Keynes in the Long Run

Published in World Economics, Vol. 8, No. 4, October-December 2007

I. Preliminary remarks

‘In the long run’, Keynes famously wrote, ‘we are all dead’. For the last twenty-five years it has been widely assumed that this applied to Keynes’s own theories. Markets were, or could be made efficient, removing the need for government stabilization policy. All that was needed was ‘control of the money supply’. The theory of efficient markets underpinned the so-called ‘Washington Consensus’. In the last ten years, evidence has accumulated that financial markets are subject to severe volatility which, in the absence of government intervention, can spill over into the real economy. So the question sixty-plus years after Keynes’s death is: is there life left in the old boy?

One can try to answer it in one of two ways. For historians of ideas, the key test is: how much of Keynes’s theory is still accepted by the economics profession? For political Keynesians the test is the extent to which governments today pursue Keynesian policies. The two tests do not necessarily give the same answer to the question. It may be possible for Keynes’s ideas to be alive in the profession, but dead for policy-makers. Conversely, they may have expired in the profession, but be alive for governments.

I shall argue that overall there has been a decline in Keynes’s influence since the 1970s. The present position in the Western world is that Keynes’s theory is more dead than alive, but Keynesian policy is more alive than dead.1 However, some of Keynes’s ideas have taken on a life they never had before, and in places where his influence barely reached. This shall be the theme of the concluding section.

II. Keynes’s theory

Let us consider first the question of the present status of Keynes’s theory in the economics profession. The Keynesian Revolution sprang from the perception that ‘in normal circumstances production in general was limited by effective demand which determined how much of potential resources were effectively utilised’.2 This overturned Say’s Law that supply creates its own demand, and more generally, the classical view that it was supply not demand which was scarce. Keynes believed, in addition, that an unmanaged economy was subject to large-scale collapses. Hence there was a role for government to ensure the full employment of actual and potential resources.

I agree with an important point made by Paul Krugman in his Introduction to a new edition of The General Theory of Employment, Interest and Money.3 Keynes opted for a narrow, technical explanation of mass unemployment to protect liberal economics and politics from radical political remedies. As I put it in my biography, ‘what [he] did, in essence, was to transfer the problem of social justice from the microeconomy to the macroeconomy’.4 However, his theory did help close the gap between economics and socialism by enabling social democrats to use Keynesian arguments to justify some income redistribution and a larger public sector. So, although Keynes was a lifelong member of the Liberal Party, there were always more Keynesians on the left than on the right of politics.

Keynes’s choice of the equilibrium method in the General Theory was clearly influenced by his policy aims. The ‘monetary disequilibrium’ approach which grew up alongside the Keynesian revolution, and at various points and moments criss-crossed with it, seemed for many economists, as it still does, the more natural way of accommodating the traditional theory of the barter economy to the fact of large-scale fluctuations in output. But this did not seem to be the right method for making a decisive statement suggesting a definite policy following the biggest slump in modern times. In the Marshallian notion of ‘temporary’ equilibrium Keynes had an alternative methodology to hand.

From the start, the General Theory was subject to heavy theoretical attack. Its weakest point was the gap between its macroeconomics and classical microeconomics. There seemed no logical way of getting from micro-rationality to macro-perversity. How was it possible for models which assumed rational actors to generate large-scale persisting unemployment?

Many younger economists, especially in the United States, who, like Keynes, wanted ‘something done’ about unemployment, looked for a formula which would save the face of traditional theory while allowing room for Keynesian policy. They found it in the notion of nominal wage rigidity. As this assumption seemed to fit the facts, counter-cyclical policy was justified. But it was not the general case: so Keynes’s theory failed as a general theory. It is in this sense that Keynes’s theory, in the form in which most economists took it up, was only ever half-alive. Joan Robertson called it ‘bastard Keynesianism’.

