What the English economist offered Keynes 1929 1933. John Maynard Keynes - biography, the main ideas of Keynesianism, quotes

Remark 1

John Maynard Keynes (1883 - 1946) - English economist, founder of the Keynesian trend in economic theory (Keynesianism), one of the founders of macroeconomics as an independent science.

Keynes was born into the famous family of economist John Nevil Keynes, lecturer in economics and philosophy at the University of Cambridge, and writer and public figure Florence Ada Brown. Keynes's younger brother, Geoffrey Keynes, was a surgeon, and his younger sister Margaret was the wife of Archibald Hill, a Nobel laureate in physiology or medicine. Keynes's niece, Polly Hill, was also a well-known economist. Thus, Keynes grew up in an intelligent environment, which was a prerequisite for his future scientific success at Cambridge University.

Keynes was a successful student of A. Marshall and G. Sidgwick. In addition to economics, Keynes was also interested in politics. IN student years he was president of the Cambridge Students' Union, participated in the work of scientific circles, clubs, etc. From 1915 to 1919, Keynes served in the Treasury. From 1919, he managed several financial companies, and was also the editor of a number of journals (Nation, Economic Journal), while advising the government. In 1942, Keynes became a Member of Parliament.

In 1925, Keynes married the Russian ballerina Lidia Lopukhova. In the same year, he visited the USSR for the first time on the occasion of the celebration of the 200th anniversary of the Academy of Sciences. In addition, Keynes became a ballet patron and author of ballet librettos. The marriage of Lydia Lopokhova and Keynes was happy but childless.

It is worth noting that Keynes was a successful investor and was able to create a good fortune. During the Great Depression, he was on the verge of bankruptcy, but soon restored his financial position. By the end of the economist's life, his fortune and the value of his many collector's books and art objects (Keynes was fond of collecting) were estimated at almost half a million pounds sterling.

Keynes showed an interest in literature and drama, was a sponsor of the Cambridge Arts Theater, which helped him become one of the most important cultural institutions located outside London.

Contribution to the development of the economy

Remark 2

Keynes is one of the most famous economists of the 20th century. It is he who is considered the founder of modern macroeconomic theory, which to this day serves as the basis for the budgetary and monetary policy of the state.

In the 1920s, Keynes dealt with global problems of economics and finance. The crisis of the early 1920s and the Great Depression that followed it drew the attention of the economist to the problem of price stability and the level of production and employment.

In 1930 came out " Treatise on money where Keynes explored exchange rates and the gold standard. In this paper, the idea was first put forward that there is no automatic balance between expected savings and investment.

In his writings, Keynes was largely critical of capitalism and argued for the need for significant adjustments to the capitalist system because the market economy could not self-regulate.

Remark 3

At times, Keynes showed interest in the Russian economy. In 1925 he published an article " A quick look at Russia”, where he expressed sympathy for the ongoing economic transformations in the USSR at that time.

John Maynard Keynes - an outstanding English economist, statesman, founder of one of the modern trends economic thought of the West - Keynesianism. J. Keynes was born into the family of a professor of logic and economic theory at Cambridge University. He received his education in economics and mathematics at Eton and King's College, Cambridge. In 1906-1908. worked for the Indian Affairs Ministry. From 1908 to 1915 - a teacher, since 1920 - a professor at the University of Cambridge. In 1915-1919. J. Keynes is an employee of the British Treasury. In 1942, he became one of the directors of the Bank of England, took an active part in the development and implementation of economic, primarily financial, policy. J. Keynes was appointed a member of the board of the International Monetary Fund and the International Bank for Reconstruction and Development (1944). He was a member. Royal Society of London (UK Academy of Sciences).

The main work of J. Keynes is the book "The General Theory of Employment, Interest and Money" (1936). It was written under the influence of the unprecedentedly devastating world economic crisis of 1929-1933, when the volume of production fell by half, every fourth employed in production was unemployed, and the real incomes of the population fell by 60%. Such a decline in production and a violation of the general economic equilibrium called into question the most important fundamental provisions of neoclassical theory.

On initial stage development of capitalism, classics and neoclassics, not without reason, argued the following. A spontaneous market economy, consisting of privately owned farms, is capable of independently, without any state intervention, preventing deep declines in production and mass unemployment. And the supply of goods on the market, as it were, automatically generates the demand of buyers equal to it in volume, which ensures the sustainable growth of the national economy.

But in the 20th century, the economy Western countries changed in many respects - private farms were quickly enlarged, free competition in the market was supplanted by gigantic monopolies - economic associations that set prices at their own discretion, etc. As a result, the chaotic nature of all economic development increased. And so in 1929-1933. a devastating global economic crisis broke out, a way out of which could not be found from the standpoint of neoclassicism.

John Keynes proposed a radical way to get rid of disastrous crises and mass unemployment. In the book "The General Theory of Employment, Interest and Money," he outlined completely new principles for regulating the national economy. These include the following key provisions.

First, John Keynes overthrew the fundamental assertion of the classics and neoclassics about non-intervention of the state in the economy. He substantiated the proposition that the state should play a decisive role in preventing crises and unemployment. It interferes in the distribution of the entire income of society and concentrates in its hands significant monetary and other resources in order to actively influence the economy.

Secondly, in order to ensure the full employment of workers, it is necessary to focus not on the supply of goods (which was proposed by the neoclassicists), but, on the contrary, to develop demand in every possible way. That is, to expand the purchasing power of the population and the purchase of new means of production by entrepreneurs. To do this, the state must increase the volume of new capital expenditures in production and increase spending on other socio-economic goals, using higher taxes and issuing more money.

