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Past Masters (Oxford)
Keynes: The Return Of The Master
Robert Skidelsky's The Return of the Master shows how the great economist's ideas not only explain why the current financial crisis occurred - but are our best way out. 'One would expect brokers to be wrong. If, in addition to their other inside advantages, they were capable of good advice, clearly they would have retired long ago with a large fortune'
John Maynard Keynes When unbridled capitalism falters, is there an alternative? The twentieth century's most influential economist tells us that there is. John Maynard Keynes argued that an unmanaged market system is inherently unstable because of irreduceable uncertainty; that fiscal and monetary ammunition is needed to counter economic shocks; and that governments need to maintain enough total spending power in the economy to minimize the chance of serious recessions happening. 'The great economist's theories have never been more relevant ... and Robert Skidelsky is the guide of choice ... A must read'
Paul Krugman, Observer 'Keynes's economic policies helped lift Britain from its 1930s slump. This accessible, timely study argues he could do the same again'
Dominic Lawson, Sunday Times 'Masterly ... conveys complex ideas with clarity and controlled anger'
Oliver Kamm, The Times 'Skidelsky knows more about Keynes than anyone alive ... he is righteous in his thunder ... provocative ... refreshing'
Dwight Gardner, The New York Times 'Thought-provoking ... the best account I have read of the development of the credit crunch'
Samuel Brittan, Financial Times Robert Skidelsky is Emeritus Professor of Political Economy at the University of Warwick. His three volume biography of the economist John Maynard Keynes (1983, 1992, 2000) received numerous prizes, including the Lionel Gelber Prize for International Relations and the Council on Foreign Relations Prize for International Relations. He is also the author of the The World After Communism (1995).
John Maynard Keynes When unbridled capitalism falters, is there an alternative? The twentieth century's most influential economist tells us that there is. John Maynard Keynes argued that an unmanaged market system is inherently unstable because of irreduceable uncertainty; that fiscal and monetary ammunition is needed to counter economic shocks; and that governments need to maintain enough total spending power in the economy to minimize the chance of serious recessions happening. 'The great economist's theories have never been more relevant ... and Robert Skidelsky is the guide of choice ... A must read'
Paul Krugman, Observer 'Keynes's economic policies helped lift Britain from its 1930s slump. This accessible, timely study argues he could do the same again'
Dominic Lawson, Sunday Times 'Masterly ... conveys complex ideas with clarity and controlled anger'
Oliver Kamm, The Times 'Skidelsky knows more about Keynes than anyone alive ... he is righteous in his thunder ... provocative ... refreshing'
Dwight Gardner, The New York Times 'Thought-provoking ... the best account I have read of the development of the credit crunch'
Samuel Brittan, Financial Times Robert Skidelsky is Emeritus Professor of Political Economy at the University of Warwick. His three volume biography of the economist John Maynard Keynes (1983, 1992, 2000) received numerous prizes, including the Lionel Gelber Prize for International Relations and the Council on Foreign Relations Prize for International Relations. He is also the author of the The World After Communism (1995).
240 pages, Hardcover
First published January 1, 2009
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About the author
Robert Skidelsky
68 books134 followersLord Skidelsky is Emeritus Professor of Political Economy at the University of Warwick. His three volume biography of the economist John Maynard Keynes (1983, 1992, 2000) received numerous prizes, including the Lionel Gelber Prize for International Relations and the Council on Foreign Relations Prize for International Relations. He is the author of the The World After Communism (1995) (American edition called The Road from Serfdom). He was made a life peer in 1991, and was elected Fellow of the British Academy in 1994. He is chairman of the Govenors of Brighton College
Robert Skidelsky was born on 25 April 1939 in Harbin, Manchuria. His parents were British subjects, but of Russian ancestry. His father worked for the family firm, L. S. Skidelsky, which leased the Mulin coalmine from the Chinese government. When war broke out between Britain and Japan in December 1941, he and his parents were interned first in Manchuria then Japan, but released in exchange for Japanese internees in England.
From 1953 to 1958, he was a boarder at Brighton College (of which he is now chairman of the board of governors). He went on to read history at Jesus College, Oxford, and from 1961 to 1969, he was successively research student, senior student, and research fellow at Nuffield College, Oxford. In 1967, he published his first book, Politicians and the Slump, Labour Government of 1929-31, based on his D.Phil dissertation. The book explores the ways in which British politicians handled the Great Depression.
During a two year research fellowship at the British Academy, he began work in his biography of Sir Oswald Mosley (published in 1975) and published English Progressive Schools (1969). In 1970, he became an Associate Professor at the School of Advanced International Studies, John Hopkins University. But the controversy surrounding the publication of his biography of Sir Oswald Mosley - in which he was felt to have let Mosley off too lightly - led John Hopkins University to refuse him tenure. Oxford University also proved unwilling to give him a permanent post.
In 1978, he was appointed Professor of International Studies at the University of Warwick, where he has since remained, though joining the Economics Department as Professor Political Economy in 1990. He is currently Andrew D. White Professor-at-Large at Cornell University.
The first volume of his biography of John Maynard Keynes, Hopes Betrayed, 1883-1920, was published in 1983. The second volume, The Economist as Saviour, 1920-1937 (1992) won the Wolfson Prize for History. The third volume, Fighting for Britain, 1937-1946 (2000) won the Duff Cooper Prize, the James Tait Black Memorial Prize for Biography, the Lionel Gelber Prize for International Relations and the Arthur Ross Council on Foreign Relations Prize for International Relations.
Since 2003, he has been a non-executive director of the mutual fund manager, Janus Capital and Rusnano Capital; from 2008-10 he sat on the board of Sistema JSC. He is a director of the Moscow School of Political Studies and was the founder and executive secretary of the UK/Russia Round Table. Since 2002, he has been chairman of the Centre for Global Studies. In 2010, he joined the Advisory Board of the Institute of New Economic Thinking.
He writes a monthly column for Project Syndicate, "Against the Current", which is syndicated in newspapers all over the world. His account of the current economic crisis, Keynes: The Return of the Master, was published by Penguin Allen Lane in September 2009. A short history of twentieth-century Britain was published by Random House in the volume A World by Itself: A History of the British Isles edited by Jonathan Clark in January 2010. He is now in the process of writing How Much is Enough? The Economics of the Good Life jointly with his son Edward Skidelsky.
Robert Skidelsky was born on 25 April 1939 in Harbin, Manchuria. His parents were British subjects, but of Russian ancestry. His father worked for the family firm, L. S. Skidelsky, which leased the Mulin coalmine from the Chinese government. When war broke out between Britain and Japan in December 1941, he and his parents were interned first in Manchuria then Japan, but released in exchange for Japanese internees in England.
From 1953 to 1958, he was a boarder at Brighton College (of which he is now chairman of the board of governors). He went on to read history at Jesus College, Oxford, and from 1961 to 1969, he was successively research student, senior student, and research fellow at Nuffield College, Oxford. In 1967, he published his first book, Politicians and the Slump, Labour Government of 1929-31, based on his D.Phil dissertation. The book explores the ways in which British politicians handled the Great Depression.
During a two year research fellowship at the British Academy, he began work in his biography of Sir Oswald Mosley (published in 1975) and published English Progressive Schools (1969). In 1970, he became an Associate Professor at the School of Advanced International Studies, John Hopkins University. But the controversy surrounding the publication of his biography of Sir Oswald Mosley - in which he was felt to have let Mosley off too lightly - led John Hopkins University to refuse him tenure. Oxford University also proved unwilling to give him a permanent post.
In 1978, he was appointed Professor of International Studies at the University of Warwick, where he has since remained, though joining the Economics Department as Professor Political Economy in 1990. He is currently Andrew D. White Professor-at-Large at Cornell University.
The first volume of his biography of John Maynard Keynes, Hopes Betrayed, 1883-1920, was published in 1983. The second volume, The Economist as Saviour, 1920-1937 (1992) won the Wolfson Prize for History. The third volume, Fighting for Britain, 1937-1946 (2000) won the Duff Cooper Prize, the James Tait Black Memorial Prize for Biography, the Lionel Gelber Prize for International Relations and the Arthur Ross Council on Foreign Relations Prize for International Relations.
Since 2003, he has been a non-executive director of the mutual fund manager, Janus Capital and Rusnano Capital; from 2008-10 he sat on the board of Sistema JSC. He is a director of the Moscow School of Political Studies and was the founder and executive secretary of the UK/Russia Round Table. Since 2002, he has been chairman of the Centre for Global Studies. In 2010, he joined the Advisory Board of the Institute of New Economic Thinking.
He writes a monthly column for Project Syndicate, "Against the Current", which is syndicated in newspapers all over the world. His account of the current economic crisis, Keynes: The Return of the Master, was published by Penguin Allen Lane in September 2009. A short history of twentieth-century Britain was published by Random House in the volume A World by Itself: A History of the British Isles edited by Jonathan Clark in January 2010. He is now in the process of writing How Much is Enough? The Economics of the Good Life jointly with his son Edward Skidelsky.
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Displaying 1 - 30 of 73 reviews
December 15, 2011
JMK: So, Milton, do you expect my theories to once again become the dominant paradigm in macroeconomics after this prolonged bout of market speed wobble?
MF: No, Mr. Keynes. I expect you to die.
Look, I'm not an economist. I don't really know jack shit about economics, and I cringe whenever I turn to any of my ill-informed musings upon the subject after I've initially committed them to (electronic) paper. I am certainly too ignorant about the details, the interrelations and interlacements, the correlations and causations, the mathematics and the analysis involved in such a sprawling, globally interconnected financial complex to be able to declare flatly that this particular ideological implementation of a market economic system is superior to that one—what I do know is that I find Keynes' thoughts and theories on and about the subject to be highly appealing because they are pragmatic, fluid to existing circumstances and conditions, and endowed with what I find to be an admirable underpinning of practicality and common sense while still intuiting certain unconventional truths about this mad science that, to these jack-rabbit ears, present themselves as sensible and tending towards accuracy. Keynes' upholding of aggregate demand and the dearth of investment as the instigating and prolongating elements of economic slumps, and that uncertainty, not manageable risk, must be understood and accounted for in market psychology if we are to be in a position to maximize employment and market stability while minimizing the shocks and wealth destruction of downswings, strikes me as convincing and valuable. But even beyond his economic legacy, it was Keynes' ability to evolve his position, develop his thought, according to the economic realities existing in the world at any particular moment and then accept their implementation in imperfectly ideological but workably pragmatic methods that I find most impressive and worthy of emulation—in the face of such flexibility and adaptability, such a willingness to learn and incorporate that learning into a wise entirety, I can't help but find the relative rigidity of the Neoclassical position—of which, to be fair, I could certainly undertake to become more deeply informed—and their intricate mathematical formulations to uphold fully rational individual actors in maximally efficient markets extendable to the macroeconomic whole to possess a woefully and dangerously obstinate utopian element that one would think conservatives, in particular, would find unappealing and unconvincing.
