One Hundred Years Ago. Keynes’s A Tract on Monetary Reform

Abstract

Keynes’s General Theory is the basis of how we think about fiscal policy today, having displaced the Gladstonian view of what constituted sound finance. His earlier Tract on Monetary Reform, written a century ago, advocated what is now the standard form of monetary policy, varying interest rates to target domestic prices rather than a fixed exchange rate. But it was less influential at the time than was the General Theory. The Tract was also less theoretically innovative, being based on the Cambridge tradition of the quantity theory of money.

Keywords:

• Keynes
• monetary policy
• quantity theory

1. Introduction

A century ago John Maynard Keynes was already the author of a best-seller predicting dire consequences from the treaty ending World War I; The Economic Consequences of the Peace. At the other end of the audience spectrum, he had published A Treatise on Probability, a dense work of mathematics and philosophy that perhaps only Bertrand Russell would fully understand. What he did not have yet was a book making a significant contribution to economics.¹ This lacuna was addressed by the Tract on Monetary Reform.

His other motivation for writing the Tract was policy-related. While Keynes wanted to restore monetary and price stability, he broke with the conventional view that this required the restoration of the gold standard at the pre-war parities; Clarke (2009, 63). Keynes wanted the Bank of England to switch from targeting the exchange rate to keep a fixed sterling price for gold to targeting the general level of prices. Keynes described as ‘one of the objects’ of the Tract as arguing for a situation where ‘there shall never exist any confident expectation either than prices generally are going to fall or that they are going to rise’ (35).²

Keynes first contacted his publisher about his proposed book, then to be titled Essays on Money and the Exchanges, in January 1923 and very optimistically thought it might be published in March 1923. He envisaged it as being ‘suitable for use as a textbook in universities’ and thought ‘it might have a considerable vogue’.³

In the event, the Tract was released in its UK edition on 11 December 1923. This was followed by American (titled just Monetary Reform), French, German, Italian (translated by Piero Sraffa), Danish and Japanese editions.

A significant amount of the Tract was recycled from articles Keynes (1922a, 1922b, 1922c, 1922d) had written for the supplements he had edited for the Manchester Guardian around the time of the Genoa international economic conference (at which he was the Guardian’s correspondent) in mid-1922. Skidelsky (1992, 153) commented that the articles in turn were based on Keynes’s lectures in 1920 and earlier. He made triple (or more) use out of some parts of it as they were reprinted in his compilation volume Essays in Persuasion in 1931.⁴ Keynes (1923a) also drew on the book in speeches, such as his address to the National Liberal Club.

Perhaps flippantly, it was dedicated to the Bank of England (page xv), who would have a more onerous role were the reforms he advocated adopted.

2. The Impact of Inflation (and Deflation)

Chapter 1, which drew heavily on Keynes (1922a), discussed the damage wrought by inflation. This is a point Keynes had forcefully argued before (contrary to the impression given by some modern day commentators who employ ‘Keynesian’ as a term of abuse meaning ‘fiscally irresponsible’). There is a well-known quote from Keynes on this topic in Economic Consequences of the Peace:

Lenin is said to have declared that the best way to destroy the capitalist system was to debauch the currency… As the inflation proceeds and the real value of the currency fluctuates wildly from month to month, all permanent relations between debtors and creditors, which form the ultimate foundation of capitalism, become so utterly disordered as to be almost meaningless… Lenin was certainly right.⁵

Keynes regarded this passage as a sufficiently significant argument to reproduce in his 1931 anthology Essays in Persuasion.

Keynes noted the long-term tendency for at least a moderate inflation. He referred to ‘an almost unbroken chronicle in every country which has a history, back to the earliest dawn of economic record, of a progressive deterioration in the real value of the successive legal tenders which have represented money’ (8). This was to become more pronounced half a century after he wrote.

Keynes distinguished the impacts of inflation on three groups within the community. In broad terms, Keynes regarded inflation as bad for investors, good for businesses and ambiguous for workers (perhaps the more unionised workers gain but others fall behind) (29).