Thirdly, for government controlled the economy needs to develop such economic and mathematical models that reveal quantitative relationships between the main indicators of the national economy. The use of these models makes it possible to put the regulation of all economic activity on a scientific basis.

Below is a summary of the main provisions of this work by J. Keynes. which marked a real revolution in neoclassical economic theory, which, together with the English classics, adhered to the principle of non-intervention of the state in the economy.

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John M. Keynes was born in Cambridge to an upper-middle-class family.

His father was a lecturer in economics and philosophy at the University of Cambridge.

Keynes studied at Eton College, received a scholarship for brilliant academic performance, then at the Mathematics Department at King's College, Cambridge.

Under the influence of the great economist Alfred Marshall, Keynes became interested in the relatively new science of economics. He published his first article on economics in 1909, and by 1911 he was editor of an economics journal.

During World War I, Keynes helped negotiate with Britain's creditors, as Britain's debt had soared during the war.

In The Economic Consequences of the Peace, Keynes put forward the central problem of imposing huge indemnities on Germany. Keynes called this a tragic mistake, which should lead to a revival of the country's export expansion and the emergence of contradictions that could lead to a new war. Keynes's opinion was taken into account after the Second World War ...

In the 1920s, Keynes was critical of the British government's decision to remain on the 1914 gold standard. He argued that the high value of the pound sterling made it difficult to export and was the main cause of deflation and high unemployment in Britain in 1920.

Keynes married the ballerina Lydia Lopukhova, they had no children. He died of a heart attack in 1946.

Keynes was at the same time a philosopher, an economist and a student of morals. He never ceased to wonder about the ultimate goals of economic activity. He believed that the craving for wealth is justified only by the fact that it allows you to live well, not necessarily richly, but righteously.

Keynes did not just study the economy, he offered concepts, tools to overcome the crises of capitalism within the framework of market ideology. Moreover, the post-war reconstruction of Europe and the United States was largely based on his principles.

Keynesian ideas

Keynes is called one of the founders of macroeconomics as an independent science.

An economy for all: Keynes sought to express the most important ideas in accessible language. Keynes was against excessive mathematization, which interfered with the perception of the economy by non-specialists.

The basic tenet of the Keynesian school is that government intervention can stabilize an economy.

During the Great Depression of the 1930s, economic theory failed to explain the causes of the severe global economic downturn and to develop adequate public policies to restore production and employment. Keynesianism is often described as a reaction of economic theory to the Great Depression.

Keynes revolutionized economic theory by discarding the prevailing idea at the time that free markets automatically provide full employment for the population, that is, everyone who wants to get a job is sure to.

A market economy is not characterized by an equilibrium that ensures full employment. The reason is the tendency to save a part of income, which leads to the fact that aggregate demand is less than aggregate supply. The state must regulate the economy by affecting aggregate demand: increasing the money supply and lowering interest rates. The lack of demand is compensated by public works and budget funding.

The key point of Keynes's theory is the assertion that aggregate demand, i.e., the sum of expenditures of households, enterprises and government, is the main driving force in the economy.

Keynes argued that free markets do not have self-regulating mechanisms that provide full employment for the population. According to Keynes, the state intervenes in the economy by pursuing a public policy of eradicating unemployment and stabilizing prices.

The correct monetary policy, according to Keynes, should proceed from the priority of maintaining the stability of domestic prices, and not aim at maintaining an overvalued exchange rate.

Keynes and socialist economics

In view of the importance of the state in the economy noted by Keynes and his criticism of capitalism (+ Russian wife), prerequisites were created for rapprochement with Soviet economists. There is a legend that Keynes visited the USSR and met with Stalin. The result could be ideas for restructuring the capitalist system based on the thesis that there is no self-regulation mechanism in the market economy.

However, Keynesianism denied the uniqueness of planned and administrative management and regulation of the economy. In exchange, Keynes proposed a system of macro economic regulation. This. as well as the rejection of Marx, in different years caused varying degrees of criticism in the USSR, up to the wording "schemer from the economy."

Keynes and the globalists

Keynes was involved in the development of the concept of the Bretton Woods system. He owns the idea of ​​​​creating a system for regulating exchange rates, which would be combined with the principle of their stability in the long term (today China largely follows these exercises, regulating its currency at the state level). Keynes came up with the idea of ​​creating the IMF.

Criticism of Keynes and Keynesianism

After the Second World War, the classical school began to revive again. Neoclassical representatives insist that the socialist economy is less efficient than the market, although the latter is not perfect, but it is better to regulate it through political rather than economic intervention.

The emergence of monetarism interrupted the dominance of Keynesianism, however, monetarism used the concept of monetary regulation developed by J. M. Keynes.

Keynesianism was criticized by history itself, so two important maxims from the above abstracts on employment:

1. Less unemployment, more demand, more inflation.
2. More unemployment, less demand, less inflation.

But in the 1970s in the United States again there was a crisis in which there was high unemployment and at the same time high inflation, this phenomenon was called stagflation. This weakened economists' confidence in Keynesianism.

Crisis according to Keynes

A fall in overall consumer demand causes a reduction in production, which leads to unemployment (ruin of small businesses, layoffs of employees, including those at large enterprises). Unemployment leads to a decrease in the income of buyers. And this, in turn, forces a further decline in consumer demand. There is a vicious circle of chronic depression.

Keynes proposed the following solution: if the mass consumer is not able to revive aggregate demand, the state should do it. Large government orders (albeit of little use) will lead to additional hiring of labor. By receiving wages, the former unemployed will increase their spending on consumer goods and, consequently, increase aggregate economic demand. This, in turn, will lead to an increase in the aggregate supply of goods and services and a general recovery of the economy.

