ABSTRACT
In the 1930s, John Maynard Keynes offered a theory for dealing with a systemic failure of the market economy: a deep and prolonged downturn and catastrophic unemployment (the Great Depression). This chapter provides an analysis of not only his theory which is often regarded as a decisive moment in the development of the branch of economics known as macroeconomics but also its origin in the many intellectual interests and projects Keynes pursued before he completed his General Theory. Keynes was deeply immersed in the philosophical discussions that were unfolding in the early decades of the twentieth century. Although he never developed a unique moral theory, his attempt to investigate the philosophical implications of the theory of probability led him to propose original answers to the problem of what needs to be done in the face of the radical uncertainty that characterizes human affairs. This focus on uncertainty—which presents some obvious parallels with the concerns of pragmatist philosophers—has recently been emphasized by historians of economic ideas; and it is the angle I use to sort through the immense literature available on Keynes’s economic and political reflections.
The chapter also briefly discusses the many currents within contemporary Keynesianism, some of which took macroeconomics in directions that are arguably rather distant from Keynes’s own thought. Keynesianism ceased to be dominant in policy circles in the 1980s, in part as a result of the critiques mounted by the Chicago school, which are discussed in this chapter, and in part as a result of the rise of alternative paradigms, which are discussed in the next chapter. However, the chapter ends by underlining current prospects for a revival of Keynesianism. The idea that state intervention is the surest way to bring about a more stable and fairer economic order once again finds support among many economists and policymakers, even if it is still more contentious than in the post-war years.