In any event, I thoroughly enjoyed and hold myself to have been considerably educated by this deceptively slim effort from Mr. All-Things-Keynes himself, Lord Skidelsky. My pace through this was glacial, because the concepts, terminology, linkages, and philosophies under discussion often required an additional pass or two in order to be grasped, while the sentences, though pleasingly formed, proved barbed and thickened at several points throughout in that they demanded of the reader a pause in order to contemplate what was actually being revealed or challenged, put forth or undermined in a particular passage. Its 193 pages are split into three sections: the first a succinct but clarifying summation of the causes and effects of the economic meltdown of 2008 followed by a look at the makeup of conventional economics in our modern age. The second undertakes a very interesting and well-proportioned guide through the fascinating life of John Maynard Keynes, with an emphasis upon the reality that economics was neither his first calling nor his true love; the man was an historian and philosopher, speculator and philanthropist, collector and correspondent, bon vivant and raconteur: a genius, in other words, possessed of that exemplary British belief in the obligation of service to one's nation required of those who'd received such privileges as Keynes had. Skidelsky convincingly makes the case that all of these other sides of the man combined to enhance his ability to understand the makeup of modern-day market economies and to grasp the elusive qualities that so defined its particular weaknesses and vulnerabilities. The final third provides an examination of the core concepts that Keynes developed, proposed, or called into question, an analysis of how these ideas aged under the purview of the two regnant schools of postwar economics, Neoclassicism and Neo-Keynesianism, as well as a theoretical sketch of what the great man's response to our current predicament might be, what proposals he might offer to ameliorate it and get the system back on the track to stable functionality with appropriate safeguards upon its growth mechanisms. Throughout Skidelsky endeavors to clarify Keynes' actual positions on various elements of the economy, not those which have been attributed to him, by admirers and detractors both, over the intervening years. Dude wasn't a socialist, didn't advocate deficit spending, didn't favor a redistributive welfare state, didn't call for the nationalization of industries. What he did believe was that economics was a means, not an end in and of itself; and a stable capitalist economy was, in Keynes' opinion, the likeliest societal setup that would allow one to achieve and live the good life.
One of the most intriguing parts of the book is where Skidelsky draws comparisons between the Keynesian Bretton Woods period—arbitrarily but sensibly defined to consist of 1951 to 1973—and that of the Neoclassical Washington Consensus—similarly configured to be from 1980 through to the present crisis—and finds the former produced on average higher real GDP growth rates, lower levels of unemployment, lower levels of market and growth volatility, and, in what I found the most surprising stat of them all, equivalent levels of inflation. Not to mention that the deregulation of markets and removal of capital controls meant that the westernized economies went from not having any global recessions during the entirety of the Bretton Woods years to experiencing five in the WC reign, including the most calamitous of them all in 2008. Furthermore, whereas Keynes' detractors were able to point out flaws in his doctrines and their real world implementation—most crucially the wage stickiness noted by Milton Friedman—that rendered them unable to deal with the requirement for currency reform in the early seventies or with the stagflation that followed, the maths-heavy formulations of the Neoclassical Monetarists proved both utterly unable to predict the great shock of 2008, even though it was engendered entirely from within, and ultimately ineffective in managing and resolving the crisis through its primary manipulative tools of money supply increase and interest rate lowering.
Skidelsky proffers a Keynesian solution in turning from a strict reliance upon abstract mathematical modeling to once again accepting unquantifiable uncertainty, with its requisite requirements of regulating and diminishing the casino element in modern banking while trying to reduce any one economy's reliance upon a bloated financial sector to provide primary economic growth and compensate for wage stagnation. He also posits the Keynesian necessity for the United States to take steps to addressing its trade imbalance with its unsustainable habit of taking on debt for consumption in lieu of investment—Skidelsky's suggestion is the creation of an IMF-like currency that would be used to clear trading accounts between other nations, or even regional-blocs, and thus reduce the global reliance upon the US dollar as a reserve currency when it cannot continue to function as such under modern conditions. With the way the Euro is looking these days that might not come across as a viable answer, but there will have to be changes implemented, and serious ones, or else the already shaky foundations of the global recovery—indeed, of the global economy—are going to be put under a strain that it simply cannot bear. The greatest contribution to this would be Keynes' humanity, his historical keenness and philosophical bent, his understanding that economics is a social science and not Newtonian physics, needs to have ends other than abstract efficiency and rationality, requires more purpose than simply the quotidian command to go out and make more money in order to have more money—or so Skidelsky holds that Keynes would hold. I find myself sympathetic to such a sentiment with its attendant prescriptions; I also find myself left thinking good luck with all that.
MF: No, Mr. Keynes. I expect you to die.
Look, I'm not an economist. I don't really know jack shit about economics, and I cringe whenever I turn to any of my ill-informed musings upon the subject after I've initially committed them to (electronic) paper. I am certainly too ignorant about the details, the interrelations and interlacements, the correlations and causations, the mathematics and the analysis involved in such a sprawling, globally interconnected financial complex to be able to declare flatly that this particular ideological implementation of a market economic system is superior to that one—what I do know is that I find Keynes' thoughts and theories on and about the subject to be highly appealing because they are pragmatic, fluid to existing circumstances and conditions, and endowed with what I find to be an admirable underpinning of practicality and common sense while still intuiting certain unconventional truths about this mad science that, to these jack-rabbit ears, present themselves as sensible and tending towards accuracy. Keynes' upholding of aggregate demand and the dearth of investment as the instigating and prolongating elements of economic slumps, and that uncertainty, not manageable risk, must be understood and accounted for in market psychology if we are to be in a position to maximize employment and market stability while minimizing the shocks and wealth destruction of downswings, strikes me as convincing and valuable. But even beyond his economic legacy, it was Keynes' ability to evolve his position, develop his thought, according to the economic realities existing in the world at any particular moment and then accept their implementation in imperfectly ideological but workably pragmatic methods that I find most impressive and worthy of emulation—in the face of such flexibility and adaptability, such a willingness to learn and incorporate that learning into a wise entirety, I can't help but find the relative rigidity of the Neoclassical position—of which, to be fair, I could certainly undertake to become more deeply informed—and their intricate mathematical formulations to uphold fully rational individual actors in maximally efficient markets extendable to the macroeconomic whole to possess a woefully and dangerously obstinate utopian element that one would think conservatives, in particular, would find unappealing and unconvincing.
In any event, I thoroughly enjoyed and hold myself to have been considerably educated by this deceptively slim effort from Mr. All-Things-Keynes himself, Lord Skidelsky. My pace through this was glacial, because the concepts, terminology, linkages, and philosophies under discussion often required an additional pass or two in order to be grasped, while the sentences, though pleasingly formed, proved barbed and thickened at several points throughout in that they demanded of the reader a pause in order to contemplate what was actually being revealed or challenged, put forth or undermined in a particular passage. Its 193 pages are split into three sections: the first a succinct but clarifying summation of the causes and effects of the economic meltdown of 2008 followed by a look at the makeup of conventional economics in our modern age. The second undertakes a very interesting and well-proportioned guide through the fascinating life of John Maynard Keynes, with an emphasis upon the reality that economics was neither his first calling nor his true love; the man was an historian and philosopher, speculator and philanthropist, collector and correspondent, bon vivant and raconteur: a genius, in other words, possessed of that exemplary British belief in the obligation of service to one's nation required of those who'd received such privileges as Keynes had. Skidelsky convincingly makes the case that all of these other sides of the man combined to enhance his ability to understand the makeup of modern-day market economies and to grasp the elusive qualities that so defined its particular weaknesses and vulnerabilities. The final third provides an examination of the core concepts that Keynes developed, proposed, or called into question, an analysis of how these ideas aged under the purview of the two regnant schools of postwar economics, Neoclassicism and Neo-Keynesianism, as well as a theoretical sketch of what the great man's response to our current predicament might be, what proposals he might offer to ameliorate it and get the system back on the track to stable functionality with appropriate safeguards upon its growth mechanisms. Throughout Skidelsky endeavors to clarify Keynes' actual positions on various elements of the economy, not those which have been attributed to him, by admirers and detractors both, over the intervening years. Dude wasn't a socialist, didn't advocate deficit spending, didn't favor a redistributive welfare state, didn't call for the nationalization of industries. What he did believe was that economics was a means, not an end in and of itself; and a stable capitalist economy was, in Keynes' opinion, the likeliest societal setup that would allow one to achieve and live the good life.
One of the most intriguing parts of the book is where Skidelsky draws comparisons between the Keynesian Bretton Woods period—arbitrarily but sensibly defined to consist of 1951 to 1973—and that of the Neoclassical Washington Consensus—similarly configured to be from 1980 through to the present crisis—and finds the former produced on average higher real GDP growth rates, lower levels of unemployment, lower levels of market and growth volatility, and, in what I found the most surprising stat of them all, equivalent levels of inflation. Not to mention that the deregulation of markets and removal of capital controls meant that the westernized economies went from not having any global recessions during the entirety of the Bretton Woods years to experiencing five in the WC reign, including the most calamitous of them all in 2008. Furthermore, whereas Keynes' detractors were able to point out flaws in his doctrines and their real world implementation—most crucially the wage stickiness noted by Milton Friedman—that rendered them unable to deal with the requirement for currency reform in the early seventies or with the stagflation that followed, the maths-heavy formulations of the Neoclassical Monetarists proved both utterly unable to predict the great shock of 2008, even though it was engendered entirely from within, and ultimately ineffective in managing and resolving the crisis through its primary manipulative tools of money supply increase and interest rate lowering.
Skidelsky proffers a Keynesian solution in turning from a strict reliance upon abstract mathematical modeling to once again accepting unquantifiable uncertainty, with its requisite requirements of regulating and diminishing the casino element in modern banking while trying to reduce any one economy's reliance upon a bloated financial sector to provide primary economic growth and compensate for wage stagnation. He also posits the Keynesian necessity for the United States to take steps to addressing its trade imbalance with its unsustainable habit of taking on debt for consumption in lieu of investment—Skidelsky's suggestion is the creation of an IMF-like currency that would be used to clear trading accounts between other nations, or even regional-blocs, and thus reduce the global reliance upon the US dollar as a reserve currency when it cannot continue to function as such under modern conditions. With the way the Euro is looking these days that might not come across as a viable answer, but there will have to be changes implemented, and serious ones, or else the already shaky foundations of the global recovery—indeed, of the global economy—are going to be put under a strain that it simply cannot bear. The greatest contribution to this would be Keynes' humanity, his historical keenness and philosophical bent, his understanding that economics is a social science and not Newtonian physics, needs to have ends other than abstract efficiency and rationality, requires more purpose than simply the quotidian command to go out and make more money in order to have more money—or so Skidelsky holds that Keynes would hold. I find myself sympathetic to such a sentiment with its attendant prescriptions; I also find myself left thinking good luck with all that.