Richard Nixon (President of the United States) 1971: "Today we are all Keynesians." Robert Lucas: Apparently, in a crisis, everyone becomes a Keynesian.

There is an opinion that the Keynesian approach to economics makes sense only in times of crisis.

John Maynard Keynes(1883-1946) - English economist, made a significant contribution to the development of economic thought of the XX century.
The economic trend that emerged under the influence of his ideas was called Keynesianism. Keynes is considered one of the founders of macroeconomics as an independent science.

(Keynesianism) - an economic theory of state regulation of the economy, arose during the difficult period of the most acute economic crisis that shook the world economy in 1929-1933.

According to many scientists, the main work of J. Keynes "The General Theory of Employment, Interest and Money" (1936) became a turning point not only in the development of economic theory, but also determined economic policy most countries.

The main methodological provisions of the approach of J. M. Keynes:

• The most important problems of expanded reproduction must be solved not from the standpoint of studying the supply of resources, but from the standpoint of demand The that provides the implementation of the resources.
• The market economy cannot self-regulate, and therefore state intervention inevitably.
• Crises of overproduction are undesirable, so the problem of equilibrium in macroeconomics should be solved from the position of " effective demand”, which expresses the balance between consumer and production, income and employment.
• The introduction of the term "effective demand" stimulated analysis of macroeconomic indicators, which made it possible to find out how the economic system as a whole functions, the flow of produced, distributed and consumed value moves.
• The main instrument for regulating the economy was budgetary policy, which was entrusted with the task of providing employment for the labor force and production equipment.

Thus, Keynes formulated new section in economic theory - macroeconomics and introduced the state as the subject of economic regulation.

Abstract by Maria Zagorskaya.

Biography of Keynes.

John Maynard Keynes(Keynes, John Maynard) was born on June 5, 1883 in Great Britain in the family of economist John Neville Keynes, who taught economics and logic at the University of Cambridge and wrote a book on the subject of economic science. Keynes's mother was the daughter of a minister, a successful writer, and in 1932-1933. even served as mayor of Cambridge.

Keynes entered the prestigious school at Eton, during which time one of his hobbies developed, which markedly affected his scientific creativity namely, collecting rare books. So, Keynes was the owner of many of the original works of Isaac Newton.

Gradually, Keynes became one of the outstanding students of the school: he managed to win the main prize in mathematics for two years in a row, and in 1901 he was also the first in history and literature. Beginning in 1902, Keynes studied at Cambridge, where his main interest was mathematics, philosophy and economics.

From 1906 to 1908 Keynes worked Clerk at the Ministry of Indian Affairs However, after a short time he switched to teaching, which he did almost until the end of his life - until 1942.

Two years of work in the ministry were not in vain - Keynes received a seat on the Royal Commission on Indian Finance and Monetary Circulation, wrote his first book "Money circulation and finance of India" ("Indian Currency and Finance", 1913), at the same time, his interest in the monetary sphere and its influence on the state of the economy as a whole developed.

In 1921, Keynes prepared a dissertation, which he published in the form of a monograph. "Treatise on Probability" (“Treatise on Probability”) is the result of his youthful passion for mathematics. In it, Keynes laid out an original theory of probability based on the assumption that probability is a logical, not a numerical, ratio.

From 1911 to 1937 Keynes was magazine editor « economic Journal ». During the First World War, in 1914 there was a banking crisis, and Keynes was appointed to work in English Treasury where he worked until 1919. After leaving the Treasury, Keynes returned to Cambridge to treasurerKing’ sCollege, where he was able to increase the size of contributions to the treasury of Cambridge by 10 times.

Keynes made his fortune on stock market speculation, which was one of the scientist's hobbies. The most interesting and revolutionary ideas of Keynes arose in his head not only on the basis of "armchair" reflections, but also as a result of the accumulation of his own business experience. From 1921 to 1938 he was member of the board of directors at least five investment and insurance companies. In 1929, Keynes was on the verge of bankruptcy, but soon managed to restore his wealth.

At the time, there was discussion in England about whether sterling should be returned to the gold standard at pre-war dollar parity. Winston Churchill's official policy was to answer yes to this question. Keynes was an opponent of this monetary reform, this was expressed in his work "Treatise on Monetary Reform" ("A Tract on Monetary Reform", 1923).

In 1925, Keynes married a Russian-born ballerina of the Diaghilev enterprise, Lidia Lopukhova, with whom he lived. happy life but the couple had no children.

In 1926-1929. Keynes played a prominent role in shaping the policies of Lloyd George's Liberal Party. This activity was developed in the appointment in 1929 to the post member of the finance and industry committee, and in 1930 Keynes becomes member of the economic advisory board under the British government.

Released in 1930 "Treatise on Money" ("A Treatise on Money"), in which he tried to show how an economy based on the gold standard can fall into the trap of low employment when the market mechanism is unable to rescue the economic system from this situation.

In 1936 Keynes published his famous book ("The General Theory of Employment, Interest and Money"). The main idea of ​​the book is that the capitalist economy lacks an internal mechanism of self-regulation and that the normal functioning of the market economy does not ensure the achievement of full employment.

Keynes's greatest scientific work was also his last major work: in 1937, he suffered a severe heart attack. Keynes returned to scientific and teaching activities in 1939.

With the onset of World War II, Keynes became member of the military advisory committee at the UK Treasury. Keynes is working on the creation of the International Monetary Fund. Keynes' active work provided him with wide recognition, expressed in the award of a baronial title to him in 1942.

