Nick Crafts is professor of economic history at the University of Warwick.
John Maynard Keyes: The Economist as Saviour 1920-37.
By Robert Skidelsky. Macmillan; 635pp; £20.
Review by Nick Crafts.
The second volume of Skidelsky's biography of Keynes has already had glowing reviews in the quality papers. It carries on from his much acclaimed first volume, published in 1983, and represents the fruit of much greater scholarly toil in Keynes's voluminous papers.
I feel sure this book was quite a bit harder to write than the first. It will also be more difficult for most people to cope with. In volume one Skidelsky broke new ground by frankly discussing Keynes's homosexual relationships, a topic discreetly avoided in Harrod's well known biography. This time around there is considerably less sex and much more economics, as the balance of Keynes's activities and interests changes with marriage and his increasing pre-occupation with macroeconomic policy.
Indeed nine of the 17 chapters deal primarily with difficult technical questions in economics or economic history, and cannot have been understood other than at a very superficial level by the Fleet Street reviewers.
In a sense these chapters succeed. They convey very well the evolution of thought over 15 years, which led eventually to the General Theory published in 1936. At the same time I suspect they will prove over the head of the non-specialist reader, yet not detailed enough to be a fully-fledged contribution to the history of economic thought.
The picture of Keynes which emerges is fascinating although by no means entirely an attractive one. He was a phenomenally busy man, simultaneously engaged in college bursarship, journalism, the City, government committees, and funding the Arts Theatre in Cambridge besides his academic work. He was extremely arrogant, based many judgments on astonishingly casual empiricism and was imbued with many of the standard prejudices of Oxbridge and/or Bloomsbury. For example, "What chiefly impressed Keynes about British businessmen was their stupidity and laziness" (p259). He played the markets enthusiastically so that by 1936 his net worth amounted to £500,000. He was thus immune to the businessman's standard attack on the academic: "If you're so smart, why ain't you rich?" (He would probably have replied, "If you're so rich, why aren't you smart?")
Skidelsky shrewdly points out that, since Keynes's approach relied heavily on intuition - and emphasised the difficulty both of control and prediction - it is not easy to know what he would have made of recent British economic policy. However he would certainly have noticed some distinct similarities between 1931 and 1992, at least in respect of importing deflation under a fixed exchange rate system. I doubt that he would have recommended Britain's entry to the ERM at 2.95DM to the pound. Of course, since he completely distrusted the whole concept of econometrics, he would not have been at all surprised at the dreadful errors made by the economic forecasting profession since 1987.
Other than the wonderful string of one-liners for which he is justifiably famous, does Keynes still have much to say to our generation? This is an issue on which the reader might hope for rather more incisive commentary from Skidelsky, who often seems rather too deferential. Nevertheless, the book supplies some important clues. In particular, the author points to Keynes's acceptance of the institutional arrangements of the economy as unchangeable (p185). He also notes that senior economists in the 1930s distrusted Keynes's willingness to discard rules (eg the balanced budget or the gold standard) in favour of the discetionary conduct of policy by politicians (p593).
I think it's clear that the economic profession's brief flirtation, 10-15 years ago, with the view that governments are powerless to influence the level of real economic activity has ended. We are (virtually) all Keynesians now, in the sense that the economy is seen as rather slow to adjust to shocks, so there is some scope for policy intervention. At the same time economists have rediscovered the theoretical attractions of pre-commitment by government to contingent policy rules, and tend to stress the tendency for politicians' discretion to be inflationary.
Moreover, supply-side policy seems a good deal more important now than it did at the height of the Keynesian revolution. A wholesale return to Keynesian policies might well have unfortunate long-run consequences for efficiency and productivity. We are surely unlikely to see a return to unreconstructed Keynesianism.
Ultimately, I regard both Keynes the man and Keynes the economist with much less admiration than does Skidelsky. I would have welcomed a slightly more detached view, informed - to a greater extent - by subsequent developments in economics and economic history. Nevertheless I enjoyed this book, which is full of insights. I look forward to the appearance of volume three in due course.