Chapter 1 warned of the longer-term adverse impacts of inflation. It causes business to focus more on short-term speculation than profits from normal business operations (23) and ‘discredits enterprise’ (25). It leads to a reduction in capital accumulation (29) and decreased financial intermediation (32–33). Economic decisions are likely to be better made when agents are not faced with an uncertain distinction between changes in absolute and relative prices. Keynes (1923a, 161) wrote that ‘a sound money’ represented ‘as great a step forward as when Dungi [ruler of the ancient city of Ur] conceived stability of weight’.

Both inflation and deflation led to ‘injuries’ from their impact on the distribution of wealth (3, 35–36). Keynes regarded deflation as generally worse than inflation as it is worse ‘to provoke unemployment than to disappoint the rentier (36)’. During periods of deflation, ‘the wise man will be he who turns his assets into cash, withdraws from the risks and the exertions of activity, and awaits in country retirement the steady appreciation promised him in the value of his cash’ (119). Keynes also recognised the risk of a vicious cycle developing, including what Irving Fisher (1933) would later call ‘debt deflation’. ‘If the business world expects that prices will fall, the process of production tends to be inhibited’ (30). This leads to less income and spending. At the same time the real value of debts increases and the ability to repay them decreases. Consumers defer purchases of durables when they expect them to become cheaper. All this reduces demand and leads business to cut prices further in an attempt to clear inventories. The expectation of falling prices therefore becomes a self-fulfilling prophecy.

Keynes observed that, even in periods of deflation, short-term interest rates seldom or never fall below 1 per cent (20). This lower bound meant that economies could get stuck in an extended slump, with falling prices but high real interest rates.

As Howson (1973) discussed, Keynes (1920, 182–183) recommended to Austin Chamberlin, Chancellor of the Exchequer, a large rise in interest rates. He recommended this not, as did some of his peers, to assist in a return to the gold standard, but because of what he regarded as the dangers of inflation. He warned (1920, 183–184) ‘a continuation of inflationism… will strike at the whole basis of contract, of security and of the capitalist system generally’ and could lead to socialism.

Chapter 2 related to public finance and drew heavily on Keynes (1922c). Keynes emphasised that inflation is a tax on the use of money and one which the public finds hard to avoid (43). But like most taxes it can be pushed too high (43–44). Keynes discussed the hyperinflation that Germany, Austria and Russia experienced in the early 1920s (45–52). His example of the distortions this caused was that ‘a prudent man at a café ordering a bock of beer should order a second bock at the same time, even at the expense of drinking it tepid, lest the price should rise meanwhile’ (41).

3. Quantity Theory of Money

Chapter 3 of the Tract dealt with the quantity theory of money. The chapter was technical and not particularly original. Keynes suggested (61) that some readers could skip it.

It now reads as somewhat ‘pre-Keynesian’. Keynes asserted that the quantity theory’s ‘correspondence with fact is not open to question’ (61). Indeed, Keynes defined inflation as ‘an expansion in the supply of money to spend relatively to the supply of things to purchase’ (2).

So it is not surprising that Milton Friedman (1983, 35, 1997, 2) regarded the Tract as Keynes’s best book, arguing it ‘continues to have a major influence on economic policy’.

The Tract, unsurprisingly, drew more on both the written and oral⁶ Cambridge tradition of Marshall (1923, 38–50) and Pigou (1917) rather than the version popularised by Irving Fisher and Harry Brown (1913, 63).⁷ But as Kahn (1984, 53) remarked, Keynes ‘was far more strongly monetarist than Marshall or Pigou’.

Rather than the more usual MV = PT or MV = PQ, Keynes (63) expressed the quantity theory using what he later dubbed in Keynes (1930, 205) the ‘Cambridge equation’: n = p(k + rk’) where n denotes currency notes (cash), p the price level, k consumption purchases to be made using currency and k’ those purchases made using bank deposits (in Keynes’s day this meant current account bank deposits from which cash could be withdrawn on demand and spent using a cheque but would now include deposits that can be drawn on by debit cards or other electronic means), and r the proportion of their liabilities to the public which the banks keep as cash. As Keynes remarked (63), ‘so long as k, k’ and r remain unchanged… n and p rise and fall together’. But, particularly if inflation persists, households may alter the values of k and k’ and banks later r and a change in n may lead to changes in all three (65–66). The quantity theory may still be true in the long run. But as Keynes famously remarked in the Tract’s best-known quip ‘in the long run we are all dead’ (65).

