The Martin Pollins Blog

History, economics, business, politics…and Sussex

Keynes (right) and the US representative Harry Dexter White at the inaugural meeting of the International Monetary Fund‘s Board of Governors in Savannah, Georgia in 1946
Attribution: International Monetary Fund, Public domain, via Wikimedia Commons
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My purpose when I chose this subject was to write this paper about two men: great thinkers in their time. The first, the renowned economist John Maynard Keynes, was called to the British Treasury in 1915 and assigned to work on Britain’s overseas finances. He was something of a phe­nomenon and changed the theory and practice of macroeconomics and the economic policies of governments.

The second, Michael Eugene Porter, the Bishop William Lawrence University Professor at Harvard Business School, is an American academic known for his theories on economics, business strategy, and social causes. He is the founder of the modern strategy field and one of the world’s most influential thinkers on management and competitiveness.

As I progressed with my research, I became intrigued with the subject. Not distracted but intrigued. As time went on, I couldn’t complete this paper without referring to the 18th century economist Adam Smith or the ideas of Karl Marx in the 19th century. Thus, the original idea of two parts has evolved into four parts.


John Maynard Keynes

 John Maynard Keynes was born in 1883 in Cambridge and died in 1946 at Firle, near Lewes in Sussex. He was an English economist, journalist and financier best known for his economic theories on the causes of prolonged unemployment.

­­Keynes’ theories (known as Keynesian Economics), centre around the idea that governments should play an active role in the economies of their countries instead of passively standing back to let the free market reign. Specifically, Keynes advocated government spending to mitigate downturns in business cycles.

Keynes’ intellect was evident early in life; in 1902, he gained admittance to the competitive mathematics program at King’s College at the University of Cambridge, where he went on to win Cambridge’s prestigious Tomline Prize, awarded to the university’s top mathematics student.

John Maynard Keynes was undoubtedly one the most important figures in the entire history of economics.  He revolutionised economics with his classic book, The General Theory of Employment, Interest and Money (1936).  This is generally regarded as probably the most influential social science treatise of the 20th Century, and it quickly and permanently changed the way the world looked at the economy and the role of government in society.  No other single book, before or since has had quite such an impact.[1] The central tenet of the Keynes school of thought is that government intervention can stabilise the economy.[2]

What is Economics?

According to Investopedia[3]:

“Economics in its basic form began during the Bronze Age (4000-2500 BCE) with written documents in four areas of the world: Sumer and Babylonia (3500-2500 BCE); the Indus River Valley Civilization (3300-1030 BCE), in what is today’s Afghanistan, Pakistan, and India; along the Yangtze River in China; and Egypt’s Nile Valley, beginning around 3500 BCE.”

The following timeline[4] helps put economics in perspective:

  • Civilisations in the Middle East, China, and elsewhere employed sophisticated financial concepts and produced written guides of best economic practices and norms in the first millennium BC.
  • Tunisian philosopher Ibn Khaldun, writing in the 14th century AD, was among the first theorists to examine the division of labour, profit motive, and international trade.
  • In the 18th century, Scottish economist Adam Smith used the ideas of French Enlightenment writers to develop a thesis on how economies should work.
  • In the 19th century, Karl Marx and Thomas Malthus expanded on their work.
  • The late-19th century economists Léon Walras and Alfred Marshall used statistics and mathematics to express economic concepts, such as economies of scale.
  • British economist John Maynard Keynes developed theories in the early 20th century, some of which the US Federal Reserve still uses to manage US monetary policy today.
  • Most modern economic theories are based on (a) the work of Keynes and (b) the free-market theories of Milton Friedman, which suggest more capital in the system lessens the need for government intervention.
  • More recent theories, such as those of Harvard University economist Amartya Sen, argue for factoring ethics into social welfare calculations of economic efficiency.

During the Great Depression of the 1930s, Keynes spearheaded a revolution in economic thinking, challenging the ideas of neoclassical economics that held that free markets would automatically provide full employment (in the short- to medium-term) as long as workers were flexible in their wage demands. He argued that aggregate demand (total spending in the economy) determined the overall level of economic activity and that inadequate aggregate demand could lead to prolonged periods of high unemployment, and since wages and labour costs are rigid downwards, the economy will not automatically rebound to full employment.[5]

John Maynard Keynes: “Britain’s most famous 20th century economist.” [6]

Keynes advocated the use of fiscal and monetary policies to mitigate the adverse effects of economic recessions and depressions. He detailed these ideas in his magnum opus, The General Theory of Employment, Interest and Money, published in late 1936. In next to no time, leading Western economies had begun adopting Keynes’s policy recommendations. Almost all capitalist governments had done so by the end of the two decades following Keynes’s death in 1946. As a leader of the British delegation, Keynes participated in the design of the international economic institutions established after World War II ended, although the US delegation overruled him on several aspects.

Keynes’s influence started to wane in the 1970s, partly as a result of the stagflation that plagued the AngloAmerican economies during that decade and partly because of criticism of Keynesian policies by Milton  Friedman and other monetarists,[7] who disputed the ability of government to regulate the business cycle favourably with fiscal policy.[8] Then, the arrival of the global financial crisis of 2007–2008 sparked a resurgence in Keynesian thinking[9].

Keynesian economics provided the theoretical underpinning for economic policies undertaken in response to the financial crisis of 2007–2008 by President Barack Obama of the US, Prime Minister Gordon Brown of the UK, and the heads of other governments.[10]

When Time magazine included Keynes among its Most Important People of the Century in 1999, it reported that “his [Keynes] radical idea that governments should spend money they don’t have may have saved capitalism.”[11]

The Economist has described Keynes as “Britain’s most famous 20th century economist.”[12]

In addition to being an economist, Keynes was also a civil servant, a director of the Bank of England, and a part of the influential Bloomsbury Group of intellectuals.[13]

The Worldly Philosophers: The Lives, Times And Ideas Of The Great Economic Thinkers by Robert L. Heilbroner refers to John Maynard being highly influential in policy and macroeconomics since the publication of his (Maynard’s) book The Economic Consequences of the Peace in 1919, an extract[14] of which arrived in my email inbox, which came from[1].  I will share it with you:

“Keynes was called to the [British] Treasury [in 1915] and assigned to work on Britain’s overseas finances. He was soon a key figure in the Treasury. His first biog­rapher and fellow economist, Roy Harrod, tells us that men of ripe judgment have declared that Keynes contributed more to winning the war than any other person in civil life. Be that as it may, he managed to find time for other things. On a financial mission to France, he was seized with the idea that it would help balance the French accounts with the British if they sold some of their pictures to the National Gallery. He thus casually acquired a hundred thousand dol­lars’ worth of Corot, Delacroix, Forain, Gauguin, Ingres, and Manet for the British and managed to get a Cézanne for himself: Big Bertha was shelling Paris and prices were pleas­antly depressed. Back in London, he attended the ballet; Lydia Lopokova was dancing the part of the beauty in ‘The Good-Humored Ladies,’ and she was the rage. The Sitwells had her to a party, where she and Keynes met. One can imagine Keynes with his classic English and Lydia with her classic struggles with English – ‘I dislike being in the country in August,’ she said, ‘because my legs get so bitten by barris­ters.’

“But all this was tangential to the main thing – the settle­ment of Europe after the war. Keynes was now an important personage – one of those unidentified men one sees standing behind the chair of a head of state, ready to whisper a guiding word. He went to Paris as Deputy for the Chancellor of the Exchequer on the Supreme Economic Council with full power to make decisions and as representative of the Trea­sury at the Peace Conference itself. But he was only second echelon; he had a grandstand seat but no power to interfere directly in the game. It must have been an agony of frustra­tion and impotence for, at close quarters, he watched while Wilson was outmaneuvered by Clemenceau and the ambi­tion of a humane peace replaced by the achievement of a vin­dictive one.

“‘It must be weeks since I’ve written anyone,’ he wrote to his mother in 1919, ‘but I’ve been utterly worn out, partly by work, partly by depression at the evil around me. I’ve never been so miserable as for the last two or three weeks; the Peace is outrageous and impossible and can bring nothing but misfortune behind it.’

“He dragged himself from the sickbed to protest against what he called the ‘murder of Vienna,’ but he could not stop the tide. The peace was to be a Carthaginian one, and Germany was to pay a sum of reparations so huge that it would force her into the most vicious practices of international trade in order to earn the pounds and francs and dollars. This was not the popular opinion, of course, but Keynes saw that in the Versailles Treaty lay the unwitting goad for an even more formidable resurgence of German autarchy and militarism.

The Lord Keynes

“He resigned in despair; then three days before the treaty was signed he began his polemic against it. He called it The Economic Consequences of the Peace; when it ap­peared that December (he wrote it at top speed and fury), it made his name.

“It was brilliantly written and crushing. Keynes had seen the protagonists at work, and his descriptions of them com­bined the skill of a novelist with the cutting insight of a Bloomsbury critic. He wrote of Clemenceau that ‘He had only one illusion – France, and one disillusion — mankind, in­cluding his own colleagues not least’; and of Wilson,’ … like Odysseus, he looked wiser when seated.’ But while his por­traits sparkled, it was his analysis of the harm that had been done that was unforgettable. For Keynes saw the Conference as a reckless settlement of political grudge in utter disregard of the pressing problem of the moment – the resuscitation of Europe into an integrating and functioning whole:

“The Council of Four paid no attention to these issues, being preoccupied with others – Clemenceau to crush the economic life of his enemy, Lloyd George to do a deal and bring home something that would pass muster for a week, the President to do nothing that was not just and right. It is an extraordinary fact that the fundamental problems of a Europe starving and disintegrating before their eyes, was the one question in which it was impossi­ble to arouse the interest of the Four.

