To CARL MELCHIOR, 1 December 1922

Dear Melchior,

Thanks for your letter of November 21st. I quite see that the German Note can be defended on the basis of its being ambiguous and not really deciding clearly in favour either of the four experts [signers of the majority report on the stabilisation of the mark] or of the three experts [signers of the minority report].

I can visualise very clearly the scene of my meeting with D. H. Lawrence in 1914 (Bunny seems to suggest 1915, but my memory suggests that it may have been earlier than that) of which he speaks in the letter from which Bunny quoted at the last meeting of the Club. But unfortunately I cannot remember any fragment of what was said, though I retain some faint remains of what was felt.

It was at a breakfast party given by Bertie Russell in his rooms in Nevile's Court. There were only the three of us there. I fancy that Lawrence had been staying with Bertie and that there had been some meeting or party the night before, at which Lawrence had been facing Cambridge. Probably he had not enjoyed it. My memory is that he was morose from the outset and said very little, apart from indefinite expressions of irritable dissent, all the morning. Most of the talk was between Bertie and me, and I haven't the faintest recollection of what it was about. But it was not the sort of conversation we should have had if we had been alone. It was at Lawrence and with the intention, largely unsuccessful, of getting him to participate. We sat round the fireplace with the sofa drawn across. Lawrence sat on the right-hand side in rather a crouching position with his head down.

This new standard edition of The Collected Writings of John Maynard Keynes forms the memorial to him of the Royal Economic Society. He devoted a very large share of his busy life to the Society. In 1911, at the age of twenty-eight, he became editor of the Economic Journal in succession to Edgeworth: two years later he was made secretary as well. He held these offices without intermittence until almost the end of his life. Edgeworth, it is true, returned to help him with the editorship from 1919 to 1925; Macgregor took Edgeworth's place until 1934, when Austin Robinson succeeded him and continued to assist Keynes down to 1945. But through all these years Keynes himself carried the major responsibility and made the principal decisions about the articles that were to appear in the Economic Journal, without any break save for one or two issues when he was seriously ill in 1937. It was only a few months before his death at Easter 1946 that he was elected president and handed over his editorship to Roy Harrod and the secretaryship to Austin Robinson.

In his dual capacity of editor and secretary Keynes played a major part in framing the policies of the Royal Economic Society. It was very largely due to him that some of the major publishing activities of the Society–Sraffa's edition of Ricardo, Stark's edition of the economic writings of Bentham, and Guillebaud's edition of Marshall, as well as a number of earlier publications in the 1930s–were initiated.

Mr William Ernest Johnson, Fellow of King's College, Cambridge, who died on Wednesday, at the age of 72, played for a great many years a leading part in the teaching of moral science in the University, especially logic and psychology, both as a lecturer and in individual teaching, and had been Sidgwick lecturer for the last 30 years.

His critical intellect did not readily lend itself to authorship. Apart from many articles in Mind and an important contribution to the Economic Journal, he did not publish his main work until 1921–4, when three volumes of ‘Logic’, out of four projected, at last appeared. He had been recognised for many years as one of the acutest philosophers in Cambridge, and had an immense influence through his love of discussion and conversation on almost all Cambridge moral scientists of the last 40 years, a great number of whom were his pupils. Indeed, conversational discussion was his greatest gift; the sweetness of his disposition joined to the subtlety of his mind to make possible the half-social, half-argumentative intercourse which must always be the best means of promoting philosophy. If his influence on Cambridge thought is to be summed up briefly, it may be said that he was the first to exercise the epistemic side of logic, the links between logic and the psychology of thought. In a school of thought whose natural leanings were towards formal logic, he was exceptionally well equipped to write formal logic himself and to criticise everything which was being contributed to the subject along formal lines.

With the outbreak of World War I in August 1914, Keynes began to provide a series of commentaries on events in some of which he participated.

From The Economic Journal, September 1914

WAR AND THE FINANCIAL SYSTEM, AUGUST 1914

While it is impossible at present to see the financial events of August, 1914, in as true a perspective, or to be as fully informed about them, as may be possible later, I propose to attempt here a brief outline while their impression is still fresh upon the mind. Whatever profound changes may ultimately be brought about in our financial system, and especially in the relations to it of government as representing the general interest, the only course at present is to look at events from much the same point of view as we assumed to be natural three months ago. The actions of the Government and of the City have been solely directed towards enabling everything to go on immediately, in a manner which shall exactly resemble, to the outward eye, our pre-existing ways. And in this examination of their measures we shall suppose coldly that nothing has happened except a rude shock to the delicate mechanism of credit, which is to be tinkered and tuned up to the performance of its normal functions. The world of borrowers and lenders, of bankers and discounters and stockbrokers, is to be galvanised by the wires of government into, at the least, a marionette existence.