Keynes discussed the extent to which monetary factors are under the influence of the central bank, and therefore its power to control inflation (68–69). He concluded: ‘the business of stabilising the price level, not merely over long periods but so as also to avoid cyclical fluctuations, consists partly in exercising a stabilising influence over k and k’, and in so far as this fails or is impracticable, in deliberately varying n and r so as to counterbalance the movement of k and k’ (68). Keynes argued that the bank rate (the Bank of England’s policy rate) should be the primary tool to counteract fluctuations in k and k’. He contrasted his view with how ‘old-fashioned advocates of sound money have laid too much emphasis on the need for keeping n and r steady’ (69).

As Cornish (2004, 639) puts it, Keynes’s view was that ‘the aim of policy should be to stabilise the demand for money, rather than the supply of money, through regulation by the monetary authorities of short-term interest rates’. This is much closer to a description of how monetary policy works today than is the traditional monetarist analysis.

Keynes extensively, and positively, discussed the ‘purchasing power parity theory’ of exchange rates (70–87), a term Keynes attributed to Cassell (1918). Laidler (1999, 107) called it ‘a masterly account’. One implication is that if two countries both have stable price levels (or achieve very similar inflation targets) their exchange rates should be relatively stable, at least in the medium-term.

There is a long discussion of, and a lot of data about, forward foreign exchange markets (94 to 115). Sprague (1924, 770) called this ‘perhaps the most valuable feature of the book’ and Schumpeter (1946, 507) dubbed it ‘masterly… impossible to admire too highly’. Others might find it a distraction from the main argument.

4. Price stability Rather than Exchange Rate Stability

Chapter 4 is the core of the Tract and addresses ‘remedies’ (116) to monetary instability. It makes the key policy argument: that policymakers should prioritise stability of the internal price level over that of the exchange rate. Keynes described stability of exchange as ‘a convenience’ whereas stability of internal prices was ‘profoundly important’ (126). The chapter included a long critique of the gold standard–what Tily (2012, 55) termed a ‘polemic’. This included the famous description of it as a ‘barbarous relic’ (138), which Gregory (1924, 169) commented was ‘an already celebrated sentence’ by early 1924.

The influential report of the Cunliffe Committee had recommended in 1918 a return to gold at the pre-war parity.⁸ By contrast Keynes argued that Treasury and the Bank of England should regard ‘stability of prices as their primary objective’ (143). He said of the committee’s report that it ‘belongs to an extinct and almost forgotten order of ideas’ but lamented that ‘the Bank of England and the Treasury are said to still regard it as their marching orders’ (153). If the pound had to be pegged to gold, Keynes thought it was better to use the then prevailing rate rather than to regain the pre-war parity which would necessitate a recession to drive down prices to allow UK exporters to remain competitive. As he put it, Keynes preferred devaluation to deflation (117–118).

Keynes pointed to two reasons why aiming at a fixed exchange rate did not ensure price stability: ‘the failure of the national currencies to remain stable in terms of what was meant to be the standard of value, namely gold; and the failure of gold itself to remain stable in terms of purchasing power’ (116).

Keynes referred to Irving Fisher as the ‘pioneer’ of his policy approach (147). Keynes may also have been influenced by his mentor Marshall (1887, 198–199). The Economist (1923, 1041) claimed that the argument for prioritising price stability had been around for a century. Known as the ‘tabular standard’, it involved stabilising the price of a basket of commodities, for which market prices could be readily obtained, rather than a consumer price index; see Ussher et al. (2018). But the conventional wisdom had long favoured the gold standard.

Keynes (1920, 263) had argued for a counter-cyclical monetary policy in an article in the Sunday Times whose ‘line of thought’ Moggridge and Howson (1974, 232) argued ‘lay at the bottom of the Tract’ (An analogy might be drawn with how Keynes’s ideas on counter-cyclical fiscal policy appeared in the media ahead of his theoretical development of them in the General Theory). He argued for prompt action: ‘as soon as a boom appears to be in progress, rates for money should be raised at once’.

Fisher had advocated a virtually automatic adjustment of central bank interest rates based on the price index but Keynes preferred to allow more discretion (147–148). He explicitly rejected a Friedman-style monetary rule. He described how the bank rate would be the ‘governor of the system’ and the ‘object of government would be stability of trade, prices and employment’. But ‘the volume of paper money would be a consequence… the precise arithmetical level of which could not and need not be predicted’ (153–154).