“Reparation was their main excursion into the economic field, and they settled it as a problem of theology, of politics, of elec­toral chicane, from every point of view except that of the economic future of the States whose destiny they were handling.

“And he went on to deliver this solemn warning: The danger confronting us, therefore, is the rapid de­pression of the standard of life of the European popula­tions to a point which will mean actual starvation for some (a point already reached in Russia and approxi­mately reached in Austria). Men will not always die qui­etly. For starvation, which brings to some lethargy and a helpless despair, drives other temperaments to the ner­vous instability of hysteria and to a mad despair. And these, in their distress, may overturn the remnants of or­ganization, and submerge civilization itself in their at­tempts to satisfy desperately the overwhelming needs of the individual. This is the danger against which all our resources and courage and idealism must now cooperate.

“The book was an immense success. The unworkability of the treaty was manifest almost from the moment of its sign­ing, but Keynes was the first to see it, to say it, and to suggest an outright revision. He became known as an economist of extraordinary foresight, and when the Dawes Plan in 1924 began the long process of undoing the impasse of 1919, his gift for prophecy was confirmed.”

Keynes’ Early Career

The economist Harry Johnson wrote that the optimism imparted by Keynes’s early life is a key to the understanding of his later thinking.[15]  Keynes was always confident he could find a solution to whatever problem he turned his attention to and retained a lasting faith in the ability of government officials to do good.[16] His optimism was also cultural in two senses, namely that he was of the last generation:

  • raised by an empire still at the height of its power; and
  • who felt entitled to govern by culture rather than by expertise.

According to Robert (Baron) Skidelsky, the British economic historian, the sense of cultural unity current in Britain from the 19th century to the end of  World War I provided a framework with which the well-educated could set various spheres of knowledge about each other and life, enabling them to confidently draw from different fields when addressing practical problems.[17]

Keynes began his Civil Service career in October 1906 as a clerk in the India Office, but becoming bored, he returned to Cambridge two years later[18], where he joined the intellectual group called “The Apostles” with the likes of Virginia Woolf, E. M. Forster, and Bertrand Russell. He started work on probability theory, and in 1909, he became a fellow of King’s College.[19] He published his first professional economics article in The Economic Journal about the effect of a recent global economic downturn on India.[20] Editorship of The Economic Journal followed in 2011. His first book was published in 2013 (Indian Currency and Finance).[21] He was then appointed to the Royal Commission on Indian Currency and Finance[22], the same topic as his book – where Keynes showed considerable talent at applying economic theory to practical problems.

The First World War

The British Government called on Keynes’s expertise a few days before the start of the First World War hostilities. Bankers had been pushing for the suspension of specie payments – the gold equivalent of banknotes — but with Keynes’s help, the Chancellor of the Exchequer (then Lloyd George) was persuaded that this would be a bad idea, as it would hurt the future reputation of the city if payments were suspended before it was necessary.

In January 1915, Keynes took up an official government position at the HM Treasury. Among his roles was the design of terms of credit between Britain and its continental allies during the war and the acquisition of scarce currencies. According to economist Robert Lekachman, Keynes’s “nerve and mastery became legendary” because of his performance of these duties, as in the case where he managed to assemble – with difficulty – a small supply of Spanish pesetas. The secretary of the Treasury was delighted to hear Keynes had amassed enough to provide a temporary solution for the British Government. But Keynes did not hand the pesetas over, choosing instead to sell them all to break the market: his boldness paid off, as pesetas then became much less scarce and expensive.[23]

Germany’s War Compensation Payments (Reparations)

Keynes’s experience at Versailles was influential in shaping his future outlook, yet it was not a completely successful one. Keynes’s main interest had been in trying to prevent Germany’s compensation payments from being set so high it would traumatise innocent German people, damage the nation’s ability to pay and sharply limit its ability to buy exports from other countries – thus hurting not just Germany’s economy but that of the wider world.

The Palace of Versailles, where the 1919 discussions concerning Germany took place.
Attribution: Eric Pouhier, CC BY-SA 2.5 <;, via Wikimedia Commons
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This file is licensed under the Creative Commons Attribution-Share Alike 2.5 Generic license.

Unfortunately for Keynes, conservative powers in the coalition that emerged from the 1918 coupon election[24] were able to ensure that Keynes and the Treasury were largely excluded from formal high-level talks about the level and manner of reparations. Their place was taken by the so-called Heavenly Twins – the judge Lord Sumner and the banker Lord Cunliffe whose nickname derived from the “astronomically” high war compensation they wanted to demand from Germany. Keynes was forced to try to exert influence but had to do so mostly from behind the scenes. The three principal players at Versailles were the UK’s Lloyd George, France’s Clemenceau and President Wilson from the US.[25] It was only Lloyd George to whom Keynes had much direct access – until the 1918 election, he had some sympathy with Keynes’s view but, while campaigning, had found his speeches were well received by the public only if he promised to punish Germany harshly and had therefore committed his delegation to extracting high payments. Lloyd George did, however, win some loyalty from Keynes with his actions at the Paris conference by intervening against the French to ensure the dispatch of much-needed food supplies to German civilians. Clemenceau also pushed for substantial reparations, though not as high as those proposed by the British, while on security grounds, France argued for an even more severe settlement than Britain.

Keynes’s analysis of the predicted damaging effects of the treaty appeared in the highly influential book, The Economic Consequences of the Peace, published in 1919[26], often described as Keynes’s best book, where he was able to bring all his gifts to bear – his passion as well as his skill as an economist. In addition to economic analysis, the book contained appeals to the reader’s sense of compassion.

As far as the reparations were concerned, only a small part was ever paid. In fact, historian Stephen A. Schuker demonstrates in American ‘Reparations’ to Germany, 1919–33, that the capital inflow from American loans substantially exceeded German out payments so that, on a net basis, Germany received support equal to four times the amount of the post-Second World War Marshall Plan. Schuker also notes that, in the years after Versailles, Keynes became an informal reparations adviser to the German government, wrote one of the major German reparation notes, and supported hyperinflation on political grounds. Nevertheless, The Economic Consequences of the Peace gained Keynes international fame, even though it also caused him to be regarded as anti-establishment – it was not until after the outbreak of World War II that Keynes was offered a directorship of a major British Bank or an acceptable offer to return to government with a formal job. However, Keynes was still able to influence government policy-making through his network of contacts, his published works and by serving on government committees; this included attending high-level policy meetings as a consultant.[27]

Going back to the period after World War I – in 1922, Keynes continued to advocate a reduction in the amount payable in German reparations with A Revision of the Treaty of Versailles.[28] He attacked the post-World War I deflation policies with A Tract on Monetary Reform in 1923 – a vigorous argument that countries should target stability of domestic prices, avoiding deflation even at the cost of allowing their currency to depreciate. Britain suffered from high unemployment through most of the 1920s, leading Keynes to argue for the depreciation of the pound sterling to boost jobs by making British exports more affordable. From 1924, he also advocated a fiscal response, where the government could create jobs by spending on public works. 

During the 1920s, Keynes’s pro-stimulus views had only limited effect on policymakers and mainstream academic opinion – according to Hyman Minsky (the American economist and a professor of economics at Washington University in St. Louis), one reason was that at this time, the theoretical justification was, in Minsky’s view, “muddled”[29] but it’s not that clear, at least to me. The Tract had also called for an end to the gold standard. Keynes advised it was no longer a net benefit for countries such as Britain to participate in the gold standard, as it ran counter to the need for domestic policy autonomy. Moreover, it could force nations to pursue deflationary policies at exactly the time when expansionary measures were called for to address rising unemployment. The Treasury and Bank of England were still in favour of the gold standard and, in 1925, they convinced the incumbent Chancellor (Winston Churchill) to re-establish it, which had a depressing effect on British industry. Keynes responded by writing The Economic Consequences of Mr Churchill and continued to argue against the gold standard until Britain finally abandoned it in 1931.[30]

Keynes began[31] work to examine the relationship between unemployment, money, and prices in the 1920s:

  • The work, Treatise on Money was published in 1930 in two volumes. A central idea of the work was that if the amount of money being saved exceeds the amount being invested – which can happen if interest rates are too high, unemployment will rise. In part, this is a result of people not wanting to spend too high a proportion of what employers pay out, making it difficult, in aggregate, for employers to make a profit.
  • Another key theme of the book is the unreliability of financial indices for representing an accurate, or indeed meaningful, appreciation of general shifts in purchasing power of currencies over time. In particular, Keynes criticised the justification of Britain’s return to the gold standard in 1925 at pre-war valuation by reference to the wholesale price index. He argued that the index understated the effects of changes in the costs of services and labour.