The last major event in the life of Keynes was a trip to the United States to participate in the opening of the IMF. Soon, heart disease made itself felt, and on April 21, 1946, John M. Case died of a myocardial infarction at the age of 62, and was buried in Westminster (London).

As a talented economist and businessman, Keynes left a serious fortune to his wife and parents - his investment portfolio was estimated at 400 thousand pounds sterling (today it is 11.2 million), and the value of the collection of books and art was 80 thousand pounds sterling ( 2.2 million).

Main scientific works of Keynes

Year	Treatise	main idea
1913	Money circulation and finance in India	The author tried to establish a relationship between price movements in India and the inflow and outflow of gold.
1923	Treatise on monetary reform(A Tract on Monetary Reform)	Keynes analyzes causes and consequences changes in the value of money while paying attention to important points, as the impact of inflation on income distribution, the role of expectations, the relationship between expectations in price changes and interest rates, etc. A sound monetary policy should be based on the priority of maintaining domestic price stability, and not aim to maintain an overvalued exchange rate, as the British government did at that time. The author does not agree with the policy of the Bank of England. Since 1925, when Britain switched to gold standard, J. M. Keynes comes to the conclusion that the mistakes of politicians are the result of erroneous theoretical ideas.
1931	Treatise on money (A Treatise of Money)	Keynes continues to explore questions regarding exchange rates and the gold standard. In this work, for the first time, the idea of ​​the absence of automatic balancing between expected savings and expected investment, that is, their equality at the level of full employment.
1936	General Theory of Employment and Money (General Theory of Employment, Interest and Money)	For the first time, the ideas of Adam Smith were consistently criticized. Keynes considers the instability of the market capitalist economy and, for the first time in economics, proves the need for government intervention in the economy. Focuses on the analysis of the ratio of investment and savings with the study of the macroeconomic category - effective demand(the central category of Keynesianism).

Moral ideas of Keynes

Keynes was at the same time a philosopher, an economist and a student of morals. He never ceased to wonder about the ultimate goals of economic activity. Keynes believed that the desire for wealth - "the love of money", in his words - is justified only in so far as it allows you to "live well."

And "to live well" - this, according to Keynes, does not mean "to live richly", it means " live righteously».

For Keynes, the only justification for human economic activity is striving for the moral improvement of the world. Keynes predicted that as labor productivity increased, the hours of work would shorten, creating conditions in which people's lives would become " reasonable, pleasant and worthy". This is Keynes' answer to the question of why economics is needed.

Economic theory of Keynes.

The theory of state regulation of the economy by J. Keynes arose during the difficult period of the most acute economic crisis that shook the world economy in 1929-1933.

The economic crisis has shown that self-regulation of the market with the help of the "invisible hand", the thesis, which had been affirmed since the time of A. Smith, turned out to be untenable in the new conditions of intensive development of the world economy.

The subject of research by J. Keynes is the analysis of the reproduction process, capital investment and national income, investment and employment, money circulation, wages, profits, interest and other economic categories at the macroeconomic level.

The task of the study is to ensure the optimal, uninterrupted functioning of the economy.

Keynes' fundamental work "The General Theory of Employment, Interest and Money"(1936) contains a number of new ideas.

From the first pages of his book, he points out the priority of the first word in its title, i.e. general theory, in contrast to the private interpretation of these categories by the neoclassicists. The restructuring of economic theory based on the teachings of J. Keynes was regarded as Keynesian revolution. In contrast to the accepted and well-established postulates and provisions in economic theory, J. Keynes in the exchange concept prefers not production, but sphere of circulation. If in the Austrian (Viennese) school of economics the doctrine is based on individual psychology - the subjective opinion of "Homo economicus", then in Keynesianism - mass psychology.

Consider the basic concepts of Keynes's theory.

The reason for the development of crises and unemployment.

Keynes caused crises and unemployment and developed a program to combat them. Thus Keynes was the first to acknowledged the existence of unemployment and crises inherent in capitalism.

Then he declared the inability of capitalism to cope with these problems with its internal forces. According to Keynes, when solving them, it is necessary state intervention. In fact, he dealt a blow to the neoclassical direction in general, as well as to the thesis of limited resources.

There is not a lack of resources, but, on the contrary, their overabundance as evidenced by unemployment. And if part-time employment is natural for a market economy, then the implementation of the theory implies full employment. Moreover, by the latter, Keynes understood not absolute employment, but relative. He considered necessary 3 percent unemployment, which should serve as a buffer for pressure on the employed and a reserve for maneuver in the expansion of production.

Keynes explained the emergence of crises and unemployment as insufficient "aggregate demand" resulting from two reasons.

Basic psychological law of society.

The first reason he named "basic psychological law" society. Its essence is that the psychology of society is such that As income rises, consumption rises, but to a lesser extent than income.

Keynes argues this approach with "common sense". On the contrary, with a decrease in income, the population reduces the allocation of funds for savings in order to maintain the same standard of living.

In other words, the growth of citizens' income outstrips their consumption, which leads to insufficient aggregate demand. As a result, there are disproportions in the economy, crises, which in turn weaken the incentives for capitalists to further investment.

Fig.1. The main psychological law: the ratio of income growth and consumption.

The rate of return on capital.

Second reason insufficient "aggregate demand" Keynes believes low rate of return on capital due to high level percent. This forces the capitalists to keep their capital in cash (liquid form). This hurts the growth of investment and further curtails "aggregate demand". Insufficient investment growth, in turn, does not allow for employment in society.

Consequently, insufficient spending of income, on the one hand, and "liquidity preference" on the other, leads to underconsumption. Underconsumption reduces "aggregate demand". Unsold goods accumulate, which leads to crises and unemployment.

