The Price of Peace: Money, Democracy, and the Life of John Maynard Keynes

by Zachary D. Carter

A page-turning biography of world-changing economist John Maynard Keynes and the big ideas that outlived him.

In the spring of 1934, Virginia Woolf sketched an affectionate biographical portrait of her great friend John Maynard Keynes. Writing a full two years before Keynes would revolutionize the economics world with the publication of The General Theory, Woolf nevertheless found herself unable to condense her friend's already-extraordinary life into anything less than twenty-five themes, which she jotted down at the opening of her homage: "Politics. Art. Dancing. Letters. Economics. Youth. The Future. Glands. Genealogies. Atlantis. Mortality. Religion. Cambridge. Eton. The Drama. Society. Truth. Pigs. Sussex. The History of England. America. Optimism. Stammer. Old Books. Hume."

Keynes was not only an economist, as he is remembered today, but the preeminent anti-authoritarian thinker of the twentieth century, a man who devoted his life to the belief that art and ideas could conquer war and deprivation. A moral philosopher, political theorist, and statesman, Keynes immersed himself in a creative milieu filled with ballerinas and literary icons as he developed his own innovative and at times radical thought, reinventing Enlightenment liberalism for the harrowing crises of his day--which included two world wars and an economic collapse that challenged the legitimacy of democratic government itself. The Price of Peace follows Keynes from intimate turn-of-the-century parties in London's riotous Bloomsbury art scene to the fevered negotiations in Paris that shaped the Treaty of Versailles, through stock market crashes and currency crises to diplomatic breakthroughs in the mountains of New Hampshire and wartime ballet openings at Covent Garden.

In this riveting biography, veteran journalist Zachary D. Carter unearths the lost legacy of one of history's most important minds. John Maynard Keynes's vibrant, deeply human vision of democracy, art, and the good life has been obscured by technical debates, but in The Price of Peace, Carter revives a forgotten set of ideas with the power to reinvent national government and reframe the principles of international diplomacy in our own time.

Genres: Economics, Biography, History, Nonfiction, Politics, Philosophy, Biography Memoir

656 pages, Hardcover

First published May 19, 2020

Reviews

[Mehrsa · Rating 5 out of 5]

This book is not just about Keynes. It is, as the author notes, an exploration about whether you can make changes through policy or through revolution. It gets at one of the greatest fissures in modern thought right now across the world--do you need to burn the system to the ground and start over and can you make technical fixes that improve people's lives, avoid inter- and intra-societal conflicts, and equality. Keynes was an optimist and a technocrat even though his ideas were debunked when his name became a byword for "radical communist." This is ironic because the neoliberal movement that swept away Keynesian was much more radical than the Keynesians. Hayek, Friedman, and Goldwater conducted a revolution in the name of incrementalism, conservatism, and technical-ism (sic). Where Keynes was the incrementalist. Anyway, this is a must-read. So well-written.

[Jason Furman · Rating 5 out of 5]

The first two-thirds of this book is an extraordinary biography of John Maynard Keynes that is the basis of my five star review. It is well written, nuanced, comprehensive, and does an excellent job explaining the complicated international finance of the period in which he lived. Zachary Carter makes compelling links between the many phases and facets of Keynes’ life: someone helping the Treasury finance to the Great War vs. returning the critical roots of the Bloomsbury group; a truth teller who wants to shout his views from the rooftops vs. a man who wants to be engaged at the highest levels; a columnist writing for the moment vs. a timeless theoretician; an avid speculator in markets who was generally hostile to speculation; etc. The life and the work fit together, which for a life and work this extraordinary is a challenge.

Carter places Keynes squarely in the tradition of a broader political philosophy, situating his work as a commentary on social and political power and the ways in which the market can only exist as a function of the state, pulling him out of the technocratic economic interpretation. He argues that Keynes’ masterwork, “The General Theory of Employment, Interest and Money is one of the great works of Western letters, a masterpiece of social and political thought that belongs with the monuments left by Aristotle, Thomas Hobbes, Edmund Burke, and Karl Marx. It is a theory of democracy and power, of psychology and historical change, a love letter to the power of ideas.” But Carter also argues, in some tension with this claim, that Keynes had pretty much worked out his ideas before the General Theory and was just using it as a rhetorical device to persuade in the present and influence posterity.

My only quibble about the first two-thirds of the book is that it overplays Keynes as columnist a bit and underplays Keynes as intellectual. His relationships with Frank Ramsey, Bertrand Russell, Ludwig Wittgenstein and his early writing on probability are all mentioned but not emphasized as much as I might have liked.

But then Keynes dies on page 367 and the next 166 pages at times read like they were written by someone who had never read or absorbed the first 367 pages. These pages are a partial and polemical account of economic ideas and economic policy in the postwar United States, basically a long indictment of how Keynes was mathematicalized and marginalized within economics and how policymaking abandoned his ideas too. This part makes some interesting points and I learned from it, but the closer it got the present the more tendentious and polemical it got.

Let me list a few concerns:

SHOULD WE CARE WHAT KEYNES WOULD HAVE THOUGHT? The justification for including the last third was a biography of the afterlife of Keynes ideas. Carter is constantly telling us what Keynes would have thought of, say, various compromises made by Bill Clinton in the 1990s. For some reason biographers of Charles Dickens rarely feel compelled to provide his reviews of 20th century literature, biographers of Isaac Newton don’t speculate about what he would have thought of quasars, and I don’t find myself seeking out articles about what Charles Darwin would have thought of COVID. Maybe a philosopher is aspiring to timeless truths so it might make sense to ask what Kant or Mill would think of an ethical question, but the Keynes portrayed in the first two-thirds of this book is a man of the moment, someone whose ideas are pragmatic, and constantly changing. If someone changes their mind once a decade—and often holds contradictory opinions at the same time—how exactly can we extrapolate their views into the future? Carter thinks Keynes would have been opposed to the WTO and Long-term Capital Management, I would have bet he would have been pro the former and on both sides of the later, but who cares.

THE NARROW FOCUS ON THE UNITED STATES IS OVERLY PAROCHIAL. Carter’s story shifts entirely to the United States after World War II. This makes the story very specific to US debates and miss out on broader themes. For example, the divergence of German and US thought on fiscal policy is large and important in putting some perspective on where Keynes’ legacy has persisted and where it has been absent. And Carter does a lot of criticism of NAFTA, the WTO and China’s accession to the WTO as evidence of the ascent of neoliberalism and the betrayal of Keynes (see previous point for why I do’t know where Keynes would have stood on those, especially when he held multiple positions on tariffs over the course of his career). But if Carter had looked at the attitudes of social democratic countries in Europe towards trade, including trade with China, it would have seen less of an exemplar of neoliberalism.

“NEOLIBERALISM” AS AN OVERLY BROAD EPITHET FOR EVERYTHING CARTER DOES NOT LIKE. Carter is critical of Kennedy for cutting the top tax rate from 91 to 70 percent and Carter for his deregulation. You can think the top rate should be much higher than it is or that environmental regulation should be much tougher while also thinking those were moves in the right direction. And then there is my least favorite sentence in the book: "Improving education, for instance, probably helped at the margins by creating more jobs for teachers. But the ultimate result was a better-educated underclass just as poor as the one that preceded it."

A ONE-SIDED NEGATIVE VIEW OF ECONOMIC HISTORY AND PROGRESS. In “Economic Possibilities for Our Grandchildren” Keynes famously predicted that productivity increases would enable future generations to work fifteen hour weeks while maintaining a good standard of living. Carter explains the failure of this prediction: “The tremendous expansion of output and productivity over the past ninety years has been harvested for the most part by a very small section of society. For everyone else, economic prospects are roughly where they were in the mid-1920s.” The problems with this explanation: (1) hours have stayed high and risen more for the highest-income workers; (2) inequality has not increased since Keynes wrote it in 1930 and moreover you see people working 40+ hour weeks in countries with much lower inequality; and (3) economic prospects are vastly better than where they were in the 1930s. The same argumentation shows up again in multiple places (e.g., misleadingly missing the *percentage* decline in absolute poverty in the 1990s because he focuses on the level and then belittling the subsequent decline because many are still living in near poverty).

OVERLY ATTRIBUTES THE DEVELOPMENT OF IDEAS TO MATERIAL INTERESTS AND FUNDING. There is no doubt that funding of ideas, organized groups like the Mont Pelerin society, and the like, have had an impact. But a lot of the development of ideas over the last 70 years has been based on what could explain more, what had evidence, what theories failed. Milton Friedman’s expectations-augmented Philips curve came out of a failure of the traditional Philips curve. Paul Samuelson’s textbook was successful in large part because it effectively unified a set of ideas. Not all math is obfuscation and, in fact, as Carter himself acknowledges, “Without those luminaries [Samuelson et al], The General Theory would today be an intellectual curiosity, the brilliant and confusing work of an influential Englishman that had briefly animated the Roosevelt administration.”

A NARROW VIEW OF ECONOMICS. In Carter's telling Keynesianism was largely dead when Jimmy Carter embraced deregulation. He writes, "Without a patron in Washington, up-and-coming economists pursued other ideas. The dwindling few who continued to hold out against the storm—Paul Krugman, Joseph Stiglitz—were Samuelson disciples from MIT who treated Galbraith with professional disdain." A few of the issues: (1) Krugman and Stiglitz, at the time, were primarily microeconomists and not overly engaged in the macroeconomic debate around Keynes; (2) much of the trajectory of economic research has nothing to do with patrons in Washington (see the previous point); and (3) there was a huge growth in the economics of imperfect information, behavioral economics, the shift to empirical study of issues like the impact of the minimum wage on employment, all of which were moving much of economics in a direction with a richer understanding of market failures, human behavior, and in many cases a greater agnosticism on these issues as empirical research replaced theory. But in Carter's version of economics there are only a few celebrity economists and the notion of market failures and behavior is highly limited.