Keynes was never one to hold back and was deeply critical of the British government’s austerity measures during the Great Depression. He believed budget deficits during recessions were a good thing and a natural product of an economic slump. He wrote, “For Government borrowing of one kind or another is nature’s remedy, so to speak, for preventing business losses from being, in so severe a slump as the present one, so great as to bring production altogether to a standstill.”[32]

At the height of the Great Depression in 1933, Keynes published The Means to Prosperity, which contained specific policy recommendations for tackling unemployment in a global recession, chiefly counter-cyclical public spending. The Means to Prosperity contains one of the first mentions of the multiplier effect. While it was addressed primarily to the British Government, it also included advice for other nations affected by the global recession. A copy was sent to the newly elected President Franklin D. Roosevelt and other world leaders. The work was taken seriously by both the US and UK governments, and according to Robert Skidelsky, helped pave the way for the later acceptance of Keynesian ideas, though it had little immediate practical influence. In the 1933 London Economic Conference, opinions remained too diverse for a unified course of action to be agreed upon.[33]

Keynesian-like policies were adopted by Sweden and Germany, but Sweden was seen as too small to command much attention, and Keynes was deliberately silent about the successful efforts of Germany as he was dismayed by its imperialist ambitions and its treatment of Jews.[34]  Apart from Great Britain, Keynes’s attention was primarily focused on the US. In 1931, he received considerable support for his views on counter-cyclical public spending in Chicago, then America’s foremost centre for economic views alternative to the mainstream.[35] However, orthodox economic opinion remained generally hostile regarding fiscal intervention to mitigate the depression, until just before the outbreak of war.[36]  In late 1933 Keynes was persuaded by Felix Frankfurter to address President Roosevelt directly, which he did by letters and face-to-face in 1934, after which the two men spoke highly of each other.[37] However, according to Skidelsky, the consensus is that Keynes’s efforts began to have a more than marginal influence on US economic policy only after 1939.[38]

Keynes’s magnum opusThe General Theory of Employment, Interest and Money, was published in 1936.[39] It was researched and indexed by one of Keynes’s favourite students, later the economist David Bensusan-Butt.[40] The work served as a theoretical justification for the interventionist policies Keynes favoured for tackling a recession. Although Keynes stated in his preface that his General Theory was only secondarily concerned with the “applications of this theory to practice,” the circumstances of its publication were such that his suggestions shaped the course of the 1930s.[41]  In addition, Keynes introduced the world to a new interpretation of taxation: since the legal tender is now defined by the state, inflation becomes “taxation by currency depreciation“. This invisible “tax” meant:

  • that the standard of value should be governed by deliberate decision; and
  • that it was possible to maintain a middle course between deflation and inflation.[42]

This novel interpretation was inspired by the desperate search for control over the economy, which permeated the academic world after the Depression. The General Theory challenged the earlier neoclassical economic paradigm, which had held that provided it was unfettered by government interference, the market would naturally establish full employment equilibrium. In doing so, Keynes was partly setting himself against his former teachers Marshall and Pigou. Keynes believed the classical theory was a “special case” that applied only to the conditions present in the 19th century, his theory being the general one. Classical economists had believed in Say’s law[43], which, put simply, states that “supply creates its demand” and that in a free market, workers would always be willing to reduce their wages to a level where employers could profitably offer them jobs.

An innovation from Keynes was the concept of price stickiness – the recognition that, in reality, workers often refuse to lower their wage demands even in cases where a classical economist might argue that it is rational for them to do so. Due in part to price stickiness, it was established that the interaction of “aggregate demand” and “aggregate supply” may lead to stable unemployment equilibria – and in those cases, it is on the state, not the market, that economies must depend for their salvation. In contrast, Keynes argued that demand is what creates supply and not the other way around. He questioned Say’s Law by asking what would happen if the money that is being given to individuals is not finding its way back into the economy and is saved instead? He suggested the result would be a recession.

To tackle the fear of a recession, Say’s Law suggests government intervention. This government intervention can be used to prevent any further increase in savings in the form of a decreased interest rate. Lowering the interest rate will encourage people to start spending and investing again, or so it is stated by Say’s Law. The reason behind this is that when there is little investing, savings begin to accumulate and reach a stopping point in the flow of money. During the normal economic activity, it would be justified to have savings because they can be given out as loans, but in this case, there is little demand for them, so they are doing no good for the economy. The supply of savings then exceeds the demand for loans, and the result is lower prices or lower interest rates. Thus, the idea is that the money that was once saved is now re-invested or spent, assuming lower interest rates appeal to consumers. To Keynes, however, this was not always the case, and it couldn’t be assumed that lower interest rates would automatically encourage investment and spending again since there is no proven link between the two.[44]

The General Theory argues that demand, not supply, is the key variable governing the overall level of economic activity. Aggregate demand, which equals total un-hoarded income in a society, is defined as the sum of consumption and investment. In a state of unemployment and unused production capacity, one can enhance employment and total income only by first increasing expenditures for either consumption or investment. Without government intervention to increase expenditure, an economy can remain trapped in a low-employment equilibrium.

The demonstration of this possibility has been described as the revolutionary formal achievement of the work.[45]

The book advocated activist economic policy by the government to stimulate demand in times of high unemployment, for example, by spending on public works. “Let us be up and doing, using our idle resources to increase our wealth,” he wrote in 1928. “With men and plants unemployed, it is ridiculous to say that we cannot afford these new developments. It is precisely with these plants and these men that we shall afford them.”[46]  The General Theory is often viewed as the foundation of modern macroeconomics. Few senior American economists agreed with Keynes through most of the 1930s.[47] Yet his ideas were soon widely accepted, with eminent American professors such as Alvin Hansen agreeing with the General Theory before the outbreak of World War II.[48]

Keynes’ Health

Keynes himself had only limited participation in the theoretical debates that followed the publication of the General Theory as he suffered a heart attack in 1937, requiring him to take long periods of rest. Among others, Hyman Minsky and Post-Keynesian economists have argued that Keynes’s ideas were diluted by those keen to compromise with classical economists or to render his concepts with mathematical models like the IS-LM model (which, they argue, distort Keynes’s ideas).[49] Keynes began to recover in 1939, but for the rest of his life, his professional energies were directed largely towards the practical side of economics: the problems of ensuring the optimum allocation of resources for the war efforts, post-war negotiations with the US, and the new international financial order that was presented at the Bretton Woods Conference.

In the General Theory and later, Keynes responded to the socialists who argued, especially during the Great Depression of the 1930s, that capitalism caused wars. He argued that if capitalism were managed domestically and internationally (with coordinated international Keynesian policies, an international monetary system that did not pit the interests of countries against one another, and a high degree of freedom of trade), then this system of managed capitalism could promote peace rather than conflict between nations. His plans during World War II for post-war international economic institutions and policies (which contributed to the creation at Bretton Woods of the International Monetary Fund and the World Bank, and later to the creation of the General Agreement on Tariffs and Trade (GATT) and eventually the World Trade Organization) were aimed to give effect to this vision.[50]

Although Keynes has been widely criticised – especially by members of the Chicago school of economics – for advocating irresponsible government spending financed by borrowing, but in fact, he was a firm believer in balanced budgets and regarded the proposals for programs of public works during the Great Depression as an exceptional measure to meet the needs of exceptional circumstances.[51]

During the Second World War, Keynes argued in How to Pay for the War, published in 1940, that the war effort should be largely financed by higher taxation and especially by compulsory saving (essentially workers lending money to the government) rather than deficit spending to avoid inflation.

Compulsory saving would dampen domestic demand, assist in channelling additional output towards the war efforts, would be fairer than punitive taxation and would have the advantage of helping to avoid a post-war slump by boosting demand once workers were allowed to withdraw their savings. In September 1941, Keynes was proposed to fill a vacancy in the Court of Directors of the Bank of England and subsequently carried out a full term from the following April.[52]  In June 1942, Keynes was rewarded for his service with a hereditary peerage in the King’s Birthday Honours.[53] On 7 July 1942,  his title was gazetted as “Baron Keynes, of Tilton, in the County of Sussex“, and he took his seat in the House of Lords on the Liberal Party benches.[54]

As the Allied victory began to look certain, Keynes was heavily involved, as leader of the British delegation and chairman of the World Bank commission, in the mid-1944 negotiations that established the Bretton Woods system. The Keynes plan, concerning an international clearing union, argued for a radical currency management system. He proposed the creation of a common world unit of currency, the bancor and new global institutions – a world central bank and the International Clearing Union. Keynes envisaged these institutions managing an international trade and payments system with strong incentives for countries to avoid substantial trade deficits or surpluses.[55] The USA’s greater negotiating strength, however, meant that the outcomes accorded more closely to the more conservative plans of Harry Dexter White. According to US economist J. Bradford DeLong, on almost every point where the Americans overruled him, Keynes was later proven correct by events.[56]

The two new institutions, later known as the World Bank and the International Monetary Fund (IMF), were founded as a compromise that primarily reflected the American vision. There would be no incentives for participating nations to avoid a large trade surplus; instead, the burden of correcting a trade imbalance would continue to fall only on the deficit countries, which Keynes had argued were least able to address the problem without inflicting economic hardship on their populations. Yet, Keynes was still pleased when accepting the final agreement, saying that if the institutions stayed true to their founding principles, “the brotherhood of man will have become more than a phrase.”[57]   The International Monetary Fund (IMF) states there are three principal tenets in the Keynesian description of how the economy works:

  1. Aggregate demand is influenced by many economic decisions—public and private: Private sector decisions can sometimes lead to adverse macroeconomic outcomes, such as a reduction in consumer spending during a recession. These market failures sometimes call for active policies by the government, such as a fiscal stimulus package. Therefore, Keynesian economics supports a mixed economy guided mainly by the private sector but partly operated by the government.
  2. Prices, and especially wages, respond slowly to changes in supply and demand: resulting in periodic shortages and surpluses, especially of labour.
  3. Changes in aggregate demand, whether anticipated or unanticipated, have their greatest short-run effect on real output and employment, not on prices: Keynesians believe that, because prices are somewhat rigid, fluctuations in any component of spending—consumption, investment, or government expenditures—cause output to change. If government spending increases, for example, and all other spending components remain constant, then output will increase. Keynesian models of economic activity also include a multiplier effect; that is, output changes by some multiple of the increase or decrease in spending that caused the change. If the fiscal multiplier is greater than one, then a one-dollar (or £) increase in government spending would result in an increase in output greater than one dollar (or £).