Keynes built the following chain: a fall in overall consumer demand causes a reduction in the production of goods and services. The reduction in production leads to the ruin of small commodity producers, to the dismissal of employees by large enterprises, and large-scale unemployment. Unemployment entails a decrease in the income of the population, that is, buyers. And this, in turn, forces a further decline in consumer demand for goods and services.

Fig.2 Vicious circle associated with falling demand.

Keynes concludes: if the market economy is left to itself, it will stagnate.

Fig.3. Causes of crises and unemployment.

Macroeconomic model of Keynes.

Keynes developed macroeconomic model, in which he established the relationship between investment, employment, consumption and income. The state plays an important role in it.

In view of the fact that the state has more information than individual individuals, Keynes assumes an active government intervention into economic processes in order to progressive development countries.

The state should do everything possible to raise the marginal (additional) efficiency of capital investments, i.e. marginal profitability of the last unit of capital due to subsidies, public procurement, etc.

On the other hand, the Central Bank lower interest rates and moderate inflation. Inflation should provide a systematic moderate rise in prices, which will stimulate the growth of capital investment. As a result, new jobs will be created, leading to the achievement of full employment.

Keynes made the main bet in increasing aggregate demand on the growth of productive demand and productive consumption. He proposed to compensate for the lack of personal consumption expansion of productive consumption.

Consumer demand needs to be stimulated through consumer credit.

Fig.4. macroeconomic model.

Essence, the central link in the theory of J. Keynes - effective demand principle, which should be regulated and supported by the state through solvency and a corresponding expansion of the market.

As a decisive means for increasing the overall volume of employment, Keynes puts forward an increase in private and public investment ( investment).

As a means to stimulate private investment, Keynes proposed regulation of the rate of interest. The rate of interest according to Keynes (payment for a loan) is the reward for parting with liquidity. It is the "price" that balances the insistence on holding wealth in the form of cash against the amount of money in circulation.

Keynes believed that the government has the ability to regulate the rate of interest by increasing the amount of money in circulation. By pursuing an “expansion policy”, the state should take it upon itself to stimulate private investment through tax cuts and increase your spending by expanding public sector or increase in subsidies consumers (pensions, allowances, scholarships). Particular hopes are placed on deficit financing from the budget, covered by the issuance and placement on the market of large government loans.

According to Keynes, the psychological inclination of a person to save a certain part of the income restrains the increase in income due to the reduction in the volume of capital investments, on which the permanent receipt of income depends. As for marginal propensity a person to consumption, then, according to the author of the General Theory, she allegedly constant and may therefore provide a stable relationship between increased investment and income levels.

An integral part of the theory of effective demand is the concept of a multiplier.

cartoon process

Keynes's macroeconomic model found its most complete expression in the theory of the so-called "multiplier process". This theory is based on multiplier principle.

Multiplier means multiplier, i.e. a multiple increase in the growth of income, employment and consumption to the growth of investment. The Keynesian "investment multiplier" expresses the ratio of the increase in income to the increase in investment.

The mechanism of the "investment multiplier" is that investments in any industry cause in it increase in production and employment. This will result in an additional extension demand on commodities, which will cause expansion of their production in the relevant industries, which will present additional demand to the means of production.

According to Keynes, the investment multiplier indicates that when there is an increase in the total amount of investment, then income increases by an amount that is R times greater than the increase in investment.

Thus, the theory of the multiplier substantiates the existence of a direct and proportional relationship between capital accumulation and consumption. The amount of capital accumulation (investment) is determined by the “propensity to consume”, and accumulation causes a multiple increase in consumption.

Predecessors of the Keynesian theory of economic regulation

Methodological connection with the concept of mercantilism

J. M. Keynes did not deny the influence of the mercantilists on the concept of state regulation of economic processes that he created.

His common judgments with them are obvious and include:

• in an effort to increase the mass of money in the country (as a means of reducing their cost and, accordingly, reducing interest rates and encouraging investment in production);

• in the approval of price increases (as a way to stimulate the expansion of trade and production);

• in recognizing that lack of money is the cause of unemployment;

• in understanding the national (state) nature of economic policy.

Methodological differences with the classics and neoclassics

In the "General Theory" by J. M. Keynes, the idea of ​​the inexpediency of excessive thrift and accumulation and, on the contrary, the possible benefits of all-round spending of funds, is clearly traced, since, as the scientist believed, in the first case, the funds are likely to acquire an inefficient liquid (monetary) form , and in the second - can be directed to increase demand and employment.

He also sharply and convincingly criticizes those economists who are committed to the dogmatic postulates of the "law of markets" J.B. Say and other purely "economic" laws, calling them representatives of the classical school.

In 1929-1933. the global economic crisis broke out. Its result was a reduction in the gross national product and the share of investment, and an increase in unemployment. The crisis swept the United States, Germany, France, England. All classes and strata of the population suffered. There were massive bankruptcies.

Neoclassicists declared that the current crisis economic situation is the cleansing of the economy from ballast and still insisted on a free exit from the crisis. However, time passed, and it was planned. The neoclassicists' credit of trust has been exhausted. They could not answer the questions why there are crises of overproduction and how to get out of the crisis.

The search for new doctrines began. During this period, a new course began to be pursued in the USA - the course of F. Roosevelt (1882-1945), and in Germany and Italy - the course of fascism.

Theories of J. M. Keynes

In the 1930s, a name appeared in economics J. Keynes (1883-1946). In 1936, his main work was published "The General Theory of the Employment of Interest and Money". With the publication of this book came the end of the theory of the "invisible hand of the market", the end of the theory of automatic adjustment of the market economy.

