Term Paper on "John Maynard Keynes"

Term Paper 7 pages (2169 words) Sources: 10

[EXCERPT] . . . .

John Maynard Kenyes

John Maynard Keynes

Keynes quotes

Keynes was one of the first and most prominent economists who militated for increased governmental spending, even if this spending would be completed from borrowed sources. And aside the borrowed sources, John Maynard Keynes also stimulated the reduction of taxation. His undying belief was that lower taxes would stimulate consumption and as such demand. In order to satisfy the incremental demands, the economic agents would be faced with the necessity of opening new plants and creating new jobs. The direct impact would then be that of a better supported economic system and a real and sustainable economic growth. Yet, this would materialize in higher levels of federal deficit. And Keynes believed that even under the circumstances of deficits, the governments should still reduce taxation. At a general level, Keynes' views opposed those of his predecessors, such as Adam Smith, who intensely militated for the laissez faire principle and the elimination of state intervention within the economic system. "In contrast to the neoclassic view, Keynes saw the state as an integrant part of economic activity and a positive force that could be used to improve overall economic performance" (Holt and Pressman, 2001).

In his John Maynard Keynes: his life, times and writings, published in 2004 by the Harvard Business School Publishing, author Huw Pill follows the life and career of the British economist. The article is divided into three distinct sections. The first commences with the obituary of Keynes: "Obituary: Lord Keynes A great Economist. Lord Keynes, the great economist, died at Tilton, Firle, Sussex, yesterday from a heart attack" (Huw, 2004). The first section introduces the reader to the life of the economist. The second section reveals the features of the economic period with which Keynes was contemporary and focuses on the events from 1920 through 10940. Finally, the third section presents a series of quotes from John Maynard Keynes's life long works. It is throughout this third section that Keynes's view over government debt is observed.

Unlike several other elements of importance in Keynes's theory -- such as uncertainty, speculation, economics and so on -- which are integrated in distinct categories, his view on federal deficit has not been treated as particular self standing category. This might mean that Pill does not consider this element of tremendous importance in Keynes's work, but he feels that there were other more important elements which deserved to be treated as independent categories.

Nevertheless, the following quotes are noteworthy:

"The authoritarian state systems of to-day seem to solve the problem of unemployment at the expense of efficiency and of freedom. […] But it may be possible by a right analysis of the problem to cure the disease whilst preventing efficiency and freedom" (Keynes on capitalism)

"On the contrary, it is, in the strictest sense, an economic problem, or, to express it better, as suggesting a blend of economic theory with the art of statesmanship, a problem of political economy" (Keynes of the Great Depression)

All in all, the few quotes on federal deficit support real economic growth included or hinted to in Pill's article reveal the initially assumed position of the economist's support for the issue. In other words, he did militate for governmental action to create a stable economic climate. However, since the scarcity of the quotes referring to the subject is obvious, one could conclude that this aspect of Keynes's work was not considered pivotal by Huw Pill. But the sustained presence of governmental criticisms in nearly all segments indicates the belief that Keynes held over a more sustained governmental intervention.

2. Confidence and psychology in understanding economics and the role of the government

It is without any doubt that John Maynard Keynes was one of the greatest personalities of the twentieth century. And one of the reasons as to why he was able to so greatly influence politics and economics within the United Kingdom and outside it was represented by his great confidence. Keynes was always confident that he would be able to solve any problem with which he crosses paths. To extrapolate, he believed that the communities and the societies would be able to overcome any challenge and that solutions could be found to any problem. This increased sense of confidence marked the economist's entire life and work.

A specific means in which the confidence would impact the understanding of economics and the role of the federal institutions refers to the confidence people must have in themselves. During the twentieth century -- or better yet said, during the second half of the twentieth century -- Great Britain had achieved high levels of emancipation and education. People had access to information and to education. Universities opened their doors to more and more students and the media was becoming more informative and even education in its data offering and presentation. In this context of growing access to education and information, Keynes encouraged the people -- as representatives of the country -- to have confidence in the national system of education and information and to remain assured that it has trained them to understand even the most complex issues. In other words, Keynes promoted confidence in the abilities of the people to understand economics and the role of the government. Even if they would not comprehend the true dimensions and complexities of the economic and governmental systems, the people should remain confident and intensify their efforts in understating them as they did indeed have the ability to do so. This status quo represented the psychological dimension of confidence by which Keynes stimulated knowledge, research and understating as a means of social and economic evolution.

Aside from the psychological dimension however, confidence was also promoted by the British economist in terms of the known elements. In other words, economic models existed to predict future events, reactions or trends within the markets. But the respective models could only be implemented if the variables of the equation were known. Keynes militated for the integration of variables known -- or variables which revealed a high degree of confidence in terms of evolution in a specific direction. And these variables were to be integrated even if they played a less direct role than other elements, regarding which one could not be confident. "It is reasonable, therefore, to be guided to a considerable degree by the facts about which we feel somewhat confident, even though they may be less decisively relevant to the issue than other facts about which our knowledge is vague and scanty" (Keynes, 2004).

Confidence is also important in the context of the individual. Despite the fact that Keynes's teaching and advices address the entire population, each individual will reveal varying degrees of confidence, based on his own characteristics, such as motives or expectations. And these varying degrees of confidence will impact the market. "For Keynes, then, the conditions associated with states of confidence concern the success or lack of success with which individuals come to assess each other's opinions about markets" (Harcourt, Riach and Keynes, 1997).

In the understanding of market reactions, Keynes focuses extensively on the foreseeing of the mass reaction of the individuals who influence the market. These individuals are often "ignorant" and their behavior and reactions can be studied with the use of psychology. For instance, there are often common situations in which the individuals will react based on opinions, rumors or other elements which do not really matter in the economic and political field. However, these reactions will lead to violent modifications within the market. As a parenthesis, Keynes believed that these quick shifts in the market translated into a speculative nature of investment actions and decisions. Returning to the very behaviors of the "ignorant" individuals who can influence the market, their reactions can be foreseen with the use of mass psychology (Wood, 1994).

3. Uncertainty with Keynes

The importance of uncertainty for Keynes can easily be understood based on his beliefs regarding the ability to foresee the events within the market. According to the British economist, one can understand the market when it constructs models based on reliable, repeatable and measurable elements -- or confident variables. However, the market cannot be foreseen and understood if the adherent models are constructed based on variables which cannot be adequately trusted, or which reveal higher degrees of uncertainty. Keynes mentions: "It would be foolish, in forming our expectations, to attach great weight to matters which are very uncertain" (Keynes, 2006). In his footnotes, the author mentions that his understanding of very uncertain is not a synonym with improbable.

As the society and the economy evolved, uncertainty became dependent upon a multitude of forces, from an event in the international context, a political decision, the reactions of the individuals in the market place and so on. One example for instance, in the immediate aftermath of the Great Depression, the populations became more active and voiced their demands and concerns. Up until that point, they were only focused on being paid for their factory jobs.

Throughout… READ MORE

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