Keynes for Our Times
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Bibliographic details
- Authors: ROBERT SKIDELSKY
- Published: June 2, 2026
Core argument and purpose
- Keynes’s moral philosophy and embrace of uncertainty remain relevant for economics, finance, and AI-driven markets today.
- Two philosophical commitments undergird his economics:
- In ethics, the distinction between “good as a means” and “good as an end.”
- In epistemology, the existence of ineradicable uncertainty.
- Keynes gave money a starring role because uncertainty turns money into a psychological refuge that can drive economies toward collapse when people flee to cash.
Theory of probability, uncertainty, and money
- Keynes’s theory of probability: probability is the degree of belief in a conclusion justified by evidence; earlier neoclassical economists treated the future as predictable.
- Under conditions of “uncertain” knowledge (examples Keynes gives: “the prospect of a European war,” “the price of copper and the rate of interest twenty years hence,” “the obsolescence of a new invention”), there is no scientific basis to form calculable probabilities.
- In information-poor markets, investors rely on conventional wisdom; when conventions break down, flight from commitment occurs and “money takes control of the economic plot.”
Evolution of Keynes’s monetary thought (chronology of ideas)
- Attack on the gold standard: gold’s scarcity created a deflationary bias; expanding economies need an increasing amount of “lubricating” money (examples: Long Depression of the 1880s and 1890s).
- Quantity Theory of Money: initial instrument to restore monetary “neutrality” via an elastic currency to fit the “needs of trade”; found to be too slow.
- A Treatise on Money (1930): introduced circulation at different speeds—“real” economy versus “financial” circulation—to explain how asset prices and unemployment can rise simultaneously in the short run; did not explain hoarding.
- Liquidity preference theory (final stage, developed around the Great Depression; Keynes quoted from 1932): collapse of investment is simultaneously a flight to liquidity; flight gives money a “liquidity premium” that can cause interest rates to rise rather than fall.
Liquidity preference in practice (recent manifestations)
- Keynes’s liquidity preference explains:
- the global financial crisis of 2008,
- the early-COVID-era dash for cash,
- dramatic swings in stock prices known as “flash crashes,”
- other recent market seizures.
Moral and psychological critique of money
- Keynes viewed the “love of money” as a moral flaw—a disease of the mind that drains life from the economy; he used King Midas as a symbol of money’s “vampiric” quality.
- Hoarding in modern times perplexed Keynes because living conditions are more secure; saving seen not as virtue but as a brake on enterprise: “[I]t is not thrift but enterprise which builds cities and drains fens.”
- The economic plot of history is the struggle for power between creditors and debtors; Keynes’s reforms aimed to reduce the power of the creditor over economic life.
- Government programs should harness “the inordinate desire for getting wealth” to drive productive investment.
Policy implications and recommendations for today (three priorities)
- First: Re-examine the purpose and limits of economic growth
- Ask how much more growth, and what kinds of growth, are needed to secure material conditions of the good life.
- Economic activity is a means to achieve the good life and “should not be extended beyond what is needed for that purpose.”
- This philosophy informs ethical questions about an AI-enabled future and supports public investment to address hoarding of wealth alongside stagnation and underemployment.
- “Vigilant observation” should enable rejecting theories such as the efficient market hypothesis.
- Second: Put money back in circulation—disgorge hoarded wealth
- Keynes’s original attack on the gold standard targeted both metal scarcity and surplus-country hoarding (example: the United States as the King Midas of Keynes’s day).
- Aim to restore balanced trade without resorting to blunt tools such as global tariffs.
- Proposals to achieve this include:
- Replace the reserve function of the dollar with a new international reserve currency called the “bancor.”
- Or achieve the same result through a progressive increase in the special drawing rights of IMF members.
- Historical notes:
- The US rejection of Keynes’s approach led to the dollar-centered Bretton Woods system set up in 1944, with the greenback alone convertible to gold.
- China’s former central bank governor, Zhou Xiaochuan, revived the bancor idea in 2009; that movement for currency reform was quashed by the US.
- A decline in the value of the dollar was argued as necessary to restore US manufacturing and export capacity; tariffs (example: President Donald Trump’s) are characterized as a crude and disruptive attempt at currency realignment.
- Third: Fearlessly face dangerous times to preserve “efficiency and freedom”
- Ask whether democracy can tame financial oligarchy, tackle racial and cultural conflict, invest to counter growing inequality and global warming, and prevent regression to barbarism.
- Keynes observed in 1939 that war was the grand experiment that proved his case: World War II, not The General Theory, brought about full employment.
- Keynes’s ideas aim to restore health to civilization in conditions of peace and freedom rather than by military means.
- The collapse of belief in a good future amplifies economic, geopolitical, and spiritual troubles; the central question echoes Keynes in 1936: must an apocalypse jolt politicians, or can better analysis restore health?
Key quotations preserved
- “better to be vaguely right than precisely wrong.”
- “One can always cook a formula to fit moderately well a limited range of past facts,” — on limits of formulaic prediction.
- “By ‘uncertain’ knowledge, let me explain, I do not mean merely to distinguish what is known for certain from what is only probable. The game of roulette is not subject, in this sense, to uncertainty…”
- “[I]t is not thrift but enterprise which builds cities and drains fens.”
Source: Keynes for Our Times, ROBERT SKIDELSKY, June 2026, F&D Magazine. Editor’s note: The author died on April 15, aged 86; final edits to this article, which draws on his forthcoming book, Keynes for Our Times, were agreed to by his assistant, Attila Mesterházy.
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