Keynes' work contains a number of new ideas. From the first pages of his book, he points out the priority of the first word in its title, i.e. general theory, in contrast to the private interpretation of these categories by the neoclassicists. Further, he investigates the cause of crises and unemployment and develops a program to combat them. In doing so, Keynes recognized for the first time the existence of unemployment and crises inherent in capitalism.

Then he declared the inability of capitalism to cope with these problems with its internal forces. According to Keynes, their solution requires the intervention of the state. In fact, he dealt a blow to the neoclassical direction in general, as well as to the thesis of limited resources. There is not a shortage of resources, but, on the contrary, their overabundance, as evidenced by unemployment. And if part-time employment is natural for a market economy, then the implementation of the theory implies full employment. Moreover, by the latter, Keynes understood not absolute employment, but relative. He considered necessary 3% unemployment, which should serve as a buffer for pressure on the employed and a reserve for maneuver in the expansion of production.

Keynes explained the emergence of crises and unemployment as insufficient "aggregate demand" resulting from two reasons. The first reason he named "basic psychological law" society. Its essence is that As income rises, consumption rises, but to a lesser extent than income. In other words, the growth of citizens' income outstrips their consumption, which leads to insufficient aggregate demand. As a result, there are disproportions in the economy, crises, which in turn weaken the incentives for capitalists to further investment.

Second reason insufficient "aggregate demand" Keynes believes low rate of return on capital due to the high rate of interest. This forces the capitalists to keep their capital in cash (liquid form). This hurts the growth of investment and further curtails "aggregate demand". Insufficient investment growth, in turn, does not allow for employment in society.

Consequently, insufficient spending of income on the one hand, and "liquidity preference" on the other, leads to underconsumption. Underconsumption reduces "aggregate demand". Unsold goods accumulate, which leads to crises and unemployment. Keynes concludes that if a market economy is left to its own devices, it will stagnate.

Keynes developed a macroeconomic model in which he established the relationship between investment, employment, consumption and income. The state plays an important role in it.

The state must do everything possible to raise the marginal (additional) efficiency of capital investments, i.e. the marginal profitability of the last unit of capital through subsidies, government purchases, etc. In turn, the Central Bank should lower the loan interest rate and conduct moderate inflation. Inflation should provide a systematic moderate rise in prices, which will stimulate the growth of capital investment. As a result, new jobs will be created, leading to the achievement of full employment.

Keynes made the main bet in increasing aggregate demand on the growth of productive demand and productive consumption. He proposed to compensate for the lack of personal consumption by expanding productive consumption.

Consumer demand needs to be stimulated through consumer credit. Keynes also had a positive attitude towards the militarization of the economy, the construction of pyramids, which, in his opinion, increases the size of the national income, provides employment for workers and high profits.

Keynes's macroeconomic model found its most complete expression in the theory of the so-called "multiplier process". This theory is based on multiplier principle. Multiplier means multiplier, i.e. a multiple increase in the growth of income, employment and consumption to the growth of investment. The Keynesian "investment multiplier" expresses the ratio of the increase in income to the increase in investment.

The mechanism of the "investment multiplier" is that investments in any industry cause an increase in production and employment in it. The result of this will be an additional expansion of the demand for consumer goods, which will cause an expansion of their production in the corresponding branches, which will present an additional demand for means of production.

According to Keynes, the investment multiplier indicates that when there is an increase in the total amount of investment, then income increases by an amount that is R times greater than the increase in investment.

The multiplier depends on the value "propensity to consume" C/Y, where Y is the national income, C is the part of it spent on personal consumption. More often, the dependence of the multiplier on the “marginal propensity to consume” is considered, i.e. ratio of consumption growth to income growth ΔС/ΔY. The greater the marginal propensity to consume, the greater the multiplier, and hence the greater the shift in employment caused by a given change in investment. Thus, the theory of the multiplier substantiates the existence of a direct and proportional relationship between capital accumulation and consumption. The amount of capital accumulation (investment) is determined by the “propensity to consume”, and accumulation causes a multiple increase in consumption.

Economic doctrineJ. M. Keynes

John Maynard Keynes(1883-1946) - an outstanding scientist and economist of our time. He studied with a no less eminent scientist, the founder of the Cambridge School of Economic Thought, A. Marshall. But, contrary to expectations, he did not become his heir, almost eclipsing the glory of his teacher.

A peculiar understanding of the consequences of the longest and most severe economic crisis of 1929-1933, which engulfed many countries of the world, was reflected in the completely extraordinary provisions of that period published by J.M. Keynes in London book under the title "The General Theory of Employment, Interest and Money" (1936).

The outstanding abilities for mathematics, discovered at school, became an important help to him during his years of study at Eton and King's College, Cambridge, where he studied from 1902 to 1906. Moreover, he happened to listen to the "special" lectures of D. Marshall himself, on whose initiative , as already mentioned, at the University of Cambridge since 1902 the course "economics" was introduced instead of "political economy" in the tradition of the classical school.

From 1906 to 1908 he was an employee in the ministry, having worked in the first year in the military department, and later in the department of income, statistics and trade of the Office of Indian Affairs.

In 1908, at the invitation of A. Marshall, he was given the opportunity to give a course of lectures on economic issues at King's College, after which, from 1909 to 1915, he was engaged in teaching work here on an ongoing basis both as an economist and as a mathematician.

Already his first economic article entitled "The Index Method" (1909) aroused a lively interest; it is even celebrated with the Adam Smith Prize.