This is a partial list of my concerns with the last third of the book. Even in that part I learned a lot, especially the debates with John Kenneth Galbraith, Joan Robinson, the intersection of Macarthyism and economics, and more. I just wish it had ended up being a standalone book that had the sensitivity, nuance and thoughtfulness that pervaded every page of their spectacular biography of John Maynard Keynes.

[Sherrie · Rating 3 out of 5]

***I won this book in a Goodreads Giveaway***

So, for the first 350 pages or so this was going to be a strong 4 stars. A little bit biography, a little bit economics and philosophy history. Combined, this made for a very interesting read. John Maynard Keynes was not what we think of nowadays when we think of economists (sorry, friends, not an insult!) He was quirky and let his personal experiences and beliefs color his views on economic systems. And in many situations...he was right. I thoroughly enjoyed how the author explained various financial systems and economic theories and how the different variables play against one another. I felt like I learned a lot.

But then, Keynes died with like 150 pages left in the book...which is weird, but could have been OK. Instead, the book lost all semblance of direction. While the first 350 pages had dealt primarily with Great Britain and the issues that Keynes worked on directly, the latter 150 pages dealt entirely with America. Everything from the Cold War through Obama's presidency. It's too much, everything was disconnected and it just sort of fell apart. Instead of working through specific cases slowly and methodically, the author went through 50+ years in a blitz, only saying things that have been said in many other books/articles already, and only loosely connecting these back to Keynes (because, realistically, very little of American politics has been driven by Keynes ideas). The book would have been improved by cutting out that whole latter section to be replaced with something more consistent with the Keynes life and philosophy.

I do recommend the first ~350 pages to readers who are curious about Keynes ideas. It was a fun and informative read. My only caveat is to keep the author's bias in mind...he's a senior reporter for HuffPost and is clearly a big fan of Keynes. He came across a little defensive at times.

[Louise · Rating 5 out of 5]

This is a biography of Keynesian economics which the author shows to be a breakthrough in economic thought and effective when used. The personal portrait of John Maynard Keynes is merely sketched. What stands out about him is ability to challenge the application of classical economics to modern times and his passion for using monetary policy for not only peace (as in the title) but also for the overall quality of life.

Zachary Carter gives a chronological presentation of the concepts and theories which he explains in easy to understand terms. He covers the issues, the papers, books, appointments, conferences, recognition and the economists who support (and those who attack) Keynes’s theories. He shows how Keynesian policies on taxes, tariffs, international finance and public works run counter to policies that preserve wealth by extracting from workers (layoffs, pay cuts, deflation).

As a British treasury official he guided Brittan through its WWI finance after which he was among the youngest participants at Versailles, where in 1919, the world powers met to divvy up the earth. He was aghast at how the war’s victors saddled Germany with unrealistic reparations/debt. He predicted an economic depression which would lead to despair and despair to revolt. He left the conference upset and depressed. Unfortunately the rise of Hitler proved him to be correct .

The most interesting parts for me were the presentation of Keynes’s writings and the application of his theories in the 1930’s and 40’s. The British coal strike, failure of Austrian banks, the severed relationship of currencies and gold reserves, British financing of WWII and the events and negotiations leading to the lend lease program.

Carter feels the closest the world has come to implementing Keynesian theories was Roosevelt’s New Deal. He presents data to show its widespread improvement in people’s lives. He shows how McCarthy and his supporters brutally and effectively attacked Keynesian New Deal policy makers. Conservative activists went so far as to ban textbooks with a Keynesian orientation. Carter notes how all presidents after Roosevelt, (exception: Bush 41 who is not covered) distanced themselves from the name of this (liberal) economic theory, but implemented it in their policies, particularly just before an election.

For Carter, Clinton, Bush 43, Obama and Trump there is a good bit on the economic issues of the day, but after Johnson (who is shown as the last New Dealer) there is little commentary on Keynesian influence or lack thereof on their policies. For instance, the new investment vehicles, more complex banking issues, NAFTA and other trade issues are covered… but it there is little commentary relating these to Keynes.

Keynes’s personal life there is sketched. There is description of his role and status in the Bloomsbury set. After years of active homosexuality he married a woman for love. He bought a magazine to promote not only his theories but to expand arts and culture. He hired Bloomsbury friend Leonard Woolf to edit the literary section (after negotiations with T.S. Eliot went nowhere). He had a series of heart attacks, and died at home in England following one he (typically) had at a conference negotiating on behalf of his country.

I learned a lot and came to understand more through this book, than through anything I have read in some time. Here are some things I learned:

• The historical difference in coinage and money: Money was the provenance of government and p. 169 was “an inherently political tool… the state created money and had always regulated its value… four thousand years at least.”

• How WWI was a public relations coup for Woodrow Wilson: Carter shows how the many loans to Britain by American banks forced the country into war. Being neither exhausted nor broke, the US provided the force to end it. Wilson elevated this war which was over the assassination of an archduke to a “War for Democracy” and articulated principles to give the war meaning. This enabled its perpetrators to skirt responsibility. The US, led by Wilson at Versailles, offended no one, and signed off on the settlement full of future problems.

• More about the role of modern economists and their relationship to the Keynesian theory: John Kenneth Galbraith is well covered, and now I understand his role as a free lance celebrity economist, who, because he followed the McCarthy era, had career difficulties and could not fully credit the basis of his ideas to Keynes. Paul Samuelson made math models of Keynesian ideas. One of the few remaining Keynes influenced economists is Paul Krugman. Milton Friedman is all over the place, perhaps trying to cover his Keynesian bent. There are women in this field who never achieved the name recognition of those above, most interesting Joan Robinson.

• why in my 1980’s MBA program, encompassing classes in micro, macro and labor economics, finance and banking, there was no mention of John Maynard Keynes.

This was an impressive book about an impressive person. I highly recommend this for anyone interested in economics and public policy.

[Bob H · Rating 5 out of 5]

A magisterial and detailed (530 pp.) account of the work and legacy of John Maynard Keynes, the legendary economist whose writing and diplomacy -- public and private -- would influence economies and world policy in his time and beyond. Although it's a biography of sorts, it follows his adult life and career starting in the years before WWI and traces his influence beyond his death in 1946 -- indeed, the book's final pages concern the 2008 financial collapse and its aftermath.

We learn of his personal life, his time as a young man with the Bloomsbury Group, an almost communal group of intellectuals in pre-WWI London who traded soirées and love affairs as their varied careers and fame would grow (Keynes would shock his friends, after the war, by marrying a woman). Keynes' reputation as an economist in his early 30s would be enough for him to solve a currency crisis in London just as WWI was starting. He would remain in various important Treasury posts and serve an important role with the UK delegation at the 1919 Paris peace talks.

Keynes witnessed considerable history and economic damage at war's end, and, out of government, would write of his disillusionment, and later his gathered theories on economics and government. Ignored at first, he would, we see, become more and more vindicated as Britain, and later the US, would see considerable economic calamity. Keynes would become an influence, both philosophical and personal, with FDR's administration after the Crash, and, through correspondence, with FDR himself. Keynes would be a key part of the economic response to the Depression and, later, in the Allied economic mobilization in WWII. His final act would be his crucial work at the Bretton Woods economic conference, an event that would be one of the decisive outcomes after the war.

Much of the book traces his legacy. Keynes would inspire or influence generations of policy economists, particularly in the US, starting with John Kenneth Galbraith and ending up with the likes of Paul Krugman and Joseph Stiglitz. In one way or another, Keynesian economics would affect policy in the administrations of JFK, LBJ and Richard Nixon. We also see a rival, conservative school of conservative economics originating with a contemporary of Keynes, Friedrich Hayek, whose later disciples, starting with Milton Friedman, would be antagonists, even nemeses, to the Keynesians.

The book traces the decline of Keynesianism in the Clinton years, a second gilded age that would seemingly retire Keynes' notions as quaint and outdated. The book does argue that all that changed under the demands of the 2008 crash and the new economic problems. It's no spoiler to say the book pretty much concludes toward the end of the Obama years. However, given the covid-19 pandemic and the sudden new Depression it has caused, this book may explain at least some of the economic ideologies shaping official policy now -- whether or not the officials have even heard of Hayek or Keynes, the dynamics are still at hand, and this book is a timely background to this day. In the long run, Keynes famously said, we're all dead; he also wrote that in the short run, we're alive. Highest recommendation.

Read in advance copy from Amazon Vine.

[Jamie Smith · Rating 4 out of 5]

I took an Economics class in college, and hated it. The textbook was confusing and dry as dust, and the professor was as bored as the students, never speaking above a monotone except to get irritated when someone asked a question. I always resented the fact that I had squandered one of my electives on a course I got so little out of, and from then on I steered clear of anything that included Economics.

But here I am with a biography of John Maynard Keynes, which I picked up in one of my periodic efforts to broaden my reading interests. To my surprise, I thoroughly enjoyed this book, not only for its examination of Keynes’s life and impact, but for its clear explanations of economic theories and how they can be used to implement and direct social and political goals. I learned more about the fundamentals of Economics from this book than I ever did in that class.