What was largely ignored in this take-up was the bridge Keynes himself offered between his macroeconomics and classical microeconomics, namely the postulate of radical uncertainty. This was intended to provide a non-classical rational actor theory. It was clearly drawn from his own intimate involvement in financial markets. To cope with uncertainty, agents adopt conventions or ‘rules of thumb’ about future prices which may inspire confidence for long periods, but are too flimsy to withstand shocks.

‘The practice of calmness and immobility, of certainty and security, suddenly break down. New fears and hopes will, without warning take charge of human conduct… I accuse the classical economic theory of being itself one of these pretty, polite techniques which tries to deal with the present by abstracting from the fact that we know very little about the future’.5

This is Keynes at his most eloquent. The outcome of uncertainty was liquidity preference. Liquidity-preference seems central to Keynes’s vision of the world. It was the buckle which bound together not just his macroeconomics and classical microeconomics, but his economics and his ethics. In the technical sense, it was central to his economic drama. Uncertainty, Keynes wrote, was the ‘sole intelligible explanation’ for people choosing to keep money in cash rather than invest it.6 The rate of interest is the price people demand for parting with cash.

The existence of uncertainty thus aborts a key part of the classical adjustment mechanism, which has the rate of interest as the price which equilibrates the desire to save with the inducement to invest. But Keynes also thought it was ethically wrong to charge interest on ‘hoarding’—that is, on that part of saved money, parting from which involved no opportunity cost. In the spirit of a medieval schoolman, he proclaimed: ‘It is usury to extract from the borrower some amount additional to the true sacrifice of the lender which the weakness of the borrower’s bargaining position or his extremity of need…make[s] feasible’.7

This was written just before he set off in 1945 on his failed attempt to negotiate an interest-free loan from the Americans. What was ethically wrong was also economically inefficient, for Keynes believed that it was usury which had kept the world poorer than it might have been. However, the bridge of uncertainty couldn’t bear the weight Keynes placed on it. His theory of expectations had nothing specific to say about how expectations were formed in the labour market; and his general account of expectation formation seemed to leave out learning from experience or making efficient use of available information. Rational agents went on making the same mistakes. It seemed more reasonable to assume that recurrent events would initiate a learning process, causing agents to be less often surprised by events. This would make economies more stable.

The attack on ‘uncertain’ expectations developed from the 1960s onwards, from the ‘adaptive’ expectations of Milton Friedman to the ‘rational’ expectations of Lucas and Sargent. Keynes’s expectations theory owed a lot to his early work on probability. However, the development of Bayesian statistics and Bayesian decision-theory suggested that agents can always be modelled as having prior probability distributions over events—distributions which are updated by evidence. So uncertainty was abolished; with it went Keynes’s liquidity preference theory of the rate of interest. Today the idea of radical uncertainty, though ardently championed by the Post-Keynesian school of Paul Davidson, has no currency in mainstream economics, though it is strongly supported by financiers of an intellectual bent like George Soros.8

With radical uncertainty out, the only support left for Keynesian underemployment equilibrium was nominal wage rigidities. Models of economies with sticky wages are still quite popular. ‘New Keynesians’ like Joe Stiglitz have explained why such rigidities occur. But this is not Keynes’s model. Further, many economists only accept such rigidities as contingent, not inescapable. The so-called ‘supply side’ school of economists advocate their dissolution by labour market reforms. Globalization is certainly making labour markets more flexible than in the heyday of the Keynesian era: how much more flexible is an empirical question.

To sum up: while the simple aggregate equations of Keynes’s macroeconomic model are still taught, there has been a return to neo-classical standards of method. No longer is it acceptable to posit ad hoc supply and demand functions. Macroeconomics is best seen as an application of microeconomics, in the sense that macroeconomic models should be based on optimisation by firms and consumers.

III. Keynesian policy

Let me now turn to the fate of Keynesian policy. The data tell us that the 1950s and 1960s were a global ‘golden age’ compared to what had gone before, and what has happened since.9 Keynesians claim that their policies were responsible for it; the critics argue that Keynesian policies were responsible for the ‘stagflation’ which ended it. Both could be right, but were they?

