{ "title": "Keynes for Our Times", "sourceUrl": "https://www.imf.org/en/publications/fandd/issues/2026/06/keynes-for-our-times-robert-skidelsky", "canonical": "https://www.imf.org/en/publications/fandd/issues/2026/06/keynes-for-our-times-robert-skidelsky", "overlayPath": "/en/publications/fandd/issues/2026/06/keynes-for-our-times-robert-skidelsky/index.md", "summary": "Keynes’s moral philosophy and embrace of uncertainty can guide economics, finance, and AI-driven markets today", "sections": [ { "heading": "Core argument and purpose", "content": "- Keynes’s moral philosophy and embrace of uncertainty remain relevant for economics, finance, and AI-driven markets today.\n- Two philosophical commitments undergird his economics:\n - In ethics, the distinction between “good as a means” and “good as an end.”\n - In epistemology, the existence of ineradicable uncertainty.\n- 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." }, { "heading": "Theory of probability, uncertainty, and money", "content": "- 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.\n- 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.\n- 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.”" }, { "heading": "Evolution of Keynes’s monetary thought (chronology of ideas)", "content": "- 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).\n- 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.\n- 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.\n- 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." }, { "heading": "Liquidity preference in practice (recent manifestations)", "content": "- Keynes’s liquidity preference explains:\n - the global financial crisis of 2008,\n - the early-COVID-era dash for cash,\n - dramatic swings in stock prices known as “flash crashes,”\n - other recent market seizures." }, { "heading": "Moral and psychological critique of money", "content": "- 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.\n- 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.”\n- 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.\n- Government programs should harness “the inordinate desire for getting wealth” to drive productive investment." }, { "heading": "Policy implications and recommendations for today (three priorities)", "content": "- First: Re-examine the purpose and limits of economic growth\n - Ask how much more growth, and what kinds of growth, are needed to secure material conditions of the good life.\n - Economic activity is a means to achieve the good life and “should not be extended beyond what is needed for that purpose.”\n - This philosophy informs ethical questions about an AI-enabled future and supports public investment to address hoarding of wealth alongside stagnation and underemployment.\n - “Vigilant observation” should enable rejecting theories such as the efficient market hypothesis.\n- Second: Put money back in circulation—disgorge hoarded wealth\n - 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).\n - Aim to restore balanced trade without resorting to blunt tools such as global tariffs.\n - Proposals to achieve this include:\n - Replace the reserve function of the dollar with a new international reserve currency called the “bancor.”\n - Or achieve the same result through a progressive increase in the special drawing rights of IMF members.\n - Historical notes:\n - 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.\n - China’s former central bank governor, Zhou Xiaochuan, revived the bancor idea in 2009; that movement for currency reform was quashed by the US.\n - 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.\n- Third: Fearlessly face dangerous times to preserve “efficiency and freedom”\n - 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.\n - 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.\n - Keynes’s ideas aim to restore health to civilization in conditions of peace and freedom rather than by military means.\n - 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?" }, { "heading": "Key quotations preserved", "content": "- “better to be vaguely right than precisely wrong.”\n- “One can always cook a formula to fit moderately well a limited range of past facts,” — on limits of formulaic prediction.\n- “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…”\n- “[I]t is not thrift but enterprise which builds cities and drains fens.”\n\nSource: 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.\n\n---\n\n Content in this bundle\n\n- Keynes for Our Times\n - Keynes for Our Times (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n - Keynes for Our Times (PDF){rel=\"external\" type=\"application/pdf\"}\n\n---\n\nSource: https://www.imf.org/en/publications/fandd/issues/2026/06/keynes-for-our-times-robert-skidelsky" } ], "bullets": [ "[Markdown version](/en/publications/fandd/issues/2026/06/keynes-for-our-times-robert-skidelsky/index.md)", "[Structured JSON version](/en/publications/fandd/issues/2026/06/keynes-for-our-times-robert-skidelsky/index.json)", "[Bundle manifest](/en/publications/fandd/issues/2026/06/keynes-for-our-times-robert-skidelsky/bundle-manifest.json)", "Authors: ROBERT SKIDELSKY", "Published: June 2, 2026", "Keynes’s moral philosophy and embrace of uncertainty remain relevant for economics, finance, and AI-driven markets today.", "Two philosophical commitments undergird his economics:", "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.", "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.”", "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.", "Keynes’s liquidity preference explains:", "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.", "First: Re-examine the purpose and limits of economic growth", "Second: Put money back in circulation—disgorge hoarded wealth", "Third: Fearlessly face dangerous times to preserve “efficiency and freedom”", "“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.”", "**Keynes for Our Times**" ], "related": [ { "title": "Keynes for Our Times", "role": "document", "sourceUrl": "https://www.imf.org/-/media/files/publications/fandd/article/2026/06/skidelsky.pdf", "summary": { "path": "/-/media/files/publications/fandd/article/2026/06/skidelsky.pdf.md", "mime": "text/markdown" }, "binary": { "path": "/-/media/files/publications/fandd/article/2026/06/skidelsky.pdf", "mime": "application/pdf" } } ], "alternates": { "markdown": "/en/publications/fandd/issues/2026/06/keynes-for-our-times-robert-skidelsky/index.md", "json": "/en/publications/fandd/issues/2026/06/keynes-for-our-times-robert-skidelsky/index.json", "bundleManifest": "/en/publications/fandd/issues/2026/06/keynes-for-our-times-robert-skidelsky/bundle-manifest.json" }, "generatedAtUtc": "2026-09-15T20:28:56.974Z" }