Robert Skidelsky, Keynes: The Return of the Master (Why, Sixty Years After his Death, John Maynard Keynes is the Most Important Economic Thinker for America). Public Affairs, 2009.
Skidelsky’s new book argues that Keynes is incredibly relevant in today’s world of financial and economic crisis. Hard to disagree with that, although some obviously do. My new Globaloney 2.0 explicitly draws upon a few of Keynes’s writings that I think are essential to understanding today’s situation and the future of globalization. So I couldn’t wait to see what Skidelsky has to say.
Robert Skidelsky is John Maynard Keynes’s foremost biographer — I have read and given glowing reviews to all three volumes of his Keynes biography trilogy and to the weighty all-in-one final book, too. Great research, beautiful writing — Skidelsky on Keynes is just fascinating.
What would Keynes do?
What would Keynes say about today’s crisis if he were alive today? That’s a tricky question, because Keynes was very pragmatic within the framework of a few strong principles. He wouldn’t say the same thing today as he did back in the 1930s — the situation is different, and so his pragmatic side would prevent a strictly doctrinaire response. You’ve got to go back to first principles, and that’s what Skidelsky tries to do.
The most important idea here is Keynes’s understanding of uncertainty. Dick Cheney famous said that there are four kinds of knowledge: known knowns, unknown knowns, known unknowns and unknown unknowns. Keynes was interested in the last two categories. Known unknowns represent risks that it is possible to assess relatively accurately and hedge against. You can calculate the odds and place your bets. But there are other circumstances where there will never be enough information to know the odds — unknown unkowns in the Cheney lexicon, or simply a more profound concept of uncertainty to people like you and me who lack Cheney’s poetic bent.
The problem, in this view, is that the financial markets confused risk (known unknowns) with the deeper uncertainty (where the odds can never truly be known). The Crash of 2008 is the obvious result.
Now that I have your attention …
I agree with this assessment — in Globaloney 2.0 I call this concept “Financial Globaloney” — the idea that global financial markets are somehow “safe as houses” (irony intended since it was the housing market that was the focus of much unwise speculation); all the risk cannot be calculated and filed away. Thinking you know the unknown unknowns will kill you.
Once Skidelsky has your attention with his analysis of Keynesian uncertainty he takes you on a guided tour of Keynes’s principles and legacy more generally. I found this less interesting, I’m afraid, probably because I have read it before in the biographies and maybe because Skidelsky’s prose is a bit less elegant as he strains to make his points (although he still writes maybe ten times better than I do). Definitely worth reading as a contribution to the current debate and an appropriate tribute to Keynes.
[Note: In Britain the long sub-subtitle of this book says that Keynes is "... the Most Important Economic Thinker for the World." Apparently the U.S. publisher doesn't think Americans are interested in the world, so the title was changed to "... for America." Perhaps they are right, but I'd like to think otherwise. The first Harry Potter book was called Harry Potter and the Philosopher's Stone in the UK but changed to Sorcerer's Stone for the US market. I guess Americans are not interested in or willing to buy books about either philosophy or the world. Pity, that.]