October 26, 2009
I have just finished this brilliant book by the historian Robert Skidelsky, biographer of Keynes. It will probably be my book of the year.
The book confirms for me that I made the right decision to leave professional economics many years ago: the intellectual pygmies obsessed with the maths and not the reality took over! Friedman and the Chicago School and even the Neo-Keynesians just don't get it: the uncertainty that is central to Keynes view of the world is not like insurable risk we have for our houses. What happens in economies as a whole is in some sense profoundly unforecastable and the free market economists just don't understand this. So their theories of market equilibrium and their complex mathematical models of risk which work quite well for individual firms and sectors, applied to the economy as a whole are so much bullshit.
Skidelsky reminds me why I loved Keynes 1936 General Theory when I first read it, and why having read it I just couldn't bring myself to spend a life building spuriously precise economic models founded on sand. And I am reminded what a great all round human being Keynes was, not to mention a successful investor, though he lost heavily twice, but he was still ahead when he died.
Sad that so many on the Right attack Keynes without having read him or come close to understand just how radical his undermining of classical economics was and remains. If bankers, politicians and the rest had read and understood Keynes we would not have put our faith in what Warren Buffet in 2002 called Weapons of Financial Mass Destruction. Collateralized Debt Obligations: duh! And they spout Rational Expectations Theory with no supporting evidence.
Skidelsky is also good on the wider Keynes, especially Keynes the moralist, Keynes the political conservative and Keynes who had attractive visions of the purpose of life: art, learning, and good friendships.
Unfortunately as Skidelsky shows there is little sign that likely financial sector reform will take into account Keynes' profound insights. Reinstating the separation of retail and investment banking would be a good first step as would international requirements for mortgage lending: 75% of house value and three times income for instance. It isn't going to happen; so hold onto your horses another crash is headed our way sometime around 2012 onwards I would guess.
The book confirms for me that I made the right decision to leave professional economics many years ago: the intellectual pygmies obsessed with the maths and not the reality took over! Friedman and the Chicago School and even the Neo-Keynesians just don't get it: the uncertainty that is central to Keynes view of the world is not like insurable risk we have for our houses. What happens in economies as a whole is in some sense profoundly unforecastable and the free market economists just don't understand this. So their theories of market equilibrium and their complex mathematical models of risk which work quite well for individual firms and sectors, applied to the economy as a whole are so much bullshit.
Skidelsky reminds me why I loved Keynes 1936 General Theory when I first read it, and why having read it I just couldn't bring myself to spend a life building spuriously precise economic models founded on sand. And I am reminded what a great all round human being Keynes was, not to mention a successful investor, though he lost heavily twice, but he was still ahead when he died.
Sad that so many on the Right attack Keynes without having read him or come close to understand just how radical his undermining of classical economics was and remains. If bankers, politicians and the rest had read and understood Keynes we would not have put our faith in what Warren Buffet in 2002 called Weapons of Financial Mass Destruction. Collateralized Debt Obligations: duh! And they spout Rational Expectations Theory with no supporting evidence.
Skidelsky is also good on the wider Keynes, especially Keynes the moralist, Keynes the political conservative and Keynes who had attractive visions of the purpose of life: art, learning, and good friendships.
Unfortunately as Skidelsky shows there is little sign that likely financial sector reform will take into account Keynes' profound insights. Reinstating the separation of retail and investment banking would be a good first step as would international requirements for mortgage lending: 75% of house value and three times income for instance. It isn't going to happen; so hold onto your horses another crash is headed our way sometime around 2012 onwards I would guess.
January 4, 2013
“The chief argument of this book has been that underlying the escalating succession of financial crises we have recently experienced is the failure of economics to take uncertainty seriously” (audio chapter 8, time 50:30).
Available as a seven-and-a-half-hour audio book from Audible.
This book seemed a welcome voice of analytical sanity in the face of berserk economic orthodoxy, but perhaps too technical, detailed, well-researched, and scholarly to be fully appreciated in audio book form. I understood it only as through a glass darkly.
Tip for listeners who are not economists: Early in the book, the narrator names and explains several initialism which, if I understand correctly, are frequently used by economists, but not the rest of us. When this happens, stop the book and note them down. They are used without repeated explanation further on in the book, and are easy to forget. I forgot them.
Complaint about the audio presentation: All amounts of money mentioned in the book are accompanied immediately afterwards by a parenthetical conversion into the equivalent amounts in contemporary US Dollars, British Pounds, and Euros. In print, this is a very reasonable choice to make. When read, these figures, coming at you hard and fast, become distracting, confusing, and instantly-forgettable. Somebody involved in the making of this audio book should have thought about how potential listeners would experience this.
Available as a seven-and-a-half-hour audio book from Audible.
This book seemed a welcome voice of analytical sanity in the face of berserk economic orthodoxy, but perhaps too technical, detailed, well-researched, and scholarly to be fully appreciated in audio book form. I understood it only as through a glass darkly.
Tip for listeners who are not economists: Early in the book, the narrator names and explains several initialism which, if I understand correctly, are frequently used by economists, but not the rest of us. When this happens, stop the book and note them down. They are used without repeated explanation further on in the book, and are easy to forget. I forgot them.
Complaint about the audio presentation: All amounts of money mentioned in the book are accompanied immediately afterwards by a parenthetical conversion into the equivalent amounts in contemporary US Dollars, British Pounds, and Euros. In print, this is a very reasonable choice to make. When read, these figures, coming at you hard and fast, become distracting, confusing, and instantly-forgettable. Somebody involved in the making of this audio book should have thought about how potential listeners would experience this.
July 19, 2015
The author describes himself as an economically literate historian in preface. As tongue-in-cheek as it may be, I think it shows. Two sections of the book stand out and they are all history related. The economic history, that is.
In chapter 5, the economic performance of Bretton Woods system and Washington Consensus system is compared. In all likelihood this is not the first time anybody ever did such comparison but it is an absolute novelty to me nevertheless. I find it fascinating and rather convincing. And later in chapter 8, Mr. Skidelsky introduces the notion of political-economy cycle and frames the modern and contemporary history as the swing between the corruption of power and the corruption of money. If one takes care not to fall into the trap of overly simplification, then such a framework certainly helps make sense of many an historical event.
The rest of the book, however, is not as intriguing as these two sections. 3 stars.
In chapter 5, the economic performance of Bretton Woods system and Washington Consensus system is compared. In all likelihood this is not the first time anybody ever did such comparison but it is an absolute novelty to me nevertheless. I find it fascinating and rather convincing. And later in chapter 8, Mr. Skidelsky introduces the notion of political-economy cycle and frames the modern and contemporary history as the swing between the corruption of power and the corruption of money. If one takes care not to fall into the trap of overly simplification, then such a framework certainly helps make sense of many an historical event.
The rest of the book, however, is not as intriguing as these two sections. 3 stars.
August 28, 2010
This is a lucid and brilliant, if a bit technical, book on Keynes. You really have to put on your thinking cap but if you care about economics, you need to read this book. (And if you care about climate change and resource depletion and peak oil, you should care about economics.)
You may not pick up everything in the book on the first read, but Skidelsky is quite clear on Keynes' key insight. Turns out that the key to Keynes' economics is his distinction between risk (when we can calculate the odds) and just flat-out uncertainty, when we don't even know the odds. Too much uncertainty drives people just to give up on the market and head to cash . . . which, it turns out, is one of the causes of deflation, the Great Depression, and our current not-yet-so-great depression.
I don't think the book could have been less technical than it is, so saying it's a bit technical is not a criticism, just a comment. Skidelsky really does try; the problem is just that intelligent economics is not something you can just "Malcolm Gladwell" your way through. And heaven defend us against the economics profession. You don't need an economics course to understand Skidelsky -- in fact, it might hurt. It doesn't hurt, though, to already be casually familiar with economics issues in some form. (I got it through reading John K. Galbraith and Herman Daly.)
I would urge my peak oil friends not to be put off by his first chapter and keep reading. Skidelsky puts his worst foot forward by trying to argue that the current crisis had nothing to do with oil prices and that we should have listened to Keynes. He is evidently oblivious to the whole issue of oil depletion and the relationship of the spike in oil prices and the financial crisis of 2008. But then he totally redeems himself with his thorough discussion of what Keynes was about and why it matters. At the end I was convinced that the current crisis had everything to do with oil prices and that we should have listened to Keynes.
One thing we should expect when oil supply hits its capacity is volatile oil prices. (It has to do with queueing theory.) Voila, you have the key to the current economic uncertainty. The whole economy is running on oil and if THAT'S uncertain, you can head for the exits.
Keynes was a really remarkable thinker. He thought that in 100 years we'd be so well off that leisure would be the big issue. That probably won't turn out as predicted, but he had his sights on the right goal -- the end of economic activity, not money in itself. The mistakes of a great man are worth 1000 correct insights of lesser thinkers. When the followers of Keynes meet ecological economics, the human race has a chance at dealing with the environmental challenges of climate change and resource depletion.
You may not pick up everything in the book on the first read, but Skidelsky is quite clear on Keynes' key insight. Turns out that the key to Keynes' economics is his distinction between risk (when we can calculate the odds) and just flat-out uncertainty, when we don't even know the odds. Too much uncertainty drives people just to give up on the market and head to cash . . . which, it turns out, is one of the causes of deflation, the Great Depression, and our current not-yet-so-great depression.
I don't think the book could have been less technical than it is, so saying it's a bit technical is not a criticism, just a comment. Skidelsky really does try; the problem is just that intelligent economics is not something you can just "Malcolm Gladwell" your way through. And heaven defend us against the economics profession. You don't need an economics course to understand Skidelsky -- in fact, it might hurt. It doesn't hurt, though, to already be casually familiar with economics issues in some form. (I got it through reading John K. Galbraith and Herman Daly.)
I would urge my peak oil friends not to be put off by his first chapter and keep reading. Skidelsky puts his worst foot forward by trying to argue that the current crisis had nothing to do with oil prices and that we should have listened to Keynes. He is evidently oblivious to the whole issue of oil depletion and the relationship of the spike in oil prices and the financial crisis of 2008. But then he totally redeems himself with his thorough discussion of what Keynes was about and why it matters. At the end I was convinced that the current crisis had everything to do with oil prices and that we should have listened to Keynes.
One thing we should expect when oil supply hits its capacity is volatile oil prices. (It has to do with queueing theory.) Voila, you have the key to the current economic uncertainty. The whole economy is running on oil and if THAT'S uncertain, you can head for the exits.
