Friday, July 17, 2009

keynes through the eyes of his biographers, as told by skidelsky

Skidelsky, who wrote a 3-volume biography of Keynes, summarizes previous biographies here (from marginal revolution):

What I gained from reading this is that each biography "specializes" in some aspect of Keynes or his thought, so from reading all of them you get a good overall view of what Keynes should be known for (relative to what he is "known" for in modern macroeconomic theory and political science).

Harrod actually knew Keynes, so he is able to discuss Keynes' character where others can only infer.

Davidson emphasizes uncertainty which is central to Keynes' thought. Unfortunately, Keynesian uncertainty was formalized in modern macro as a stochastic process with mathematically simple properties where Keynes viewed it differently. Essentially, according to Keynes, state control of investment is necessary to align the interests of investors (in stock and bond markets, for example, who watch the ups and downs of stock prices and risk on an hourly, sometimes minute-by-minute basis) with managers (who must plan more for the long-term outlook of a company); otherwise short-term interests of investors will create a highly volatile market for investment. Since investment drives jobs which drives income which is a central indicator of the health of an economy, we need to maintain stability of investment behavior.

Minsky provided a very thorough analysis of how Keynes discussed financial institutions (he provided a model of Keynes' argument concerning financial institutions in the General Theory and updated it to include the various "financial innovations" of post-WWII) and also emphasized uncertainty.

Walsh's biography seems most interesting to me. He focuses on Keynes' views on investment and his activity in financial markets. While I'm quite familiar with Keynes' observations and arguments from the General Theory concerning the financial sector, it would be interesting to hear more about his successes and failures, and his own thoughts on financial institutions.

Near the end, Skidelsky speaks a bit more about Keynes' place in the history of economic thought, and the current state of modern macroeconomic theory. Overall, a very interesting article. Enjoy!

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