Soon enough J.M. Keynes receives and public acceptance. So, from 1912, he became the editor of the Economic Journal, retaining this post for the rest of his life. In 1913-1914 He is a member of the Royal Commission on the Finance and Monetary Circulation of India. Another appointment of this period was the approval of him as secretary of the royal economic society. Finally, his first book, published in 1913, The Monetary Circulation and Finances of India, brought him wide popularity.

Further, the scientist-economist J.M., popular in his country, Keine agrees to go to serve in the British Treasury, where from 1915 to 1919 he deals with problems of international finance, often acting as an expert in British financial negotiations held at the level of Prime Minister and Chancellor of the Exchequer. In particular, in 1919 he was the chief representative of the Treasury at the peace conference in Paris and at the same time the representative of the British Minister of Finance in the Supreme Economic Council of the Entente. In the same year, his book "The Economic Consequences of the Treaty of Versailles" published by him brings him worldwide fame; it is translated into various languages.

Then J.M. Kay leaves service in public institutions, focusing on teaching at the University of Cambridge and preparing scientific publications. Among them appear "A Treatise on Probability" (1921), "A Treatise on Monetary Reform" (1923), "The Economic Consequences of Mr. Churchill" (1925), "The End of Free Enterprise" (1926), "A Treatise on Money" (1930) and some others who brought the great scientist closer to the most important work published in 1936 - the General Theory.

To the active social and political activity of J.M. Keynes returned at the end of 1929, when, from November of that year, he was appointed a member of the government committee of finance and industry. During the Second World War (in 1940) he was appointed Advisor to the British Treasury. In 1941, he was included in the British government delegation to participate in the preparation of materials for the lend-lease agreement and other financial documents with the US government. The next year, 1942, was the year of appointment to the post of one of the directors of an English bank. In 1944, he was appointed as the chief representative of his country at the Bretton Woods Monetary Conference, which developed plans for the creation of the International Monetary Fund and the International Bank for Recovery and Development, and then appointed one of the board members of these international financial organizations. Finally, in 1945, J.M. Keynes again heads the British financial mission - this time to the USA - for negotiations in connection with the end of lend-lease assistance and agreeing on conditions for obtaining a large loan from the USA 7 .

The novelty of the main idea of ​​the "General Theory"

According to many economists, J.M. Keynes was a turning point in the economics of the 20th century. and largely determines the economic policy of countries at the present time.

Her main and new idea is that the system of market economic relations is by no means perfect and self-regulating, and that the maximum possible employment and economic growth can only be ensured by the active intervention of the state in the economy. The perception of this idea by the progressive public as proper and correct is due, according to the modern American economist J.K. Galbraith, the fact that “by the 30s. (XX century. - Ya.Ya.) the thesis about the existence of competition between many firms, which are inevitably small and act in every market, has become untenable, "because" the inequality that arises as a result of the existence of monopoly and oligopoly applies to a relatively narrow circle of people and therefore, in principle, can be remedied by the intervention of the state.”

In much the same way, they regard main idea the great work of J.M. Keynes and many other scientists, including M. Blaug and others.

Subject and method of study

Innovation of the economic doctrine of J.M. Keynes in terms of the subject of study and methodologically manifested itself, firstly, in the preference of macroeconomic analysis to the microeconomic approach, which made it the founder of macroeconomics as an independent section of economic theory, And, Secondly, in justification (based on some "psychological law") the concept of the so-called "effective demand", i.e. potential and government-stimulated demand. Based on J.M. Keynes, in contrast to his predecessors and contrary to the prevailing economic views, argued that it was necessary to prevent cuts in wages with the help of the state as the main condition for eliminating unemployment, and also that consumption, due to a person’s psychologically determined propensity to save, grows much more slowly than income.

Psychological tendencies of a person

According to Keynes, psychological inclination of a person to save a certain part of income hinders the increase in income due to the reduction in the volume of capital investments on which permanent income generation depends. Concerning marginal propensity to consume, then it, according to the author of the General Theory, is allegedly constant and can therefore determine a stable relationship between the increase in investment and the level of income.

The foregoing indicates that in the research methodology of J.M. Keynes takes into account the important influence on economic growth and non-economic factors, such as: the state (stimulating consumer demand for means of production and new investment) and the psychology of people (predetermining the degree of conscious relationships between economic entities). At the same time, the Keynesian doctrine is mainly a continuation of the fundamental methodological principles of the neoclassical direction of economic thought, since J.M. Keynes and his followers (however, like neoliberals), following the idea of ​​"pure economic theory", proceed from the priority value in the economic policy of society, first of all, of economic factors, determining the quantitative indicators expressing them and the relationships between them, as a rule, on the basis of methods limiting and functional analysis, economic and mathematical modeling.

Methodological connection with the concept of mercantilism

J.M. Keynes did not deny the influence of the mercantilists on the concept of state regulation of economic processes that he created. His common judgments with them are obvious and are:

• in an effort to increase the supply of money in the country (as a means of making them cheaper and, accordingly, lowering interest rates and encouraging investment in production);
• in the approval of price increases (as a way to stimulate the expansion of trade and production);
• in recognizing that lack of money is the cause of unemployment;
• in understanding the national (state) nature of economic policy.

Methodological differences with the classics and neoclassics

In the "General Theory" J.M. Keynes clearly traces the idea of ​​the inexpediency of excessive thrift and hoarding and, conversely, the possible benefits of all-round spending of funds, since, as the scientist believes, in the first case, the funds are likely to acquire inefficient liquid (cash) form, and in the second, they can be directed to increase demand and employment 15 . He also sharply and reasonably criticizes those economists who are committed to the dogmatic postulates of the "law of markets" J.B. Say and other purely "economic" laws, calling them representatives of the classical school.