One reason is that he argued, quoting Hawtrey (1923, 108), that monetary policy needed to be forward-looking and react to expected inflation (148). The forward-looking approach required central banks to forecast inflation. Keynes listed variables that might be relevant to doing this: past inflation, employment, industrial production, credit, new issues, foreign trade and the exchange rate (149).⁹

In Chapter 5 Keynes described the relationship between the Bank of England, banks and credit as it stood in 1923 and how it gave an adequate basis for the government and central bank to achieve price stability through the adjustment of the Bank of England’s bank rate (141–146). He also described how the principles could apply to US institutions (154–158). He thought most other countries could peg to either sterling (Europe and the Commonwealth other than Canada) or the dollar (the Americas) (160).

Keynes also suggested that the Bank of England could have a secondary objective, only to be sought if not inconsistent with the primary objective of price stability, namely stabilising the exchange rate by setting weekly buying and selling prices with a ½ to 1 per cent difference between them (149–150).

5. Contemporary Reactions to The Book

Keynes’s writing was widely praised. Alfred Marshall called the book ‘fascinating’.¹⁰ Pigou ‘expressed a sympathetic judgement’; Bridal and Ingrao (2005, 162). Hawtrey (1924, 235) referred to Keynes’s ‘lucid and masterly reasoning’. Gregory (1924, 165) wrote that ‘Mr Keynes’ daring, restless, eager mind has shaped for itself a perfect medium of expression in his style’. Sprague (1924, 770) referred to his ‘effective style’. Albert Hahn (1924, 692) thought the Tract almost a masterpiece. Shann (1924, 11) called him a ‘clear thinker’ whose book contained plenty of ‘brilliant writing’. H. G. Wells (1924) wrote that ‘Keynes thinks with scientific lucidity, says what he thinks exactly and skilfully’. An Australian reviewer, who admired his earlier work, regarded the Tract as containing ‘the same literary ability, the same smashing logic, the same deadly prophetic argument and the same pitiless humour’.¹¹

The Economist (1923, 1040) thought Keynes had ‘done great service in making the issues clear’ and wrote with ‘marvellous lucidity’. The Times Literary Supplement hailed the writing as ‘vivid’, a ‘skilful piece of work’ and ‘a brilliant exposition of monetary theory’. Alvin Johnson (1924, 288) referred to its ‘clarity’.

The New Statesman’s reviewer was a little disappointed, regretting the absence of the ‘pungent satire of his earlier work’ and thought him ‘too brief, too illusive, and in places too careful of the susceptibilities of the august audience of bankers and statesmen’; anon (1924). Presumably the reviewer was more a fan of The Economic Consequences of the Peace.

But the substantive argument for replacing the gold standard with a goal of price stability was less well received. Harrod (1951, 344) recalled ‘on the whole the reception was hostile’. Carter (2020, 132) wrote that ‘Wall Street and the City were aghast’.

Ralph Hawtrey’s (1924) review in the Economic Journal argued Keynes ‘hardly does justice to the case for retaining the gold standard’. While Hawtrey, who had been the author of the Genoa Conference’s resolutions on currency, agreed with Keynes that stability of prices is more important than stability of the exchange rate, he warned that demonetise gold would lower its price. Given how much gold was held by the Bank of England, ‘the first consequence of demonetisation would be the threatened bankruptcy of the Bank’.

The LSE’s Edwin Cannan (1924, 53), also writing in the Economic Journal, took issue with what he regarded as a ‘somewhat disconcerting’ argument, which ‘treated with somewhat supercilious contempt’ the doctrines of the report of the Cunliffe Committee. Cannan stated ‘I hold that while the control of prices by controlling currency and letting credit follow suit is perfectly real and effectual, the control of prices by controlling credit and letting currency follow suit is altogether chimerical’. Keynes (1924) exercised his editorial privilege to include in the same issue his reply to what he termed Cannan’s ‘confused and wrong’ article. He pointed to the volatility of velocity.