In answering this question we need to start with the Bretton Woods system. Keynes’s Clearing Union Plan was designed to provide an escape from the protectionist policies of the 1930s by setting up a world central bank which would be the manager of a ‘closed’ system of national central banks. It was based on his theory of liquidity preference. In a global trading system, mass unemployment, he thought, could result from the propensity of some countries to hoard their surpluses in their central banks, which forced deflation on the deficit countries. He particularly had in mind the gold hoarding policies of the US Federal Reserve Board in the 1920s. His plan was designed to prevent such an outcome by forcing adjustment policies on the surplus countries. Countries which accumulated surplus balances would be required to accept ‘bancor’ cheques in payment for their unrequited exports. Keynes’s Bank was, in effect, to be the central manager of global aggregate demand, varying the supply of bancor according to the demand for it, subject to a limit on total overdraft facilities, and incentives for both surplus and deficit countries to adjust their policies. This would leave national full employment policy with a much more modest task.

As we know, it was the White Plan, not the Keynes Plan, which triumphed at Bretton Woods. Instead of a Bank issuing overdrafts, there was a much smaller subscribed Fund making loans. The Articles of Agreement upheld the orthodox policy of debtor adjustment, aiming to provide only limited help to deficit countries, conditional on them putting their houses in order. Quickly running up against their quota limits, they would be required, as a condition for additional borrowing, to contract their demand for imports or sell more exports in competition with those from surplus countries. The IMF was conceived as a modest monetary add-on to the classical gold standard. Keynes believed that, lacking a bank’s ability to create credit, it would not be able to do much to check any tendency to global recession. So the onus of maintaining full employment would fall on national policy.

How was national policy supposed to work? The British and American governments soon started publishing ‘unemployment targets’, and other countries followed suit. It was up to fiscal policy to achieve these—monetary policy was almost out of commission till the late 1950s. The earliest British approach, sanctioned by Keynes himself, was to use contra-cyclical variations in public investment, which were made more feasible, or more plausible, by the establishment of a large public sector. Keynes’s fiscal rule was that the government’s revenue budget should normally be in surplus, but that its segregated capital budget should be varied to offset output or inflation gaps. However, this proved impracticable, and by the 1950s British governments were using discretionary changes in tax rates as their main instrument for maintaining the balance between aggregate demand and supply. In the 1960s (a leftwing decade) there was more emphasis on using public spending as the balancer, and incomes policies were started to restrain the rise in costs at full employment.

Other elements of ‘national’ full employment policy were controls over capital movements and the retention of both tariffs and quantitative controls over imports. The failure to create an international monetary manager and the retention by practically all nations of the machinery of tariffs, quotas, and exchange and capital controls, might easily have led the world back to the Protectionist economic policies of the late 1930s. But in the developed world it did not. There was a marked trend towards trade liberalisation. So what kept employment continuously full?

Let me assert here what really requires argument: it was neither national full employment policies, nor the existence of the Bretton Woods institutions which sustained full employment and fast output growth in the Golden Age. It was the fact that the United States for largely geopolitical reasons played much of the role that Keynes had envisaged being played by his Clearing Bank. That is to say it voluntarily dishoarded its accruing balance of payments surpluses to keep the free world safe from communism, to such an extent that by the end of the 1950s its surpluses had disappeared, enabling a widespread resumption of currency convertibility on current account in the main European countries as well as a relaxation of trade and capital controls.10 Thus far the Keynesian and geopolitical logics had proceeded hand in glove to everyone’s benefit. But in the late 1960s American surpluses turned into deficits, precisely because the outflow of dollars was undertaken for political, not Keynesian reasons, and was not therefore subject to Keynesian restraints. The USA was now financing its import surpluses by writing dollar cheques, without being obliged to take the corrective actions laid down in the Keynes plan, such as devaluing its currency or restricting capital exports. And surplus countries like Germany, France, and Japan were under no compulsion to revalue their currencies or to liberalise their capital account. By the end of the 1960s, the Pax Americana had become the engine of worldwide inflation—of excess demand in Keynesian terms. In the kind of global monetary set-up Keynes had envisaged, the United States would have run out of bancor facilities. But in the actual world of geopolitically-determined spending, the United States was able to increase overseas military spending in Vietnam without being required to reduce its demand for private consumption. It took more than ten years and many false starts to liquidate the stagflationary boom of the 1970s. A major casualty on the way was the system of fixed, but adjustable exchange rates.

