At a time of unparalleled political unrest and economic insecurity, John Keynes challenged the prevailing and time-honored economic theory of laissez-faire, a tradition led by the virtual demigods of economic theory—Adam Smith and John Stuart Mill. As Keynes uttered in the now-famous words, “The difficulty lies not so much in developing new ideas as in escaping from old ones,” Keynes perpetuated both his own fame and notoriety, ensuring his enduring status as perhaps the most controversial figure in modern economic thought. 
 

John Keynes was born in Cambridge, England in 1883 to a family of noteworthy intellectuals. Keynes followed in his parent’s footsteps and went into academia, attending Eton College and Cambridge University. Keynes subsequently found a niche within an elite clique of liberal thinkers and artists known as the Bloomsbury Group—a free-spirited circle that included the likes of Virginia Woolf, Lytton Strachey, and E.M. Forster. After spending a couple of relatively unhappy years employed in the India office of the Civil Service and as a teacher of Economics at Cambridge, Keynes took a position in the British Treasury during World War I. Frustrated by the economic absurdity of the Treaty of Versailles, Keynes wrote The

Economic Consequences of the Peace (1919), an unabashed condemnation of the heavy reparations levied against Germany in which he forecasted an inevitable backlash of German nationalism. 

Keynes continued to examine the practical concerns of the post-war economy throughout the 1920s, writing Treatise on Probability (1921) and A Treatise on Money (1930). While these works introduced an examination of the “boom and bust” cycles, Keynes’s chef d’oeuvre, the 1936 The General Theory of Employment, Interest and Money, would prove to become the virtual New Testament of modern macroeconomic theory. The Classical economic commandment—a recession will inevitably self-correct—was challenge by a  new tenet: a recession is not a natural function of the market that needed to be allowed to run its course, but rather can be prevented or fought by prudent governmental intervention. Keynes did not merely pronounce the end of laissez-faire; he proposed that man could still his own sea, metaphorically speaking, by effectually counterbalancing the disparity of demand and thereby controlling unemployment and investment. Whereas consumer demand capriciously fluctuates, Keynes insisted that the government must implement demand management policies compensating for the fickleness of the market. When times are poor, Keynes suggested that the government must boost aggregate demand with increased spending or reduced taxes, and that it was tolerable for a government to run a budget deficit in such circumstances; when the good times roll again, the government could then trim spending and pay off its earlier debts. 

Keynes’s theory, encapsulated in his words, “In the long run, we are all dead,” did not remain a theoretical proposition; those of political authority seeking to abandon all remnants of laissez-faire now had the backing of intellectual credibility. Subsequently, with the notable examples of FDR’s unprecedented “New Deal” and the Employment Act of 1946, Keynesian policies transformed the post-WWII economies of the western world. In addition, while Keynes suffered a heart attack shortly after writing The General Theory, an ailment from which he would never fully recover, he virtually single-handedly conceived and formalized the construction of the IMF at the Bretton Woods Conference of 1942.