After the end of World War II, despite his deteriorating health, Keynes continued to represent the UK in international negotiations. Just before he died in 1946, Keynes told Henry Clay, a professor of social economics and advisor to the Bank of England,[58] of his hopes that Adam Smith‘s “invisible hand” could help Britain out of the economic hole it was in: “I find myself more and more relying for a solution of our problems on the invisible hand which I tried to eject from economic thinking twenty years ago.”[59]

By the 1950s, Keynesian policies were adopted by almost the entire developed world, and similar measures for a mixed economy were used by many developing nations. By then, Keynes’s economic views had become mainstream in the world’s universities. Throughout the 1950s and 1960s, the developed and emerging free capitalist economies enjoyed exceptionally high growth and low unemployment.[60]   Professor Gordon Fletcher wrote that the 1950s and 1960s when Keynes’s influence was at its peak, appear in retrospect as a golden age of capitalism.[61]

Keynesian Resurgence

The global financial crisis of 2007–08 led to widespread public scepticism about the free market consensus:

  • In March 2008, Martin Wolf, chief economics commentator at the Financial Times, announced the “death of the dream of global free-market capitalism.”[62]
  • In the same month, macroeconomist James K. Galbraith used the 25th Annual Milton Friedman Distinguished Lecture to launch a sweeping attack against the consensus for monetarist economics and argued that Keynesian economics were “far more relevant for tackling the emerging crises.”[63]
  • Economist Robert J. Shiller had begun advocating robust government intervention to tackle the financial crises, specifically citing Keynes.[64] 
  • Nobel laureate Paul Krugman also actively argued the case for vigorous Keynesian economic intervention in his columns for The New York Times.[65]
  • Other prominent economic commentators who argued for Keynesian government intervention to mitigate the financial crisis include George Akerlof,[66] J. Bradford DeLong,[67] Robert Reich[68] and Joseph Stiglitz.[69]

A series of major bailouts were pursued during the financial crisis, starting with the US Government nationalising two government-sponsored enterprises which oversaw most of the US subprime mortgage market – Fannie Mae and Freddie Mac. In October 2008, Alistair Darling (at the time, the British Chancellor of the Exchequer) referred to Keynes as he announced plans for substantial fiscal stimulus to head off the worst effects of the recession by following Keynesian economic thought.[70]

In December 2008 and beyond:

  • The Financial Times reported that “the sudden resurgence of Keynesian policy is a stunning reversal of the orthodoxy of the past several decades.”[71] 
  • Paul Krugman released his book The Return of Depression Economics and the Crisis of 2008, arguing that economic conditions similar to those existing during the earlier part of the 20th century had returned, making Keynesian policy prescriptions more relevant than ever.
  • In February 2009, Robert J. Shiller and George Akerlof published Animal Spirits, a book where they argued the current US stimulus package was too small as it did not take into account Keynes’s insight on the importance of confidence and expectations in determining the future behaviour of businesspeople and other economic agents.
  • In the March 2009 speech entitled Reform the International Monetary SystemZhou Xiaochuan, the governor of the People’s Bank of China, came out in favour of Keynes’s idea of a centrally managed global reserve currency. Although Zhou’s ideas had not been broadly accepted, leaders meeting at the 2009 G-20 London summit agreed to allow $250 billion of special drawing rights to be created by the IMF, to be distributed globally.
  • Stimulus plans were credited for a better-than-expected economic outlook by the OECD[72] and the IMF[73] in reports published in June and July 2009. Both organisations warned global leaders that recovery was likely to be slow and counter-recessionary measures should not be rolled back too early.

Among professional economists, the revival of Keynesian economics has been even more divisive:

  • Although many economists, such as George Akerlof, Paul Krugman, Robert Shiller, and Joseph Stiglitz, supported Keynesian stimulus, others did not believe higher government spending would help the US economy recover from the Great Recession.
  • Some economists, such as Robert Lucas, questioned the theoretical basis for stimulus packages.[74]
  • Others, like Robert Barro and Gary Becker, say that empirical evidence for beneficial effects from Keynesian stimulus does not exist.[75] 

However, there is a growing academic literature that shows that fiscal expansion helps an economy grow in the near term and that certain types of fiscal stimulus are particularly effective.[76]


Rather than writing with the mindset of being upset at the current system, Keynes instead produced arguably his most famous work, The General Theory of Employment, Interest and Money, to solve the then-current issue which was plaguing the whole world – the Great Depression. When he wrote this book, one theme that occurred numerous times was his view on how individuals should save during a time of economic downturn or recession. His answer was that people tend to save more in these times, which he thought could be very harmful if there is no government intervention because individuals and businesses are too scared or cannot invest in new ideas and jobs due to the state of the economy – an issue especially prevalent during the Great Depression because individuals were saving their money, and businesses were not investing, which kept that particular recession alive as long as it did and made the unemployment rate go up from around four per cent to about 25 per cent.

The individuals were saving with the hope that the recession would not last very long, which then caused it to get worse due to a lack of economic stimulation. To escape this cycle, Keynes argued that the government alone would be able to solve this problem and break the whole world out of the Great Depression. Keynes, normally an endorser of free-market capitalism, realised that this recession was a special case in that it had the potential to be inescapable. The US government eventually did this when President Franklin D. Roosevelt introduced the New Deal, a relief program set up where the federal budget was increased to get the economy out of the recession by injecting money manually from these government aid programs. Keynes highlighted the fact that people are used to making certain decisions during different times of the business cycle and also that individuals and businesses needed to change the way they viewed saving money so that the country could get out of the recession. Keynes had a different approach to economic thought from Marx because he was writing with the intention of solving the current world problem, the Great Depression, rather than critiquing the unfairness in the current system.


On a personal level, Keynes’s charm was such that he was generally well-received wherever he went – even those who found themselves on the wrong side of his occasionally sharp tongue rarely bore a grudge.[77] Keynes’s speech at the closing of the Bretton Woods negotiations was received with a lasting standing ovation, rare in international relations, as the delegates acknowledged[78] the scale his achievements made, despite his poor health:

  • Austrian School economist Friedrich Hayek was Keynes’s most prominent contemporary critic, with sharply opposing views on the economy,[79] yet after Keynes’s death, he wrote: “He was the one really great man I ever knew and for whom I had unbounded admiration. The world will be a very much poorer place without him.”[80]
  • A colleague of Keynes, Nicholas Davenport, recalled: “There were deep emotional forces about Maynard … One could sense his humanity. There was nothing of the cold intellectual about him.”[81]
  • Lionel Robbins, former head of the economics department at the London School of Economics, who engaged in many heated debates with Keynes in the 1930s, had this to say after observing Keynes in early negotiations with the Americans while drawing up plans for Bretton Woods[82]: “This went very well indeed. Keynes was in his most lucid and persuasive mood: and the effect was irresistible. At such moments, I often find myself thinking that Keynes must be one of the most remarkable men that have ever lived – the quick logic, the birdlike swoop of intuition, the vivid fancy, the wide vision, above all the incomparable sense of the fitness of words, all combine to make something several degrees beyond the limit of ordinary human achievement.”
  • Douglas LePan,[83] an official from the Canadian High Commission, wrote: “I am spellbound. This is the most beautiful creature I have ever listened to. Does he belong to our species? Or is he from some other order? There is something mythic and fabulous about him. I sense in him something massive and sphinx-like, and yet also a hint of wings.”
  • Bertrand Russell[84] named Keynes one of the most intelligent people he had ever known, commenting[85]: “Keynes’s intellect was the sharpest and clearest that I have ever known. When I argued with him, I felt that I took my life in my hands, and I seldom emerged without feeling something of a fool.”
  • Keynes’s obituary in The Times included the comment: “There is the man himself – radiant, brilliant, effervescent, gay, full of impish jokes … He was a humane man genuinely devoted to the cause of the common good.” [86]
  • Todd G. Buchholz, former White House director of economic policy under US President George H W Bush, said: “No one embodied the Cambridge spirit of culture, fun, and public duty so much as Maynard Keynes. No one was more brilliant or charming. No economist in this century influenced politicians or the course of economics more.”


Lydia Lopokova and John Maynard Keynes in the 1920s
Attribution: Walter Benington (1872-1936), Public domain, via Wikimedia Commons
Page URL:
Note: This file has been extracted from another file: Lopokova and Keynes 1920s.jpg

In 1946, Keynes suffered a series of heart attacks, which ultimately proved fatal. A few weeks after returning from the United States, Keynes died of a heart attack at Tilton, his farmhouse home near Firle, East Sussex, on 21st April 1946, at the age of 62.[87] Against his wishes (he wanted his ashes to be deposited in the crypt at King’s), his ashes were scattered on the Downs above Tilton.[88]

In 1925, Keynes married the Russian Ballerina Lydia Lopokova, also known as the Right Honourable Lady Keynes. They had no children. Lydia largely disappeared from public view after Keynes’s death in 1946 and spent her remaining years in Sussex, and died in Seaford in 1981, aged 89.


Professor Michael Eugene Porter

In his breakthrough work, The Competitive Advantage of Nations (1990), author Michael Porter set a new standard for analysing the economic strengths and weaknesses of leading nations. I received an extract from[89] about Porter’s critique of Britain, much of which remains eerily as valid today as it was more than 30 years ago[90]:

“Where Britain has fallen down is not so much in the starting pool of factors but in the mechanisms to create and upgrade them. The result has been a major barrier to upgrading and even to sustaining competitive advantage in industry. The British educational system has badly lagged behind that of virtually all the nations we studied. Access to top-quality education has been limited to a few, and a smaller percentage of students go on to higher education than in most other advanced nations. Education for the elite has stressed humanities and pure science in favor of more practical pursuits, and many talented people in Britain have avoided practical disciplines such as engineering. Consequently, the proportion of university students in technical areas is lower than in other advanced nations. Even engineering has been treated in a theoretical way at the leading universities.