I have never seen a wholly convincing explanation for the collapse of the Golden Age. But looking at the matter in retrospect, it seems to me that too much weight was placed on the OPEC oil price shock of 1973–74 and the hubris of Keynesian policy-makers and not nearly enough on the imperatives of US foreign policy. Whether the unrestrained American overseas spending was the only way to preserve the free world from communism and, in the end, to bring about communism’s downfall, will long be debated by historians.

How does this account relate to the monetarist/public choice critique of Keynesian economic policy? It seems to me that the critics were right to identify excess demand as the problem and in their analysis of its effects. But they were wrong to see rising inflation as an ineluctable consequence of Keynesian policy. The truth is that any macroeconomic policy will become perverse or ineffective if carried out recklessly. But there is nothing specifically Keynesian about inflation, and until the Vietnam War it was kept within modest bounds. Equally, the public choice theorists exaggerated the extent to which politicians and administrators use public policy as a vehicle for private self-interest. Anti-communism was certainly a political project, but it does not fit the public choice model.

Nevertheless, the critiques of Keynesian policy were valuable in four respects. Firstly, they reinserted supply constraints into the Keynesian picture of the economy. Friedman’s notion of a ‘natural rate of unemployment’ captures this insight. Secondly, Friedman’s correct contention that fiscal stabilization policy is subject to ‘long and variable lags’ brought monetary policy back into the picture. Thirdly, the critics rightly emphasised that the effects of government policy depend on the expectations held of it. Finally, the ‘rent-seeking’ critique of public choice theorists was a valuable correction to the idealisation of the policy-maker as a benevolent despot. These insights in combination suggested a more modest role for macroeconomic policy in the future.

IV. Keynes today

Let me now try to sum up my answer to my original question. The main tendency of theoretical evolution in the last twenty-five years has been to minimise Keynes’s theoretical contribution to economics. There is general acceptance of the usefulness of an aggregative framework, and this is the one clear sense in which Keynes lives on as a theorist.But the macro-models in use are based on assumptions Keynes would have rejected. Thus, disagreement between monetarists and wage rigidity Keynesians is in the nature of a family quarrel. They agree that, given wage and price stickiness, changes in monetary policy have real short-term effects, but argue about the speed with which the Phillips curve becomes vertical.

Keynesians have also had to concede to the rational expectations school. The ‘New Keynesians’ have taken on board rational expectations and now theorise about them in terms of optimisation strategies of firms and workers. In ‘New Keynesian’ hands, rational expectations models can also be used to justify short-run stabilization policy.

The influence of rational expectations theory can also be seen in the much greater attention paid to managing expectations by means of clear rules. This follows the normative prescription that governments should aim to provide agents with a consistent model of the economy. This is expected to make real variables more stable.

The effect of the theoretical developments above has been to narrow the scope of macro-policy and change its explicit aim. With acceptance of the ‘natural rate’ doctrine much of macro-policy’s earlier unemployment reducing function is now assigned to supply-side reforms, leaving macroeconomic policy with the aim of maintaining price stability. This in turn tends to re-establish the so-called classical dichotomy between money and the ‘real’ economy, leaving the quantity theory of money as the only relevant macroeconomic theory. That would amount to the theoretical abolition of the Keynesian revolution.

