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John Maynard Keynes, 1st Baron Keynes of Tilton
(pronounced kānz / kAnze), ) (June 5, 1883
– April 21, 1946) was an English economist,
whose ideas had a major impact on modern economic
and political theory as well as on Franklin D.
Roosevelt's New Deal. He is particularly
remembered for advocating interventionist
government policy, by which the government would
use fiscal and monetary measures to aim to
mitigate the adverse effects of economic
recessions, depression (economics)|depressions and
economic boom| booms. He is considered by many to
be the founder of modern macroeconomics.

== Biography ==
=== Education ===
John Maynard Keynes was the son of John Neville
Keynes, an economics lecturer at Cambridge
University and Florence Ada Brown, a successful
author and a social reformist.  Keynes enjoyed an
elite early education at Eton, where he displayed
talent in nearly every field of his unusually
wide-ranging interests.  His abilities were
remarkable for their sheer diversity.  He entered
King’s College, Cambridge to study mathematics,
but his interest in politics led him towards the
field of economics, which he studied at Cambridge
under A.C. Pigou and Alfred Marshall.

=== Career ===
In the interest of finding some source of income,
Keynes postponed writing his dissertation for
Cambridge, and instead took the civil service
examinations, in which he placed second.
Hilariously, he got his worst grade in the
economics portion, to which he remarked, “The
examiners presumably knew less than I did.”  The
most desirable opening in the British Treasury
being taken by the person who came first, Keynes
accepted a job in the India Office, the demands of
which he claims were so low that he divided his
time between reading the newspaper and catching up
on personal correspondence.  Also during this
time, he worked on his dissertation, which
was—to his annoyance—not accepted when he
submitted it, meaning also that the accompanying
lifelong fellowship to Cambridge was not granted
either.  Instead, he accepted a lectureship in
economics funded personally by Alfred Marshall,
from which position he began to build his
reputation as an economist.  Soon he was appointed
to the Royal Commission on Indian Currency and
Finance, a position from which he could show his
considerable talent at applying economic theory to
practical problems. Having demonstrated such an
aptitude, particularly with regards to currency
and credit, his services were called on after the
outbreak of the first World War.  He worked for
the Adviser to the Chancellor of the Exchequer and
to the Treasury on Financial and Economic
Questions.  Among his responsibilities were the
design of terms of credit between Britain and its
continental allies during the war, and the
acquisition of scarce currencies.  At this latter
endeavor Keynes’ “nerve and mastery became
legendary,” in the words of Robert Lekachman, as
in the case where he managed to put
together—with difficulty—a small supply of
Spanish pesetas and sold them all to break the
market: it worked, and pesetas became much less
scarce and expensive.  These accomplishments led
eventually to the appointment that would have a
huge effect on Keynes’ life and career:
financial representative for the Treasury to the
1919 Paris Peace Conference.

Keynes' career lifted off as an adviser to the
United Kingdom|British finance department from
1915–1919 during World War I, and their
representative at the Treaty of
Versailles|Versailles peace conference in 1919.
The visit resulting in the publication of The
Economic Consequences of the Peace the same year
followed by A Revision of the Treaty in 1922
earned him public prominence. The works argued
that the reparations which Germany was forced to
pay to the victors in the war were too large and
would lead to the ruin of the German economy. 
These predictions were arguably borne out when the
German economy collapsed in the hyperinflation of
1923, with only a small amount of reparations ever
being paid.

Keynes published his Treatise on Probability in
1920, a notable contribution to the philosophical
and mathematical underpinnings of probability
theory. He attacked the deflation policies of the
1920s with A Tract on Monetary Reform in 1923, a
trenchant argument that countries should target
stability of domestic prices and proposing
flexible exchange rates. The Treatise on Money
1930 (2 volumes) effectively set out his Knut
Wicksell|Wicksellian theory of the credit cycle.

His magnum opus, General Theory of Employment
Interest and Money|The General Theory of
Employment, Interest and Money challenged the
Classical economics|economic paradigm when
published in 1936. In this book Keynes put forward
a theory based upon the notion of aggregate demand
to explain variations in the overall level of
economic activity, such as were observed in the
Great Depression. The total income in a society is
defined by the sum of consumption and investment;
and in a state of unemployment and unused
production capacity, one can only enhance
employment and total income by first increasing
expenditures for either consumption or investment.




The total amount of saving in a society is
determined by the total income and thus, the
economy could achieve an increase of total saving,
even if the interest rates were lowered to
increase the expenditures for investment. The book
advocated activist economic policy by government
to stimulate demand in times of high unemployment,
for example by spending on public works.  The book
is often viewed as the foundation of modern
macroeconomics and had a profound impact on U.S.
president Franklin Delano Roosevelt|Roosevelt's
New Deal. 

In 1942 Keynes was a very recognised economist and
was raised to the peerage as Baron Keynes of
Tilton. During World War II, Keynes argued in How
to pay for the war that the war effort should be
largely financed by higher taxation, rather than
deficit spending, in order to avoid Inflation
(economics)|inflation.  As Allied victory began to
look certain, Keynes was heavily involved, as
leader of the British delegation and chairman of
the World Bank commission, in the negotiations
that established the Bretton Woods system. The
Keynes-plan, concerning an international
clearing-union argued for a radical system for the
management of currencies, involving a world
central bank, the Bancor, responsible for a common
world unit of currency. The USA's greater
negotiating strength, however, meant that the
final outcomes accorded more closely to the less
radical plans of Harry Dexter White. 

Keynes wrote Essays in Biography and Essays in
Persuasion, the former giving portraits of
economists and notables, whilst the latter
presents some of Keynes' attempts to influence
decision-makers during the Great Depression.
Keynes was editor in chief for the Economical
Journal from 1912.  