“The more serious problem is the education of the average student. British children are taught by teachers less qualified than those in many nations, receive less training in math and science, put in fewer hours, and drop out more. The thrust of educational reform until the Thatcher years was to make the system more egalitarian rather than competitive. Standards have fallen and the performance of British children with them. The educational system has also both reflected and reinforced British tendencies toward noncompetitiveness in personal terms. British people tend to downplay their accomplishments. Moreover, once they are out of secondary school the alternatives are thin. Technical colleges still have low status, and there is no well-developed apprenticeship system as in Germany. The government-supported Youth Training Scheme, still poorly linked to the needs of industry, has not compensated.

 “The result of such an educational system is a study in contrasts. On the one hand, there is a pool of outstanding people well-qualified for professional services, consultancy, software, publishing, and the like. The upper tier of the human resource pool remains well trained and low cost compared to other nations. Outstanding thinkers and scientists continue to graduate from the top British universities. On the other hand, there is a serious problem confronting the bulk of industry. The British workforce is well behind in education and skills compared with that of many other advanced nations. Managers in Britain are also much less likely to have college or university degrees than are those in other advanced nations. There is a shortage of managers trained in technology entering manufacturing industries, and a technical background has been uncommon in top management.

“Most British companies have done little in-house to offset a weak educational system. Investment in training by industry is estimated at far less than one percent of revenues (0.15 percent in 1980) in Britain, compared to 2 percent in Germany and 3 percent in Japan. The pool of human resources that starts out more poorly educated only falls further behind. The net result is that Britain has lagged badly in upgrading the average quality of human resources. This is in many ways the most fundamental problem for the nation’s economy, as it has come to be in the United States.

“Britain makes a significant investment in research. Most of it is oriented toward pure science and especially to defense. Much of British public R&D spending has been defense-related. In 1987, for example, 50 percent of government R&D was for defense purposes compared to about 12 percent in Germany, 5 percent in Japan, and 34 percent in France. As in the United States, this has had limited benefit for industry and sometimes distracted British firms from commercial opportunities. Public R&D spending in all fields has long been under pressure because of a chronic need to reduce government expenditure.

“British companies have been aggressive investors in R&D in some industries, such as chemicals and pharmaceuticals. Here, they have established close links with university researchers in related fields. In most industries, however, British companies have been outspent by foreign rivals. Many firms have lacked organized R&D. Overall, private sector R&D spending in Britain as a percentage of GDP (1.19 percent in 1986) is well behind Japan (2.19 percent), Germany (1.60 percent), and Sweden (1.71 percent). Total British nondefense R&D spending as a percentage of GDP, at 1.8 percent in 1986, compares unfavorably with 2.8 percent in Japan, 2.6 percent in Germany, and similar figures in several other advanced nations. Numerous industries have gradually lost technical position. The pace of decline accelerated with the advent of electronics, new materials, and advanced manufacturing techniques.

“Selective factor disadvantages were once a principal driver of innovation in the British economy. Britain was a relatively small island nation that depended on many raw materials from abroad. This helped propel Britain initially to become a great trading nation. British firms established a far-flung trading system, including associated industries in finance, shipping, and insurance. Later, British scientists and engineers created many advanced product and process technologies to upgrade imported raw materials and create new, advanced goods.

“As British prosperity grew, rising wages led to pressures for process innovation that fueled technological leadership in many British industries. Many new forms of automation were pioneered. Britain originated and developed strong positions in many machinery industries.

“In the postwar period and before, however, the process has been working in reverse. Until the development of North Sea oil and gas, devaluations took pressure off industry. As British wages have lagged behind, the impetus to innovate and automate declined compared to nations such as Germany, Switzerland, Italy, and Sweden. Union restrictions on work practices have further blunted change. Over time, many British manufacturing industries drifted toward competing on price with obsolete or lower-quality products and processes. Instead of overcoming selective disadvantages, British firms have slowly harvested market position.”

Note: DelanceyPlace[2] is a brief daily email. It provides an excerpt or quote they view as interesting or noteworthy, offered with commentary to provide context. They say:

“There is no theme, except that most excerpts will come from a non-fiction work, mainly works of history, and we hope will have a more universal relevance than simply the subject of the book from which they came. And there is not necessarily an endorsement, and in some cases, an excerpt may be particularly controversial, and we may disagree with some or all of it, but nevertheless deem it worth noting.”              

Who is Michael Porter?

If you had asked me the question in 1996, I would have answered, “Honestly, I haven’t got a clue.” But, over the next two years, as I completed my Master’s Degree in Business Administration at Roffey Park (under the auspices of Sussex University), I learned much about the learned professor and why he is regarded so highly.

Michael Eugene Porter (born 23rd May 1947) is a US- academic best known for his theories on economics, business strategy, and social causes. He is the Bishop William Lawrence University Professor at Harvard Business School and is one of the founders of the consulting firm The Monitor Group (now part of Deloitte) and FSG, a social impact consultancy. He is credited for creating Porter’s five forces analysis, which is instrumental in business strategy development. Generally regarded and hailed as the father of the modern strategy field[91], he is also considered one of the world’s most influential thinkers on management and competitiveness and one of the most influential business strategists the world has ever seen.[92] He is the most sought-after research scholar, and his work has been highly recognised by governments, non-governmental organisations and universities.[93]

Picture Credit:
Professor Michael Porter” by Nestlé is licensed under CC BY-NC-SA 2.0.

Porter, the Scholar

Porter received a BSE with high honours in aerospace and mechanical engineering from Princeton University in 1969, where he graduated first in his class and was elected to Phi Beta Kappa and Tau Beta Pi. He received an MBA with high distinction in 1971 from Harvard Business School, where he was a George F. Baker Scholar, and a PhD in business economics from Harvard University in 1973.

He said in an interview that he first became interested in competition through sports. He was on the NCAA championship golf squad at Princeton and also played football, baseball and basketball when growing up.[94] Porter credits Harvard professor Roland “Chris” Christensen with inspiring and encouraging him to speak up during class, hand-writing Porter a note that began: “M. Porter, you have a lot to contribute in class, and I hope you will.” Porter reached the top of the class by his second year at Harvard Business School.[95] 

At Harvard, Porter took classes in industrial organisation economics, which attempts to model the effect of competitive forces on industries and their profitability. This study inspired the Porter five forces analysis framework for analysing industries.[96]

Porter, the Author

Michael Porter is the author of 20 books and numerous articles – including Competitive StrategyCompetitive AdvantageCompetitive Advantage of Nations, and On Competition. A six-time winner of the McKinsey Award for the best Harvard Business Review article of the year, Professor Porter is the most cited author in business and economics.[97]  Porter stated in a 2010 interview: “What I’ve come to see as probably my greatest gift is the ability to take an extraordinarily complex, integrated, multidimensional problem and get arms around it conceptually in a way that helps, that informs and empowers practitioners to actually do things.”[98]

The Outside In approach, also known as the Market Based View/Prescriptive approach, falls under the competitive positioning schools of thought and is taught using Porter’s Five Forces model, Porter’s Generic Strategies and Porter’s Value Chain frameworks. During his illustrious career, Michael Porter has emphasised that strategy should not be merely chosen based on the majority of votes in a popularity contest, but that strategy’s essence is about making choices.[99]

He has delivered public speaking based on the importance of strategy formulation and has served as a consultant to many governments and NGOs[100] devising strategy formulations.

Porter wrote “The Competitive Advantage of Nations” in 1990. The book is based on studies of ten nations (Britain being one of them) and argues that a key to national wealth and advantage is the collective productivity of firms and workers and that the national and regional environment supports that productivity.[101]  He proposed the “diamond” framework, a mutually-reinforcing system of four factors that determine national advantage:

  • factor conditions
  • demand conditions
  • related or supporting industries
  • firm strategy, structure and rivalry

Information, incentives, and infrastructure were also key to that productivity.[102]

In April 2014, Porter discussed how the US ranks relative to other countries on a comprehensive scorecard called “The Social Progress Index“, an initiative he co-authored.[103] This scorecard rated the US on a comprehensive set of metrics; overall, the US was placed in 16th position. The 2021 index shows the US in the 24th position, with the UK in the 18th slot.[104]

Michael Porter defined the two ways an organisation can achieve competitive advantage over its rivals:

  • Cost advantage – when a business provides the same products and services as its competitors, albeit at a lesser cost.
  • Differentiation advantage – when a business provides better products and services than its competitors.

In Porter’s view, strategic management should be concerned with building and sustaining competitive advantage.[105]  He developed Porter’s Five Forces model 43 years ago, and it is still widely used to analyse industries and to estimate whether it would be profitable and ideal enough to enter an industry after carefully examining:

  • the bargaining power of buyers
  • the bargaining power of suppliers
  • the threat of new entrants
  • competition among existing firms
  • the threat of substitutes[106]

The first mention of Porter’s Five Forces was in Porter’s 1979 article How Competitive Forces Shape Strategy and has further explained the Five Forces principles in his 1980 article Competitive Strategy: Techniques for Analyzing Industries and Competitors.[107]  Porter introduced the concept of competitive advantage in 1985, which later became one of the key concepts in management science.[108] He also published a book titled Competitive Advantage: Creating and Sustaining Superior Performance to explain the concept of competitive advantage. The book, which later became a bestseller, also focuses on the value chain concept.[109]

It was Porter who first coined and introduced the concept of value chain analysis which was another groundbreaking idea that changed the dynamics of how business activities are conducted.[110]

Porter has devoted considerable attention to understanding and addressing the pressing problems in healthcare delivery in the United States and other countries. His book, Redefining Health Care[111] (written with Elizabeth Teisberg), develops a new strategic framework for transforming the value delivered by the health care system, with implications for providers, health plans, employers, and government, among other actors.