In this regard, J.M. Keynes, in particular, wrote: "Since the time of Say and Ricardo, classical economists have taught: supply itself generates demand ... that the entire value of production must be spent directly or indirectly on the purchase of products." On the basis of excerpts confirming this thesis from the Fundamentals of Political Economy by J.S. Mill and "The Pure Theory of National Values" by A. Marshall J.M. Keynes concludes that among the classics and their successors “the theory of production and employment can be built (like Mill) on the basis of barter; money does not play any independent role in economic life," therefore, "Say's law ... is tantamount to the assumption that there are no obstacles to achieving full employment."

"Basic Psychological Law"

The essence of this "law" J.M. Keynes: "The psychology of society is such that as aggregate real income increases, aggregate consumption also increases, but not to the same extent as income increases." And in this definition, his unambiguous theoretical and methodological position, according to which, in order to identify the causes of underemployment and incomplete implementation, the imbalance of the economy, as well as to justify the methods of its external (state) regulation, the "psychology of society" is no less important than "laws of economics".

In particular, this is why J.M. Keynes argues that "education... statesmen on the principles of classical political economy" will not allow them to "choose any better path" to stimulate the increase in wealth, except in the hope of "building pyramids, earthquakes, even wars." Hence, in his opinion, “if only the psychological inclinations of the participants in the economic process really turn out to be approximately the same as we assumed them here, then we can assume that there is a law according to which the expansion of employment, directly related to investment, must inevitably have a stimulating effect on those industries that produce consumer goods, and thus lead to an increase in total employment, and this increase exceeds the increase in primary employment directly related to additional investment.

Investment multiplier concept

Meanwhile, the increase in investment and the resulting growth in national income and employment can be regarded as an expedient economic effect. The latter, which has received the name of the multiplier effect in the economic literature, means that "an increase in investment leads to an increase in the national income of society, moreover, by an amount greater than the initial increase in investment." In the specific solution of the mechanism of this "effect" lies the answer to the question why in the scientific research of J.M. Keynes paid so much attention to the concept of the multiplier, which, according to him, was introduced into economic theory as early as 1931 by R.F. Kan.

However, characterizing "employment multiplier" R.F. Kana as an indicator to measure "the ratio between the increase in total employment in industries directly related to investment", the recommended own coefficient of J.M. Keynes called investment multiplier which, unlike the multiplier R.F. Cana characterizes the position that “when there is an increase in the total amount of investment, then income increases by an amount that in TO times the increase in investment". The reason for this situation, emphasizes J.M. Keynes, lies in the constantly mentioned by him "psychological law" by virtue of which "as real income increases, society is willing to consume an ever-decreasing part of it."

He further concludes that "the multiplier principle provides a general answer to the question of how fluctuations in investment, which constitute a relatively small share of national income, can cause such fluctuations in aggregate employment and income, which are characterized by a much larger amplitude." But, according to him, “although the size of the multiplier is relatively large in a poor society, the impact of fluctuations in the size of investment on employment will be much stronger in a rich society, since it can be assumed that it is in the latter that current investment constitutes a much larger share of current output.”

So, the theoretical essence of the multiplier effect is really quite simple.

Measures of state regulation of the economy

The result of his research J.M. Keynes considered the creation of a qualitatively new economic theory. The latter, in his opinion, “points to the vital necessity of creating centralized control in matters that are now mainly left to private initiative ... The state will have to exercise its guiding influence on the propensity to consume, partly through an appropriate system of taxes, partly by fixing the rate of interest and, perhaps in other ways," for "it is precisely in determining the volume of employment, and not in the distribution of the labor of those who are already working, that the present system has proved unsuitable." That is why, according to J.M. Keynes, “the establishment of the centralized control necessary to ensure full employment will, of course, require a significant expansion of the traditional functions of government ... But still there remain ample opportunities for the manifestation of private initiative and responsibility.”

The effectiveness of state regulation of economic processes, in the opinion of J.M. Keynes, depends on finding funds for public investment, achieving full employment of the population, reducing and fixing the rate of interest. He wrote: “Ricardo and his successors overlooked the fact that, even in the long run, employment does not necessarily tend to the level of full employment, that the level of employment may change, and that each individual banking policy corresponds to a different level of employment. Thus, there are many states of long-term equilibrium corresponding to various conceivable options for the interest rate policy of the body that regulates the monetary system.

As J.M. Keynes, public investment in the event of a shortage must be guaranteed by the issuance of additional money, and a possible budget deficit will be prevented by an increase in employment and a fall in the rate of interest. In other words, according to the concept of J.M. Keynes, the lower the rate of loan interest, the higher the incentives for investment, for an increase in the level of investment demand, which, in turn, expands the boundaries of employment and leads to overcoming unemployment. At the same time, he considered the starting point for himself to be such a provision on the quantity theory of money, according to which, in reality, “instead of constant prices in the presence of unused resources and prices that grow in proportion to the amount of money in conditions of full use of resources, we practically have prices that gradually increase along as the employment of factors increases.

In this regard, M. Blaug writes: “For Keynes, full employment depends on the correct ratio of the interest rate and wages and can be achieved by lowering the first rather than reducing the second. Keynes's fundamental reason for unemployment is that the rate of interest remains too high in the long run... At the same time, according to Blaug, “according to the Keynesian theory, doubling the money supply does not lead to a doubling of the price level, but it does affect interest rate... because the Keynesian demand function for money, in particular speculative demand, takes into account the "money illusion" or the reaction of individuals to any, even nominal, change in cash stocks.

And summarizing his position in relation to the teachings of J.M. Keynes, M. Blau r exclaims: "Kay our some kind of revolution really took place!"