For instance, it is intriguing to think that Hitler’s rise to power could, perhaps, have been halted if the United States had continued providing loans to German banks, which invested them in businesses, spurring additional investments, rebuilding, and employment. But with the stock market crash in 1929 American banks were hemorrhaging cash, and the Hoover administration’s only solution was increased austerity, which further reduced the banks’ ability to make loans. The German financial system collapsed, and when it did, the way was set for angry and disillusioned people to bring Hitler to power on a platform of racism, populism, and the promise to make them pay, whoever they were. It all sounds much, too much, like many current United States politicians.

This book tracks the life and writings of John Maynard Keynes from role as an economic advisor to the British government during the First World War, through his development as a public intellectual, his influence on policy, and his conflicts with other economists. It is well researched and well written, and is full of interesting facts that add context to the situations being described.

Pre-war London was without question the greatest financial center in the world, and the pound sterling was the benchmark against which all other currencies were measured. The outbreak of World War One would permanently shift that power overseas to the United States, which became essential to Britain’s war effort and, “as the war dragged on, it became clear that the British were ceding not only economic power but political influence to their American rescuers. Keynes foresaw a postwar international realignment in which Americans and Wall Street financial power would dominate the future course of Western affairs, with France and Great Britain fading into history as client states of the New World.” The funds kept coming, but they were loans, not gifts, and repaying them would strain the economies of Europe. By the end of the war, the European allies owed the U.S. government more than $7 billion and another $3.5 billion to American banks.

The United States’s greatest contribution to the Allied war effort was as a financier. “The 116,708 soldiers the United States had lost seemed staggering on the American home front, but they constituted just 2 percent of Allied military deaths—less than half the fatalities suffered by Romanian forces alone.” And it should be noted that more than half of those deaths were not combat related, but from influenza, and most of those occurred stateside.

The book does a good job explaining one of the great mysteries of the post-war peace negotiations. Germany had asked for an armistice based on Wilson’s Fourteen Points, which were humane and progressive, but the peace treaty they were forced to sign was harsh and punitive. The question, then, was why the French insisted on such terms; after all, the terms imposed by the Germany after the Franco-Prussian war did not cause France to turn away from war, but rather filled its people with a burning desire for revanche – revenge. Why would the French have thought the the Germans would react any differently, especially when they were required to pay reparations even greater than what had been imposed on France in 1871? The answer is that, “To Clemenceau, there was no use trying to strike balances or prevent future conflicts at the peace conference. Europe would eventually come to blows again over some pretext or other, and when the moment came, he wanted France to be strong and its enemies to be weak.”

Keynes grew disgusted with the way the peace talks were being conducted, writing to a friend, “I work for a government I despise for ends I think criminal.” He eventually resigned his position as an economic advisor wrote a scathing book describing the inept and short-sighted way the proceedings were being conducted. While the politicians were working for short-term advantages, Keynes was able to envision the long term consequences. “All over Europe—but particularly in the defeated German Empire—conditions were ripe for the rise of a strongman. Without food, jobs, a sense of purpose, and confidence in a better tomorrow, Europe was already on the path to another war.”

During the 1920s and 30s he developed the economic theories he is famous for today. His theories were radical at the time, but they seem much less so today. “For the most part, he believed, laissez-faire economics worked. Supply and demand did bring society to a prosperous equilibrium. They just needed a few pieces of basic economic architecture to work: property rights, the rule of law, and price stability.”

Through the 1920s a precarious system of payments came into place. “The United States, through J.P. Morgan, loaned money to Germany, which turned it over to France and Great Britain in the form of reparations, which sent it back to the United States in payments on war debts, enabling the cycle to begin again. It was a fragile system, but it worked—as long as Germany could keep getting foreign loans.” Then the Great Depression hit, the system collapsed, and Germany was ripe for a populist strongman to take over.

In discussing these events, the author makes a comment describing he United States’s inability to address its structural economic problems in the 1930s, and it is just as true about the country today, as seen in the debates over universal healthcare: “’The great trouble with Keynes was that he was an idealist,’” his colleague and collaborator Joan Robinson once wrote. His faith that “’an intelligent theory would prevail over a stupid one’” was hard to square with a world in which ‘vested interests’ often rejected reforms that carried broad benefits for all, preferring even a dysfunctional status quo as long as it maintained their place at the top of the social pecking order.”

With his remarkable ability to see behind surface appearances and into the root causes of complex situations, he noted that inflation, ultimately, was a roundabout way of cutting everyone’s pay. Rising prices reduced the purchasing power of workers’ paychecks. With pay reduced, employers would then be able to hire more people. A policy of deliberate inflation was not only politically easier than an attack on organized labor, it ensured that particular industries would not be unfairly singled out.

His fame and influence were at their zenith during World War Two, and he had a major role in shaping post-war economic policy, but his triumph was short-lived. With the Red Scares of the late 40s and early 50s, and the rise of McCarthyism, he came under suspicion, and many of his ideas were discredited. Once again, he saw clearly the dangers which lay ahead, which are just as significant today, “The danger exists that businessmen, obsessed with a devil theory of government, will attempt to use their economic power to suppress democracy and place in its stead a dictatorship supposedly dedicated to their desires.”

I suppose it can be a relief to know that the economic dumbassery of our times is nothing new, and that there have always been those whose concern is only for their own narrow self interests. “When Harry Truman called to raise the minimum wage, establish a national health care program, and begin a new federal commitment to civil rights for black America in his 1948 State of the Union address, [the National Association of Manufacturer’s] weekly newsletter suggested this cocktail would “ultimately destroy the American business system.”

The last decades of Keynes’s life were a struggle against other economists, such as Friedrich Hayek, Paul Samuelson, John Kenneth Galbraith, and Milton Friedman. Hayek was the apostle of unfettered sink-or-swim capitalism which is much in favor with right-wing politicians today, and was unalterably opposed to ideas such as a progressive income taxation, retirement pensions, and state-provided medical care.

I highlighted 131 passages from this book. It is not just biography, but a clear and insightful explanation of complex economic ideas and systems. I learned a great deal, and highly recommend it.

[Kevin Lopez (on sabbatical) · Rating 5 out of 5]

“ No European mind since Newton has impressed himself so profoundly on both the political and intellectual development of the world. When the Times wrote Keynes’ obituary, it declared him ‘the greatest economist since Adam Smith.’ But even praise so high as this sold Keynes short, for Keynes was to Smith as Copernicus was to Ptolemy—a thinker who replaced one paradigm with another. In his economic work he fused psychology, history, political theory, and observed financial experience like no economist before or since. ”

“ For Keynes, economics was the critical realm that had to unite the drive for stability with the drive for social justice. ”


For the past few days I’ve been wrestling with how to write a review that might actually do some justice to the value of Zachary D. Carter’s The Price of Peace: Money, Democracy, and the Life of John Maynard Keynes.

Having finished reading it within a day or so of Robert Silverberg’s New Wave sci-fi classic Dying Inside, and finding the the latter to be a profoundly poetic, funny, and poignantly-drawn novel (and thus another I’ve been struggling to review!), The Price of Peace is a truly rare book indeed; the sort one only stumbles upon every so often, and after reading it almost inevitably feels the need to evangelize and convince others to read, too.

And if this weren’t enough to humble one’s pretensions as a reviewer, it’s a positively massive book, to boot. Not in terms of its length (although it does clock in at a respectable 656 pages, the deftness of Carter’s writing makes it feel far shorter than that), but massive in the sense that it contains a truly massive amount of valuable information and documentation, suffused by the intellect of a first-rate academic historian.

So while I try to wrap my head around it, and maybe compose a review which is worthy of the book being reviewed, I left a few quotes above for anyone who may be interested to further their knowledge on the subject.

[Andrew · Rating 5 out of 5]

A great read.

This book came out at the perfect time. It highlights many transformative moments throughout the 20th century that Keynes was part of. It is especially telling today as we go into a new transformative moment for what the world will look like after the coronavirus.

Keynes was a marvelous intellect and Carter tells a gripping tale of his life. He was there for it all, the Treaty of Versailles, the abandonment of the gold standard, the formation of the New Deal, and many other significant events. Interestingly, Keynes dies half way through this book. From there on, Carter does a fascinating take of how Keynesian thinking persisted and evolved from Keynes's death to the present. John Kenneth Galbraith becomes a "main character" and his evolution of Keynesianism into an American version is especially interesting.

All in all, this is a most wonderful history that goes beyond the life of one man. Keynes was a persistent optimist, and my favorite quote of his was "Down with those who declare we are dumped and damned!" (533), referring to pessimists. He is spot on!

[Alan D'Souza · Rating 5 out of 5]

Superlative biography on one of the world's most influential economists. Very timely given Keynes' renewed popularity among central bankers and policy economists and the rise of the clout of modern monetary theory and deficit spending. At 650 pages, this thing is an absolute tome.

[Marks54 · Rating 5 out of 5]

The most fascinating aspects of a critical biography, at least to me, show how the person influenced the world around him/her and continues to do so. For an intellectual biography, you have the added requirement of guiding the reader through what the subject has written and explaining how it fits into the broader story. When all of this fits together, and the author of the biography is himself a superb writer, the result is magic. I just finished Zachary Carter’s book on Keynes and it is nothing short of amazing. I have encountered Keynes in one form or another since my sophomore year in college and I never expected to find him exciting.

