<h1 class="pgc-h-arrow-right" > John Maynard Keynes</h1>
John Maynard Keynes (June 5, 1883 – April 21, 1946), British economist and one of the most influential economists in modern economics, founded macroeconomics, along with Freud's psychoanalysis and Einstein's discovery of relativity, and called the three revolutions of human intellectualism in the twentieth century.
In 1936, Keynes's magnum opus, The General Theory of Employment, Interest and Money (Interest and Money), was published, and his two other important works on economic theory were A Tract on Monetary Reform (1923) and A Treatise on Money (1930).
Keynes was famous for pioneering the "Keynesian Revolution" of economics, and was called the "father of macroeconomics" by later generations.
< h2 class = "pgc-h-arrow-right" > character biography</h2>
John Maynard Keynes was born on 5 June 1883 in Cambridge, England, and at the age of 14 he entered Eton College on a scholarship to major in mathematics and was awarded the Tomline Prize.
After graduating, he entered King's College, Cambridge on a scholarship to mathematics and classics. He graduated in 1905 with a Master of Arts degree from Cambridge. After that, he stayed in Cambridge for a year, studying economics under Marshall and Pigou
In his early years, Keynes prepared for the British Civil Service Examination.
In 1906, he passed the civil service examination with a second place and was elected to the Ministry of Indian Affairs. During his tenure, he made extensive research preparations for his first economic book, Indian Currency and Finance (1913).
He resigned from the Ministry of Indian Affairs in 1908 and returned to Cambridge as lecturer in economics until 1915.
During this period, he was elected a fellow of King's College, Cambridge, for a paper on probability theory, and an Adam Smith Prize for a paper on indexes. The theory of probability theory was slightly supplemented and published in 1921 under the title ATreatise on Probability.
Soon after the outbreak of the First World War, he was enlisted in the British Treasury to take charge of foreign financial work such as exchange control and US loans. In early 1919 he attended the Paris Peace Conference as chief representative of the British Treasury. In June of the same year, indignant at the Compensation Commission's recommendation on compensation for Germany's defeat and its borders, he resigned as a delegate to the Peace Conference and returned to cambridge. The publication of The Economic consequences of the peace (1919), which soon expressed his views on the issue of German reparations, caused great controversy among people in Europe, Britain, and the United States, making it a central figure in the issue of European economic revival. While teaching, he wrote a large number of economic articles.
During his tenure as chairman of the National Mutual Life Insurance Company from 1921 to 1938, his annual reports to shareholders were always a must-read for the financial community and were the first news to listen to.
In 1940, he became an adviser to the Treasury, involved in the decision-making of various financial and financial issues in wartime, and at his initiative, the British government began to compile national income statistics, which gave the necessary tools for the formulation of the country's economic policy.
Because of his profound academic achievements, he served as the editor-in-chief of the Journal of Economics and president of the Royal Economic Association of the United Kingdom, and was elected a member of the British Academy of Sciences in 1929 and was promoted to lord in 1942
In July 1944, he led a British government delegation to the Bretton Woods Conference and became a British governor of the International Monetary Fund and the International Bank for Reconstruction and Development (World Bank), and was elected as the first president of the World Bank at the first meeting of the two organizations held in March 1946.
In 1946, the University of Cambridge awarded him a doctorate in science.
On April 21, 1946, he died of a heart attack at his home in Sussex.
Keynes (1883-1946)
John maynard keynes
Originally a free trade theorist, he still believed in traditional free trade theory until the end of the 1920s, believing that protectionism was not desirable for domestic economic prosperity and job growth. Even in 1929, during a debate with the Swedish economist Orlin over German reparations, he insisted that the balance of payments would automatically return to equilibrium through changes in domestic and foreign price levels.
In 1936, when his masterpiece The General Theory of Employment, Interest and Money was published, Keynes reversed his previous position and emphasized the impact of the trade balance on national income, believing that if the protection policy could bring about a trade surplus, it would be conducive to raising the level of investment and expanding employment, and eventually lead to economic prosperity.
Keynes believed that the traditional trade theory was premised on the premise that various factors of production, including labor force, were already fully employed, and advocated trade according to the principle of comparative cost, which had both full employment and the benefits of the division of labor. However, this premise does not exist in real life, but there are often a large number of involuntary unemployment, and if a country, in accordance with the traditional theory of free trade, can engage in specialized production in sectors with comparative advantages and obtain certain benefits in the division of labor, but abandons or reduces the peace of sectors with little or no comparative advantage, it is bound to be more serious unemployment. Keynes flatly protested that traditional trade theory does not apply to modern capitalism.
