Who has had the biggest influence on global economic policy over the past year? Plausible cases can be made for a handful of global bigwigs. But a moment's reflection suggests the answer lies elsewhere, with an English economist who died in 1946. As policymakers have battled the biggest economic bust since the Depression, John Maynard Keynes has been their guide. Keynes's intellectual framework - a world in which pervasive uncertainty leads to persistently inadequate demand - has seemed more relevant in recent months than at any time since the 1930s. And his solutions, particularly the use of fiscal stimulus, have been adopted on a dramatic worldwide scale.
Less clear is the scope of the comeback. Should Keynes's insights be drawn temporarily and selectively, as the toolkit for understanding and fighting a slump? Or do his ideas, coupled with our recent experience, demand a more fundamental overhaul of economic policy? Most mainstream economists and policymakers lean to the former. These three books, from three highly regarded Keynes devotees, argue passionately for the latter.
Their perspectives differ. Peter Clarke, an historian, makes the case for Keynes's continued relevance by combining and absorbing narratives of his life with perceptive comments on how that life shaped his views. The book progresses chronologically through the important biographical landmarks： Keynes's membership of the Bloomsbury group； his rollercoaster record as an investor； his interest in economic policy, from a minor technical role at the 1919 Paris Peace Conference to center-stage at the 1944 Bretton Woods Conference. Along the way it charts Keynes's intellectual progress, showing how events, such as Britain's persistently high joblessness in the 1920s, fed the evolution of his view that classical economic theory was inadequate and that a capitalist economy called for government intervention.
Mr Clarke deftly describes the twisting contours of Keynes's impact on both economic policy and economic theory. He convincingly demolishes the naive deficit-loving, market-hating caricature that ゛Keynesianism゛ is often reduced to. But, despite the occasionally proselytising tone, this book is more a celebration of Keynes's revival than a call to action.
In ゛The Return of the Master゛Rebert Skidelsky takes a different tack. As the author of a magisterial three-part biography of Keynes, Mr Skidelsky knows more about him than any other scholar. He now tries to refocus Keynesianism in the public mind - and in doing so claims that most modern economics is bunk (=buncombe).
Keynes's insights, he argues, can be broken down into two broad categories： why economies go into a downturn； and why they stay in one - the main topic of Keynes's most important work, ゛The General Theory of Employment, Interest and Money゛, written at the bottom of the Depression in 1936. Keynes showed that, contrary to the beliefs of classical economist supply did not always create its own of demand, and that governments needed to step in to prevent persistent underemployment. This is the idea that lies behind most post-war demand management as well as today's fiscal stimulus packages.
It is also the areawhere Keynes's influence within economics is most felt. Much of modern macroeconomics has been about how, and whether, his ideas fit into the formal microeconomic building blocks of rational behaviour and complete markets. ゛New classical゛ economists say no； ゛New Keynesian゛ ones say yes. Thanks to imperfections, whether ゛sticky wages゛ or asymmentries of information, markets do not always clear, and overall demand can fall short of an economy's potential.
Unfortunately, says Mr Skidesky, this intellectual evolution has paid far too little attention to Keynes's other big insight, which regards ゛radical゛ or ゛irreducible゛ uncertainty as the root cause of economic instability. This immeasurable uncertainty, he argues, explains why people hoard cash, why investment is volatile and why financial markets are inherently unstable.
The idea of uncertainty and its connection with confidence rings truer after the happenings of the past year. But it is a concept that sits ill with the theoretical underpinnings of modern macroeconomics. And that, Mr Skidelsky says, is the real problem. By ignoring irreducible uncertainty, modern economics had gone fundamentally off course. Those intellectual errors, in turn, prompted huge policy errors, such as relying on deregulated financial markets. ゛This present crisis,゛ he thunders, ゛is a crisis of systemic ignorance not asymmetric information゛.