Keynes lived an amazing life. He was influential apparently from the day he entered government service to the end of his life. He was raised in a well connected family and hung around with perhaps the toughest intellectual crowd imaginable - seriously. ...and then there is the economics and politics. As a very young man he was a critical advisor to the Paris Peace Conference and wrote “The Economic Consequences of the Peace”, one of the most influential books of the times that defined the reparations problem that would plague Europe in the next twenty years and lead to WW2. He lost a bit of official influence in the process but lived to fight again. Read the book now and see what you think. It is still gripping.

Then there is the economics - leading to the Great Depression and the General Theory. This story is well told by Carter who weaves Keynes’ writings into the flow along with the dynamics of his colleagues and opponents, such as Hayek. This story is well known but the details of people like Joan Robinson are well done. His work on the Bretton Woods accord was also hugely important but just added to an already amazing career.

The continuation of Keynes’ influence after his death shows the continuing importance of his ideas both in terms of their own influence and in terms of the vitriol of his opponents as the Cold War and its various morality plays developed. The story of academic politics and general nastiness regarding Keynesian devotees in the postwar period is well known but still sad. Recent histories of the “Austrian” economists tell the same story from a different perspective.

One of Mr. Carter’s major punchlines appears to be that Keynes remains viable as a source of policy insights today - not surprising for someone whose work arguably stimulated the invention of the entire area of “macroeconomics”. More important than that is the position that Keynesian ideas are neither good nor bad in themselves but tools that can be used for a variety of policy objectives. In today’s terms, Keynes is the source of policy options for putting a progressive social and economic policy agenda into practice. Given issues of widespread inequality as well as the bankruptcy of the neoliberal policy consensus for handling crises since 2007-2008, this is a reassuring takeaway from the book as makes Carter’s biography of crucial importance today - and well worth reading.

[David Dayen · Rating 5 out of 5]

Took me entirely too long to get through this but well worth the wait. A dazzling portrait of Keynes, his importance, and by the end his erasure, with his ideas sort of enduring but his spirit extinguished. The story of Keynes is the story of a century of economics, and by the end we see a profession adrift. But along the way we get a portrait of Keynes, who comes out of the Bloomsbury art and literature collective in London and really kept that perspective. The good life was Keynes' lifelong goal, not for him but for all citizens. He brimmed with optimism and possibility, perhaps to the detriment of realism. But in the end Carter lays out how we need people like Keynes, confident that he can solve problems, rather than a world of cynics.

[sarah · Rating 5 out of 5]

Easily the best thing I've read all year. I literally cried at the end, which is an embarrassing reaction to have in a public place to a book about a 20th century British economist

[Hadrian · Rating 4 out of 5]

I've wanted to read a biography of John Maynard Keynes for a long time. I've told myself that I might get to the 1700 page multivolume book by The Lord Robert Skidelsky, but that might be wishful thinking. But I've been recommended this one strongly, I found a copy, and its lived up to the recommendations on the life of Keynes himself.

The book's main idea is in the title. Carter asserts that the man John Maynard Keynes had reinvented himself multiple times in his life, but one of the most fundamental was after the publication of his 1919 tract, The Economic Consequences of the Peace. His criticism of the Treaty of Versailles and the end of the First World War, his resignation from the British government, and his loud denouncement of the peace negotiations had exiled him from high politics for many years.

But in the years after the First World War, from his marriage to the Russian ballerina Lydia Lopokova after so many romances with men, his turn from policy to academia, and his renewed examination of works of Enlightenment philosophers encouraged him to recast his ideas. He was not ever a Marxist, as was often misunderstood. He may have been both a conservative like Edmund Burke, and a liberal democrat like Jean-Jacques Rousseau. He feared what violent revolution might do to a society, but he later spoke on the reduction of societal inequality. That was the price of peace - a kind of economic policy that would be aimed at preventing 'militarism' (Carter's word) and ensuring international peace.

Keynes worked himself to death, and he passes away of overexertion in 1946, a few months after the end of the Second World War and the orchestration of a new international order at the Bretton Woods conference of 1944.

I was deeply impressed by the first 12 chapters - which incorporate so many aspects of Keynes' life, and incorporated his work in philosophy and association with the aesthetes of the Bloomsbury Group. Carter tells this story entertainingly, eschewing some of the technical details for an able summary, and he incorporates much from Keynes' own archives and primary sources. It is in the last chapters that I feel more concerned.

That still leaves five chapters of the book, which discuss the strands of Keynes' legacy, primarily in the United States. Carter asserts that after the death of Franklin Delano Roosevelt in 1945, and a resurgent anti-Communism in the Cold War, Keynesian economics grew more sidelined. For examples, he cites the authors Lorie Tarshis, John Kenneth Galbraith, and that a distorted view of Keynesian economics was able to hold on, championed by ... Paul Samuelson, who in Carter's view, presents an obscurantist, mathematical view of economics to avoid right-wing scrutiny.

That Paul Samuelson? Who was also under serious attack by the anti-Communist right? Who was not only a major textbook writer, but also one who wrote in those textbooks on gender inequality, racial inequality, etc.? His contrast between Samuelson and Galbraith seems too artificial and even to my layman view seems suspicious. Additionally, there was a minor detail in the narrative, but its more of a sign in terms of basic facts that caught my attention. Carter cites Lawrence Klein, a Nobel prize winner founder of computer modeling in the field of econometrics, as an economic 'historian'. This causes me to doubt if Carter's assessment of economic history post-Keynes is on the mark.

Finally, this story of Keynesianism in the mid-20th century seems under doubt. Given the relative influence of Keynes on so many successive economists, it would be easy to find those who were war-hawks in foreign policy and those who were not. Recasting a 'good' and 'bad' set of Keynesians may work for a popular history, but given how many conservative and liberal administrations borrowed from his policies, that's a harder sell.

But for Keynes' life himself, I had the impression that I was shown some of the complexity and competing influences in that story. The book reads well and there was a lot of substance in it. I'm glad to have read it.

[Jakub Dovcik · Rating 5 out of 5]

About 2/3rds of the book is a fascinating intellectual biography of John Meynard Keynes, considering his intellectual developments, and achievements, but also the values he was grounded in. It presents a complex portrait of Keynes - a public intellectual explaining complex theoretical ideas to the masses and an academic economist, developing complex ideas comprehensible for the very few; a mover-and-shaker within the halls of Whitehall, influencing the levers of power, but also a truthteller, not shying away from attacking people he closely worked with for years.

While Taylor to a large extent skips Keynes’ childhood and early adulthood (the book really begins with the outbreak of the First World War)- his university days, friendships with Bertrand Russel and Ludwig Wittgenstein and work for the India Office are briefly mentioned, but not really explored - Taylor shows the importance of the Apostles and Bloomsbury circles to Keynes and his lifelong values. Artistic expression and appreciation for its various forms was a cornerstone for his worldview and economics was only among the means to securing “the good life” of virtues.

Keynes that Taylor presents is much more than an economist - a philosopher, political thinker and social theorist and critic, but also a financial speculator and businessman (he was bold in actions like self-publishing the Economic Consequences of the Peace on which he made a lot of money which together with his speculation allowed him to buy the magazine The Nation, which not just influenced the Liberal discourse, but also bankrolled much of the Bloomsbury group). He was pragmatic, intellectually agile and able to develop his opinions - like for instance about tariffs and free trade - during his career in response to the changing circumstances of the global order. But, Taylor argues, a key aspect of Keynesianism was always his Burkean belief in the necessity to preserve social stability and order - that, more than radicalism attempting to upset orthodoxy, informed his books and ideas from the Economic Consequences of the Peace to the end of his life.

One of the best aspects of the books is the analysis of Keynes’ major books, which put them in intellectual, political, but also interpersonal contexts. Like for instance that the Economic Consequences of the Peace was not just a rant out of desperation, written after the disappointments of the negotiations at Versailles, but also an attempt to gain recognition in the Bloomsbury group as a writer, where among all the artists (like Virginia Woolf, Keynes was merely a lowly economist and diplomat.

A Treatise on Probability and A Tract on Monetary Reform show the early versions of ideas that influenced his later thinking, departing from the classical economics of his mentor Alfred Marshall (who again, is only briefly mentioned, largely in relation to his misogyny).

Beginning with The End of Lasses-Faire and later Treatise on Money, Taylor shows how Keynes began to truly break the grip of the classical orthodoxy. Especially Keynes’ work on economic history in The Treatise on Money shows that money was always a product of the state, which was revolutionary in his time and is still often misinterpreted in today’s popular economic discourse.

And while The Economic Possibilities for Our Grandchildren is often remembered for its prediction about a 15-hour workweek, it is more convoluted - it shows the possibilities for a future not just post-scarcity, but also after satisfying the investment needs of 1930s Britain (Keynes argued for the government doing 2/3 of all investments in the economy), which formed an important part of his argumentation for massive programs of public works, to get Britain out of the Depression.

All across the book are references to Keynes’ memorable quotes, like his reference to the need to build .“a form of society which shall be ethically tolerable and economically not intolerable.” , or this amazing quote from The Treatise on Money:

“The important thing for government is not to do things which individuals are doing already, and to do them a little better or a little worse; but to do those things which at present are not done at all."

It is also great to read about the influence of economists around Keynes like most of all, Joan Robinson (and her intellectual journey sketched across the book is itself fascinating, as she is probably the most undervalued of modern economists - like few people really stress that she created the theory of monopsony), but also lesser-known figures, like Richard Kahn, Keynes’ academic right-hand man.