Keynes was a really remarkable thinker. He thought that in 100 years we'd be so well off that leisure would be the big issue. That probably won't turn out as predicted, but he had his sights on the right goal -- the end of economic activity, not money in itself. The mistakes of a great man are worth 1000 correct insights of lesser thinkers. When the followers of Keynes meet ecological economics, the human race has a chance at dealing with the environmental challenges of climate change and resource depletion.
June 22, 2014
This is a competent answer by Keynes's biographer to the question "What would Keynes have done?" in the aftermath of the 2008 crash and a response to the economic theories that have dominated the US and UK since the Reagan / Thatcher putsch. Such as pointing out the absurdities of "Rational Expectations," the "Efficient Market Theory," "Real Business Cycle Theory," and the like.
A quote about Keynes's view of uncertainty is apt: "Keynes argued that, faced with varying degrees of uncertainty, it is rational to fall back on conventions, stories, rules of thumb, habits, traditions in forming our expectations and deciding how to act. Their function is partly psychological - designed to give a feeling of security, like magic spells or incantations to ward off evil spirits. Talking about 'risk' when one should be talking about 'uncertainty' is a typical 'convention', ubiquitous in company boardroom discussion. . . . But Keynes emphasized two things. First, learning makes only very slow inroads into ignorance and uncertainty. Second, the process is erratic, since the material of learning is subject to unexpected changes. What was learned in one period might become useless in the next." But this is not Donald Rumsfeld, more Sextus Empiricus. We have to act in the world, but it is dangerous to act based on theories that are absurd.
There is much more in this book, such as Skidelsky's interpretations of Keynes's ethical and political theories and well deserved hopes for a solution to the global savings glut of the last 30 years by implementation finally of Keynes's rejected Clearing Union plan at Bretton Woods.
Read the book. It will do you good. And I will try to take that advice myself (I have only skimmed it so far!)
A quote about Keynes's view of uncertainty is apt: "Keynes argued that, faced with varying degrees of uncertainty, it is rational to fall back on conventions, stories, rules of thumb, habits, traditions in forming our expectations and deciding how to act. Their function is partly psychological - designed to give a feeling of security, like magic spells or incantations to ward off evil spirits. Talking about 'risk' when one should be talking about 'uncertainty' is a typical 'convention', ubiquitous in company boardroom discussion. . . . But Keynes emphasized two things. First, learning makes only very slow inroads into ignorance and uncertainty. Second, the process is erratic, since the material of learning is subject to unexpected changes. What was learned in one period might become useless in the next." But this is not Donald Rumsfeld, more Sextus Empiricus. We have to act in the world, but it is dangerous to act based on theories that are absurd.
There is much more in this book, such as Skidelsky's interpretations of Keynes's ethical and political theories and well deserved hopes for a solution to the global savings glut of the last 30 years by implementation finally of Keynes's rejected Clearing Union plan at Bretton Woods.
Read the book. It will do you good. And I will try to take that advice myself (I have only skimmed it so far!)
August 8, 2011
Don't be fooled by the length of this volume. At less that 200 pages, it is packed with useful information and great insights. It is not a fast read (at least for people like me that don't read economics all the time) but it's a very entertaining one.
Skidelsky starts with a short explanation of the Financial Crisis. If you have been following the news you won't learn anything new here, but it helps to put the book in context. The rest is devoted to the life (very little) and thought (a lot) of Keynes. The book excels in packing Keynes' economic, political, moral, and philosophical thought in a very short volume. The main thesis is that modern economists don't acknowledge the existence of uncertainty. Risk can be measured but uncertainty can't, and Keynes' political systems is constructed to have Government reduces uncertainty through policy. In this, Skidelsky is very critic of the present state of the economic discipline (he calls it "regressive").
The utopian thinking in Keynes is also covered, and although it sounds like a post-history type of thesis, it is interesting not in the utopian part but in how it shapes Keynes's ethical philosophy. Skidelsky points out that Keynes never lost touch with the goal of economics, and some of its "evils" are justified as a way to achieve the post-economic stage in history. You probably won't buy this Utopia but the moral ramifications are interesting nevertheless.
For the least economic literate among us, a glossary or an appendix would have been useful to explain some concepts that are not straightforward.
Skidelsky starts with a short explanation of the Financial Crisis. If you have been following the news you won't learn anything new here, but it helps to put the book in context. The rest is devoted to the life (very little) and thought (a lot) of Keynes. The book excels in packing Keynes' economic, political, moral, and philosophical thought in a very short volume. The main thesis is that modern economists don't acknowledge the existence of uncertainty. Risk can be measured but uncertainty can't, and Keynes' political systems is constructed to have Government reduces uncertainty through policy. In this, Skidelsky is very critic of the present state of the economic discipline (he calls it "regressive").
The utopian thinking in Keynes is also covered, and although it sounds like a post-history type of thesis, it is interesting not in the utopian part but in how it shapes Keynes's ethical philosophy. Skidelsky points out that Keynes never lost touch with the goal of economics, and some of its "evils" are justified as a way to achieve the post-economic stage in history. You probably won't buy this Utopia but the moral ramifications are interesting nevertheless.
For the least economic literate among us, a glossary or an appendix would have been useful to explain some concepts that are not straightforward.
January 20, 2019
Simply brilliant. In this very important book Skidelsky, not only sketches a biography and notes the contribution of Keynes to economic thought but also charts the rise and fall of Keynesianism as a policy doctrine; maps the emergence of neo-liberalism and also explores the nature of classical and neo-classical economic philosophy. He notes the major weaknesses of the latter, most prominently the Efficient Markets Hypothesis, Rational Expectations Hypothesis and the theory of Real Business Cycles - none of which have any realistic assumptions or empirical foundations and have proved to have little predictive value.
He also cogently points out the evolution of Keynes thought, from being a laissez-faire adherent to one believing that the state needs to maintain full employment, free trade needs to be managed and that finance should be primarily national. The importance of this book cannot be overstated.
He also cogently points out the evolution of Keynes thought, from being a laissez-faire adherent to one believing that the state needs to maintain full employment, free trade needs to be managed and that finance should be primarily national. The importance of this book cannot be overstated.
July 12, 2019
I think this was a pretty good historical overview of some competing ideas within economics and of the life and work of Keynes. I certainly did not understand everything in the book -- I was hoping for a somewhat "popular" text, but this one presupposes quite a bit of knowledge of macroeconomics ( more the practice of it in banking and in public policy than the theory of it, i.e. who sets interests rates, what sort of stuff can happen as a consequence, how international trade is interrelated with exchange rates and reserves, etc.) that I didn't have (certainly not the fault of the book). I was able to pick up some knowledge along the way, but if I'd had a better understanding of these to begin with, I would have taken more away.
One small note: the author repeatedly and forcefully critiques the over-mathematization of economics --- in particular abstract, ideal models that treat the economy as an optimization problem of rational agents with perfect (albeit probabilistic) knowledge --- and finance, in particular bogus models of risk involving subprime mortgages. He contests instead that economists should instead be trained more broadly in history and "moral philosophy" to better understand the successes and failures of economics, its consequences for people throughout recent history, and skepticism regarding whether the sheer maximization of wealth should be the goal of economics. All of these seem like very good suggestions; Thomas Piketty argued something similar in "Capital in the 21st Century", contrasting (as I recall) his current work and vision of economics as a branch of sociology with his very technical early work in traditional mathematical optimization models (possibly game-theoretic, if I remember correctly). Occasionally the author seems to paint a picture of economists working with mathematical models so technical and erudite that they might as well be discussing angels dancing of the head of a pin, doing technical work for its own sake rather than for any connection to real world problems. Perhaps I read into the text too much, but my quibble would be that the problem isn't really mathematics itself, but rather the unscientific use of mathematical models that don't bear out actual evidence: its the axioms that are wrong, not the use of math in general. Again, I'm far from an expert, but I'd imagine that mathematical analysis rooted in more realistic models of economic reality could be very useful, no matter how obscure and technical. For instance, microeconomic models based not on rational expectations but work coming out of behavioral economics; mathematical formulations of the difference between "uncertainty" and "risk", i.e. Knightian uncertainty (perhaps, a thought that struck me, risk models allowing for infinite variance distributions? A Google search reveals some work, e.g. by Taleb, with the "infinite variance" keyword, but I don't understand them).
One small note: the author repeatedly and forcefully critiques the over-mathematization of economics --- in particular abstract, ideal models that treat the economy as an optimization problem of rational agents with perfect (albeit probabilistic) knowledge --- and finance, in particular bogus models of risk involving subprime mortgages. He contests instead that economists should instead be trained more broadly in history and "moral philosophy" to better understand the successes and failures of economics, its consequences for people throughout recent history, and skepticism regarding whether the sheer maximization of wealth should be the goal of economics. All of these seem like very good suggestions; Thomas Piketty argued something similar in "Capital in the 21st Century", contrasting (as I recall) his current work and vision of economics as a branch of sociology with his very technical early work in traditional mathematical optimization models (possibly game-theoretic, if I remember correctly). Occasionally the author seems to paint a picture of economists working with mathematical models so technical and erudite that they might as well be discussing angels dancing of the head of a pin, doing technical work for its own sake rather than for any connection to real world problems. Perhaps I read into the text too much, but my quibble would be that the problem isn't really mathematics itself, but rather the unscientific use of mathematical models that don't bear out actual evidence: its the axioms that are wrong, not the use of math in general. Again, I'm far from an expert, but I'd imagine that mathematical analysis rooted in more realistic models of economic reality could be very useful, no matter how obscure and technical. For instance, microeconomic models based not on rational expectations but work coming out of behavioral economics; mathematical formulations of the difference between "uncertainty" and "risk", i.e. Knightian uncertainty (perhaps, a thought that struck me, risk models allowing for infinite variance distributions? A Google search reveals some work, e.g. by Taleb, with the "infinite variance" keyword, but I don't understand them).
April 21, 2024
"There is nothing to fear but fear itself"
Going in, I thought Keynes: The Return of the Master by Robert Skidelsky would be a discussion of the 2008 financial crisis and how Keynesian ideas were making a resurgence and why. But rather it is an exploration of the ideas of the man himself. It is a book about ideas which asserts that the problem with the economic establishment is that they are beholden to an unrealistic view of behavior in an industrial capitalist society.
Keynes' worldview is a pragmatic realism, that our ability to hold expectations about the future contrary to present reality is the root of the oscillations of the business cycle, of which he so famously wrote his General Theory of Unemployment during the Great Depression. Our rational capacity to abstract where in space and time we will be relative to todays desires actually clouds good judgement, leading to too much faith in the future, the stock market will never crash, or too much pessimism where people hoard savings out of fear the economy will never recover. This psychology is damaging because it robs us of acting in the present real world, and makes us forget we determine the economy and are not subject to the abstract laws of David Ricardo.