It is to resist this theoretical debacle that doctrinaire Keynesians like Paul Davidson continue to insist on the absolute centrality of uncertain expectations. But this will not decide the issue. Davidson is much closer to the original spirit of the General Theory than the sticky wage Keynesians. The still-to-be-answered question is which kind of theory makes best sense of the world in which we live. We may have to wait for the next depression to give us the answer.

If Keynes’s theory seems moribund, Keynesianism is far from dead as policy. Symmetrical inflation-targeting, as practised by the Bank of England, depends on calculating output, as well as inflation, gaps, and using interest rate policy to offset forecasts of both. Fiscal policy is still available for use in emergencies. When the threat, and eventually fact, of recession in the USA in 2001 was met by President Bush’s announcement of a ‘stimulus package’, Milton Friedman deplored the fact that ‘Crude Keynesianism is risen from the dead’. In President Bush’s economics, budget deficits are justified by war, recession, or national emergency, and when all three coincide the case is irresistible. But if this is Keynesianism, governments have surely known about it since the time of the Pharaohs.


Concluding reflections A thinker may be dead in some bits of the world and alive in others. This has to some extent happened to Keynes. Keynes lives on in developing countries, even though his work was not about development at all. In some of these countries he is taken up as a critic of globalization, or apostle of a ‘balanced’ and ‘harmonious’ economy—strands which can readily be plucked out of his interwar writings11 though they form no part of the General Theory model. In China he has been compared to Confucius. A thinker may be alive in a different sense to those so far discussed, because of the sheer fertility of his thought. A great thinker’s throwaways, bon mots, aphorisms, even wisecracks can inspire research programmes even if his central reasonings, policy proposals, prophecies, are rejected. In this sense Keynes is very much alive, and we have not yet mined his legacy. There is renewed interest in his little essay Economic Possibilities for Our Grandchildren, as ‘limits to growth’ arguments gain support. And this is apart from his contributions to ethics and logic.

With the passage of time, the sense of what is important and unimportant in a thinker’s work shifts. No one today remembers Mill’s Principles of Political Economy. But his essays On Liberty (1859) and The Subjection of Women (1869) are fully alive. The same thing has happened to Karl Marx. For a long time Marx stood or fell by a single book, Das Kapital. But then there was a rediscovery of the early Marx. Now few bother with Das Kapital, but many see Marx as a prophet (and critic) of globalization, and Marxist-inspired cultural criticism is certainly worth taking seriously. Lives are exemplary. They are the stuff of which dreams are made. Who cares today that Churchill was a champion of British imperialism? He was a great man. Lives have a much greater currency than thoughts unadorned, and are today perhaps the main route into a person’s thought. Think of the vogue for biographies of outstanding scientists: who would have thought that John Nash’s life would be turned into a film?12

The shift of interest to biography attests to a loss of faith in science. People still pay lip service to the scientific method, but they are much more disposed than before to believe that ‘scientific’ theories come to us loaded with contexts. The context rather than the method then becomes the key explanatory variable, and biography is the best way to understand the context for the generation and currency of ideas. I think my biography of Keynes opened up a line of biographies of great economists—those of Marshall, Galbraith and Schumpeter have since appeared—which seek to set their thought in the context of life and times, intentions and results.

I want to turn in conclusion to one wider aspect of Keynes’s legacy, which however little influence it may have on current thinking or policy deserves, in my view, to be rescued from oblivion, and further developed. This is his view of the relationship between ethics and economics. I believe our consumption-obsessed societies are ripe for this Keynesian revelation.