He also criticized the traditional theory for focusing only on the interests of the division of labor and emphasizing the automatic adjustment process of the balance of payments on foreign payments, while completely ignoring the impact of trade balances on national income and employment. The latter is argued to be more important than the former in the case of a country, because surpluses increase income, capital inflows, lower interest rates, higher investment, and more employment; conversely, "if it is a deficit, it may soon produce a stubborn recession." "
As a result, Keynes favored the trade surplus and revived mercantilism, arguing that "mercantilism contains an element of the doctrine of admission." However, while affirming some of the views of mercantilism, he also acknowledged that "the benefits that can be achieved by practicing mercantilism are limited to one country and will not reach the whole world."
Book by John Maynard Keynes
In the General Theory, Keynes further elaborated on the relationship between the trade balance and the rise and fall of the national economy, starting from the principle of investment multiplier. He believes that the multiplier effect of investment is manifested in the fact that new investment in one sector will not only increase the income of that sector, but also cause the income of other relevant departments to increase through a chain reaction, and it will also cause other relevant departments to increase new investment through a chain reaction to obtain new income, resulting in an increase in total national income several times that of the initial investment.
And a country's total investment includes both domestic investment (which is determined by the marginal efficiency and interest rate of domestic capital) and foreign investment (which is determined by the trade surplus), "increasing the surplus is the only direct way that the government can increase foreign investment; and if trade is a surplus, the precious metals inflow, so it is the only indirect way that the government can reduce domestic interest rates and increase the motivation for domestic investment." In addition, Keynes emphasized that the trade surplus itself plays an important role in the national economy as investment. Thinking that exports are demand for the country's products, like investment, is an "injection" that increases national income, while imports are an increase in consumption of imported goods, like savings, a kind of leakage that weakens the investment multiplier and reduces national income.
As a result, Keynes strongly advocated the trade surplus and advocated that exports should be expanded as much as possible, while restricting imports by protecting tariffs and encouraging "buying British goods". The above Keynes analysis of multiplier theory and trade surplus was later developed into foreign trade multiplier theory by the British scholar Harold and the American scholar Mahlopp.
In addition to the General Theory, Keynes's two other important works on economic theory were A Tract on Monetary Reform (1923) and A Treatise on Money (1930). These two works are masterpieces of his study of monetary theory, but neither of them can escape the shackles of classical monetary quantity theory.
< H2 class="pgc-h-arrow-right" > major achievements</h2>
<h3 class="pgc-h-arrow-right" > dominant theory</h3>
Before Keynes, the dominant economic theory was the neoclassical school of laissez-faire economics represented by Marshall, also known as traditional economics. This doctrine is based on the five principles of "free market, free operation, free competition, automatic regulation, and automatic equilibrium", and its core is the theory of "automatic equilibrium". It is believed that under the conditions of free competition, the economy can automatically achieve equilibrium through the price mechanism; the price fluctuation of commodities can balance the supply and demand of commodities; the price of capital - changes in interest rates can make savings and investment tend to be balanced; the price of labor - the rise and fall of wages can make the labor market supply and demand balance and achieve full employment. Therefore, all human intervention, especially government intervention, is superfluous, and the government that cares about nothing is the most manageable government, and should abide by the economic principles of free competition, automatic regulation, and laissez-faire, and government intervention in the economy will only destroy this automatic adjustment mechanism, but will cause economic turmoil or imbalance.
< h3 class="pgc-h-arrow-right" > basic theory</h3>
Keynes's three basic theories:
1. The law of diminishing marginal consumption tendency
2. The law of diminishing marginal efficiency of capital
3. Flow preference law
Keynes pointed out that in real life, there are three major laws: diminishing marginal consumption tendencies, diminishing marginal efficiency of capital, and flow preferences. Due to the existence of these laws, with the development of society, there will inevitably be a problem of insufficient effective demand. Insufficient effective demand makes it impossible to sell what enterprises produce, and enterprises stop production or even go bankrupt, which eventually leads to the outbreak of economic crisis and causes workers to lose their jobs.