==== Investor ====
Keynes' brilliant record as an investor is
demonstrated by the publicly available data of a
fund he managed on behalf of King's College,
Cambridge.

From 1928 to 1945, despite taking a massive hit
during the Crash of 1929, Keynes' fund produced a
very strong average increase of 13.2% compared
with the general market in the United Kingdom
declining by an average 0.5% per annum.

The approach generally adopted by Keynes with his
investments he summarised accordingly:

*1. A careful selection of a few investments
having regard to their cheapness in relation to
their probable actual and potential intrinsic
value over a period of years ahead and in relation
to alternative investments at the time;

*2. A steadfast holding of these fairly large
units through thick and thin, perhaps for several
years, until either they have fulfilled their
promise or it is evident that they were purchases
on a mistake, and;

*3. A balanced investment position, i.e. a variety
of risks in spite of individual holdings being
large, and if possible opposed risks (e.g. a
holding of gold shares among other equities, since
they are likely to move in opposite directions
when there are general fluctuations).

Keynes argued that "It is a mistake to think one
limits one's risks by spreading too much between
enterprises about which one knows little and has
no reason for special confidence ... One's
knowledge and experience are definitely limited
and there are seldom more than two or three
enterprises at any given time in which I
personally feel myself to put full confidence."

Keynes' advice on speculation, some might say, is
timeless:

:(Investment is) intolerably boring and
over-exacting to any one who is entirely exempt
from the gambling instinct; whilst he who has it
must pay to this propensity the appropriate toll.

When reviewing an important early work on equities
investments, Keynes argued that "Well-managed
industrial companies do not, as a rule, distribute
to the shareholders the whole of their earned
profits. In good years, if not in all years, they
retain a part of their profits and put them back
in the business. Thus there is an element of
compound interest operating in favor of a sound
industrial investment."

=== Personal and Marital life ===
Standing at approximately 6' 9", Keynes was very
tall even by today's standards. In the early part
of his life he had homosexual relationships. He
had a series of relationships with men during his
university days, and a serious relationship with
the Bloomsbury Group|Bloomsbury painter Duncan
Grant from 1908 to 1915. Keynes continued to
assist Grant financially for the rest of his life.
Keynes met Lydia Lopokova, a well-known Russian
ballerina, in October 1918. The two married, and
by most accounts, Keynes enjoyed a happy marriage
with Lopokova. They were unable to have children
for medical reasons. 

Keynes was ultimately a successful investor
building up a substantial private fortune. He was
nearly wiped out following the Wall Street Crash
but soon recouped his fortunes. He enjoyed
collecting books and for example collected and
protected during his lifetime many of Isaac
Newton's papers. He was interested in literature
in general and drama in particular and supported
the Cambridge Arts Theatre financially, which
allowed the institution to become at least for a
while a major British stage outside of London.
Keynes died of cardiac infarction, his heart
problems being aggravated by the strain of working
on post-war international financial problems.

His brother Sir Geoffrey Keynes (1887-1982) was a
distinguished surgeon, scholar and bibliophile.
His nephews are Richard Keynes (born 1919), a
physiologist, and Quentin Keynes (1921-2003) an
adventurer and bibliophile.

== Influences on Keynes' works ==
*Arthur C. Pigou
*Alfred Marshall
*Adam Smith
*David Ricardo
*Karl Marx

== Keynes' influence ==
Keynes' theories were so influential, even when
disputed, that a subfield of Macroeconomics called
Keynesian economics is further developing and
discussing his theories and their applications.
John Maynard Keynes had several cultural interests
and was a central figure in the so-called
Bloomsbury group, consisting of prominent artists
and authors in Great Britain. His
autobiography|autobiographical essays Two Memoirs
appeared in 1949.

== Critique ==
The work 1930 Treatise on Money (2 volumes) was
regarded as Keynes's best work by his frequent
intellectual opponent, Milton Friedman. Friedman
and other monetarists have argued that Keynesian
Economists do not pay enough attention to
stagflation and other inflationary issues.

*Friedrich von Hayek reviewed the Treatise on
Money so harshly that Keynes decided to set Piero
Sraffa to review (and condemn no less harshly)
Hayek's own competing work. The Keynes-Hayek
conflict was but one battle in the
Cambridge-London School of Economics|LSE war.
*Ludwig von Mises
*Rational expectations



== References ==
* Essays on John Maynard Keynes, Milo Keynes
(Editor), Cambridge University Press, 1975, ISBN
0-521-20534-4
* John Maynard Keynes: Hopes Betrayed 1883-1920,
Robert Skidelsky, Papermac, 1992, ISBN 033357379X
(US Edition: ISBN 014023554X)
* John Maynard Keynes: The Economist as Saviour
1920-1937, Robert Skidelsky, Papermac, 1994, ISBN
0333584996 (US Edition: ISBN 0140238069)
* The Commanding Heights: The Battle for the World
Economy, Daniel Yergin with Joseph Stanislaw, New
York: Simon & Schuster, 1998, ISBN 0684829754
* John Maynard Keynes: Fighting for Britain
1937-1946 (published in the United States as
Fighting for Freedom), Robert Skidelsky, Papermac,
2001, ISBN 0333779711 (US Edition: ISBN
0142001678)

== See also ==
* Behavioral finance|Behavioral Economics
* Keynesianism
* Marxism
* Market imperfection
* Michał Kalecki
* Simon Kuznets
* Treatise on Money
Wikiquote

== External links ==
*
http://cepa.newschool.edu/het/profiles/keynes.htm
Bio, bibliography, and links
*gutenberg author|id=John_Maynard_Keynes|name=John
Maynard Keynes
*
http://www.time.com/time/time100/scientist/profile
/keynes.html Bio at Time 100 - the most important
people of the century