Porter’s work on healthcare is being extended to address healthcare delivery problems in developing countries in collaboration with Dr Jim Yong KimSachin H. Jain, and others at the Harvard Medical School and Harvard School of Public Health.

Porter, the Consultant

In addition to his research, writing, and teaching, Porter is an advisor to business, government, and the
social sector. He has served as strategy advisor to numerous leading US and international companies, including Caterpillar, Procter & Gamble,[112] Scotts Miracle-GroRoyal Dutch Shell, and Taiwan Semiconductor. Professor Porter once served on two public boards of directors, those of Thermo Fisher Scientific and Parametric Technology Corporation.

In 1983, Michael Porter co-founded the Monitor Group, a strategy-consulting firm. Deloitte Consulting
acquired the Monitor Group in 2013 through structured insolvency proceedings.[113]

Porter’s Legacy

Porter’s Five Forces has been criticised for omitting the importance of strategic alliances and collaborations. Two of the Yale School of Management professors, Adam Brandenburger and Barry Nalebuff, came up with a solution by joining hands together to create a sixth new force as complementors[114] using tools of game theory.

Michael Porter has written numerous books on modern competitive strategy for business.[115]  His research work in strategic management has often been an important subject matter as far as the university system is concerned. His concepts and theories relating to strategic management are given utmost priority in universities and colleges where his theories, such as Porter’s Five ForcesPorter’s Diamond model, Porter’s Generic Strategies and Porter’s Value Chain, are taught by lecturers and professors to the students. The assignments delegated to students often test how Porter’s Five Forces and Porter’s Diamond model can be used practically in making effective decisions when implementing appropriate and well-thought-out strategies.

Recognition and Honours   [116]

Michael Porter has been widely recognised for his work. Some of his many honours include Harvard’s David A. Wells Prize in Economics (1973) for his research in industrial organisation. He also received the Graham and Dodd Award from the Financial Analysts Federation in 1980. Michael Porter’s book Competitive Advantage won the George R. Terry Book Award of the Academy of Management in 1985 as the outstanding contribution to management thought. Geoff Colvin, Senior Editor-at-large at Fortune magazine, 2012 said this:

“Michael Porter has influenced more executives – and more nations – than any other business professor on earth. Now, he and an all-star team aim to rescue the U.S. economy.”


Adam Smith

‘What sort of man was Adam Smith?’ was the question asked in an email I received from[3].  He was a Scottish economist whose 1776 book, The Wealth of Nations (full title: An Inquiry into the Nature and Causes of the Wealth of Nations), profoundly influenced economic thought, particularly about free markets, free trade, and the “invisible hand”. The following extract (pages 45-47) from The Worldly Philosophers: The Lives, Times, and Ideas of the Great Economic ThinkersbyRobert L. Heilbroner[117] [4] provides an answer to the question posed:

The ‘Muir Portrait’. Painting of Adam Smith, probably posthumously, by an unknown author,  based on a medallion by James Tassie.
Scottish National Gallery, Public Domain, via Wikimedia Commons.

“‘I am a beau in nothing but my books,’ was the way Adam Smith once described himself, proudly showing off his treasured library to a friend. He was certainly not a hand­some man. A medallion profile shows us a protruding lower lip thrust up to meet a large aquiline nose and heavy bulging eyes looking out from heavy lids. All his life Smith was trou­bled with a nervous affliction; his head shook, and he had an odd and stumbling manner of speech.

“In addition, there was his notorious absentmindedness. In the 1780s, when Smith was in his late fifties, the inhab­itants of Edinburgh were regularly treated to the amusing spectacle of their most illustrious citizen, attired in a light­colored coat, knee breeches, white silk stockings, buckle shoes, flat broad-brimmed beaver hat, and cane, walking down the cobbled streets with his eyes fixed on infinity and his lips moving in silent discourse. Every pace or two, he would hesitate as if to change his direction or even reverse it; his gait was described by a friend as ‘vermicular.’

“Accounts of his absence of mind were common. On one occasion, he descended into his garden clad only in a dressing gown and, falling into a reverie, walked fifteen miles before coming to. Another time while Smith was walking with an eminent friend in Edinburgh, a guard presented his pike in salute. Smith, who had been thus honored on countless occa­sions, was suddenly hypnotized by the saluting soldier. He returned the honor with his cane and then further astonished his guest by following exactly in the guard’s footsteps, dupli­cating with his cane every motion of the pike. When the spell was broken, Smith was standing at the head of a long flight of steps, cane held at the ready. Having no idea that he had done anything out of the ordinary, he grounded his stick and took up his conversation where he had left off.

“This absent-minded professor was born in 1723 in the town of Kirkcaldy, County Fife, Scotland. Kirkcaldy boasted a population of fifteen hundred; at the time of Smith’s birth, nails were still used as money by some of the local townspeo­ple. When he was four years old, a most curious incident took place. Smith was kidnapped by a band of passing gypsies. Through the efforts of his uncle (his father had died before his birth), the gypsies were traced and pursued, and in their flight they abandoned young Adam by the roadside. ‘He would have made, I fear, a poor gypsy,’ says one of his early biographers.

“From his earliest days, Smith was an apt pupil, although even as a child given to fits of abstraction. He was obviously destined for teaching, and so at seventeen he went to Oxford on a scholarship — making the journey on horseback — and there he remained for six years. But Oxford was not then the citadel of learning which it later became. Most of the public professors had long ago given up even a pretence of teaching. A foreign traveller recounts his astonishment over a public de­bate there in 1788.

“All four participants passed the allotted time in profound silence, each absorbed in reading a popular novel of the day. Since instruction was the exception rather than the rule, Smith spent the years largely untutored and un­taught, reading as he saw fit. In fact, he was once nearly ex­pelled from the university because a copy of David Hume’s A Treatise of Human Nature was found in his rooms — Hume was no fit reading matter, even for a would-be philosopher.

“In 1751 — he was not yet twenty-eight — Smith was of­fered the Chair of Logic at the University of Glasgow, and shortly thereafter he was given the Chair of Moral Philoso­phy. Unlike Oxford, Glasgow was a serious centre of what has come to be called the Scottish Enlightenment, and it boasted a galaxy of talent. But it still differed considerably from the modem conception of a university.

“The prim professorial group did not entirely appreciate a certain levity and enthusi­asm in Smith’s manner. He was accused of sometimes smil­ing during religious services (no doubt during a reverie), of being a firm friend of that outrageous Hume, of not holding Sunday classes on Christian evidences, of petitioning the Senatus Academicus for permission to dispense with prayers on the opening of class, and of delivering prayers that smacked of a certain ‘natural religion.’ Perhaps this all fits into better perspective if we remember that Smith’s own teacher, Francis Hutcheson, broke new ground at Glasgow by refusing to lecture to his students in Latin!

“The disapproval could not have been too severe, for Smith rose to be dean in 1758. Unquestionably he was happy at Glasgow. In the evenings, he played whist — his absent­mindedness made him a somewhat undependable player­, attended learned societies, and lived a quiet life. He was beloved of his students, noted as a lecturer — even Boswell came to hear him — and his odd gait and manner of speech gained the homage of imitation. Little busts of him even ap­peared in booksellers’ windows.

“It was not merely his eccentric personality that gave him prestige. In 1759 he published a book that made an instant sensation. It was entitled The Theory of Moral Sentiments, and it catapulted Smith immediately into the forefront of English philosophers. Theory was an inquiry into the origin of moral approbation and disapproval. How does it happen that man, who is a creature of self-interest, can form moral judgments in which self-interest seems to be held in abeyance or transmuted to a higher plane? Smith held that the answer lay in our ability to put ourselves in the position of a third person, an impartial observer, and in this way to form a sympathetic notion of the objective (as opposed to the self­ish) merits of a case.”

Smith was born in Kirkcaldy, in Fife, Scotland. His father (also Adam Smith) was a Scottish Writer to the Signet[118] (senior solicitor), advocate and prosecutor (judge advocate) who also served as comptroller of the customs in Kirkcaldy[119]  but died before his son was born. Adam Smith, the economist, was a pioneer in the thinking of political economy and a key figure during the Scottish Enlightenment.[120]  He was seen as “The Father of Economics[121] or “The Father of Capitalism[122]  and wrote two classic works: the first in 1759, The Theory of Moral Sentiments and An Inquiry into the Nature and Causes of the Wealth of Nations in 1776. The latter is considered his magnum opus and the first modern work to treat economics as a comprehensive system and an academic discipline. He also wrote various essays on philosophical matters and an account of the last days of his friend, David Hume.

Smith as a Student and Teacher

Smith studied social philosophy at the University of Glasgow, which he entered at age 14[123] in 1737 and at Balliol College, Oxford, where he was one of the first students to benefit from scholarships set up by fellow Scot John Snell. After graduating, he delivered a successful series of public lectures at the University of Edinburgh, leading him to collaborate with David  Hume during the Scottish Enlightenment. Smith obtained a professorship at Glasgow, teaching moral philosophy, and during this time, wrote and published The Theory of Moral Sentiments. In his later life, he took a tutoring position that allowed him to travel throughout Europe, where he met other intellectual leaders of his day.