Another LSE economist, Theodore Gregory (1924, 170), later to be an adviser to Otto Niemeyer on his Australian tour, was sceptical. He wrote ‘there are too many vested interests always on the side of inflation to make it at all likely that even a central bank, robbed of the steadying influence of the gold standard, will be able to keep a currency on a stable basis in terms of commodities for long periods of time’.

Harvard’s Oliver Sprague (1924, 770–771), writing in the American Economic Review, accused Keynes of an ‘oversimplification of monetary problems’ which skated over ‘some very fundamental difficulties’. In any case Sprague argued it was not the right time to consider such a change. A return to the gold standard would have ‘very real and positive advantages of uniformity and public confidence’ (ibid). Richard Owens (1924), writing in the Journal of Political Economy, took Keynes to task for failing to specify how the central bank could forecast economic conditions and to prove that the central bank could adequately control the price level.

An anonymous commentator in The Statist (1923) rejected Keynes’s suggestion and advocated the gold standard as ‘common prudence’. The reviewer in the Times Literary Supplement was critical of Keynes’s advocacy of ‘manufactured stabilization’, although the reviewer seemed to confuse stability of the general price level with that of individual relative prices.

The Economist also rejected Keynes’s arguments for moving from an exchange rate peg to a price level target. They were wary of a regime that ‘places absolute discretion in the hands of the Treasury and the Bank of England’; (1923, 1042). They also doubted whether there would be well-informed people who could take the right decisions, especially as ‘action must be taken in anticipation of a price movement’ (ibid). Josiah Stamp (1924) had some similar reservations.

Keynes did not discuss how the central bank should be structured, including its degree of independence, to ensure it made decisions in the broad public interest; Bibow (2002). At the time (and until 1946) the Bank was privately owned but, as Keynes would have known from his experience in Treasury during World War I, significantly influenced by Treasury. Basil Blackett, a former senior Treasury official, told Keynes his proposal was ‘further outside the realm of practical politics than I would have expected from you’.¹²

H. G. Wells was surprised by the implicit confidence Keynes showed in the ‘spirit of service’ that would motivate officials to maintain the value of the currency. He asked ‘if currency can be ‘managed’ in the public interest by men working not for profits but for service, why not also the production of staples and land and sea transport? But a system of economics run on motives of service is not individualism at all, it is socialism’ (1924, 3).

Among leading central bankers, the Bank of England’s Montagu Norman commented ‘Mr Keynes seems to have rather outdone himself, a fact that perhaps comes from his trying to combine the position of financial mentor to this and other countries with that of a high-class speculator’.¹³ Benjamin Strong of the New York Federal Reserve referred to Keynes’s ‘more erratic ideas, which impressed me as being the product of a vivid imagination without very much practical experience’.¹⁴

Keynes’s proposal was more favourably received in more progressive circles. The New Statesman’s reviewer expressed ‘nothing but admiration’ for this ‘powerful indictment’ of ‘economic illusion and superstition’. Alvin Johnson in the New Republic was also convinced by Keynes’s argument.

There were a few references in the Australian press, particularly in the gold mining state of Western Australia. Professor Shann (1924, 11) wrote that the Tract ‘lacked persuasive power’ as he felt that Keynes was unconvincing about the ability of Treasury and the Bank of England to resist government pressure to inflate. But Shann still thought highly enough of the Tract to set it as a text for his students, such as ‘Nugget’ Coombs; Rowse (2002, 33).

The radical Westralian Worker praised Keynes for having ‘got to grips with the worst canker of our age’, namely usury. It supported the idea of replacing the gold standard with a goal of stabilising the purchasing power of money but argued this would require the nationalisation of banking.¹⁵

Arguably Australia’s leading economist of the time, Douglas Copland was influenced by the Tract as shown by the many references to it in Copland (1925, 1930); see also Cain (1980, 2, 5–7), Millmow (2010, 53) and Turnell (1999, 22). Edward Dyason was also a fan. He later conjectured that ‘the financial history of England 1920–30 would have been much brighter if Keynes’s influence had been stronger’.¹⁶

The Tract was also an influence on two of New Zealand’s leading economists of the period, Horace Belshaw and John Condliffe; Fleming (1997, 2–3).