In the whole book, it is fascinating to read how Keynes was able to think both within and outside of his time. To move his thinking beyond the 19th-century tenets of scarcity and efficiency, to the problems of allocation and inequality, with the ultimate focus on their political effects.

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The last 166 pages of the book, however, somewhat feel like a different book - focusing solely on the interpretation of post-war economics and economic developments in the United States - and to a lesser extent within the economic profession in general. How, in the author’s words ‘Keynes the philosopher of war has given way to Keynes the fiscal therapist.’

It shows how Keynesianism moved and transformed in its political effects from Burkean conservatism (Keynes) through 1930s radicalism (Robinson, but also Lauchlin Currie) to, what Taylor argues, was an adaptation to the political mood and environment in the United States (Samuelson hiding Keynes behind econometrics, Galbraith embracing corporate America with his theory of the equilibrium of power/countervailing power). Large parts of the latter part of the book feel like an intellectual biography of John Kenneth Galbraith.

Taylor does not idealise Galbraith (he is described as arrogant and self-important) but believes his ideas to be truer to Keynesian values than those of Heller, Samuelson or Solow. Especially the discussion of the Affluent Society is interesting and insightful, also in relation to the discussion of what really is Keynesianism, economics and economic policy in the post-Keynes era - a toolbox of solutions for crises, or a more complex (and philosophical/value-driven) approach to a better state and society?

As Galbraith has to a large extent faded into history in recent decades, it is nevertheless fascinating to read about his influence on the public debates in the 1950s and 1960s, the experiences with taming inflation and price controls in the US (which are more than relevant now) and generally his critiques that established today’s common phrases like “conventional wisdom” - “the class of ideas considered acceptable to right-thinking people in government. Those ideas were not necessarily directly related to the financial interests of the ruling class, but they were the ideas that elites found most comfortable and enjoyed reading about in newspapers or hearing repeated in speeches or represented in art. Such thinking was not necessarily wrong, but it was inevitably behind the times; the conventional wisdom had always been developed in response to a particular set of circumstances and was always vulnerable to political and social change.”

This part also has some incredible quotes by Joan Robinson that should be more present in contemporary discourse, like “Normality is a fiction of economic textbooks.” or “The point of the General Theory was to restore human agency to economic theory.” (which she argues was eliminated by Samuelson, Hicks and Solow); or “economic production could not be understood as a self-sustaining set of processes independent from social norms and political realities.”

Some other bits of the latter part are also fascinating - like the story about the first Keynesian textbook in the US, written by by Lorie Tarshis was cancelled after a letter-writing campaign by Merwin Hart, a pre-cursor to the neoliberal activists of the political Right in the US, utilizing the power of donor funding to influence the mainstream economic narrative, that is, as is shown even in Kenyes’ own exchanges with Hayek, inherently political. (Generally interesting are also discussions about the antisemitism across the book, latent in the Bloomsbury circle and by Kenyes himself, and relatively frequent by the circle around Luhnow that funded Hayek and Friedman).

But there are also annoying bits, like constant references to what the author thinks would Keynes think at one junction or another (which is difficult to say, not least because of Keynes’ pragmatism in questions of policy), over-use of neoliberalism for most of what the author disagrees with or excessive use of Norman Angell without reference to his book as a shibboleth for false belief in the pacifying influence of international trade.

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Overall, the book is well worth a read - it just should be rather labelled for what it is - a composite of an excellent intellectual biography of a complex man and thinker and author’s narrative about the post-war economy and economics in the United States.

[Peter · Rating 4 out of 5]

In spite of his one-time prominence, John Maynard Keynes ("Cains") isn't a household name today. So Zachary Carter's The Price of Peace: Money, Democracy, and the Life of John Maynard Keynes (2020) is a timely effort to fill that gap.

Keynes's Personal Life: A Thumbnail Sketch

It's well known that Keynes was homosexual. This was not unusual in his generation on Britain among prep school and university students. For Carter it is an up-front issue in Keynes's life, and Carter marvels at Keynes's successful marriage to an internationally-acclaimed Russian ballerina named Lydia Lopokova.

Carter does write well, as in this beautifully phrased snapshot capturing the complexity of his subject:

Keynes was a tangle of paradoxes: a bureaucrat who marries a dancer; a gay man whose greatest love was a woman; a loyal servant of the British Empire who railed against imperialism; a pacifist who helped finance two world wars; an internationalist who assembled the intellectual architecture for the modern nation-state; an economist who challenged the foundation of economics. But embedded in all of these seeming contradictions is a coherent vision of human freedom and political salvation.

Keynes Before WWI

John Maynard Keynes ("Maynard") was born in 1883, the son of Ada Keynes, a social reformer, and John Neville Keynes ("Neville"), an economist at King's College, Cambridge University. He attended Eton College and graduated from King's college in 1908 with a first in mathematics—Bertrand Russell extolled his brilliance. In the same year he took a civil service position at the India Office, where he worked on financial matters in India.

Though his education was in mathematics, Maynard's primary interests were in political philosophy and economics. He was a liberal of his day, believing that that government could be the solution for many social and economic problems. He was also a problem-solving optimist, an outlook that shaped his career and his work. His impact on economics began in 1909 when he was given a minor academic position as a lecturer at King's College, where his father was a noted economist. In 1911 he published Indian Currency and Finance, a result of a brief attachment to the India Office. In that treatise he argued that India should have a different monetary system for international and domestic transactions: the British pound—a gold standard currency—for international finance; a paper standard, the rupiah for domestic finance. This idea would eventually inform hos proposals for a new international monetary system after WWII.

In 1911 Keynes was appointed editor of The Economic Journal, a position from which he could help shape the field by selecting papers worthy of publication. His particular expertise was in finance and monetary theory, and he would soon be tested.

At the outbreak of the war in August 1914 Keynes was called to assist in managing the financial crisis facing Britain: speculative runs against the pound, both internal and external, were draining Britain's coffers of gold and of currencies convertible into gold. The result was "tight money" with high interest rates and a declining domestic money supply. A recession was in the headlights when in 1915 Keynes was appointed to an official position in the Treasury to manage the problem. This began a lifelong career with one foot in the academy and one foot in government, a career that continued until his death in 1946.

The standard prescription for resolution of a financial crisis under the gold standard was to either devalue the pound (raise the price of gold in terms of pounds) or to suspend convertibility entirely (simply end the requirement that the Treasury buy or sell gold), thus letting the pound "float." In the absence of those steps, the only solution was price deflation to reduce the domestic price level relative to price levels for trading partners.

Bankers, the Treasury, and the Bank of England objected to devaluation or suspension of convertibility because London's position as a financial center would be compromised. Instead they proposed a plan to end the sale of gold to foreigners—a suspension of external convertibility but a continuation of internal convertibility: British citizens could trade pounds for dollars, but foreigners could not. This would reserve the British gold stock for internal use.

Keynes opposed that idea and made a counter-proposal based on his work in India: end sales of gold to the public (suspend internal convertibility) but maintain external convertibility. This turned the proposal by the bankers and their fellow travelers on its head: the gold specie (coins) used in domestic transactions would be replaced by new Treasury notes not convertible into gold. The risk was that the public would reject the new and inconvertible currency, in which case they’d want to get rid of the bad currency and inflation would emerge, exacerbating a foreign run on gold.

To almost everyone's surprise, Keynes's proposal was adopted, and it worked: the new paper currency was accepted and the external drain of gold stopped because foreigners now believed there was sufficient gold at the British Treasury to maintain convertibility.
Keynes Between the Wars

In 1919 Keynes attended the Paris Peace Conference that hashed out the Versailles Treaty finalizing WWI. From this vantage point he wrote The Economic Consequences of the Peace (1919), a book assessing the Treaty and predicting that the massive reparations in gold and resources (like German rolling stock, Ruhr coal production) levied by the Triple Entente (France, Britain, the U. S. and Russia) to reimburse them for the costs of the war would impoverish the Central Powers (Germany and Austria-Hungary) and set the foundations for another European war. He was, of course, correct: WWII would pop up twenty years later.

The next serious crisis occurred in 1925 when Winston Churchill, the Chancellor of the Exchequer, decided to return Britain to the international gold standard. Once again, this was driven by a desire to enhance London's position as a financial center. The return to gold at prewar parity ($4.86) was a disaster—during the war the British price level had risen sharply relative to U. S. prices. At the pre-war parity the pound was greatly overvalued—the price to foreigners of British goods was much higher than before the war and, as a corollary, the prices of foreign goods were much lower.

The return to pre-war parity created a sharp decline British exports and a correspondingly sharp increase in imports to Britain. The result was sizable net imports of goods, an imbalance that was financed by an outflow of Britain's scarce post-war gold supply to other countries. The only way to stem the gold outflow was to deflate the economy via high interest rates. The result was severe unemployment that lasted until external gold convertibility was suspended in 1931. The domestic economy's troubles from this self-inflicted wound left the British with over a decade of social unrest and unemployment, and left it ill-equipped for the arrival of WWII. In addition, U. S. attempts to help by maintaining low interest rates helped to create an economic boom that would end with the 1929 stock market crash.

The Great Depression

The Great Depression that took the world by storm in 1930 changed the direction of Keynes's thinking. He set out to explain why the world stayed in such a prolonged economic slump when the received economic doctrine—now called “neoclassical economics”—held that business cycles were self-correcting: a slump (or a boom) would initiate adjustments of relative prices, of the national price level, and of interest rates that would return the economy to a stable position of full employment. This would take time, but the common assumption was that any intervention by government would only slow the adjustment process.

