1970s in response to the oil crisis and U.S. inflation. The “General Theory” was particularly criticised by the economists Milton Friedman and Joseph Schumpeter, who claimed that the theory was only a special case and in the long run could only exacerbate the situation. However, the economic crisis of 2008 brought back the ideas of John Keynes, as the governments in Europe and in the U.S. started to invest heavily in their economies in order to mitigate or to lessen the impact of the recession (Briggs, 2010).
References
Briggs, B. (2010). John maynard keynes: The man who transformed the economic world.
In InvestingAnswers. Retrieved from
http://www.investinganswers.com/education/economics/john-maynard-keynes-man-
who-transformed-economic-world-621
Moggridge, D. E. (2005). Maynard Keynes: An economists' biography. New York, NY:
Routledge.
