Keynes' Economic Theories Back In Vogue

Some 63 years after his death, British economist John Maynard Keynes is enjoying a resurgence of popularity. Keynes' theories were considered radical in their time, but are now at the heart of the incoming administration's thinking on how to respond to the U.S. economic crisis.

As NPR's Adam Davidson tells Renee Montagne, Keynes was a man of many contradictions. A graduate of Cambridge and Eton, he was part of England's elite social class. But he was also a shocking figure — for instance, he was openly gay.

"He would bring his boyfriends to dinner parties and talk about being married to them," Davidson said.

Keynes didn't shy away from controversy in his writing, either. He was a prolific writer who owned a magazine and published his own books. And he wasn't worried about contradicting himself in any of them.

"One day he's a free-market extremist, the next day he's a socialist," Davidson said.

And Keynes wasn't shy about expressing controversial social views.

"He did not like Jews," Davidson said. "He didn't like the French. He really found Americans to be stupid — he didn't think they had any right to have as much power as they had in the world. And he really did not care for the working class at all."

Yet President-elect Barack Obama is expected to espouse many Keynesian ideas as possible solutions to the current economic crisis.

The reason, Davidson said, is because of the ideas Keynes put forth in his 1936 book, The General Theory of Employment, Interest and Money.

Before Keynes, most economists believed that markets are at their best when they are allowed to regulate themselves, Davidson said. But Keynes believed that markets can reach a point where they can no longer correct themselves — and that can result in persistently high unemployment and a stagnant economy.

Keynes' solution may sound familiar to anyone reading business headlines today: "When all else fails, the government can step in where the private sector failed, and kick-start the economy," Davidson said.

"Basically, you could say that the economics profession since 1936 has been a huge battle over the implications of Keynes' ideas," he noted.

The economic boom of post-World War II America is cited as proof that Keynes was right. But critics point to the economic policies of Presidents Kennedy and Nixon as proof that Keynesian ideas don't apply to America's economy.

As the U.S. government grapples with trying to solve problems in the nation's financial and housing industries, those ideas are likely to get a new test soon, Davidson said.

Copyright 2022 NPR. To see more, visit https://www.npr.org.