So, for example, during a recession the neoclassical course for economic policy was government spending austerity and tax increases to balance the budget. True, these steps might make things worse in the short-run but they would hasten the return to full employment. This idea shaped FDR's unfortunate tax increases in 1936, and it is still in vogue—consider the austerity adopted by the British government after the 2008 financial collapse, or the European Economic Community 's reaction to the financial collapse of weak Euro-region countries ("the southern tier"), particularly Greece!

For a variety of reasons, Keynes thought that reliance on self-correction was dangerous. He argued that the process of natural adjustment could be very long, famously quipping that “in the long run we're all dead." And he had the Great Depression as an immediate example. His analysis of the basis of the Great Depression was published in two books—A Treatise on Money (1930) and The General Theory of Employment, Interest, and Money (1936). The second was by far the most influential: it would kick-start the field of Macroeconomics and upend our understanding of the role of government in responding to a business cycle. Regrettably, The General Theory was anything but general, and the book was almost unreadable, even among economists, so it has taken many decades to flesh out its finer points. But they can be reduced to a few observations.

1. Capitalist economies suffer from high unemployment when aggregate demand is insufficient.

2. Capitalist economies are is not homeostatic: there is no automatic adjustment mechanism that returns an economy to full employment within a reasonable time. Thus, an economy can get stuck at an "underemployment equilibrium."

3. Economies stuck at an underemployment equilibrium require active government policies to promote spending and get on the path to full employment.

4. In an underemployment equilibrium, monetary policies are likely to be ineffective.Monetary policies rely on an increase in money supply or, equivalently, a decrease in interest rates. But when interest rates are very low, as is common in depressions, monetary policy is toothless because of a "liquidity trap" in which additional money is willingly held and not spent or loaned.

5. The only effective action is a depression is fiscal policy in the form of direct government spending or tax cuts designed to increase private spending.

The Bretton Woods Conference, 1944

Keynes's last major appearance was at the 1944 Bretton Woods Conference in New Hampshire 1944. The international financial system was in a shambles: all countries were off of the gold standard and foreign exchange rates “floated” according to demand and supply. The notion of a world of floating exchange rates was abhorrent at the time, and some way of getting the advantage of fixed exchange rates without the burden of a gold link was sought.

The Bretton Woods Conference was devoted to redesigning the international monetary system. Prior to the war that system had been a “gold standard” in which each participating nation fixed the price of gold in terms of its own currency. This, of course, established a fixed price of one currency in terms of another. For example, in 1925 the U. S. Mint bought and sold gold at $20.64 per ounce and the British Treasury bought and sold gold at £4.25 per ounce, resulting in $4.86 as the dollar price of a British pound sterling.

That system had always been problematic because at any time the world’s stock of gold was both (largely) fixed in amount and unequally distributed among nations: after WWI the bulk of the world’s gold supply was in American and French hands; after WWII it was almost all in American vaults. This left the deficit-ridden European nations with little ability to buy the goods needed to restore their economies. Furthermore, the fixity of the world’s gold stock meant that an increasing volume of international trade would induce a general deflation in prices.

Using his work on Indian finance and the ideas expressed in his Treatise on Money, Keynes shaped the British Treasury’s proposal for a post-war international monetary system. An international organization, to be called the International Clearing Union, would be created to make loans to deficit countries in the form of a new international currency called the Bancor; surplus countries would accumulate the Bancors used by deficit countries to finance their international trade. Thus, the surplus countries would effectively finance the net imports of the deficit countries.

Bancors would become what we now call “international reserve assets,” displacing gold and avoiding the deflationary tendency of the gold standard that had plagued international finance and trade. In addition, each nation would fix the value of its national currency in terms of the Bancor, just as it had once been fixed relative to gold. The result would be a fixed exchange rate system like the gold standard, but with a flexible monetary base (Bancors) that could grow with the “needs of trade.”

Keynes’s design became the foundation of the new international monetary system, though other countries (particularly the U. S.) put their stamp on the final product: the name of the new international financial institution became the International Monetary Fund (a benign change) and, because the American delegation was loath to give the power of the printing press to an international organization, and wanted to maintain its financial hegemony, the U. S. dollar was specified as the new international reserve asset. In effect, Keynes’s proposal was adopted but the British lost the battle of nomenclature and had to accept a national currency as the international reserve asset. Even so, Keynes and the British delegation had won the war of monetary redesign.

Was Keynes "right"? Well, he was certainly right enough! The last few years have been a laboratory test for Keynes's macroeconomic ideas, and they have been generally supported. Keynes is as relevant now as he was then—his interpretation of the 1930s fits the 2010s well. The U.S. economy is now in the midst of its closest approach to the features defining the Great Depression that we've seen in eighty years—very low interest rates, toothless monetary policy, and U.S. government budget deficits that are out-of-sight as the government attempts to maintain full employment.

Keynes died in 1946 at the very-young age of 63. If I had ten votes to select the Nobel Prize in Economics for best 20th century economist, all ten would go to Keynes. A pox on the naysaying troglodytes that lumber through the internet.

[Milind Hegde · Rating 5 out of 5]

John Maynard Keynes is now famous as the economist who taught the world how to get out of the throes of the Great Depression. In some ways he did do this, but he also did so much more. He was an economist, philosopher, mathematician, popular journalist, international diplomat, a patron of high art. His ideas and life directly influenced the world in the 20th century like no other intellectual, and continue to be relevant today. This is my attempt to form a short coherent picture of some of his important ideas based on my reading of this wonderfully written book, The Price of Peace.

The thematic thread connecting Keynes' economic work is the recognition of the central roles politics and society play in economics. Classical economics held that markets operate rationally and according to essentially natural laws; so, the interventions of governments to guide economies to a desired state inevitably end in disaster, in the same way that meddling in a biological ecosystem will upset its natural cycles and equilibria. In fact, the idea that markets operate according to laws independent of society, politics, and culture is a central part of the broader political philosophy of liberalism, and is also closely associated to its 20th century version, neo-liberalism.

While Keynes saw himself firmly in the liberal tradition for his entire life, much of his work was dismantling the idea that markets are natural and the assumptions that that idea relies on.

First, there was the common analytic simplification of the economy being at equilibrium. For example, introductory economics textbooks state that the price of a good is fixed at the point at which its supply and demand curves intersect: if the supply is greater than what is demanded at the current price, the price will fall (as suppliers struggle to sell all their goods) till demand meets supply, and vice versa if the supply is too low. This is a dynamic that brings the price to the supply-demand intersection point, the equilibrium situation. But it is only in this final equilibrium that the characterization of the price is true---it's not true during the dynamic itself, when the suppliers and customers are witnessing price fluctuations. Keynes realized the enormous importance of this basic distinction between equilibrium and non-equilibrium: since non-equilibrium is the typical scenario, there was a need for a theory which worked under general, non-equilibrium conditions. This is the meaning of "general" in his monumental work The General Theory of Employment, Interest and Money.

Second, he noted that theories which rely on the wisdom of the market only make sense if people are assumed to be rational agents acting in their self-interest. Keynes emphasized the enormous role that the simple phenomenon of uncertainty played in the decisions of people, individually and collectively---a truth that was plain for him to see in the financial crisis that beset London at the beginning of World War I. In times of deep uncertainty, people do not act in any mathematical sense of self-interest, because it is completely unclear what exactly the efficient self-interested action is: if, say, the world economy looks like it will be shut down for months, hoarding money will be the choice made by many, for it is impossible to determine whether more long-term investments have any value at all. This point holds even when the degree of uncertainty is milder: at the end of the day, nobody truly knows the value of investing in, say, a tech company for ten years. People make such investments on the basis not of a calculation of expected payoff, but because of an optimistic belief that the investment will be sound; this belief is supported by many things, including an intrinsic confidence in long-term political stability. (Of interest to me was Keynes origins as a mathematician/philosopher studying the philosophy of probability, and how the ideas he first came upon there developed into his insights into the functioning of markets later.)

These two observations tie back to the deeper underlying truth of economics central to Keynes' thinking: if people act in the face of uncertainty and situations that are in constant flux, both of which are caused by political forces, then it is impossible to extricate society and politics from economics.

This goes hand in hand with another basic observation: the issue facing the economies Keynes was considering then, and many economies today, was not one of scarcity. There was more than enough resources to go around. And so the role of government is not to determine what can be afforded, but how the people would like to live---an unavoidably political problem. A society of general prosperity, equality, and peace was not forbidden by any economic "law", and was achievable given sufficient political will.

What guided Keynes' views was his conception of the good life. He placed enormous importance on aspects of life only available to aristocrats and the upper-most classes of British society, of which he was undoubtedly a part. But these aspects still hold a great deal of appeal today: an appreciation of art, good conversation, leisure, nature and the countryside (a major complaint he had about America was insufficient birdlife). Things which were then luxuries, but did not have to be. Keynes' goal, and in some sense his view of the role of government, was to bring the good life to the larger population.

But to make this possible, a certain amount of stability is needed, both in domestic and international affairs. Keynes evolved in his views on what this precisely meant. As a younger man, he held a starry-eyed view that the British empire essentially secured this stability, but this idea fell apart under the pressure of the reality of World War I and his first-hand perspective of the subsequent imperialist-driven negotiations at Versailles. In response to the collapse of the idealizations of his youth, Keynes initiated the intellectual project of developing an international and domestic system that could sustain the good life. At this point in his mid-30s, fleshing it out in theory and attempting to bring it about in practice occupied him for essentially the rest of his life.