Keynes wasn't totally against the classical economists like Ricardo and believed in the free enterprise system. The problem he had was with the expectation that markets always correct themselves in the long run so we should let the situation run its course and do nothing. In the long run we are all dead, Keynes famously said. Falling aggregate demand takes down the supply side with it and can continue on for years, leading to misery and high unemployment, while waiting for the market to adjust. It was with this practical immediate problem that Keynes was concerned with, not that markets usually work which he agreed with. In this Keynes was preceded by another classical economist, Thomas Malthus. Both were critical of Says law, which Keynes pithily summed up as "supply creates its own demand", which Ricardo triumphed over against Malthus in bringing to economic orthodoxy.
Basically this book is a broadside against rational expectations which dominates not just through the neo-classical school but also the "heretical" new Keynesians, who agree the market is rational but that it takes longer to recover to fix prices. Most interesting is a discussion of Keynes' ethical philosophy inherited from utilitarian G.E. Moore which proposes that your actual state of mind in the present is what makes a happy life and not some expectation of a secure future. Very different from the Christian idea that the belief in the afterlife is what keeps us in line. Keynes was as a member of the upper class, a libertine, and at a time self described amoralist.
Keynes' legacy is greatly politicized and therefore misunderstood. He is painted as a leftist responsible for the stagflation of the 1970s by those on the right as well as great grandfather of Obama's 2009 stimulus. The left also takes Keynes to be on their side as progressive champion of big government and opponent of free markets. None of this is totally accurate. Keynes was somewhat conservative temperamentally and a small l type of liberal. He and Friedrich Hayek agreed on much and differed on specifics, and it isn't as well remembered that Hayek supported a role for government in the economy. Keynes wrote his General Theory in response to a specific crisis of deflation and lack of demand, and given his practical nature would council against the opposite in another situation.
Finally, even today's conservatives are somewhat Keynesian. Supply siders agree with Keynes that it is acceptable to run deficits in a recession and that getting economic growth going is the goal. Reagan not only ran big deficits with tax cuts but also supported military and infrastructure spending. Supply siders also differentiate between savings and investment which the classical economists didn't and want to lower taxes to encourage the latter. Keynes' problem was with saving and not investment, and he did advocate cutting taxes as well as increasing government spending to get the economy going. Before the supply siders, conservatives like Barry Goldwater opposed cutting taxes without cutting spending, which left liberal Democrats John Kennedy and Lyndon Johnson to do the tax cutting. Milton Friedman’s permanent income hypothesis essentially revised Keynesianism that it is consistent income and inflationary expectations that allow for sufficient aggregate demand which would council against temporary discretionary stimulus in favor of a guaranteed income policy and low marginal tax rates.
So as Richard Nixon said, we're all Keynesians now.
Going in, I thought Keynes: The Return of the Master by Robert Skidelsky would be a discussion of the 2008 financial crisis and how Keynesian ideas were making a resurgence and why. But rather it is an exploration of the ideas of the man himself. It is a book about ideas which asserts that the problem with the economic establishment is that they are beholden to an unrealistic view of behavior in an industrial capitalist society.
Keynes' worldview is a pragmatic realism, that our ability to hold expectations about the future contrary to present reality is the root of the oscillations of the business cycle, of which he so famously wrote his General Theory of Unemployment during the Great Depression. Our rational capacity to abstract where in space and time we will be relative to todays desires actually clouds good judgement, leading to too much faith in the future, the stock market will never crash, or too much pessimism where people hoard savings out of fear the economy will never recover. This psychology is damaging because it robs us of acting in the present real world, and makes us forget we determine the economy and are not subject to the abstract laws of David Ricardo.
Keynes wasn't totally against the classical economists like Ricardo and believed in the free enterprise system. The problem he had was with the expectation that markets always correct themselves in the long run so we should let the situation run its course and do nothing. In the long run we are all dead, Keynes famously said. Falling aggregate demand takes down the supply side with it and can continue on for years, leading to misery and high unemployment, while waiting for the market to adjust. It was with this practical immediate problem that Keynes was concerned with, not that markets usually work which he agreed with. In this Keynes was preceded by another classical economist, Thomas Malthus. Both were critical of Says law, which Keynes pithily summed up as "supply creates its own demand", which Ricardo triumphed over against Malthus in bringing to economic orthodoxy.
Basically this book is a broadside against rational expectations which dominates not just through the neo-classical school but also the "heretical" new Keynesians, who agree the market is rational but that it takes longer to recover to fix prices. Most interesting is a discussion of Keynes' ethical philosophy inherited from utilitarian G.E. Moore which proposes that your actual state of mind in the present is what makes a happy life and not some expectation of a secure future. Very different from the Christian idea that the belief in the afterlife is what keeps us in line. Keynes was as a member of the upper class, a libertine, and at a time self described amoralist.
Keynes' legacy is greatly politicized and therefore misunderstood. He is painted as a leftist responsible for the stagflation of the 1970s by those on the right as well as great grandfather of Obama's 2009 stimulus. The left also takes Keynes to be on their side as progressive champion of big government and opponent of free markets. None of this is totally accurate. Keynes was somewhat conservative temperamentally and a small l type of liberal. He and Friedrich Hayek agreed on much and differed on specifics, and it isn't as well remembered that Hayek supported a role for government in the economy. Keynes wrote his General Theory in response to a specific crisis of deflation and lack of demand, and given his practical nature would council against the opposite in another situation.
Finally, even today's conservatives are somewhat Keynesian. Supply siders agree with Keynes that it is acceptable to run deficits in a recession and that getting economic growth going is the goal. Reagan not only ran big deficits with tax cuts but also supported military and infrastructure spending. Supply siders also differentiate between savings and investment which the classical economists didn't and want to lower taxes to encourage the latter. Keynes' problem was with saving and not investment, and he did advocate cutting taxes as well as increasing government spending to get the economy going. Before the supply siders, conservatives like Barry Goldwater opposed cutting taxes without cutting spending, which left liberal Democrats John Kennedy and Lyndon Johnson to do the tax cutting. Milton Friedman’s permanent income hypothesis essentially revised Keynesianism that it is consistent income and inflationary expectations that allow for sufficient aggregate demand which would council against temporary discretionary stimulus in favor of a guaranteed income policy and low marginal tax rates.
So as Richard Nixon said, we're all Keynesians now.
October 3, 2021
A friend had urged me to read Skidelsky's one-volume biography of Keynes. I couldn't find that in the library, but did find this, which served as an appetiser for the biography rather than a fully satisfying meal in itself.
The book's greatest shortcoming is not really Skidelsky's fault. It was written too soon after the financial crisis to fully consider the measures taken by governments, central banks and regulators after the crisis. The friend who recommended me this book argues that "everything that has happened since the crisis is Keynesian", chiefly the enormous government stimulus that has been delivered (under the cloak of austerity in the UK, because "the Tories would never dream of admitting that they were taking a Keynesian approach".) Skidelsky is writing as the details of the policy response to the crash are still emerging, so is unable to confirm or disprove my friend's assessment, or offer a Keynesian perspective on quantitative easing.
What Skidelsky does is to analyse the causes of the crash, both those that had been brewing for a long time and the immediate catalysts. He looks at the different parties who have been blamed for it, from greedy bankers and supine ratings agencies to complacent governments, central banks and regulators. All are culpable to some degree, but it is the central argument of this book that the financial crisis was a failure of ideas, not individuals or institutions.
Skidelsky then turns his attention to the two main schools of thought in economics today, both of which have utterly failed to explain the crisis. The two schools are the new Classicists and new Keynesians. The dominance of the former is shown by the fact that the new Keynesians have, unlike Keynes himself, accepted the main tenets of the Classicists: namely, that markets exist for every possible contingency (the 'complete markets paradigm'); that those markets are efficient; and that people are able to form rational expectations based on all the information available to them (the 'rational expectations hypothesis'). Where the new Keynesians differ from the new Classicists is that they believe that it may take time for markets to adjust - time in which government interventions can be worthwhile.
What both schools miss is one of Keynes's most important observations and founding principles of his theory: the difference between risk and uncertainty. Risk can be measured and insured against ('priced'); uncertainty cannot. The FSA (now FCA) has admitted that one of its 'intellectual assumptions' before the crisis was that 'the risk characteristics of financial markets can be inferred from mathematical analysis, delivering robust quantitative measures of trading risk'. This blithe assumption, of course, was blown out of the water in 2008. Keynes would not have been in the least surprised by that. One of his principal justifications for government intervention in markets was the existence (maybe I should say ubiquity) of this uninsurable uncertainty.
All that is Part 1 of the book. Parts 2 and 3 introduce Keynes, his thoughts, and how they relate to the financial crisis. He was a complicated man who adopted various roles throughout his life, some of them simultaneously - speculator, academic, public figure, moralist - and changed his mind more than once (his is the immortal line: 'when the facts change, I change my mind. What do you do, sir?') So he is not easily summed up. The aspects of his thought that Skidelsky dwells on most in this book are those that relate to the 2007-9 crisis: the difference between risk and uncertainty, as mentioned above, the tension between capitalism and morality, and the need for the state to intervene in markets to protect people from their worst excesses and periodic collapses.
Gradually, a further theme emerges. Skidelsky divides the post-war years in two: the period until 1974, when governments broadly adopted Keynesian principles, and the period from 1974 to the financial crisis, when Keynes was rejected in favour of a free-market, small-state philosophy. Skidelsky argues that the first period was the more successful, for example in maintaining higher employment levels and avoiding recessions, and sees the financial crisis as the eventual result of policymakers' rejection of Keynes's ideas. Are we now seeing a 'return' to Keynes as the book's title implies? The early signs are that although governments may have taken a few leaves out of his book in devising their responses to the crisis, the deeper lessons have not been learned and something similar may happen again.
The book's greatest shortcoming is not really Skidelsky's fault. It was written too soon after the financial crisis to fully consider the measures taken by governments, central banks and regulators after the crisis. The friend who recommended me this book argues that "everything that has happened since the crisis is Keynesian", chiefly the enormous government stimulus that has been delivered (under the cloak of austerity in the UK, because "the Tories would never dream of admitting that they were taking a Keynesian approach".) Skidelsky is writing as the details of the policy response to the crash are still emerging, so is unable to confirm or disprove my friend's assessment, or offer a Keynesian perspective on quantitative easing.
What Skidelsky does is to analyse the causes of the crash, both those that had been brewing for a long time and the immediate catalysts. He looks at the different parties who have been blamed for it, from greedy bankers and supine ratings agencies to complacent governments, central banks and regulators. All are culpable to some degree, but it is the central argument of this book that the financial crisis was a failure of ideas, not individuals or institutions.