<h3 class = "pgc-h-arrow-right" > state intervention</h3>
Keynes comprehensively discussed his economic theory and policy claims, arguing that the "Saye's Law" does not hold, that supply cannot automatically create demand, and that the economy cannot automatically reach equilibrium. Because, in the case of a generally stable marginal propensity to consume, people always spend most of their increased income on savings rather than consumption, which makes effective demand often manifest as insufficient, and it is difficult to automatically achieve equilibrium between total social supply and total social demand. Therefore, in order to solve the problem of insufficient effective demand, Keynes advocated abandoning economic liberalism and replacing it with the principle and policy of state intervention. The most direct manifestation of State intervention is to achieve deficit fiscal policy, increase government spending, and make up for the lack of private investment with an increase in public investment. Increasing public investment and public consumption expenditure and achieving expansionary fiscal policies are effective ways for the state to intervene in the economy. The resulting fiscal deficit is not only harmless, but also helps to reuse the "leaked" or "sluggish" wealth in economic operation to production and consumption, thus achieving a balance between supply and demand and promoting economic growth.
Keynes noted that by expanding spending, including public consumption and public investment, the government can improve the situation of insufficient effective demand, thereby reducing unemployment and promoting economic stability and growth. Government spending has a knock-on effect of being larger than the amount of original spending, and a single government expenditure can achieve an income level several times the amount of original expenditure. This phenomenon is called the "multiplier effect". "We call K the investment multiplier, and this multiplier tells us that when the total amount of investment increases, the increase in income will be K times the investment increment."
So, K= 1/(1-b). Where b is the marginal consumption tendency, b = Δc/ΔY, Δc is the consumption increment, and ΔY is the increase in national income. It can be seen that the greater the marginal propensity to consume, the greater the multiplier effect of expenditure. That is to say, under the action of the multiplier principle, every time the government increases expenditure ΔG, the economy correspondingly increases the national income of K times ΔG. i.e. K·ΔG. In order to achieve the purpose of increasing national income and promoting economic growth, the government will implement an expansionary fiscal policy, and it will certainly continue to expand the scale of government expenditure.
Keynes finally concluded that there is no invisible hand in the market that can transform private interests into social interests, that economic crises and unemployment cannot be eliminated, and that only by relying on the visible hand, the government's all-out intervention in the economy, can we get rid of economic depression and unemployment. To this end, Keynes advocated that the government stimulate effective demand through income distribution policies to achieve full employment. In order to stimulate the increase in demand for social investment, he advocated that the government should expand spending on public works and other aspects, increase the money supply, and implement deficit budgets to stimulate national economic activity in order to increase national income and achieve full employment.
<h2 class="pgc-h-arrow-right" > social evaluation</h2>
John Maynard Keynes Was a well-known economist, philosopher and statesman active in the Western academic, intellectual and political arena in the first half of the 20th century, and was also a pivotal figure in the 20th century in the Western world's response to internal and external crises and the fundamental transformation of the policies and ideological traditions of state and social governance. In the 1930s, Keynes initiated a revolution that led to a fundamental shift in the paradigm and field of economic research (the famous "Keynesian Revolution"): in the late World War II and early post-war periods of the 1940s, Keynes participated in the formation of institutions such as the International Monetary Fund, the International Bank for Reconstruction and Development (i.e., the World Bank), and the General Agreement on Tariffs and Trade (the predecessor of the WTO), which constituted the so-called "Washington System"), and was one of the main founders of the world economic order in the world today. At the 1998 Annual Meeting of the American Economic Association, Keynes was named the "most influential" economist of the 20th century out of a vote of 150 economists (Friedman ranked second).
On February 4, 1936, the publication of Keynes's masterpiece General Theory of Employment, Interest and Money (which was the core document of the "Keynesian Revolution") immediately caused a sensation in the Western world that was uncertain after the Great Crisis. Western scholars commented: "Keynes saved and consolidated this society when a deadly crisis threatened the capitalist world. Some scholars compare Keynes's theory to "the same revolution as Copernicus in astronomy, Darwin in biology, and Einstein in physics."
As a teenager, he had the opportunity to make contact with some economists and philosophers, and to meet some friends with literary talent and innovative spirit. He entered Cambridge University to study mathematics, graduated with honors, and later worked as an economics teacher at King's College Cambridge. After the outbreak of the First World War, he was drafted into the Treasury, attended the Paris Peace Conference as the chief representative of the British Treasury, and resigned and returned to Cambridge because his opinion on the issue of German reparations was not accepted. Keynes has long been the editor-in-chief of the authoritative journal "Economic Journal", has published several famous books, engaged in securities investment profits of hundreds of thousands of pounds, concurrently served as a consultant or director of many companies, opened an art theatre, and served as the general secretary of the Royal Academy. Keynes served as an adviser to the British Treasury during World War II and was the main architect of British wartime economic policy. Before and after the end of the war, he was busy with a series of activities such as the Anglo-American loan negotiations and the Bretton Woods Conference. He died on 21 April 1946.