The distinctive feature of Keynes’s ethical system was his assumption that we know what is good. We can’t define or prove it: we know it by introspection or intuition. This doctrine he got from G. E. Moore as a Cambridge undergraduate and stuck to it all his life. A central point in Moore’s philosophy was the distinction between ‘good as an end’ and ‘good as a means’, corresponding to that between ethics and morals, and more roughly to that between ‘states of mind’ and ‘states of action’. This distinction is put to use in the following often-quoted passage from Moore’s Principia Ethica: ‘By far the most valuable things we know or can imagine are certain states of consciousness which may be roughly described as the pleasures of human intercourse and the enjoyment of beautiful objects… It is only for the sake of these things—in order that as much of them as possible may at some time exist—that one can be justified in performing any public or private duty; …it is they…that form the rational ultimate end of human action and the sole criterion of social progress’.13 Economics and politics are clearly members of the department of means, not ends.

The belief that rationality attaches to ends and not just to means is what distances Keynes qua economist from the economics (and indeed ethical philosophy) of today. Today we would say that maximising the quantity of ethical goods cannot provide a criterion for economic action, because rational people disagree about what is good. Economics therefore is bound to take wants as data and treat the maximisation problem in terms of want satisfaction. It cannot be denied that this is a problem for any attempt to marry ethics and economics. We can ease it, but not remove it entirely by constructing indexes of ‘well-being’ which contain ‘quality of life’ or political measures. Keynes was touching here on an issue which has always baffled economists with a philosophical bent: the relationship between quantity and quality. Keynes’s partial solution was to let economic rationality rule till abundance reigned, when ethical or ‘quality of life’ values could come to the fore. On the way, though, public investment in the arts, architecture, sport, and other leisure activities should remind society of what economic growth was for. In particular, there was no need to trade quantity for quality while resources were unemployed.

Keynes’s view that economics ought to be mindful of ethical ends had four interesting implications. First of all it challenged the obsession with economic growth as an end. Wealth-creation should be carried only to the point at which all those capable of it could, in his words, live ‘wisely and agreeably, and well’. His vision was of a society working to its full productive capacity for the relatively short time it would take to get to a state of abundance. That is why he preferred a full employment policy by means of investment to one which relied on consumption.14 Then people could slacken their effort. And he thought this slackening would in fact happen naturally, since with growing income, the marginal utility of income would fall, lessening the incentive to work. This leads to an empirical question: why have Keynes’s predictions in Economic Possibilities or Our Grandchildren not come to pass? Since the 1960s hours of work have not declined by much in the richest countries, and, as Leijonhufvud says, ‘The United States today presents a strange contrast to Keynes’s futuristic vision of short work weeks, time to spare and money to save’.15 Did Keynes underestimate insatiability of wants, the power of advertising, envy?

Secondly, Keynes challenged the ethical value of capitalism. Moneymaking was good as a means, but positively bad as an end. With the coming of abundance, he wrote, ‘the love of money as a possession—as distinguished from he love of money as a means to the enjoyments and realities of life—will be recognised for what it is, a somewhat disgusting morbidity, one of those semi-criminal, semi- pathological propensities which one hands over with a shudder to the specialists in mental disease’. 16 This was Keynes setting out to shock. In the General Theory he defends the decentralized private market system as a safeguard of liberty, enterprise, and variety. But the central message was clear: economic values were means, not ends. Of all such values, he detested ‘hoarding’ most: it is the purest expression of ‘love of money’ as an end and the chief obstacle to rapid growth. He looked forward to the ‘euthanasia of the rentier’.

Thirdly, Keynes raises an important question about the value of globalization. Keynes claimed that the theory of comparative advantage had lost much of its importance: it derived from the age of scarcity and small-scale production closely tied to geography and climate. The division of labour should not be carried to the point where it eroded the human capital of a society. A greater measure of national self-sufficiency, he started to argue in 1933, offered a ‘well-balanced’ or ‘complete’ national life, allowing a society to display the full range of its talents as well as preserve its traditions. ‘To say a country cannot afford agriculture is to delude oneself about the meaning of the word ‘afford’. A country which cannot afford art or agriculture, invention or tradition is a country in which one cannot afford to live’.17 One can hear echoes of Adam Smith’s lament that specialization would drastically narrow a society’s skill base, and thus deprive its people of a ‘full’ life.