Keynes himself certainly did not regard the Tract as the final word for long. By the second half of 1924 he had already started on a new book on money, which Patinkin (1975, 268) interpreted as a ‘systemisation of the Tract’. It would not emerge as the Treatise on Money until 1930.

6. The Verdict of History

The Tract has been completely overshadowed by the General Theory. Some accounts of Keynes’s work, such as Bateman (2018) and Yueh (2018) omit the Tract entirely. Others, such as Butlin (1946), Moggridge (2017), Roncaglia (2005) and Screpanti and Zamagni (1993), only accord it a single sentence. It is only given a couple of pages among the more than 900 in Moggridge’s (1992) biography. It sometimes seems to be mainly remembered for the ‘in the long run, we are all dead’ line.

But the Tract still has some admirers. Schumpeter (1946, 507) referred to the ‘many excellent things’ it contained.

It is often grouped with the Treatise and General Theory as Keynes’s trilogy of important economic works. And while Keynes’s monetary thought evolved, partly in response to the changing economic challenges of the 1920s and 1930s, there is a certain continuity in the three works. They are all macroeconomic, with little regard to microeconomic foundations.

In his biography of Keynes, Harrod (1951, 339) tentatively suggested that ‘a claim could be made’ that the Tract was Keynes’s most significant book. The basis would be that Keynes’s book had, eventually, killed off the gold standard.

Another biographer, Skidelsky (1992, 153) described it as ‘the most sparkling but the least well organised of his economics books’ marking ‘the start of macroeconomics, and of the theory of macroeconomic policy’. Skidelsky (2010, 29) argued that the Tract established Keynes as ‘the foremost intellectual opponent’ of the policy of returning sterling to the gold standard at the pre-war parity, which Churchill went on to do in 1925.¹⁷ He compared it (1992, 159) to The Economic Consequences of the Peace in being ‘full of “blasphemies” designed to amuse Bloomsbury and provoke the complacent’.

As noted above, Milton Friedman (1983, 35, 1997, 2) regarded the Tract as Keynes’s best book. But Friedman (1983, 37) argued that Keynes ‘elitist political philosophy’ made him too confident about the ability of central bank officials to get policy settings right. He adapted a quip from Clemenceau to claim ‘money is much too serious a matter to be left to the central bankers–or, for that matter, to economists’ (ibid.).

On the more progressive side, Brad de Long (1996) opined that the Tract ‘may well be Keynes’s best book’. He then sounded like he was damning it with faint praise by calling it ‘the best monetarist economics book ever written’. But he clarified that his definition of monetarism was not any simplistic notion of inflation being controlled by a monetary growth rule. Rather by ‘monetarist’, he meant acknowledging that inflation or deflation caused other economic problems and that one job of the public sector is to provide a stable measuring rod. Like the initial reviewers he admires the style, which he compares favourably to that of the General Theory; ‘clearer, less academic… more straightforward, linear, easy to follow’.

Clarke (2009, 63) described the book as having a ‘lambent lucidity’. Patinkin (1975, 269) opined that the Tract ‘can still be read with both pleasure and profit’.

7. The Policy Impact

Keynes was not the first to argue for the primacy of internal price stability over external. Wicksell (1898, 1907) has priority.¹⁸ But Keynes was arguably the most prominent economist to do so. And in doing so, he was on the right side of history. But at the time no policymakers were converted. The gold standard remained the conventional wisdom. One important economic adviser did cite the Tract in attempting to influence policy. Charles Wickens quoted from it in a memorandum to the acting Australian prime minister in 1930 advocating policies to stabilise prices.¹⁹

Stamp may have identified one reason why Keynes was not more influential. His writing sometimes seemed designed to impress his iconoclastic Bloomsbury chums and may have alienated more conservative and conventional readers. As Stamp commented, ‘his attitude towards mental calibre of a less powerful order perhaps militates against a welcome consideration of his views… Mr Keynes cannot suffer fools gladly, or even at all… [policymakers] do not like being poked fun at… they do not come to the consideration of the author’s thesis with that attitude of mind which makes for easy acquiescence in his logic’ (1924, 453). Keynes’s biographer Skidelsky (1992, 154) concurred. He commented that Keynes’s ‘iconoclasm of expression… made for entertaining reading but bad advocacy… he could not help mocking the “sound men” he needed to persuade’.