Skidelsky then turns his attention to the two main schools of thought in economics today, both of which have utterly failed to explain the crisis. The two schools are the new Classicists and new Keynesians. The dominance of the former is shown by the fact that the new Keynesians have, unlike Keynes himself, accepted the main tenets of the Classicists: namely, that markets exist for every possible contingency (the 'complete markets paradigm'); that those markets are efficient; and that people are able to form rational expectations based on all the information available to them (the 'rational expectations hypothesis'). Where the new Keynesians differ from the new Classicists is that they believe that it may take time for markets to adjust - time in which government interventions can be worthwhile.
What both schools miss is one of Keynes's most important observations and founding principles of his theory: the difference between risk and uncertainty. Risk can be measured and insured against ('priced'); uncertainty cannot. The FSA (now FCA) has admitted that one of its 'intellectual assumptions' before the crisis was that 'the risk characteristics of financial markets can be inferred from mathematical analysis, delivering robust quantitative measures of trading risk'. This blithe assumption, of course, was blown out of the water in 2008. Keynes would not have been in the least surprised by that. One of his principal justifications for government intervention in markets was the existence (maybe I should say ubiquity) of this uninsurable uncertainty.
All that is Part 1 of the book. Parts 2 and 3 introduce Keynes, his thoughts, and how they relate to the financial crisis. He was a complicated man who adopted various roles throughout his life, some of them simultaneously - speculator, academic, public figure, moralist - and changed his mind more than once (his is the immortal line: 'when the facts change, I change my mind. What do you do, sir?') So he is not easily summed up. The aspects of his thought that Skidelsky dwells on most in this book are those that relate to the 2007-9 crisis: the difference between risk and uncertainty, as mentioned above, the tension between capitalism and morality, and the need for the state to intervene in markets to protect people from their worst excesses and periodic collapses.
Gradually, a further theme emerges. Skidelsky divides the post-war years in two: the period until 1974, when governments broadly adopted Keynesian principles, and the period from 1974 to the financial crisis, when Keynes was rejected in favour of a free-market, small-state philosophy. Skidelsky argues that the first period was the more successful, for example in maintaining higher employment levels and avoiding recessions, and sees the financial crisis as the eventual result of policymakers' rejection of Keynes's ideas. Are we now seeing a 'return' to Keynes as the book's title implies? The early signs are that although governments may have taken a few leaves out of his book in devising their responses to the crisis, the deeper lessons have not been learned and something similar may happen again.
January 6, 2013
This is a biography of John Maynard Keynes, the man who revolutionized economics in the 1930's. His ideas helped shape much of American capitalism until the 1980's when classical economics had a resurgence. This book argues that, since the 2008 recession, Keynes' philosophies have been making a comeback. It discusses his life, his philosophy, his economics, and his politics, and considers them all in light of recent events.
It's an interesting book. It helped me understand the role uncertainty plays in an economy, and persuaded me that uncertainty is the greatest cause of these painful recurring recessions that have plagued us. I also have a better understanding of who this man was, and what he believed. He has a reputation for being anti-free market. He's actually a huge free market advocate, but he acknowledges that the free market alone, left to its own devices, is sometimes not enough. What we now call "black swan" events occasionally throw a monkeywrench in the free market, and manual invervention is necessary.
Although I like this book and think it's a fine explanation of Keynes and what he believed, I still don't feel like I walked away with the ability to explain at length what Keynes was all about. Maybe I'm just not educated enough about economics, or maybe this book was a little over my head, but I'd have liked this book to be written in a way that's easier to grasp.
It's an interesting book. It helped me understand the role uncertainty plays in an economy, and persuaded me that uncertainty is the greatest cause of these painful recurring recessions that have plagued us. I also have a better understanding of who this man was, and what he believed. He has a reputation for being anti-free market. He's actually a huge free market advocate, but he acknowledges that the free market alone, left to its own devices, is sometimes not enough. What we now call "black swan" events occasionally throw a monkeywrench in the free market, and manual invervention is necessary.
Although I like this book and think it's a fine explanation of Keynes and what he believed, I still don't feel like I walked away with the ability to explain at length what Keynes was all about. Maybe I'm just not educated enough about economics, or maybe this book was a little over my head, but I'd have liked this book to be written in a way that's easier to grasp.
February 6, 2013
Robert Skidelsky is John Maynard Keynes's most prominent biographer and advocate. His earlier biography of Keynes is outstanding, capturing the complicated his personal and intellectual life in a clear and compelling way. Keynes was a pro-capitalist who saw capitalism's flaws--a business cycle induced by waves of "animal spirits." To Keynes, government intervention was the key to capitalism's salvation, and his forceful advocacy of "fiscal policy" was a staple of the field when I was a graduate student.
But this book is disappointing. We have learned much about the failures of fiscal policy in the years since that early post-WWII entusiasm. Skidelsky gives nods to some of these matters, but his message is that Keynes has much to say about the post-2008 financial crisis, and that fiscal policy is more needed now than ever.
My own view is that fiscal policy is of little use, even now, and that the long-run consequences of fiscal interventions (like increased spending) are adverse, a matter Keynes barely addressed because his focus was very short term and his concern about accumulating deficits was too subdued. Joseph Schumpeter--an economist whose name is almost unknown today--had a much better appreciation of capitalism and its business cycles.
If you want to learn about Keynes, read Skidelsky's biography. If you want an over-the-top appreciation of Keynes, read this book.
But this book is disappointing. We have learned much about the failures of fiscal policy in the years since that early post-WWII entusiasm. Skidelsky gives nods to some of these matters, but his message is that Keynes has much to say about the post-2008 financial crisis, and that fiscal policy is more needed now than ever.
My own view is that fiscal policy is of little use, even now, and that the long-run consequences of fiscal interventions (like increased spending) are adverse, a matter Keynes barely addressed because his focus was very short term and his concern about accumulating deficits was too subdued. Joseph Schumpeter--an economist whose name is almost unknown today--had a much better appreciation of capitalism and its business cycles.
If you want to learn about Keynes, read Skidelsky's biography. If you want an over-the-top appreciation of Keynes, read this book.
July 12, 2010
Scholarly argument for a return to Keynesian economics
The modern recession casts doubt on many long-held economic beliefs, in particular, the validity of free markets. Unable to agree on causes or remedies, economists look on as politicians try various kinds of stimulus spending and corporate bailouts. Pundits call forth the ghost of John Maynard Keynes, often incorrectly labeled as a has-been socialist and tax-and-spend liberal. But Robert Skidelsky, Keynes’ biographer and a noted expert on the economist and his work, reveals how Keynes’ pre-World War II experiences shaped an economic worldview that still holds lessons for the 21st century. This scholarly book assumes that the reader has more than a nodding acquaintance with modern economic theory and philosophy, yet Skidelsky also injects literary references and sparks of wit that enliven the sometimes-challenging text. getAbstract suggests this abbreviated, but solid, look at Keynes to students of economic and political history, and to anyone who is trying to make sense of how the 2008 crisis happened and how to move forward.
The modern recession casts doubt on many long-held economic beliefs, in particular, the validity of free markets. Unable to agree on causes or remedies, economists look on as politicians try various kinds of stimulus spending and corporate bailouts. Pundits call forth the ghost of John Maynard Keynes, often incorrectly labeled as a has-been socialist and tax-and-spend liberal. But Robert Skidelsky, Keynes’ biographer and a noted expert on the economist and his work, reveals how Keynes’ pre-World War II experiences shaped an economic worldview that still holds lessons for the 21st century. This scholarly book assumes that the reader has more than a nodding acquaintance with modern economic theory and philosophy, yet Skidelsky also injects literary references and sparks of wit that enliven the sometimes-challenging text. getAbstract suggests this abbreviated, but solid, look at Keynes to students of economic and political history, and to anyone who is trying to make sense of how the 2008 crisis happened and how to move forward.
December 1, 2011
Skidelsky's account is marred by his undisguised adulation of Keynes: the economist could do no wrong, in the author's estimation, and those areas where Keynes erred are explained away. In the introduction, Skidelsky criticizes economic historians for engaging in prosaic doublespeak instead of adopting Keynes' injunction to describe economic phenomena in clear, everyday language-- and then proceeds to engage in these same linguistic gymnastics for the duration of the memoir.
Ultimately, the genius of Keynes is not conveyed due to the old trick of erecting a straw man to represent all economic theory which is not-Keynes: the Chicago school is depicted as a group bound by unyielding, quasi-religious fervor, worshiping at the alter of efficient market theory. Such extreme character portraits are easy to dismantle in light of the events of 2008. Does anyone really believe that economic actors always conduct themselves according to purely rational impulses? Behavioral economics has been with us for long enough to strip the rose from anyone who would claim to discredit EMT.
I was hoping to find a compelling account of Keynesian economics. What I found, instead, was worship material.
Ultimately, the genius of Keynes is not conveyed due to the old trick of erecting a straw man to represent all economic theory which is not-Keynes: the Chicago school is depicted as a group bound by unyielding, quasi-religious fervor, worshiping at the alter of efficient market theory. Such extreme character portraits are easy to dismantle in light of the events of 2008. Does anyone really believe that economic actors always conduct themselves according to purely rational impulses? Behavioral economics has been with us for long enough to strip the rose from anyone who would claim to discredit EMT.
I was hoping to find a compelling account of Keynesian economics. What I found, instead, was worship material.
June 20, 2020
The book almost sells itself as how Keynes would have approached the global financial crisis. Aside from a short final chapter, it is not that book. Instead, it is an interesting read about Keynes' philosophy, economics, and modern thought. While a great read, probably not recommended for those without any background in economics.
July 16, 2014
Review incorporated with my review on Keynes's The General Theory of Employment, Interest and Money.
August 24, 2017
Great introduction to one of the greats in the history of economic thought.
November 17, 2020
Succinct and eminently readable. A very interesting summary of Keynes’s ideas and why he was mire than just a standard economist.
July 24, 2021
In this book a modern economist (Robert Skidelsky) explains some of the ideas of Keynes and how they relate to the modern era, and particularly the financial crisis of 2008.
Throughout, modern economic views are compared and contrasted with some of Keynes’s teachings, and suggestions made for how Keynes would have dealt with the 2008 crisis differently. Overall, the author believes that Keynsian economics is the way forwards, albeit with some modifications.
The author adds in a good sprinkling of social history, Keynes’ background and the economic and political eras in which he grew up and developed his theories. One of the things I learned is that Keyens apparently changed his views quite considerably over the course of his lifetime (this speak to me of learning and evolving, so I think this is a great positive trait).