On the domestic side of things, the basic questions were how to ensure economic stability (in terms of indicators like employment and inflation), and how to pay for the public services he wished to call for. One of his important insights was, crudely, that the services would pay for themselves and provide economic stability. His view was that the economy functioned because of demand: in the presence of demand, there was both money to make investments (in technology, infrastructure, and so on) and the confidence that it was worth it. But because of economic cycles, demand would inevitably sometimes falter, such as during depressions or recessions, and the economy would stumble, in spite of the basic physical resources (labour, capital, infrastructure) being plentiful; then, the government has to prop up demand through public spending. (This last prescription is what Keynes is today most associated with, what is commonly called Keynesian economics.) By spending money (for example through public works projects), the government provides employment and puts money into the hands of the people; the people then spend the money, creating demand, confidence, and stability. The money also has a multiplier effect as it passes from one hand to the next, in that one dollar in the government's ledger generates more than one dollar of economic activity as it moves along.

Keynes observed that this last dynamic operates no matter what the government pays people to do. As he said, the government could put money into bottles, bury them in the sand, and have people dig them up, and the effect would be the same. But what Keynes wanted was for the spending to be on services which would support, directly or not, his conception of the good life. It was in this sense that building the good life would itself generate the resources needed to do so. (Notice the importance of the observation that the economy was not in a state of scarcity in terms of physical resources.)

Keynes also believed that from domestic stability could flow international peace. He believed that the siren call of fascism that was heard across Europe in his time only held any appeal because of the economic destitution and unemployment people found themselves in. Of course, these economic difficulties weren't simply domestic matters: a major part was driven by international debts (related to creditors, who ran trade surpluses with debtors, who ran deficits), which he believed may sometimes need to be simply cancelled. And sometimes, he believed, weak nations may need to use protectionist measures---the dreaded enemy of free trade---to give themselves some leeway in their domestic policies.

But determining how to handle debt (cancel it, or bring trade into balance), and when protectionist measures were fair and not predatory was a difficult problem of international relations. A short description of his proposal for this, delivered near the end of his life at the time of the Bretton Woods conference which determined the post-war world economic order, is this: establish an international bank with which all nations hold an account, and give the bank the power to both create its currency at will and to enforce a commitment to balanced trade. With balanced trade, countries would be free to focus on domestic policies for local prosperity, and peace would prevail. If adopted, the proposal would have taken power out of the hands of powerful countries, and so it was promptly rejected by the US at Bretton Woods. In its place, we got the IMF and World Bank, which are very much not the institutions Keynes proposed.

Much of what Keynes was advocating for seems to fit quite easily with leftist positions today. But Keynes considered himself a classical liberal and had an uncertain view on socialism. For example, he was a staunch supporter of Britain's Liberal party in the face of a young and insurgent Labour party. On the other hand, by the end of his life he viewed it as almost necessary that large parts of the economy be socialised, and he was a fierce champion of the National Health Service as its proposal was being developed by the economist William Beveridge. This is in keeping with the difficulty of boxing Keynes into any particular category. For in spite of the definiteness that I've ascribed to Keynes' economic beliefs, what is striking is the flexibility and originality he had in modifying them and his preferred methods in the face of new circumstances, while staying true to his ultimate goal of peace, prosperity, and the good life. He overcame established orthodoxies and defined new ways of thinking many times over. In this way, he is inspiring.

[Andrew Morin · Rating 4 out of 5]

Overall very enjoyable, especially surrounding the relationship between Keynes' political philosophy and economic theory which is very compelling. The book gives a really interesting perspective on the transition from Victorian Europe to the Wars through Bloomsbury, with the social setting and economic theory both well covered.

I do think it would benefit from a tighter focus; the initial adoption through Samuelson and Robinson was great, Galbraith was long and the Clinton/Great Recession coverage was too divorced from the core subject for me.

[Glenn · Rating 5 out of 5]

Because it's about an economist and his theories, and economic practices, it can be a little stiff for the layman, and I have to admit that as cogently and coherently as Carter explains things, I'm not sure I could now convey that to you if you cornered me at a party and demanded an account. That said, this is an engaging and ultimately rather depressing story about an idealist and the numbers that proved his idealism wasn't a delusion. And of how the world got into the mess that it's in, or at least one critical aspect of that "how."

[Jessica Dai · Rating 4 out of 5]

actually the first real great-man biography I've ever read and def worth the while; good to book club

v cool to read about:
- keynes' ~youth~ (with the bloomsbury group - oh to be buddies with the woolf sisters), how it shaped his perception of "the good life," and ultimately his politics;
- the economic dimension of the world wars;
- the birth of an academic discipline & its ideological development in the US

[Unnati Bose · Rating 5 out of 5]

Excellent- a well-written and spectacularly detailed account of economic history since the first world war to now, through the lens of Keynesianism. Zachery Carter mindfully knits together Keynes personal life - his friends, affairs and internal conflicts with his professional experience - his aspirations, failings, mistakes, and everything in between. This book is more than just Keynes and you realize that halfway through when Zachery (sometimes frustratingly) continues to detail how keynes' ideas were deployed long after his death - often contemptuously and always insincerely.

Th book can serve as a primer for all econ undergrads so they understand the inevitable and obvious political project of the discipline. However, it can do with a greater inspection of how these ideals when poorly executed affected the developing world.

[Dave · Rating 4 out of 5]

I had no idea that John Maynard Keynes was such an amazing guy. I vaguely knew him as an economist whose theories influenced FDR during the Depression. I had no idea that he was a journalist, philosopher, member of the Bloomsbury group of authors and artists among other things. And his economic ideas stemmed from a desire to halt war and help the little guys. Unfortunately, he wasn't always listened to.

This isn't a traditional biography in two ways. First, we don't get the cradle-to-grave treatment. Carter begins the bio in 1914 at the start of The Great War, when Keynes is called from his post at university to advise the British government on how to finance the war effort. That begins his lifelong goal to develop economic principles that would help make war less likely and fueled his frustration with the Versailles Treaty that he was convinced would lead to another war with Germany. Unfortunately he was right.

The other way that this is not a typical biography is that roughly the last third of the book follows events after Keynes's death. Carter follows economists like Paul Samuelson, John Kenneth Galbraith and others who took Keynes's work and built on it - or evolved it into something quite different from what Keynes intended. Between the first half of the century when Keynes was alive and the second half, we get an economic history of the 20th century (and the opening years of the 21st - including economic decisions that led to the Great Recession). And Carter manages to make some of the complex theories downright readable.

NOTE - I received an Advanced copy of this book from the publisher through a Goodreads giveaway.

[Sheri · Rating 4 out of 5]

I am doing policy reading this semester; political and economic theories and frameworks are relevant and last week I noticed a link to an interview with Carter on Ezra Klein's podcast and so I peeked at this book. It was advertised as one of the best books of the year and seemed like an approachable background read to supplement the policy stuff. It was very educational, but less entertaining than I had hoped.

I would hesitate to call it a biography as only about the first 2/3rds is devoted to Keynes and his life. Mostly it is a history of Keynesian thought and the effects it has had on the British and American economies from the end of WWI through the Clinton years.

Carter does a great job, though of putting it all into historical context and explaining how economics and economic thinking has changed over time. He is also very clearly a supporter of Keynes and Keynesian thought. My take away is that Keynes believes that there is no such thing as a free market and that the role of government is regulation of the economy. He was also a humanitarian that believed in democracy and a more equitable distribution of resources. Throughout the last century, economic policy has followed Keynes upon occasion, but for the most part policy has been directed towards aiding business interest which has fueled the development of our inequality.

Overall I would not call in an entertaining read, but it was certainly educational.

[Ellison · Rating 5 out of 5]

A very readable and entertaining biography of Keynes and a concise history of the 20th century from an economic perspective.

‘But in his role as an economic theorist, uncertainty became the central psychological insight of his work. Uncertainty couldn’t be measured statistically. People had different levels of confidence about the future, but nobody could calculate it.’

‘…the market prices of stocks, bonds, and other assets created an illusory sense of mathematical certainty about prospective investments.’

‘Uncertainty about the future - not irrationality or stupidity - makes crowds prone to calamity in both finance and politics, particularly under conditions of significant anxiety. Markets are no more self-correcting than a mob hailing a demagogue.’

‘The importance of money essentially flows from its being a link between the present and the future.’

‘In the long run we are all dead. Economists set themselves too easy, too useless a task if in tempestuous seasons they can only tell us that when the storm is long past the ocean is flat again.’
The last two quotes are from Keynes.

[Frederick Gault · Rating 5 out of 5]

One of the finest things I have ever read! I felt as though I had come home when I learned what the brilliant mind of John Maynard Keynes had given to the world. This genius bequeathed us no less than ways to provide prosperity and social justice to us all. Alas, if only we would listen. A few times throughout history JMK's theories were put to the test. The evidence is clear, it works. FDR's end to the Great Depression, the post WW II boom in the USA and many other examples, show that he was right. What did he say? Basically, government has a duty to provide that which Capitalism can not or will not do. Prosperity means the populace won't turn to Fascist leadership in desperation. Spend money on infrastructure, use deficit financing when necessary, don't rely on deflation, and allow sufficient wealth to your citizens so they can be customers. Also, that money given directly to folks who put it right back into the economy is a force multiplier - unlike money given to the wealthy where it sits useless in a bank. I sincerely hope this book reignites trust in JMK's brilliant work.