After World War II, exchange rates remained pegged under the Bretton Woods regime, which Keynes himself had a large hand in creating. It was only in the 1990s that inflation targeting gradually became the dominant monetary policy paradigm; Hawkins (2022, 5). But no accounts by central bankers of this transition appear to refer to the Tract as an influence.

Acknowledgements

Thanks to Selwyn Cornish and Harry Bloch, and two anonymous referees, for helpful comments.

Disclosure Statement

No potential conflict of interest was reported by the author.

Additional information

Notes on contributors

John Hawkins

Dr John Hawkins is a senior lecturer in, and acting head of, the Canberra School of Politics, Economics and Society at the University of Canberra. He holds an MSc from the London School of Economics and a PhD from the Australian National University. His main research interests are monetary policy and Australian economic and political history. He published an earlier ‘100 years ago’ article, on Pigou’s The Economics of Welfare, in History of Economics Review in 2020.

Notes

1 This lack of economic publications is not just surprising given his subsequent contributions but also given that he had edited the Economic Journal since 1911. He had published Indian Currency and Finance in 1913 but this only attracted a specialist audience. Admittedly, he had a busy career combining journalism, teaching, business, serving as secretary to the Royal Economic Society and work for the government, including during the war and subsequent peace conference.

2 Page references refer to the 1971 Royal Economic Society edition as this is likely to be the most accessible for most readers.

3 Keynes to Maurice Macmillan, 15 January 1923, reprinted in Collected Writings, volume XIX, part 1, 76–77.

4 A shortened version of the first chapter of the Tract (1–36), much of which had first appeared as Keynes (1922a), was reprinted as Keynes (1931, 59–75). An abridged version of the fourth chapter (116–140), appeared as Keynes (1931, 164–182). An abridged version of the first part of the fifth chapter (141–151), appeared as Keynes (1931, 183–187).

5 Keynes (1919, 14–149 and 1931, 57). There was doubt whether Lenin had actually said this as Fetter (1977) reported he could not find any such reference in Lenin’s collected works. White and Schuler (2009) suggested that Keynes was referring to a second-hand account of an interview with Lenin, which is consistent with the tentative wording Keynes employed.

6 Dimand (2019, 139, 142) referred to the ‘Cambridge oral tradition of monetary theory’.

7 Fisher and Brown (1913, 26) credited Ricardo with launching the quantity theory.

8 Walter Cunliffe served as governor of the Bank of England from 1913 to 1918. The committee included Keynes’s Cambridge colleague Pigou.

9 This had been the stance of the Reserve Bank of Australia until recently. Stevens (2004, 2) explained the Bank must ‘think not just about where inflation has been, but where it is likely to be in the future’. But in the depth of the Covid recession, Governor Lowe (2020, 14) moved away from this, commenting that the Bank ‘will now be putting a greater weight on actual, not forecast, inflation’. Anderson and Hawkins (2021:180) provide a further discussion of the importance of this distinction, including for the Taylor Rule.

10 Marshall to Keynes, 19 December 1923, reprinted in Collected Writings, volume XIX, part 1: 162–163.

11 The Brisbane Courier, 9 February 1924: 18.

12 Blackett to Keynes, 31 December 1923, reprinted in Collected Writings, volume XIX, part 1: 163–164.

13 Norman to Benjamin Strong, 30 January 1924, cited by Ahamad (2009, 168–169). Keynes’s generally good record as an investor is discussed in Walsh (2021) and Moggridge (1983: 1–113). A summary with a contemporary twist is given by Hawkins and Cornish (2021). His poor performance speculating during 1919–20 is described in Moggridge (1992, 348–351).

14 Strong to Norman, 4 January 1924, cited by Ahamed (2009, 170).

15 Westralian Worker, 29 February 1924: 4.

16 Dyason’s diary entry, 7 July 1930, cited by Hunter (2018, 38).

17 Churchill’s unwise act led to Keynes (1925) writing ‘The Economic Consequences of Mr Churchill’.

18 Keynes was instrumental in having Wicksell (1898) translated into English and published by the Royal Economic Society; Robinson (1947, 36).

19 The memorandum was leaked to the press. It can be read, for example, in the Sydney Morning Herald, 27 November 1930:2. See Hawkins (2019, 88–89).