ARTICLE IV. PAR VALUES OF CURRENCIES

Sec. 3. Foreign exchange dealings based on parity. The maximum and the minimum rates for exchange transactions between the currencies of members taking place within their territories shall not differ from parity

1. (i) in the case of spot exchange transactions, by more than one percent; and

2. (ii) in the case of other exchange transactions, by a margin which exceeds the margin for spot exchange transactions by more than the Fund considers reasonable.

Sec. 4. Obligations regarding exchange stability, (a) Each member undertakes to collaborate with the Fund to promote exchange stability, to maintain orderly exchange arrangements with other members, and to avoid competitive exchange alterations.

(b) Each member undertakes, through appropriate measures consistent with this Agreement, to permit within its territories exchange transactions between its currency and the currencies of other members only within the limits prescribed under Section 3 of this Article. A member whose monetary authorities, for the settlement of international transactions, in fact freely buy and sell gold within the limits prescribed by the Fund under Section 2 of this Article shall be deemed to be fulfilling this undertaking.

Sec. 5. Changes in par values, (a) A member shall not propose a change in the par value of its currency except to correct a fundamental disequilibrium.

(b) A change in the par value of a member's currency may be made only on the proposal of the member and only after consultation with the Fund.

We regret to record the death of George James Short Broomhall on 23 June. The loss of perhaps the greatest practical statistician of our age deserves more than passing notice from economists. There are numerous cases in which comprehensive statistics, which it should be the natural duty of governments to collect, have been compiled in the first instance by private enterprise. As a rule, however, after this pioneer work has been done for some years, the duty has been taken over by official bodies, which, as soon as they pay attention to the matter, naturally have more comprehensive figures at their disposal. The case of George Broomhall and the Corn Trade News is, however, remarkable, in that he not only built up an extraordinarily efficient pioneer institution on a matter of great importance, but has continued to be regarded as the first authority on the matter long after various official and semi-official bodies, including the chief governments of the world, the Agricultural Institute at Rome, and the Research Institute at Stanford University, have taken up the work. The compilations of these bodies are still found depending more on the compilations of George Broomhall in the Corn Trade News, than his on theirs.

Broomhall's training was well suited to his ultimate task. He was educated at the City of London School, and afterwards at a school in Germany. He then entered the corn trade, first of all in London, and then in Liverpool, and eventually started a brokerage business of his own in conjunction with a partner.

Alfred Marshall, on whose Principles of Economics all contemporary English economists have been brought up, was at particular pains to emphasise the continuity of his thought with Ricardo's. His work largely consisted in grafting the marginal principle and the principle of substitution on to the Ricardian tradition; and his theory of output and consumption as a whole, as distinct from his theory of the production and distribution of a given output, was never separately expounded. Whether he himself felt the need of such a theory, I am not sure. But his immediate successors and followers have certainly dispensed with it and have not, apparently, felt the lack of it. It was in this atmosphere that I was brought up. I taught these doctrines myself and it is only within the last decade that I have been conscious of their insufficiency. In my own thought and development, therefore, this book represents a reaction, a transition away from the English classical (or orthodox) tradition. My emphasis upon this in the following pages and upon the points of my divergence from received doctrine has been regarded in some quarters in England as unduly controversial. But how can one brought up in English economic orthodoxy, indeed a priest of that faith at one time, avoid some controversial emphasis, when he first becomes a Protestant?

Perhaps Japanese readers, however, will neither require nor resist my assaults against the English tradition. We are well aware of the large scale on which English economic writings are read in Japan, but we are not so well informed as to how Japanese opinions regard them. The recent praiseworthy enterprise on the part of the International Economic Circle of Tokyo in reprinting Malthus's 'Principles of Political Economy' as the first volume in the Tokyo Series of Reprints encourages me to think that a book which traces its descent from Malthus rather than Ricardo may be received with sympathy in some quarters at least.

The causes of disequilibrium to be discussed in this chapter are not always separated by a sharp line from those discussed in the preceding chapter, and, after the initial stage has been passed, they shade off into one another. For a disturbance initially due to monetary factors will soon set up some disturbance on the investment side, and similarly a disturbance due to investment factors is likely, as we shall see, to cause some modification to monetary factors. But there is, nevertheless, the broad distinction that the former are due to changes on the supply side and the latter, generally speaking, to changes on the demand side.