[Arjun Ramani · Rating 5 out of 5]

- One of my all-time favourite books
- A fascinating biography of one the world's preeminent public intellectuals, an economic history of 20th century Europe, and an intellectual history of economic thought. All in one.
- Loved the tidbits on Keynes's social/love life e.g. the Bloomsbury Group. What is most interesting is he placed his friends' aesthetic pursuits above his material/political ones. Art was the end of history to Keynes. This idea naturally fits with his famous essay: "Economic Possibilities for our Grandchildren", which predicts an almost post-scarcity society of 15hr work weeks and absolute freedom to pursue the arts.
- Keynes viewed economics as a combination of philosophy, politics, and what is now considered classical empirical economics. Yet the way economics is done today, highly mathematical and descriptive, is far cry from that. The book argues this development was historically contingent on factors like 1960s libertarian campaigns in schools, and the popularity of Paul Samuelson's "Principles of Economics" textbook. The point was not developed in depth but I wish it were.

[Agnes]

Edizione in italiano: Neri Pozza

[Jon · Rating 5 out of 5]

Perhaps you’ve heard the term “Keynesian Economics” used before by politicians or economic talking heads, particularly during times of economic upheaval, and have always wondered what it exactly means or where it came from? The Price of Peace follows the life of the man who the term was derived, John Maynard Keynes. Keynes is perhaps the most distinguished and influential economist of the 20th Century and his ideas on modern economics is still utilized today.

Keynesianism can be described as a demand driven economic philosophy of public deficit spending on employment generators such as public works, usually during times of economic recession. The thinking is that when the private sector is in a recessionary period and unemployment is high, the government should fill the void with spending to spur economic activity. The increase in economic activity creates a multiplier effect rippling throughout the economy as more goods and services are required from the creation of public works. Keynes’s ideas were summarized in his 1936 opus “The General Theory of Employment, Interest and Money”.

While not a full-fledged cradle to the grave biography of the renowned economist, the book begins during Keynes’s formative years at Cambridge as part of the eclectic Bloomsbury Group, a group of artists, intellectuals, and writers. Keynes went to work for the British Treasury during WWI, playing an indispensable role in designing the terms of credit to pay for the War. After the War was over and the Treaty of Versailles signed between the Allies defining the terms of the peace, Keynes was aghast at the Treaty’s outcome, believing the terms would cripple the Germany economy so brutally, that the outcome would only lead to more war. He was right.

The Price of Peace is much more than a biography of Keynes but an examination of how his radical ideas changed economic thought and were essential to tackling the challenges after a ravaging world war. Keynes challenged the gold standard and its strict control of the money supply as an outdated vestige to 19th century laisse fair economic theory, and its inability to handle the new world’s challenges. After the death of Franklin Roosevelt, whose New Deal programs espoused and adopted the Keynes’s ideas through government spending on public works and jobs programs, and the death of Keynes in 1948, a massive whole in the force of his ideas were created. The ascendancy of McCarthyism in the 1950s began to portray this economic philosophy as socialist or even communist, which continue to resonate with conservative ideologies today.

While Keynesian economics would be the reigning economic policy and throughout JFK’s New Frontier, LBJ’s Great Society, and the Nixon administration, where he famously stated “we are all Keynesians now”, Keynesian economics began to fall out of esteem, with the ascendancy of Reaganism. The monetarist policies (control of the money supply and interest rates, as opposed to the fiscal approach of Keynes) of economists like Milton Friedman (an acolyte of Keynes’s chief rival Friedrich von Hayek) began to take hold reaching its nadir in the Clinton Administration. While American administrations continued to utilized a form of Keynesianism through deficit inducing tax cuts and military spending, Keynes would have a resurgence during the Obama administration’s stimulus program to combat the financial systems collapse in 2008.

The Price of Peace is a phenomenal work, not only of Keynes the man, but how his ideas shaped economic thought and the modern world. While the death of Keynes occurs about ¾’s of the way through, the remaining section of the book portrays how his ideas began to wane and recently re-surge. Readers looking for a biography only of Keynes may begin to lose interest from there. However, couple this reading with Binyamin Appelbaum’s recently released “The Economists' Hour: False Prophets, Free Markets, and the Fracture of Society”, and you will have a very commanding understanding of the economic ideas and philosophies of the 20th Century though today.

[Matt · Rating 4 out of 5]

Framed as a biography of Keynes, this book actually tries to do much more - tracing the impact of Keynes well beyond the end of his life, all the way up through the Great Recession of 2008. Indeed, almost half the book is about the life of Keynesianism *after* Keynes - the work of John Kenneth Galbraith and his long running intellectual dispute with Paul Samuelson, the neoliberalism of Milton Friedman, and the varieties of "radical," "reactionary" and "centrist" versions of Keynesianism in the latter half of the 20th century.
At times the book borders on the hagiographic. Here, for instance, is how Carter sums up Keynes' impact midway through the book:

“No European mind since Newton had impressed himself so profoundly on both the political and intellectual development of the world. When the Times wrote Keynes’ obituary, it declared him “the greatest economist since Adam Smith.” But even praise so high as this sold Keynes short, for Keynes was to Smith as Copernicus was to Ptolemy—a thinker who replaced one paradigm with another. In his economic work he fused psychology, history, political theory, and observed financial experience like no economist before or since.”

But while the author certainly finds much to admire in Keynes, one gets the distinct sense that his true sympathies lie with the more radical ideas of Joan Robinson. If Keynesianism faced problems in the 20th century, according to Carter, it's because it betrayed Keynes radical and utopian foundations, and erred in conceding too much to mathematization and the demands of the political right.

Readers with Austrian sympathies will find much to sympathize with in Robinson's critique of the path Keynesianism took. The problem with the Neo-Keynesians, according to Robinson, was essentially that they ignored the role human action in economics. More specifically, that they ignored the role of agency, uncertainty, irrationality, and time. These are all factors that Austrians have also identified as lacking in mainstream economic analysis, so that even as their prescriptions go in quite a different direction than Robinson's, they find a shared target of reproach in much of the dominant Keynesian orthodoxy of the 20th century.

An enjoyable and informative read!

[Justina · Rating 4 out of 5]

Last night someone asked me how I found the book, and I said "Long." That is what it has to be: a biography of a polymath and an intellectual history of one of the most important -- and still one of the most frequently invoked -- economic ideas from the 20th century. There are parts of it where in order to set up the debate over a particular legacy of Keynesianism, the author delves into chapters of American political history that have little direct link to the man itself (indeed, about a quarter of the book is about the period after his death) and there are times when I wonder if they book has wandered off course (an example is an attack on a failure by the Obama administration that seems far too specific for the subject of this book).

But that also speaks to the book's dedication to parsing the various strands of Keynesianism and its discontent -- as well as the man's far-reaching impact.

The book is particular intriguing in capturing the nuanced fact that while Keynesian economics have largely won over western democracies in the narrow sense that governments do tend to spend in recessions -- the pandemic economy would be a perfect example for the book -- many of its underlying principles have been largely forgotten.

While today he is mostly known for demand-side economics, the book emphasizes his dedication to peace and the arts; if anything, sound economic management is only a means to an end to him.

Keynes was also a different kind of economist than what we are now used to. His ideas responded to the times, were much broader than pure economics and much less mathematical. While his core proposal seems to have taken root, the whole profession has developed in a different direction.

While the book still leans toward the intellectual, it also evokes a Bloomsbury pulsing with interpersonal drama, friendship, romance and talent. Virginia Woolf's recollections are a literary bonus of this book.

Its hidden (?) heroine is Joan Robinson, the firebrand Cambridge economist who fought to preserve Keynes's legacy from what she sees as the distortions of the American cohort. Oh, she also has a juicy romantic side story.

Even if you have little interest in the man, this book serves as a in-depth look at the sharpest economic debates from WWI through the Great Depression, WWII and the post-war boom. Indeed, that might be the benefit of this book's length and breadth: you'll end up learning a whole lot more than just a famous economist's biography.

[Barry · Rating 3 out of 5]

3.5 stars

Ostensibly a biography of Keynes, this book functions more as a history and defense of Keynesian economics. Indeed, the death of Keynes occurs about 2/3 of the way in, and the final third then follows how closely his theories have been adhered to over the past 70-plus years. Carter contends that when economies flourished it was because they followed Keynesian principles, and when economies languished it was because these ideas were either abandoned or not followed closely enough.

The book has a decidedly political slant which makes me a little more skeptical about its economic interpretations and pronouncements, but at minimum, it does demonstrate the critical importance of proper monetary policies and financial regulation, and thus serves as an effective takedown of laissez faire economics. But then again, nobody these days really argues that government should have no role to play in making sure that a free market functions as it should...


2020 MGM BAB Challenge:
1. The Fellowship (656 p)
2. Lonesome Dove (964 p)
3. These Truths (960 p)
4. Wind-up Bird Chronicle (607 p)
5. Parting the Waters (1120 p)
6. Gone with the Wind (1037 p)

Bonus round:
7. The Count of Monte Cristo (1138 p)
8. Pillar of Fire (746 p)
9. Dominion (612 p)
10. Les Miserables (1456 p)
11. Price of Peace (656 p)

CBNC
The Splendid and the Vile (585)