Smith was discontented while at Oxford, perhaps in part due to the absence of his beloved teacher in Glasgow, Francis Hutcheson, who was well regarded as one of the most prominent lecturers at the University of Glasgow in his day and earned the approbation of students, colleagues, and even ordinary residents with the enthusiasm and earnestness of his orations (which he sometimes opened to the public). Hutcheson’s lectures endeavoured not only to teach philosophy but also to make his students embody that philosophy in their lives, appropriately acquiring the epithet, the preacher of philosophy. Unlike Smith, Hutcheson was not a system builder; rather, his magnetic personality and method of lecturing so influenced his students and caused the greatest of those to reverentially refer to him as “the never to be forgotten Hutcheson“—a title that Smith, in all his correspondence, used to describe just two people, his good friend David Hume and his influential mentor Francis Hutcheson.[124]

Following the 1759 publication of The Theory of Moral Sentiments, Smith became so popular that many students from wealthy families left their schools in other countries to enrol at Glasgow to learn under him.[125] At this time, Smith began to give more attention to other matters in his lectures and less to his theories of morals.[126]  For example, Smith lectured that the cause of an increase in national wealth is labour rather than the nation’s quantity of gold or silver, which is the basis for mercantilism, the
economic theory that dominated Western European economic policies at the time.[127]

In 1762, he received the degree of LL.D. from the University of Glasgow, and two years later resigned his chair to become the travelling tutor to the young Duke of Buccleuch (Henry Scott), accompanying him to the Continent of Europe[128] as preparation for a career in international politics.  Smith’s tutoring job entailed touring Europe with Scott, during which time he educated Scott on many subjects. As a tutor:

  • Smith travelled first to France, where he stayed for a year and a half, but found Toulouse to be somewhat boring and wrote to Hume to say that he “had begun to write a book to pass away the time“.[129] After touring the south of France, the group moved to Geneva, Switzerland, where Smith met with the philosopher Voltaire.[130]
  • From Geneva, the party moved to Paris, where Smith met American publisher and diplomat Benjamin Franklin, who a few years later would lead the opposition in the American colonies against four British resolutions from Charles Townshend (in history known as the
    Townshend Acts), which threatened American colonial self-government and imposed taxation on several items necessary to the colonies.
  • Smith discovered the Physiocracy[131] school founded by François Quesnay.[132] Physiocrats opposed mercantilism, the dominating economic theory of the time, illustrated in their motto Laissez faire et laissez passer, le monde va de lui même! 

The wealth of France had been virtually depleted by Louis XIV[133] and Louis XV in ruinous wars[134] and was further exhausted in aiding the American insurgents against the British. The excessive consumption of goods and services deemed to have no economic contribution was considered a source of unproductive labour, with France’s agriculture the only economic sector to maintain the nation’s wealth. Given that the British economy of the day yielded an income distribution that stood in contrast to that which existed in France, Smith concluded that “with all its imperfections, [the Physiocratic school] is perhaps the nearest approximation to the truth that has yet been published upon the subject of political economy.”[135]

In Wealth of Nations, Smith explained[136] the relationship between the growth of private property and civil government:

“Men may live together in society with some tolerable degree of security, though there is no civil magistrate to protect them from the injustice of those passions. But avarice and ambition in the rich, in the poor the hatred of labour and the love of present ease and enjoyment, are the passions which prompt to invade property, passions much more steady in their operation, and much more universal in their influence. Wherever there is great property, there is great inequality. For one very rich man there must be at least five hundred poor, and the affluence of the few supposes the indigence of the many. The affluence of the rich excites the indignation of the poor, who are often both driven by want, and prompted by envy, to invade his possessions. It is only under the shelter of the civil magistrate that the owner of that valuable property, which is acquired by the labour of many years, or perhaps of many successive generations, can sleep a single night in security. He is at all times surrounded by unknown enemies, whom, though he never provoked, he can never appease, and from whose injustice he can be protected only by the powerful arm of the civil magistrate continually held up to chastise it. The acquisition of valuable and extensive property, therefore, necessarily requires the establishment of civil government. Where there is no property, or at least none that exceeds the value of two or three days’ labour, civil government is not so necessary. Civil government supposes a certain subordination. But as the necessity of civil government gradually grows up with the acquisition of valuable property, so the principal causes which naturally introduce subordination gradually grow up with the growth of that valuable property. (…) Men of inferior wealth combine to defend those of superior wealth in the possession of their property, in order that men of superior wealth may combine to defend them in the possession of theirs. All the inferior shepherds and herdsmen feel that the security of their own herds and flocks depends upon the security of those of the great shepherd or herdsman; that the maintenance of their lesser authority depends upon that of his greater authority, and that upon their subordination to him depends his power of keeping their inferiors in subordination to them. They constitute a sort of little nobility, who feel themselves interested to defend the property and to support the authority of their own little sovereign in order that he may be able to defend their property and to support their authority. Civil government, so far as it is instituted for the security of property, is in reality instituted for the defence of the rich against the poor, or of those who have some property against those who have none at all.”

Additionally, Smith outlined his view about the proper expenses of the government in The Wealth of Nations, Book V, Ch. I. Included in his requirements of a government are the enforcement of contracts and provision of a justice system, the granting of patents and copyrights, the provision of public goods such as infrastructure, the provision of national defence, and banking regulation. The role of the government was to provide goods “of such a nature that the profit could never repay the expense to any individual,” such as roads, bridges, canals, and harbours. He also encouraged invention and new ideas through his patent enforcement and support of infant industry monopolies. He supported partial public subsidies for elementary education, and he believed that competition among religious institutions would provide general benefit to society. In such cases, however, Smith argued for local rather than centralised control: “Even those publick [sic] works which are of such a nature that they cannot afford any revenue for maintaining themselves … are always better maintained by a local or provincial revenue, under the management of a local and provincial administration, than by the general revenue of the state” (Wealth of Nations, V.i.d.18). Finally, he outlined how the government should support the dignity of the monarch or chief magistrate, such that they are equal or above the public in fashion.

Smith’s Theory of Absolute Advantage

Smith refused to explain the distribution of wealth and power in terms of God’s will and instead appealed to natural, political, social, economic and technological factors and their interactions. In his work, Smith introduced, among other theories, his theory of absolute advantage[137]: in economics, this theory postulates as being the ability of a party (an individual, a firm, or a country) to produce an item of goods or service more efficiently than its competitors.[138] He first described the principle of absolute advantage in the context of international trade in 1776, using labour as the only input. Since absolute advantage is determined by a simple comparison of labour productiveness, a party can have no absolute advantage in anything[139].

Smith’s Free Market Economic Theory

As a reaction to the common policy of protecting national markets and merchants, what came to be known as mercantilism, Smith laid the foundations of classical free market economic theory: In economics, a free market is an economic system in which the prices of goods and services are determined by supply and demand expressed by sellers and buyers. Such markets operate without the intervention of government or any other external authority. Proponents of the free market as a normative ideal contrast it with a regulated market, where a government intervenes in supply and demand using various methods such as taxation or regulation. In an idealised free market economy, prices for goods and services are set solely by the bids and offers of the participants.

Scholars contrast the concept of a free market with the idea of a coordinated market in fields of study such as political economynew institutional economicseconomic sociology and political science. These fields emphasise the importance of currently existing market systems of rule-making institutions external to the simple forces of supply and demand, which create space for those forces to operate to control productive output and distribution. Although free markets are commonly associated with capitalism in contemporary usage and popular culture, free markets have also been components in some forms of market socialism[140].  It should be noted that historically, free market has also been used synonymously with other economic policies.

­Smith’s concept of the Division of Labour

The Wealth of Nations was a precursor to the modern academic discipline of economics. In this and other works, he developed the concept of division of labour and expounded how rational self-interest and competition can lead to economic prosperity. In his day, Smith was controversial, while his general approach and writing style were often satirised by writers such as Horace Walpole.[141]

The division of labour is the separation of the tasks in any economic system or organisation so that participants can specialise (specialisation). Individuals, organisations, and nations have or acquire specialised capabilities and either form combinations or trade to take advantage of the capabilities of others in addition to their own. Specialised capabilities may include equipment or natural resources and skills and training, and the various combinations of such assets are often important.

In the first sentence of An Inquiry into the Nature and Causes of the Wealth of Nations (1776), Adam Smith foresaw the essence of industrialism by determining that the division of labour represented a substantial increase in productivity. Like du Monceau, Smith’s example was the manufacture of pins. But, unlike Plato, Smith famously argued that the difference between a street porter and a philosopher was as much a consequence of the division of labour as its cause.

Therefore, while for Plato, the level of specialisation determined by the division of labour was externally determined, for Smith, it was the dynamic engine of economic progress. However, in a further chapter of the same book, Smith criticised the division of labour, saying it can lead to “the almost entire corruption and degeneracy of the great body of the people.…unless the government takes some pains to prevent it.”[142] The contradiction has led to debate over Smith’s opinion of the division of labour.[143]
Alexis de Tocqueville agreed with Smith: “Nothing tends to materialize man, and to deprive his work of the faintest trace of mind, more than extreme division of labour.”[144] Although Adam Ferguson shared similar views to Smith, he was generally more negative.[145]

The specialisation and concentration of the workers on their single subtasks often leads to greater skill and greater productivity on their particular subtasks than would be achieved by the same number of workers, each of whom carries out the original broad task, in part due to increased quality of production, but more importantly because of increased efficiency of production, leading to a higher nominal output of units produced per time unit.[146] Smith used the example of a production capability of an individual pin maker compared to a manufacturing business employing ten men[147]:

“One man draws out the wire; another straightens it; a third cuts it; a fourth points it; a fifth grinds it at the top for receiving the head; to make the head requires two or three distinct operations; to put it on is a peculiar business; to whiten the pins is another; it is even a trade by itself to put them into the paper; and the important business of making a pin is, in this manner, divided into about eighteen distinct operations, which, in some manufactories, are all performed by distinct hands, though in others the same man will sometimes perform two or three of them.

