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Keynes, Savings, and the Jews

In this week’s EconTalk (to be released tomorrow morning), I talk with Robert Skidelsky about his new book, co-authored with his son Edward, How Much is Enough: Money and the Good Life.

The opening of the conversation is about an essay that Keynes published in 1930, “Economic Possibilities for our Grandchildren.” It’s a fascinating essay. Keynes argues that because of growth, there will come a day when our grandchildren will be much much richer than we are. And when that day comes, we won’t have to work so hard, we’ll be able to enjoy life in all kinds of way that we can’t now.

Remember, he was writing this during the Great Depression. But he understood, correctly, that it would pass and good times would return.

In the Skidelskys’ book, they discuss why Keynes’s prediction was only half-right. We do have a fabulously richer material life than our grandparents and great-grandparents. But we still work very hard. The Skidelskys ask, how much is enough? Why can’t we be satisfied with less? Much of the podcast is about this question and what, if anything, we should do about it both individually and collectively. I raise the possibility that we do work a lot less than it appears we work by taking leisure on the job. Nor do I see much that is dehumanizing about our work. To the extent that our work dehumanizes us, I see it as a personal problem, not one we should try to deal with collectively, for a host of reasons.

By the way, Skidelsky understands, as do I, that much of the world remains desperately poor and that even in the wealthy countries, there are plenty of people whose material lives are challenging.

In Keynes’s essay, capitalism is a degrading, but necessary way-station on the road to nirvana. Until we reach the coming golden age of prosperity, “We must go on pretending that fair is foul and foul is fair; for foul is useful and fair is not. Avarice and usury and precaution must be our gods for a little longer still. For only they can lead us out of the tunnel of economic necessity into the daylight.” Keynes decries deferred gratification—what he disparaged as “purposiveness”—a failure to live in the present, a dishonest attempt to achieve a “spurious and delusive immortality.”

Keynes associated the quest for immortality and the willingness to defer gratification with the Jews. “Perhaps it is not an accident that the race which did most to bring the promise of immortality into the heart and essence of our religions has done the most for the principle of compound interest and particularly loves this most purposive of human institutions.”


In the podcast, I remarked that I assumed that Keynes was talking about the Jews when he mentioned “the race which did the most to bring the promise of immortality into the heart and essence of our religions…” What I did not explain is the reason for why I assumed he was referring to the Jews. It wasn’t because Keynes was something of an anti-semite. He was, but that’s not the reason. It’s the story Keynes quotes just before this passage. It’s a story about a tailor who never collects his fee for a suit because the customer always offers to double the fee if the tailor waits another year to collect. The customer explains to his children that he’ll never have to pay because the tailor will never be able to resist the higher payment coming in the future.

Here’s the whole passage from Keynes’s essay that puts the quote in context. Sylvie and Bruno is a Lewis Carroll novel that was surely better known in Keynes’s day than in ours:

Let me remind you of the Professor in Sylvie and Bruno:

“Only the tailor, sir, with your little bill,” said a meek voce outside the door.

“Ah, well, I can soon settle his business,” the Professor said to the children, “if you’ll just wait a minute. How much is it, this year, my man?” The tailor had come in while he was speaking.

“Well, it’s been a-doubling so many years, you see,” the tailor replied, a little gruffly, “and I think I’d like the money now. It’s two thousand pound, it is!”

“Oh, that’s nothing!” the Professor carelessly remarked, feeling in his pocket, as if he always carried at least that amount about with him. “But wouldn’t you like to wait just another year and make it four thousand? Just think how rich you’d be! Why, you might be a king, if you liked!”

“I don’t know as I’d care about being a king,” the man said thoughtfully. “But it dew sound a powerful sight o’ money! Well, I think I’ll wait—”

“Of course you will!” said the Professor. “There’s good sense in you, I see. Good-day to you, my man!”

“Will you ever have to pay him that four thousand pounds?” Sylvie asked as the door closed on the departing creditor.

“Never, my child!” the Professor replied emphatically. “He’ll go on doubling it till he dies. You see, it’s always worth while waiting another year to get twice as much money!”

Perhaps it is not an accident that the race which did most to bring the promise of immortality into the heart and essence of our religions has also done most for the principle of compound interest and particularly loves this most purposive of human institutions.

Being a tailor was once a stereotypically Jewish profession. I think there is little doubt that Keynes was referring to the Jews as lovers of compound interest and its role in purposiveness. What intrigued about Keynes’s attitude is the possibility that Keynes’s dislike of savings may have been tied to his anti-semitism or at least tied to his attraction for living in the moment and refusing to defer gratification. Six years after this essay was published, Keynes published The General Theory where he blamed inadequate spending and excessive saving for the economic malaise of the day. Were his social attitudes part of the reason he crafted a theory that condemned living for tomorrow and deferring gratification?

I asked Skidelsky that question. You can hear his answer in the podcast if you’re interested. He mentions that Keynes was conflicted about saving–it played a necessary role in capital accumulation but at the same time, he saw saving and postponement of gratification as morally questionable. Skidelsky pointed out that Keynes’s antisemitism was part of the conventional attitudes of his day and that Keynes himself, when challenged via letter by a Jewish professor at the time, was quick to admit that his Jewish stereotype might not be accurate.

I don’t think Skidelsky responded to the question of whether Keynes’s intellectual ideas were affected by his personal views on living for today and stereotype of the Jews. I didn’t really expect him to. It’s an unanswerable question that I find interesting as an example of confirmation bias, both Keynes’s and my own.