Some Economic Consequences of a Declining Population

Abstract

For demographers, and for members of the Galton Institute, John Maynard Keynes (1883-1946), Baron Keynes of Tilton, may be most remembered for having turned his astonishing talents to address the issue of population in his famous Galton Lecture of 1937, which is reprinted below. Before considering that essay, however, we should step back to consider Keynes the academic economist, the civil servant, the international negotiator, the college bursar, the patron of art. In early life he oscillated between civil service life in the India Office (1906–08), and lecturing in economics at Cambridge (1908– 13), where he began his editorship of the Economic Journal up to 1945. He returned to the civil service in 1915, joined the Royal Commission on Indian Finance and Currency 1913–1914 and acted as the principal representative of HM Treasury at the Versailles Peace Conference in 1919. There, his farsighted belief that the Versailles proposals on changing European borders, and on German reparations, were destructive and counter-productive provoked his resignation in 1919. His objections were set out in ‘The Economic Consequences of the Peace’ (1919), the first and one of the most famous of a number of books which set out strong opinions in compelling, lucid and elegant prose seldom if ever approached by latter-day economists and demographers. A short example may suffice, from the ‘General Theory’ (Ch. 24): “The ideas of economists and political philosophers, both when they are right and when they are wrong, are more powerful than is commonly understood. Indeed, the world is ruled by little else. Practical men, who believe themselves to be quite exempt from any intellectual influences, are usually the slaves of some defunct economist. Madmen in authority, who hear voices in the air, are distilling their frenzy from some academic scribbler of a few years back. Now ‘in the long run’ this [way of summarizing the quantity theory of money] is probably true ... But this ‘long run’ is a misleading guide to current affairs. 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’. His chief work was in his influential books and pamphlets attacking laissez-faire economics and the return to the gold standard, advocating instead a radically new approach to economic management that was widely adopted, and widely misunderstood, post-war. Other innovative ideas related to interest rates and short-term equilibrium. He returned to the Treasury in 1940 and in 1944 played a leading part in the Bretton Woods Conference. He was the first British governor on the International Monetary Fund and the International Bank, but these institutions owed more to US Treasury orthodoxy than to Keynes’s ideas. He was responsible for the negotiations with the United States on Lend-Lease 1944– 45 and for a crucial post-war loan, helping to save Britain from the ‘economic Dunkirk’ that faced us after paying for global war for six years. Keynes was from an academic family (his father was an economist and logician at Cambridge) and moved in elite cultural and intellectual circles, being a member of the ‘Apostles’ at Cambridge and the Bloomsbury Group in London. He had wide interests. Marriage to the Russian ballerina Lydia Lopokova (1925) developed his taste for ballet. He built and financed the Arts Theatre, Cambridge (1935) and helped to found the Arts Council, being its first chairman. His brilliant writing style not only elucidated economic problems but covered wider areas. For example his 'Essays in Biography’ (1933), still highly readable, included an essay on Malthus, although he concentrated on Malthus the economist, with whose views he had much sympathy, rather the Malthus the pioneer ‘demographer’. I put that word in quotes because of course it was not used in Malthus’ time. Malthus’ demographic writings were essentially those of an economist; indeed it was Malthus’ pessimistic outlook that gained for economics the epithet of ‘the dismal science’. Putting his abilities to practical use Keynes also amassed a large fortune for himself and for King's College Cambridge, of which he was Bursar from 1919-46.