Key bits of economic theory I understood / revised from the book:
Difference between fiscal and monetary policy, and how that plays out in management of a depression (spending stimulus money in infrastructure projects etc vs moving interest rates)
The philosophy of management of supply vs management of demand (Keynes’s desire to manage demand rather than managing supply - though there is more to this and I didn’t have enough theoretical background to really appreciate it all)
The simplifications that modern economic theory applies (e.g. immediate rebalancing of jobs and wages in the event of a shift in demand)
The book also included a brief history of economic schools of thought and the principles which underpin them, and in particular the tension between free market capitalism unfettered by government intervention, vs the unstable economy which requires governments to manage it carefully. I particularly liked the characterisation of Keynes as attributing uncertainty (i.e. unknowable risk) to the economy, in comparison to the alternative view which attributes risk (i.e. it’s measurable).
Overall I really enjoyed this book and the way it brought in and synthesised the history of economics with economic theory and a good dose of storytelling. My economics is too rusty to make a judgement as to whether the author is right or not - he certainly made a compelling and interesting case.
This book is probably most of interest to those with some background in economics, since although all concepts are explained in plain English and perfectly understandable, the way the author weaves them together is richer and more interesting if you have some background knowledge.
Throughout, modern economic views are compared and contrasted with some of Keynes’s teachings, and suggestions made for how Keynes would have dealt with the 2008 crisis differently. Overall, the author believes that Keynsian economics is the way forwards, albeit with some modifications.
The author adds in a good sprinkling of social history, Keynes’ background and the economic and political eras in which he grew up and developed his theories. One of the things I learned is that Keyens apparently changed his views quite considerably over the course of his lifetime (this speak to me of learning and evolving, so I think this is a great positive trait).
Key bits of economic theory I understood / revised from the book:
Difference between fiscal and monetary policy, and how that plays out in management of a depression (spending stimulus money in infrastructure projects etc vs moving interest rates)
The philosophy of management of supply vs management of demand (Keynes’s desire to manage demand rather than managing supply - though there is more to this and I didn’t have enough theoretical background to really appreciate it all)
The simplifications that modern economic theory applies (e.g. immediate rebalancing of jobs and wages in the event of a shift in demand)
The book also included a brief history of economic schools of thought and the principles which underpin them, and in particular the tension between free market capitalism unfettered by government intervention, vs the unstable economy which requires governments to manage it carefully. I particularly liked the characterisation of Keynes as attributing uncertainty (i.e. unknowable risk) to the economy, in comparison to the alternative view which attributes risk (i.e. it’s measurable).
Overall I really enjoyed this book and the way it brought in and synthesised the history of economics with economic theory and a good dose of storytelling. My economics is too rusty to make a judgement as to whether the author is right or not - he certainly made a compelling and interesting case.
This book is probably most of interest to those with some background in economics, since although all concepts are explained in plain English and perfectly understandable, the way the author weaves them together is richer and more interesting if you have some background knowledge.
This entire review has been hidden because of spoilers.
August 27, 2017
Keynes possesed some truly interesting concepts about how our economy shall optimally function. A majority of the contemporary economists might disagree with him, though, for me personally, there is a degree of thruth in what he argues.
The corrupted political and economical systems in today's society have turned perverse. Not longer do they benefit the population as a whole and their welfare. Instead, resources and capital is concentrated amongst the elite, who chase economical growth regardless of the consequenses. This has resulted in a system which sole purpose is growth, while all of the other factors are neglected out of the equation. To examplify, this can vividly be noticed in the education where students' subjects are mostly dominated by mathematics, in the hope of finding a formula to predict the future. Though, as Kaynes champions, this is of no avail and only contributes to an economy even more fragile. On the contrary to the prevalent deterministic theory taught in schools, he argues that the future is filled with doubt and uncertainity. Therefore, should most of the mathematical element be discarded and replaced my practices which includes this uncertainity. As the theory goes, this would stabalize the economy and avoid the cataclysms, which has frequently hit us through the last decades.
Even though I only brought up a couple of the aspects of Keynes theory, I hope you recieved a glimpse in how his thesis i structured. Except the theory of doubt previously described, "Keynesianism" contains a multitude of other theories worth considering. Which in deed, if we would now consider the book, is brought up by Robert Skidelskey. Though, for me personally, it could have been presented in a more structured way. For me as a reader, a more focused book which restricted it self to a certain domain of Keyne's theories, whould have been further appreciated. Nonetheless, all in all the book should still be considered read-worthy due to the extraordinary ideas effused my Keynes. However, if another option is presented I would rather consider that alternative.
The corrupted political and economical systems in today's society have turned perverse. Not longer do they benefit the population as a whole and their welfare. Instead, resources and capital is concentrated amongst the elite, who chase economical growth regardless of the consequenses. This has resulted in a system which sole purpose is growth, while all of the other factors are neglected out of the equation. To examplify, this can vividly be noticed in the education where students' subjects are mostly dominated by mathematics, in the hope of finding a formula to predict the future. Though, as Kaynes champions, this is of no avail and only contributes to an economy even more fragile. On the contrary to the prevalent deterministic theory taught in schools, he argues that the future is filled with doubt and uncertainity. Therefore, should most of the mathematical element be discarded and replaced my practices which includes this uncertainity. As the theory goes, this would stabalize the economy and avoid the cataclysms, which has frequently hit us through the last decades.
Even though I only brought up a couple of the aspects of Keynes theory, I hope you recieved a glimpse in how his thesis i structured. Except the theory of doubt previously described, "Keynesianism" contains a multitude of other theories worth considering. Which in deed, if we would now consider the book, is brought up by Robert Skidelskey. Though, for me personally, it could have been presented in a more structured way. For me as a reader, a more focused book which restricted it self to a certain domain of Keyne's theories, whould have been further appreciated. Nonetheless, all in all the book should still be considered read-worthy due to the extraordinary ideas effused my Keynes. However, if another option is presented I would rather consider that alternative.
March 17, 2019
The financial crisis of 2008 was the most terrific and shocking economic event since the collapse of 1929. After eleven years, the entire economic system is still paying the consequences, and the end hasn’t yet arrived. The governments quickly adopted unpopular policies of reduction of the public expenditures, worsening, in certain situations, the critical conditions of their economies.
Robert Skidelsky explains step-by-step the life and studies of John Maynard Keynes, the most famous and influencing economist of the Twentieth century, to point out how his theories, nowadays, are relevant and fundamental to deal with the negative economic trend.
Born in 1883, Keynes’s theory became popular after the collapse of 1929. He challenged the main economic theory – based on the studies of the Classical school of which principal exponents were Ricardo, Adam Smith, and the academic rival von Hayek – and brought the attention on the demand, instead of focusing on the supply as his previous colleagues had done.
The innovative theory led the British economist to claim that the State had an important role in preventing and balancing the economic shocks caused by the changes in the demand of a country.
The author – who wrote the best biography of John Maynard Keynes – thoroughly goes through the life of the Master, then clearly analyses and contextualises his theories and their application. Keynes’s approach hasn’t always been successful, but it went through huge critics and severe questions.
The book presents a detailed reflexion about the importance of the British economist and sets strong evidence about the Keynesianism; its influence hasn’t finished and left behind, but governments and economists have to reconsider it if they want to end this terrible and dramatic economic moment.
Robert Skidelsky explains step-by-step the life and studies of John Maynard Keynes, the most famous and influencing economist of the Twentieth century, to point out how his theories, nowadays, are relevant and fundamental to deal with the negative economic trend.
Born in 1883, Keynes’s theory became popular after the collapse of 1929. He challenged the main economic theory – based on the studies of the Classical school of which principal exponents were Ricardo, Adam Smith, and the academic rival von Hayek – and brought the attention on the demand, instead of focusing on the supply as his previous colleagues had done.
The innovative theory led the British economist to claim that the State had an important role in preventing and balancing the economic shocks caused by the changes in the demand of a country.
The author – who wrote the best biography of John Maynard Keynes – thoroughly goes through the life of the Master, then clearly analyses and contextualises his theories and their application. Keynes’s approach hasn’t always been successful, but it went through huge critics and severe questions.
The book presents a detailed reflexion about the importance of the British economist and sets strong evidence about the Keynesianism; its influence hasn’t finished and left behind, but governments and economists have to reconsider it if they want to end this terrible and dramatic economic moment.
July 25, 2020
Another introduction to Keynes, based on an analysis of the 2008 financial collapse and how Keynes' ideas might have been applicable to it. There was a lot of stuff I didn't understand, because economics is something I don't quite get, but it further supports my idea that even so called American Keynesianism is not based on Keynes' most important ideas. Skidelsky used terminology that clarified for me what "supply" side vs. "demand" side is, and how demand side thinking and policy work better to create stable and reasonably healthy economies.
Chapter 6, "Keynes and the Ethics of Capitalism," was where the book caught fire for me and I'm going to scan those pages to reread.
Still need to understand Keynes better. An important point is that the supply side/right wing economists cry Socialism if you say Keynes, but in fact Keynes' whole goal was to achieve a fair enough capitalist society to prevent violent revolution and extremism in political life.
Also very interesting was the beginning of the book where Skidelsky basically eviscerates all classical and neoclassical economics as based on untenable assumptions and unrealistic models, on which he blames a lot of the damage done to US and world economies in the last 40 years. I'm no longer sorry I never took economics in school if that's a true accounting of its so-called contents!
Chapter 6, "Keynes and the Ethics of Capitalism," was where the book caught fire for me and I'm going to scan those pages to reread.
Still need to understand Keynes better. An important point is that the supply side/right wing economists cry Socialism if you say Keynes, but in fact Keynes' whole goal was to achieve a fair enough capitalist society to prevent violent revolution and extremism in political life.
Also very interesting was the beginning of the book where Skidelsky basically eviscerates all classical and neoclassical economics as based on untenable assumptions and unrealistic models, on which he blames a lot of the damage done to US and world economies in the last 40 years. I'm no longer sorry I never took economics in school if that's a true accounting of its so-called contents!
March 4, 2010
This is a short and accessible introduction to the economic and philosophical worldview of John Maynard Keynes, the 20th Century British economist whose ideas are suddenly back in vogue as governments seek to mop up the mess caused by overleveraged banks, easy credit, and speculators who didn't understand their own investment vehicles. Skidelsky also authored a three-part biography of Keynes, and he uses his familiarity with the man to detail the development of his ideas.
One of Skidelsky's main themes is Keynes' distinction between risk and uncertainty, a distinction lost on the neoclassical (neoliberal/freshwater/Chicago) economics that has guided economic policy since the late 1970s. For Keynes, uncertainty about the future is key to economic decision making; people have little capacity to accurately predict the future, and they make decisions based on conventional expectations ("rules of thumb") about probable future expectations rather than relying on the perfect knowledge assumed to be available to them by the neoliberal camp.
