Keynes’s analytical view of ’the long run’
Professor(em) Jesper Jespersen
Roskilde University
Please cite the paper as:
Professor(em) Jesper Jespersen, (2024), Keynes’s analytical view of ’the long run’, World Economics Association (WEA) Conferences, No. 1 2024, Capitalism, Socialism and Democracy 80 years later, Looking at capitalism today in light of its past and possible future
Abstract
John Maynard Keynes (1883-46) known as the ‘father of macroeconomics’ had surprisingly little to say about ‘the long run’. There are, as we shall see, good reasons for this attitude; but if we look carefully into his writings we will, fortunately, find interesting and important analytical views also of the long run. In any case one should be somewhat cautious to talk of the ‘economics of Keynes’, because it really did undergo significant changes during his (rather short) life.
In this paper I will give an account on Keynes’s analytical view on macroeconomics in the long run, which except for his essay ‘The economic possibilities for our grandchildren’ was very sketchy.
References
Boldrin, M. and David K. Levine, All the Interesting Questions, Almost All the Wrong Reasons in Lorenzo Pecchi and Gustavo Piga (ed). (2008), Revisiting Keynes: Economic Possibilities for Our Grandchildren, Cambridge, MA: MIT Press. Pp. 161-78
Carabelli, A. (2021), Keynes on Uncertainty and Tragic Happiness, London: Palgrave/Macmillan
Chick, V. (1983), Macroeconomics after Keynes, New York: Phillip Allan
Chick, V. and J. Jespersen (2016), John Maynard Keynes (1883-1946) in G. Faccarello & H. Kurz (eds), Handbook of Economic Analysis, vol.1. Cheltenham: Edward Elgar, pp. 468-483
Chick, V. and A. Freeman (2018), The Economics of enough: a future for capitalism or a new way of living? in S. Dow et al. ‘Money, Method and Contemporary Post-Keynesian Economics‘, Cheltenham, UK and Northampton, MA, USA: Edward Elgar, pp. 148-159
Dimand, R. W. & H. Hagemann (eds), 2019, The ELGAR Companion to John Maynard Keynes, Cheltenham: Edward Elgar Publishing
Dow, S. (2002), ‘Economic Methodology: an Inquiry’, Oxford: Oxford University Press
Fitzgibbons, A. (1988), Keynes’s Vision: A New Political Economy, Oxford: Clarendon Press
Hagemann, H. (2019), “Economic Possibilities for our Grandchildren”, in Dimand & Hagemann, pp. 162-67
Hagemann, H. (2019), Joseph Alois Schumpeter, in Dimand & Hagemann, pp. 324-33
Harrod, R. (1951), The Life of John Maynard Keynes, London: Macmillan
Jespersen, J. (2009), Macroeconomic Methodology: A Post-Keynesian Perspective, Cheltenham, UK and Northampton, MA, USA: Edward Elgar
Jespersen, J. (2011), Keynes’s General Theory becoming 75 years – time to re-read and reflect, in
J. Jespersen og M. O. Madsen (eds), Keynes’s General Theory for today – contemporary perspectives, Cheltenham, UK and Northampton, MA, USA: Edward Elgar, pp.131-50
Jespersen, J. (2012), John Maynard Keynes, København: DJØFs Forlag.
Johnson, E. and D. Moggridge (eds) (1972-89), The Collected Writings of John Maynard Keynes, 30 vol., London: Macmillan and Cambridge University Press
Keynes, J.M. (1930a), A Treatise on Money, in E. Johnson and D. Moggridge (eds) (1972), The Collected Writings of John Maynard Keynes, vols V and VI, London: Macmillan and Cambridge University Press
Keynes, J.M. (1930b), Economic Possibilities for our Grandchildren, in E. Johnson and D. Moggridge (eds) (1972), The Collected Writings of John Maynard Keynes, vol. IX, London: Macmillan and Cambridge University Press, pp. 321-332
Keynes, J.M. (1936), The General Theory of Employment, Interest and Money, in E. Johnson and D. Moggridge (eds) (1973), The Collected Writings of John Maynard Keynes, vol. VII, London: Macmillan and Cambridge University Press.
Keynes, J.M. (1937), ‘The General Theory of Employment’, The Quarterly Journal of Economics, vol. 51, pp. 212-223.
Keynes, J.M. (1949), My Early Beliefs, in E. Johnson and D. Moggridge (eds) (1972), The Collected Writings of John Maynard Keynes, vol. X, London: Macmillan and Cambridge University Press, pp. 433–51.