Moreover there is a further characteristic of great importance which differentiates monetary disturbances (whenever, that is to say, the monetary change is of a quasi-permanent nature) from investment disturbances; namely that the former represents a passage from one equilibrium price level to another, whereas the latter (even when the investment change is of a quasi-permanent nature) is an oscillation about an approximately unchanged price level. Thus the former ends up in a new price structure; whereas the latter is calculated to generate an equal and opposite reaction later on. It is this characteristic which makes it appropriate to designate investment disturbances as credit cycles.

THE DEFINITION OF THE CREDIT CYCLE

Our fundamental equation has demonstrated that, if costs of production remain constant, the purchasing power of money suffers a seesaw movement up and down according as the volume of savings exceeds the cost of investment or the cost of investment exceeds the volume of savings. On the other hand, if the volume of savings is equal to the cost of investment, then the purchasing power of money fluctuates inversely with the costs of production. Moreover, the effect on the purchasing power of money of a change in the costs of production and the effect on it of a disequilibrium between the volume of saving and cost of the investment are additive and superposable.

This new standard edition of The Collected Writings of John Maynard Keynes forms the memorial to him of the Royal Economic Society. He devoted a very large share of his busy life to the Society. In 1911, at the age of twenty-eight, he became editor of the Economic Journal in succession to Edgeworth; two years later he was made secretary as well. He held these offices without intermittence until almost the end of his life. Edgeworth, it is true, returned to help him with the editorship from 1919 to 1925; Macgregor took Edgeworth's place until 1934, when Austin Robinson succeeded him and continued to assist Keynes down to 1945. But through all these years Keynes himself carried the major responsibility and made the principal decisions about the articles that were to appear in the Economic Journal, without any break save for one or two issues when he was seriously ill in 1937. It was only a few months before his death at Easter 1946 that he was elected president and handed over his editorship to Roy Harrod and the secretaryship to Austin Robinson.

In his dual capacity of editor and secretary Keynes played a major part in framing the policies of the Royal Economic Society. It was very largely due to him that some of the major publishing activities of the Society—Sraffa's edition of Ricardo, Stark's edition of the economic writings of Bentham, and Guillebaud's edition of Marshall, as well as a number of earlier publications in the 1930s—were initiated.

§A series of articles by the editor of the Nation has brought to the forefront of politics during recent weeks the future relations between the Liberal Party and the Labour Party. So far as the leaders are concerned on either side, we are not yet much enlightened. Nevertheless, Mr Lloyd George has produced the impression that, on terms, he would not decline a working arrangement between the two parties. And Mr Snowden that he, also on terms, would welcome it. Lord Oxford—perhaps wisely—has avoided the issue for the present by occupying his speech with perfervid declarations that no conversations have occurred as yet.

Lord Oxford may be right to suppose that there is no hurry. No hurry, that is, to decide. But nothing is more necessary than that those of us who have no responsibility should speak our minds. It is the urgent subject for discussion wherever Liberals are gathered together. §

I do not wish to live under a Conservative government for the next twenty years. I believe that the progressive forces of the country are hopelessly divided between the Liberal Party and the Labour Party.

This new standard edition of The Collected Writings of John Maynard Keynes forms the memorial to him of the Royal Economic Society. He devoted a very large share of his busy life to the Society. In 1911, at the age of twenty-eight, he became editor of the Economic Journal in succession to Edgeworth: two years later he was made secretary as well. He held these offices without intermittence until almost the end of his life. Edgeworth, it is true, returned to help him with the editorship from 1919 to 1925; Macgregor took Edgeworth's place until 1934, when Austin Robinson succeeded him and continued to assist Keynes down to 1945. But through all these years Keynes himself carried the major responsibility and made the principal decisions about the articles that were to appear in the Economic Journal, without any break save for one or two issues when he was seriously ill in 1937. It was only a few months before his death at Easter 1946 that he was elected president and handed over his editorship to Roy Harrod and the secretaryship to Austin Robinson.

In his dual capacity of editor and secretary Keynes played a major part in framing the policies of the Royal Economic Society. It was very largely due to him that some of the major publishing activities of the Society–Sraffa's edition of Ricardo, Stark's edition of the economic writings of Bentham, and Guillebaud's edition of Marshall, as well as a number of earlier publications in the 1930s–were initiated.