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John Maynard Keynes: Life, Ideas, Legacy

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The origins of this slim volume lie in a video that the author undertook for the Institute of Economic Affairs. As Blaug notes, the limitations of a one hour programme encouraged him to use his reference material to write this book which, I should say at the outset, should be on the shelves of anyone who claims to have an interest in Economics.

John Maynard Keynes occupies a strange position in the pantheon of economic thought. Revered and detested by different groups, he is like a candidate for sainthood, adjudged to be possessed of mythical and miraculous powers including second sight as well as being the originator of much which is claimed by his disciples as stemming from his greates work.

To talk of Keynes in such a fashion is appropriate because he is revered by his followers as nuch as many Eastern deities, taken from this earth before his time, and with a legacy that is kept by the faithful as the Holy Grail.

Blaug's central concerns lie in what is meant by Keynesianism (or what is purported to be the policy prescriptions deduced from the writings of the master), how the theories derived from Keynes took hold among almost the entire swathe of economists throughout the world in such a short space of time, and to determine if there is any future in Keynesian theory.

The book is clearly divided in three just as the title describes: Life, Ideas and legacy and in the concise, clear and lucid way that the author is well known for. Indeed, reading through this prose is very reminiscent of the work of Arthur Seldon in it's judicious editing and clarity.

The book is relatively short and by being so focussed enables the reader, general and specialist to get to the heart of the issue without getting bogged down in unnecessary detail or doctrinal disputes. Keynes' colourful life is referred to in a factual way without any prejudicial remarks and to me it's only drawback is the fact that there is no exposition of the relationship between Keynes and Hayek, While there was clear evidence of the rivalry which took place professionally between these two giant intellects of the 20th Century, there has been little written of the friendliness and very courteous relations which existed between them. Perhaps one day a study along those lines may be presented.

Keynes' ideas and intellectual development are again clearly discussed in what some may feel as too short an exposition but given the author's clear intent to provide a window to further study and to cover only the core ideas it seems very appropriate. Blaug develops the ideas into their takeup by scholars and policy-makers around the world in the context of a timeframe to establish the speed at which they took hold.

Finally, Blaug interviews some of the high priests of the new religion to establish basic building blocks, to elaborate clearly different fundamental aspects of the emerging Kuhnian scientifi revolution and to project forward into the future about the developments of Keynesian theory.

For me it is the latter section which holds most of the intellectual interest of the book, offering some interesting lines of inquiry and opening up the world view of Keynesianism to see that it is a broad church indeed. One of the flattering features of this approach is that in more recent times it has been taken up and developed by Brian Snowdon and Howard Vane in a series of volumes about the development of macroeconomics wherein they identify recent developments in theory and associate them with interviews with the various authors.

However, to the subject in hand, Blaug's exposition does not claim to be the final word on Keynes. Indeed his further reading lists refers the interested reader to the eceptional work of Professor Skidelsky among others who has done sterling work on Keyne. What it does provide is a working guide to this fascinating man and his works and the way in which his supporters and disciples broadened those lines of inquiry into the subject we know today. In writing this he provides a better context for Keynes than is normally provided and shows that while there was a lot that was new in his work, there was a lot that was a development from the ideas that he tried to refute.

Overall I would strongly recommend that even now this book is essential reading for anyone with an interest in economics, politics or the development of ideas. Blaug is an excellent writer and he has very ably provided a highly readable very comprehensive introduction to what is now a very sophisticated and complex subject.

This is a much,much shorter biography of the type exhibited by R.Skidelsky in his three volume biography of Keynes(1983,1992,2000).It is an excellent book for the generalist who is interested in Keynes the man.Blaug covers,in very general terms,Keynes's life story,his basic philosophy(economics,politics,ethics,etc.),and his contributions to economics,history,and philosophy.Blaug interviews various economists who claim that they are Keynesians and presents their assessment of Keynes's contributions.On the other hand,the book is a complete waste of time to a reader who wants a straightforward accounting of Keynes's technical contributions .There is absolutely nothing presented in this book that would allow a reader to understand why Keynes is the greatest economist of this century.I will spend the rest of this review correcting this lacuna.First,Keynes was the first scholar in history to develop an interval valued approach to probability.Second,he was the first to put forth a logical theory of probability.Third,he was the first to define and integrate into decision theory a decision rule(his conventional coefficient of weight and risk,c)incorporating what Keynes called the weight of the evidence,w',where w' is defined on the unit interval [0,1].Keynes generalized the expected value(expected monetary value)and expected utility(subjective expected utility)decision rules.Fourth,Keynes generalized macroeconomic theory with his demonstration that the existence of involuntary unemployment could be modeled as multiple equilibria.Keynes accomplished this by demonstrating that the general case in macroeconomic theory is given by the optimality condition w/p=mpl/(mpc+mpi),where mpc+mpi is < or = 1,w/p is the real wage,mpl is the marginal product of labor derived from a neoclassical aggregate production function,mpc is the marginal propensity to spend on consumption goods,and mpi is the marginal propensity to spend on investment goods.The classical and neoclassical theory(monetarism,rational expectations,real business cycle,supplyside.etc.)is all based on the special case ,that mpc+mpi=1.In this special case you obtain the neoclassical result, w/p=mpl, which defines an equilibrium position in the labor market which is also a point on both of the boundaries of the static and dynamic production possibilities curves.Finally,Keynes generalized the Quantity theory of money by incorporating uncertainty(Ellsbergian ambiguity)into the equation of exchamge using elasticity analysis that distinguished between actual,realized results and expected results.A simplified version of Keynes's accomplishment is that ,instead of MV=PO,where M is the supply of money,V is the velocity,P is the price level,O is real output,and PO is nominal output,the equation of exchange must be written as M(Vw')=PO,where w' (Ellsberg's rho)is defined on the unit interval between 0 and 1.The classical and neoclassical results are a special case that occurs only if w'=1 or is approaching 1.This is the case of risk.If w<1,decision makers are facing conditions of Keynesian Uncertainty or Ellsbergian Ambiguity,not risk.Under such conditions it is mathematically impossible for V to be stable,constant,predictable,or strictly proportional to nominal output.This simply means that all of the work of Milton Friedman and Robert Lucas,which is based on the misbelief that only risk,represented by a normal probability distribution's mean and standard deviation,is relevant is a special case of Keynes's(AND Ellsberg's)general theory of decision making.