A few months back, my Aunt Charlotte wrote, wondering why I — a relentless searcher focused upon human evolution and long-term human survival strategy, had chosen to pursue a PhD in economics (Banking & Finance).  I recently replied that, as it turns out, sound economic theory and global financial stability both play central roles in the quest for long-term human survival.  In the fifth and final chapter of my recent Masters thesis, On the Problem of Sustainable Economic Development:  A Game-Theoretical Solution, I argued (with considerable passion) that much of the blame for the economic crisis of 2008 (which is, essentially still upon us) may be attributed the adoption of Keynesian economics and the dismissal of the powerful counter-arguments tabled by his great rival, F.A. von Hayek.  Despite the fact that they remained friends all the way until the very end, their theories are diametrically opposed at nearly every point.  There was, however, at least one central point they agreed upon — indeed, Hayek was fond of quoting one of Keynes’ most famous maxims:  “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” [1].

And, with this nontrivial problem and and the great Hayek vs. Keynes debate in mind, I’ll offer a preview-by-way-of-prelude with this invitation to turn a few pages of On the Problem of Modern Portfolio Theory:  In Search of a Timeless & Universal Investment Perspective:

It is perhaps significant that Keynes hated to be addressed as “professor” (he never had that title). He was not primarily a scholar. He was a great amateur in many fields of knowledge and the arts; he had all the gifts of a great politician and a political pamphleteer; and he knew that “the ideas of economists and political philosophers, both when they are right and when they are wrong, are more powerful than is generally understood.  Indeed the world is ruled by little else” [1].  And as he had a mind capable of recasting, in the intervals of his other occupations, the body of current economic theory, he more than any of his compeers had come to affect current thought.  Whether it was he who was right or wrong, only the future will show.  There are some who fear that if Lenin’s statement is correct that the best way to destroy the capitalist system is to debauch the currency, of which Keynes himself has reminded us [1], it will be largely due to Keynes’s influence if this prescription is followed.…

Perhaps the explanation of much that is puzzling about Keynes’s mind lies in the supreme confidence he had acquired in his power to play on public opinion as a supreme master plays on his instrument. He loved to pose in the role of a Cassandra whose warnings were not listened to.  But, in fact, his early success in swinging round public opinion about the peace treaties had given him probably even an exaggerated estimate of his powers.  I shall never forget one occasion – I believe the last time that I met him – when he startled me by an uncommonly frank expression of this.  It was early in 1946, shortly after he had returned from the strenuous and exhausting negotiations in Washington on the British loan.  Earlier in the evening he had fascinated the company by a detailed account of the American market for Elizabethan books which in any other man would have given the impression that he had devoted most of his time in the United States to that subject.  Later a turn in the conversation made me ask him whether he was not concerned about what some of his disciples were making of his theories.  After a not very complimentary remark about the persons concerned, he proceeded to reassure me by explaining that those ideas had been badly needed at the time he had launched them.  He continued by indicating that I need not be alarmed; if they should ever become dangerous I could rely upon him again quickly to swing round public opinion – and he indicated by a quick movement of his hand how rapidly that would be done. But three months later he was dead [2].

As always, any and all comments, criticisms, thoughts, and suggestions are welcome!

Bidding you Godspeed,

Matt Funk, FLS, PhD Candidate, University of Malta, Dept. of Banking & Finance

[1].  KE YNES, J. (1920).  The General Theory of Employment, Interest and Money (Palgrave Macmillan, London).

[2].  HAYEK, F.  (1952).  Review of R.F. Harrod’s ‘The Life of John Maynard Keynes’. J of Mod Hist 24:195–198.