Moggridge, D. (ed.), (2010), Keynes on the Wireless, London: Palgrave/Macmillan
O‘Donnell, R. (1989), Keynes, Philosophy, Economics and Politics, London: Macmillan
Skidelsky, R. (1983), Keynes, hopes betrayed, London: Macmillan
Skidelsky, R. (2001), Keynes, as Saviour, London: Macmillan
Skidelsky, R. & E. Skidelsky (2012), How Much is Enough? The Love of Money and the Case for the Good Life, London: Allen Lane
Keynes’s vision of a future with abundant capital, comfortable living standards and significant amounts of leisure seems very similar to J.S. Mill’s steady state. Any connection?
Dear John,
Sorry to have delayed my reply.
You know, Vol. XXX of CWK is a goldmine of references to the writings of Keynes. From the index I can see that Keynes had a number of references to the works of JSM. From this index I can see that Keynes had made a review of JSM’s ‘Principles of Political Economy’ in vol. XI of CWK. Furthermore, I can see that in the index there is a reference to ‘Effective demand’ & JSM in vol XIII, pp, 596-98 – to me this reference is important related to my paper to this web-seminar ‘Keynes in the long run’.
Thank you so much for paying my attention to the JSM-reference.
Dear John,
You are right they both had the same social vision.
In many aspects they were quite similar:
1. member of the Liberal Party
2. Intellectually dominant father
3. Open minded
4. took a critical view on the leading economic paradigm in their more mature age
I will take a look into volume XXX of CWK to see what references Keynes might have to the writings of JSM.
Sincerely
Jesper Jespersen
jesperj@ruc.dk
It is a very interesting contribution. Just a question, what could be the role of Keynes’s Bancor for realising a society free from “economic motive”?
Dear Arturo,
I am afraid that you mix-up two (important) but separated aspects of Keynes’s ‘economic philosophy’.
a. Economic philosophy: ‘For at least another hundred years we must pretend that to ourselves and to everyone that fair is foul and foul is fair; for fair is useful and fair is not. Avarice and usury and precaution must be our gods for a little longer. For only they can lead us out of the tunnel of economic necessity into daylight.’ (CWK, vol IX, p. 331)
b. World Economic order after the WWII. In 1942, see Vol. XXV, Keynes wrote a long memorandum on this issue – especially on the lack of international liquidity (i. e. gold), which would be a hindrance on international trade after the war. His suggestion was that an international organization should be entitled to issue a limited amount of ‘Bancor’ to be allocated among member states to supplement their limited amount of internationally accepted liquidity; but only to be circulated among central banks.
As you know, the outcome of the Bretton Woods agreement was, on request from the American delegates, a much more limited scheme of ‘drawing rights’ building upon gold reserves deposited of member states at the IMF (later supplimented with SDR, (1968)). A system which broke down in 1971/73 where the leading economies switched into floating exchange rates.
Sincerely
Dear Jesper, the two important aspects of Keynes’s ‘economic philosophy’ that you mentioned are in reality not so separated! Actually, the long term perspective set forth in particular in “The Economic Possibilities for Our Grand Children” had been in some ways put in the shadow, both in the “General Theory” and in his subsequent contributions. The reason for this can be found in Keynes’s attempt – because he was also a good diplomat – to gain approval of his General Theory by keeping in the background the most revolutionary aspects of his perspective. These aspects, however, had always been present in his work, and, on that account, all his short term policies go in that direction: namely, a perspective that considers wild and individualistic capitalism only as a transitory stage towards a new stage of capitalism (and Keynes refers in this respect to John R.Commons’s taxonomy of merchant capitalism, individual capitalism and the concerted or managed capitalism of out time). A central aspect of this transition lies in overcoming the quest for political, military and economic supremacy typical of capitalism (central on that account is also his “The Economic Consequences of the Peace). Hence, building peaceful and equitable international relations constitutes the basis of his society “free from economic motive” and his Bancor’s proposal is the instrument (a multilateral clearing system trying to avoid the supreamcy of the strongest countries) to realise that more balanced international order. That’s why I asked that question, which is topical and debated also in our time.
Dear Arturo,
Thank you so much for your relevant comments.
In some way Keynes had ‘two faces’ like Janus!
His long term vision of the ‘good society’ developed all the way back in his younger years as student at King’s College under the supervision and influence of G.E. Moore (and Bertrand Russell). But a precondition for the establishment of the ‘good society’ was a well-functioning (and fair!!) (macro)economic system (and politics). Hence, he devoted much of his academic life to develop a (macroe) economic theory, which he called a ‘General Theory’ to understand the new macroeconomic so much different from neoclassical aggregate microeconomics. But he never gave up his long term vision of the good society from his youth, see his ‘My early Beliefs’ from 1937 (published post mortem in 1946).
By the way my Keynes-biography has been translated into Italian, ‘John Maynard Keynes: un manifesto per la ‘bouna vita’ e la ‘bouna società’ by Bruno Amoroso, published by CastelVecchi, 2015