Finally, justice is not an end in Keynes’s ethics, only a means to an end. He was clearly not an egalitarian: ‘man for man the middle and even the upper class is very much superior to the working class’ is a classic Keynes mot.18 He wanted to level up rather than down, but worried that levelling up quantity beyond a certain point might involve some levelling down of quality. He did not think contemporary society was just. In many cases it violated the principle of equity, that reward should be proportioned to merit or contribution. For this reason he favoured taxing inherited wealth at a higher rate than earned wealth. But in general social justice was not a passion with him. He felt no acute moral discomfort at the reward structure of the market system of his day, though he did not think it was necessary for the game to be played ‘for such high stakes’.19 His distinctive position was to identify injustice with instability—in the price level, later in employment—leading to disappointed expectations. That is why he attached so much importance to stabilization policy. It expressed a contractual, not distributive, theory of justice.

Keynes’s ethics gave his economics its distinctive flavour. A case can be made for saying that this flavour is the most important part of his legacy.



1 By Keynes’s theory I mean, as shall become apparent, the theory of the General Theory of Employment, Interest and Money, not ‘Keynesian theory’ as understood in the 1950s and 1960s. Keynes’s theory was never more than half alive.

2 Nicholas Kaldor, ‘Keynesian Economics after Fifty Years’, in David Worswick and James Trevithick (eds), Keynes and the Modern World, 1983, p. 2.

3 Palgrave Macmillan, October 2007.

4 Robert Skidelsky, John Maynard Keynes 1883–1946, 2003, p. 365.

5 JMK, Collected Writings, xiv, pp. 114–115.

6 JMK, Collected Writings, vii, p. 168.

7 Robert Skidelsky, op. cit., p. 780

8 This may be changing. See Roman Frydman and Michael D. Goldberg, Imperfect Knowledge Economics (Princeton University Press, 2007) which draws on the insights of both Keynes and Hayek in rejecting models based on rational expectations.

9 ‘The years 1950 to 1973 were ones of unparalleled prosperity, with GDP of our 32 countries growing 5.1 per cent a year, and per capita income 3.3 per cent’. Angus Maddison, The World Economy in the 20th Century, OECD, 1989, p. 65.

10 Razeen Sally makes the case that it was Ludwig Erhard’s 1948 ‘unilateral liberalisation’ of the Germany economy, plus his introduction of a new and stable currency, which led Europe’s high growth performance of the 1950s, with international cooperation playing only an auxiliary part. See Sally’s Classical Liberalism and International Economic Order, Routledge, 1998, pp. 123, 143.

11 See Robert Skidelsky, ‘Keynes, Globalisation and the Bretton Woods Institutions in the Light of Changing Ideas about Markets’, World Economics, Vol. 6, No. 1, 2005.

12 The Princeton mathematician John Nash was awarded a Nobel Prize in Economics in 1994 for his work on cooperative and non-cooperative games. A film of his life, A Beautiful Mind (2001), based on the biography by Sylvia Nasar had Russell Crowe in the title role.

13 G. E. Moore, Principia Ethica, 1959 ed., pp. 188–189.

14 Keynes to T. S. Eliot, 5 April 1945, in JMK, Collected Writings, ix, p. 384.

15 A. Leijonhufvud, mimeo, ‘Spreading the Bread Thin on the Butter’, 2006.

16 JMK, Collected Writings, ix, p. 329.

17 JMK, ‘Pros and Cons of Tariffs’, Listener, 30 November 1932, reproduced in Collected Writings, xxi, pp. 209–210.

18 Quoted in Robert Skidelsky, John Maynard Keynes, The Economist as Saviour, Macmillan, 1992, p. 233.

19 This is from The General Theory of Employment, Interest, and Money, 1936, p. 374.