Risk, on the other hand, is reserved for economic activities where, in Keynes' words, "our views of the future are... reliable in all respects". In other words, investors invest in situations where they are relatively well apprised of the risk, and confident about the returns. There is a risk that the confidence is misplaced, but not necessarily one so strong that the desire to invest is extinguished. Uncertainty is different from risk, in that we cannot confidently assess the future, leaving us, says Keynes, in a position where "our previous expectations are liable to disappointment and expectations concerning the future affect what we do today."
Skidelsky argues that the trouble with current economics is that Keynes' distinction has been rubbed out of our thinking by the neoliberal approach, with its heavy reliance on mathematical models, "risk management" strategies, and unreal assumptions of "rational expectations" and perfect information about future events. The econometric premise that past or present performance is a reliable indicator of future results—the basis of the risk management strategies that have so spectacularly failed in the ongoing crisis—is one that Keynes thoroughly rejected, in part by noting the power of human innovation to induce pattern-smashing paradigmatic shifts.
Skidelsky notes that Keynes held that people were reasonable, but not always "rational" in the sense of the word used by neoclassical economists. This is evidenced by their reliance on rules of thumb and conventions in the formation of expectations. It also helps explain their "liquidity preference" (the desire to keep their assets in more easily tradeable forms, with money/cash being the most liquid) in times of increased uncertainty, despite the negative impact such saving—in aggregate—can have on the economy.
Keynes recognized that the combined effect of individuals' liquidity preference in uncertain times would lead to higher interest rates (since people threatened by uncertainty were less willing to part with their cash, driving its price up) in the precise moments when lower interest rates should prevail (thereby spurring investment that could restart a stalling economy). Keynes famously held that governments should—in these uncertain periods—fill the void left by lack of private investors, using the public purse to drive an economy through the moments of highest uncertainty, sustaining the recovery by spending. In less uncertain times, when investors had more confident expectations and people were willing to spend money more freely, government economic policy could revert to reducing income inequality and promoting leisure.
Yes, leisure. Another interesting aspect of Skidelsky's book is his exploration of Keynes' commitment to an ethical economics aimed at diminishing "love of money" and instead promoting a morally grounded "good life" in which we would live "wisely, agreeably, and well". As Skidelsky summarizes, one of the key values of Keynes' economics is that it
At 193 pages, the book is quite short, and those looking for detailed theoretical arguments will probably be somewhat let down. Instead, this is a book ideally suited to university courses and interested "lay" readers looking to get a better understanding of the background for such current trends as "fiscal stimulus", "quantitative easing", and "economic recovery". Standout sections include Chapter Two, "The Present State of Economics", which examines the tenets of the neoliberal school and some critiques thereof; Chapter Four, "Keynes's Economics", which is a useful introduction to the vast topic; and Chapter Six, "Keynes and the Ethics of Capitalism", which outlines the more holistic breed of economics that Keynes sought to establish. The closing chapter, "Keynes for Today", contains policy prescriptions based on Skidelsky's channeling of Keynes into the present day—including a call to broaden the scope of studies of economics students and rescue the discipline from its current emphasis on purely mathematical pursuits. Regarding the meta topic of today's financial crisis, Skidelsky suggests that "We need a new synthesis, in which government is accepted as non-benevolent, but market forces are not thereby totally rehabilitated."
Skidelsky's Keynes: The Return of the Master implicitly serves as a reminder that economic policy is often reexamined in the depths of crisis, when minds are muddled by the urgency of the situation. By invoking the ideas of Keynes, who worked during the last great depression and whose policies helped drive the recovery from it, Skidelsky provides a timely corrective to some of the theoretical miscues and moral shortcomings that led to our current morass.
One of Skidelsky's main themes is Keynes' distinction between risk and uncertainty, a distinction lost on the neoclassical (neoliberal/freshwater/Chicago) economics that has guided economic policy since the late 1970s. For Keynes, uncertainty about the future is key to economic decision making; people have little capacity to accurately predict the future, and they make decisions based on conventional expectations ("rules of thumb") about probable future expectations rather than relying on the perfect knowledge assumed to be available to them by the neoliberal camp.
Risk, on the other hand, is reserved for economic activities where, in Keynes' words, "our views of the future are... reliable in all respects". In other words, investors invest in situations where they are relatively well apprised of the risk, and confident about the returns. There is a risk that the confidence is misplaced, but not necessarily one so strong that the desire to invest is extinguished. Uncertainty is different from risk, in that we cannot confidently assess the future, leaving us, says Keynes, in a position where "our previous expectations are liable to disappointment and expectations concerning the future affect what we do today."
Skidelsky argues that the trouble with current economics is that Keynes' distinction has been rubbed out of our thinking by the neoliberal approach, with its heavy reliance on mathematical models, "risk management" strategies, and unreal assumptions of "rational expectations" and perfect information about future events. The econometric premise that past or present performance is a reliable indicator of future results—the basis of the risk management strategies that have so spectacularly failed in the ongoing crisis—is one that Keynes thoroughly rejected, in part by noting the power of human innovation to induce pattern-smashing paradigmatic shifts.
Skidelsky notes that Keynes held that people were reasonable, but not always "rational" in the sense of the word used by neoclassical economists. This is evidenced by their reliance on rules of thumb and conventions in the formation of expectations. It also helps explain their "liquidity preference" (the desire to keep their assets in more easily tradeable forms, with money/cash being the most liquid) in times of increased uncertainty, despite the negative impact such saving—in aggregate—can have on the economy.
Keynes recognized that the combined effect of individuals' liquidity preference in uncertain times would lead to higher interest rates (since people threatened by uncertainty were less willing to part with their cash, driving its price up) in the precise moments when lower interest rates should prevail (thereby spurring investment that could restart a stalling economy). Keynes famously held that governments should—in these uncertain periods—fill the void left by lack of private investors, using the public purse to drive an economy through the moments of highest uncertainty, sustaining the recovery by spending. In less uncertain times, when investors had more confident expectations and people were willing to spend money more freely, government economic policy could revert to reducing income inequality and promoting leisure.
Yes, leisure. Another interesting aspect of Skidelsky's book is his exploration of Keynes' commitment to an ethical economics aimed at diminishing "love of money" and instead promoting a morally grounded "good life" in which we would live "wisely, agreeably, and well". As Skidelsky summarizes, one of the key values of Keynes' economics is that it
keeps alive the importance of having an idea of the good life. Without it, economic activity is bound to be simply an envious striving for relative advantage, without any natural terminus... Keynes forces us to consider the question of what economic activity is for.
At 193 pages, the book is quite short, and those looking for detailed theoretical arguments will probably be somewhat let down. Instead, this is a book ideally suited to university courses and interested "lay" readers looking to get a better understanding of the background for such current trends as "fiscal stimulus", "quantitative easing", and "economic recovery". Standout sections include Chapter Two, "The Present State of Economics", which examines the tenets of the neoliberal school and some critiques thereof; Chapter Four, "Keynes's Economics", which is a useful introduction to the vast topic; and Chapter Six, "Keynes and the Ethics of Capitalism", which outlines the more holistic breed of economics that Keynes sought to establish. The closing chapter, "Keynes for Today", contains policy prescriptions based on Skidelsky's channeling of Keynes into the present day—including a call to broaden the scope of studies of economics students and rescue the discipline from its current emphasis on purely mathematical pursuits. Regarding the meta topic of today's financial crisis, Skidelsky suggests that "We need a new synthesis, in which government is accepted as non-benevolent, but market forces are not thereby totally rehabilitated."
Skidelsky's Keynes: The Return of the Master implicitly serves as a reminder that economic policy is often reexamined in the depths of crisis, when minds are muddled by the urgency of the situation. By invoking the ideas of Keynes, who worked during the last great depression and whose policies helped drive the recovery from it, Skidelsky provides a timely corrective to some of the theoretical miscues and moral shortcomings that led to our current morass.
August 15, 2022
Useful reminder of the irreducibility of risk and uncertainty in life and finance and the need to put economics in its place (i.e. economist as doctor not as saviour).
Naturally the biographer of Keynes will be slightly biased in his view of things but not clear that there is a “un-biased” view of economic history so better to get lots of different views than to give up.
Overlap with ‘how much is enough?’ In the chapter on Keynes’ views of the future and the need for the pursuit of money to diminish the need for the pursuit of money (i.e. the capitalistic disposition as a necessary but temporary evil).
Should the state have the aim of sustaining full employment and diminishing boom and bust until we can all chill and fish? I’m not sure but it sure is an idea.
Naturally the biographer of Keynes will be slightly biased in his view of things but not clear that there is a “un-biased” view of economic history so better to get lots of different views than to give up.
Overlap with ‘how much is enough?’ In the chapter on Keynes’ views of the future and the need for the pursuit of money to diminish the need for the pursuit of money (i.e. the capitalistic disposition as a necessary but temporary evil).
Should the state have the aim of sustaining full employment and diminishing boom and bust until we can all chill and fish? I’m not sure but it sure is an idea.
November 25, 2019
The work could be better, Skidelsky is a specialist of Keynes but the book has no direction in my view, as an economics student taught by Keynes' admirers and disciples, I am familiar with all what he said but he did not argue for what can be done to avoid the crisis nor did he direct the critic of Keynes' ideas and policies, I was expecting a great work since I have listened to the majority of his conferences and youtube lectures but I was disappointed.
The book could be though, helpful for people who are not familiar with Keynes and search an introduction.
The book could be though, helpful for people who are not familiar with Keynes and search an introduction.
October 24, 2017
Good overview of Keynes' theories especially in regard to the 2008-9 recession. Skidelsky is obviously a fan of Keynes, but is not beyond criticizing him, and an accomplished economist in his own right. He presents many arguments against neo-classical economics, only within reference to Keynes' ideas, although many of his criticisms are well-stated. Recommend for those interested in the recent crash or Econ in general.
July 3, 2018
This book provides a great overview of history of economic thought. It highlights the main turning points, differences in ways of thinking among economic schools and the consequences to our daily lifes.
The book was extensively used in Vilnius University lecturing the history of economic thought.
Despite all the positives been said here, the book is only a compilation of other works, though a very decent one.
The book was extensively used in Vilnius University lecturing the history of economic thought.
Despite all the positives been said here, the book is only a compilation of other works, though a very decent one.
November 13, 2024
This is why economics courses should have compulsory course in history alongside it. A man of many talents and a book spoken a lot about around the office. Enjoyed how he thought of himself as more than an economist but I guess one can’t just be an economist without other skills. A real thinker and very well put together though I fear his influence has and sadly will not re-enter public psyche in the manner hoped.
March 15, 2018
"La crítica más profunda, sin embargo, se dirige al hecho de que los reguladores y los banqueros siguen dependiendo de modelos financieros matemáticos para medir y contener el riesgo que prometen más de lo que pueden dar. Ésta es una consecuencia de hacer caso omiso de la distinción de Keynes entre riesgo e incertidumbre."
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