John Maynard Keynes
John Maynard Keynes
Biography
John Maynard Keynes was born June 5, 1983 in Cambridge in a relatively prosperous family. Father of the great scientist John Neville Keynes was also economic theorist who taught economics and logic at Cambridge University and wrote a book on the subject of economics. His mother was the daughter of Florence Keynes Minister and graduated from the same University of Cambridge and in 1932-1933 even served as mayor of Cambridge.
Education of the future great scientist began when he was seven years old. Since that time and until 1892 he primarily learnt at home. Being nine years old he entered the preparatory school Saint Faith but he never was considered to be the best pupil in the class. The first success came to the scientist in 1894 when he first became the best in class and achieved a particularly great success in mathematics. Sometime later Keynes passed the entrance exam to a prestigious school in Eton where he finally got a very favorable environment for the intellectual development. While studying at the school Keynes discovered one of his hobbies to which he later devoted all his life and noticeably affected the scientific works, namely. It was collecting rare books. Keynes gradually became one of the most outstanding students at the school: he managed to get the main prize in mathematics within two years and in 1901 he was the first also in the history and literature.
1902 J. M. Keynes studied at Cambridge where his main interests were devoted to mathematics and philosophy. Keynes soon realized that mathematics is one of his favorite subjects and it has some exceptional abilities and later under the influence of another great economist Alfred Marshall (who was at the same time a friend of his father) he focused on the study of economics. In 1906 Keynes successfully passed the exam for a position of public official (it is interesting to note that one of the things that brought him the worst results was the economy although he expressed the opinion that knows more about it than his examiners) and until 1908, the year of graduation, Keynes worked as a clerk in the Indian Office. However, after the graduation Keynes temporarily left the public service apparently in connection with A. Marshall's offer about more interesting position of the Professor of Economics at Cambridge. Obviously, the teaching work was one of the most desired and interesting for Keynes. Eventually, he was engaged in it almost till the end of his life.
A major work of James M. Keynes, The General Theory of Employment, Interest and Money ("The General Theory of Employment, Interest and Money") was published in 1936. It is considered that this book marked the beginning of the so-called "Keynesian revolution", which along with the marginal revolution is the most significant event in the history of economic analysis for the last two centuries.
Keynesian revolution can be interpreted in different ways. On the one hand, this revolution was to ensure the separation of an independent discipline to entire branch of economics - macroeconomics. Of course, economists before Keynes (physiocrats, classical, neo-classical, Austrians, and suchlike) had their own ideas about macroenvironment of the economy. But the study of macroeconomic issued in that period was carried out as if "the way", without isolation of these issues as an independent object of consideration. Due to the Keynesian revolution analysis of macroeconomic problems the studies began to be conducted independently of aspects of values, competition, consumer behavior, etc.
On the other hand, the Keynesian revolution was a response to the shortcomings of the neoclassical approach towards the analysis of economic life. The issues that were conceived during the Keynesian revolution were more of a methodological and theoretical alternative to the neoclassical school. Firstly, J. M. Keynes rejected the principles of optimization and methodological individualism as a mandatory prerequisite for moving functions of economic variables and economic models. These principles are known to be the main methodological basis of modern macroeconomic theory in general and in particular the neoclassical approach. Macroeconomic functions derived by J. M. Keynes as a rule were based on habits, emotions, patterns of group behavior or simply on a priori assumptions, non-optimizing choice. Secondly, the scientists of the Keynesian revolution brought fundamental changes in economic theory itself making a completely new analysis of macroeconomic linkages. This new analysis was possible by eliminating the law Se, according to which the normal state of the market economy is total employment. The global economic crisis of the late 1920 - 1930-ies and especially the Great Depression of 1929 - 1933's empirically refuted this approach and were "concrete historical" reason of Keynesian revolution. The process of Keynes' theory implementation highlighted the elements of aggregate demand and, particularly, investment in fixed assets. Their variability has been shown to cause variability in real national income and employment. As a result the economy failed to demonstrate its self-regulatory mechanism, the level of unemployment was far above the natural level. Therefore the need for active state intervention in macroeconomic functioning market economy was obvious. Such interference can be best applied in the discretionary macroeconomic policy, which is the policy being implemented at the discretion of the government depending on the economic environment (and not in accordance with certain rules that characterize the opposite of discretionary policy - regulatory policies).
Thus, in contrast to the neoclassical model market plays a passive role in theory J. M. Keynes' labor. The employment rate is not determined by the autonomous functioning of the labor market and the amount of effective demand. Though this factor depends on the real wage rate, which contrary to popular opinion of Keynes ancestors could not be set by labor contracts (the latter only determine the cash rate of salary). This implies that the effective demand for goods generates demand for labor while the demand labor function is not a function of the marginal productivity of labor as states the neoclassical theory.
In addition, the difference of Keynes' interpretation from the neoclassical labor market is the negation of the balancing role of wage flexibility. J. M. Keynes did not accept the neoclassical thesis that the decrease in the rate of wages is a "cure for unemployment." According to George M. Keynes, the reduction in unemployment can only take place through increased volume of aggregate demand. The flexibility of wages in general may increase the degree of instability of the economy leading to difficulties related with the formation of expectations. Therefore, J. M. Keynes was an advocate of maintaining sustainable overall level of money wages.
Overall, the life and the work of J. M. Keynes was full of unpredictable situations though he managed to survive thought he taught critic and his theory is nowadays widely implemented into economic strategies all over the world.