“I have seen a small manufactory of this kind, where ten men only were employed, and where some of them consequently performed two or three distinct operations. But though they were very poor, and therefore but indifferently accommodated with the necessary machinery, they could, when they exerted themselves, make among them about twelve pounds of pins in a day. There are in a pound upwards of four thousand pins of a middling size. Those ten persons, therefore, could make among them upwards of forty-eight thousand pins in a day. Each person, therefore, making a tenth part of forty-eight thousand pins, might be considered as making four thousand eight hundred pins in a day. But if they had all wrought separately and independently, and without any of them having been educated to this peculiar business, they certainly could not each of them have made twenty, perhaps not one pin in a day.”

Smith saw the importance of matching skills with equipment—usually in the context of an organisation. For example, pin makers were organised with one making the head and another the body, each using different equipment. Similarly, he emphasised a large number of skills, used in cooperation and with suitable equipment, were required to build a ship.


Smith’s father had shown a strong interest in Christianity and belonged to the moderate wing of the Church of Scotland.[148] The fact that Adam Smith received the Snell Exhibition[149] suggests that he may have gone to Oxford to pursue a career in the Church of England.[150]  Anglo-American economist Ronald Coase has challenged the view that Smith was a deist[151] based on the fact that Smith’s writings never explicitly invoke God as an explanation of the harmonies of the natural or the human worlds. According to Coase, though Smith sometimes refers to the “Great Architect of the Universe“, later scholars such as Jacob Viner have “very much exaggerated the extent to which Adam Smith was committed to a belief in a personal God“.[152]

Brendan Long argues that Smith was a theist[153], whereas according to professor Gavin Kennedy, Smith was “in some sense” a Christian.[154]

Adam Smith was a close friend of David Hume, who, despite debate about his religious views in modern scholarship, was commonly characterised in his own time as an atheist.[155] The publication in 1777 of Smith’s letter to William Strahan, in which he described Hume’s courage in the face of death despite his irreligiosity, attracted considerable controversy.[156]

Smith’s First Work

In 1759, Smith published his first work, The Theory of Moral Sentiments, sold by co-publishers Andrew Millar of London and Alexander Kincaid of Edinburgh.[157]  Smith continued making extensive revisions to the book until his death.[158]

Although The Wealth of Nations is widely regarded as Smith’s most influential work, Smith is believed to have considered The Theory of Moral Sentiments to be a better piece of writing:[159]

  • Smith critically examines the moral thinking of his time and suggests that conscience arises from dynamic and interactive social relationships through which people seek “mutual sympathy of sentiments.”[160]
  • His goal in writing the work was to explain the source of humanity’s ability to form a moral judgment, given that people begin life with no moral sentiments at all.
  • Smith proposes a theory of sympathy, in which through observing others and seeing the judgments they form of both others and oneself, makes people aware of themselves and how others perceive their behaviour. The feedback people receive from perceiving (or imagining) others’ judgment creates an incentive to achieve “mutual sympathy of sentiments” with them and leads people to develop habits, and then principles, of behaviour, which come to constitute one’s conscience.[161]

The main theme running through this work is Smith’s unusually strong commitment to the soundness of the ordinary human being’s judgments and a “concern to fend off attempts, by philosophers and policy-makers to replace those judgments with the supposedly better “systems” invented by intellectuals”.[162]

Some scholars have perceived a conflict between The Theory of Moral Sentiments and The Wealth of Nations. Rather than viewing the booksas presenting conflicting views of human nature, some regard the works as emphasising different aspects of human nature that vary depending on the situation:

  • In the first part – The Theory of Moral Sentiments – Smith laid down the foundation of his vision of humanity and society.
  • In the second – The Wealth of Nations – Smith elaborated on the virtue of prudence, which meant the relations between people in the private sphere of the economy.

Smith planned to elaborate further on the virtue of justice in a third book, but death intervened.[163]

In the Theory Of Moral Sentiments, Adam Smith said[164]:

“Little else is requisite to carry a state to the highest degree of opulence from the lowest barbarism, but peace, easy taxes, and a tolerable administration of justice: all the rest being brought about by the natural course of things.”

Smith’s Magnum Opus

Disagreement runs rife between classical and neoclassical economists about the central message of Smith’s most influential work: An Inquiry into the Nature and Causes of the Wealth of Nations (1776). Neoclassical economists emphasise Smith’s invisible hand,[165] a concept mentioned in the middle of his work – Book IV, Chapter II – and classical economists believe that Smith stated his programme for promoting the “wealth of nations” in the first sentences, which attributes the growth of wealth and prosperity to the division of labour. He elaborated on the virtue of prudence, defining it as the relations between people in the private sphere of the economy.

Smith used the term “the invisible hand[166] in “History of Astronomy”[167], referring to “the invisible hand of Jupiter“, and once in each of his two books. This last statement about “an invisible hand” has been interpreted in numerous ways. In one statement, Smith said:

As every individual, therefore, endeavours as much as he can both to employ his capital in the support of domestic industry, and so to direct that industry that its produce may be of the greatest value; every individual necessarily labours to render the annual revenue of the society as great as he can. He generally, indeed, neither intends to promote the public interest, nor knows how much he is promoting it. By preferring the support of domestic to that of foreign industry, he intends only his own security; and by directing that industry in such a manner as its produce may be of the greatest value, he intends only his own gain, and he is in this, as in many other cases, led by an invisible hand to promote an end which was no part of his intention. Nor is it always the worse for the society that it was no part of it. By pursuing his own interest he frequently promotes that of the society more effectually than when he really intends to promote it. I have never known much good done by those who affected to trade for the public good. It is an affectation, indeed, not very common among merchants, and very few words need be employed in dissuading them from it.”

Smith’s central message seems to be that under dynamic competition, a growth machine secures “The Wealth of Nations“. Smith’s argument predicted Britain’s evolution as the workshop of the world, underselling and outproducing all its competitors. The opening sentences of the “Wealth of Nations” summarise this policy[168]:

“The annual labour of every nation is the fund which originally supplies it with all the necessaries and conveniences of life which it annually consumes … . [T]his produce … bears a greater or smaller proportion to the number of those who are to consume it … .[B]ut this proportion must in every nation be regulated by two different circumstances; first, by the skill, dexterity, and judgment with which its labour is generally applied; and,  secondly, by the proportion between the number of those who are employed in useful labour, and that of those who are not so employed.”

However, Smith added that the “abundance or scantiness of this supply too seems to depend more upon the former of those two circumstances than upon the latter.”[169]

Comments and Criticisms from Experts

  • George Stigler[170] attributes to Smith “the most important substantive proposition in all of economics“. It is that, under competition, owners of resources (for example, labour, land, and capital) will use them most profitably, resulting in an equal rate of return in equilibrium for all uses, adjusted for apparent differences arising from such factors as training, trust, hardship, and unemployment.[171]
  • Paul Samuelson finds in Smith’s pluralist use of supply and demand as applied to wages, rents, and profit a valid and valuable anticipation of the general equilibrium modelling of Walras a century later. Smith’s allowance for wage increases in the short and intermediate term from capital accumulation and invention contrasted with Malthus, Ricardo, and Karl Marx in their propounding of a rigid subsistence–wage theory of labour supply.[172]
  • Joseph Schumpeter[173] criticised Smith for lack of technical rigour, arguing it enabled Smith’s writings to appeal to wider audiences, saying[174]: “His very limitation made for success. Had he been more brilliant, he would not have been taken so seriously. Had he dug more deeply, had he unearthed more recondite truth, had he used more difficult and ingenious methods, he would not have been understood. But he had no such ambitions; in fact he disliked whatever went beyond plain common sense. He never moved above the heads of even the dullest readers. He led them on gently, encouraging them by trivialities and homely observations, making them feel comfortable all along.”
  • Former US Federal Reserve Chairman Alan Greenspan argues that, while Smith did not coin the term laissez-faire, “it was left to Adam Smith to identify the more-general set of principles that brought conceptual clarity to the seeming chaos of market transactions”. Greenspan continues that The Wealth of Nations was “one of the great achievements in human intellectual history“.[175]
  • P.J. O’Rourke described Smith as the “founder of free market economics“.[176]
  • Economic historians such as Jacob Viner regard Smith as a strong advocate of free markets and limited government (what Smith called “natural liberty“) but not as a dogmatic supporter of
  • Economist Daniel Klein believes using the term “free-market economics” or “free-market economist” to identify the ideas of Smith is too general and slightly misleading. Klein offers six characteristics central to the identity of Smith’s economic thought and argues that a new name is needed to give a more accurate depiction of the “Smithian” identity.[178]
  • Economist David Ricardo set straight some of the misunderstandings about Smith’s thoughts on a free market. Most people still fall victim to the thinking that Smith was a free-market economist without exception, though he was not. Ricardo pointed out that Smith was in support of helping infant industries. Smith believed that the government should subsidise newly formed industry, but he did fear that when the infant industry grew into adulthood, it would be unwilling to surrender the government’s help. Smith also supported tariffs on imported goods to counteract an internal tax on the same good but fell to pressure in supporting some tariffs in support of the national defence.[179]

Smith’s Late Years and Death

In 1778, Smith was appointed to a post as commissioner of customs in Scotland and went to live with his mother (who died in 1784)[180] in Panmure House in Edinburgh’s Canongate.[181] Five years later, as a member of the Philosophical Society of Edinburgh, when it received its royal charter, Smith automatically became one of the founding members of the Royal Society of Edinburgh.[182] From 1787 to 1789, he occupied the honorary position of Lord Rector of the University of Glasgow.[183]

Smith died in the northern wing of Panmure House in Edinburgh on 17th July 1790 after a painful illness. His body was buried in the Canongate Kirkyard.[184] On his deathbed, Smith expressed disappointment that he had not achieved more.[185] Adam Smith never married[186] and seems to have maintained a close relationship with his mother, with whom he lived after his return from France and who died six years before him.[187]

Smith’s personal papers were destroyed at his death at his request.[188] In his last years, he seemed to have been planning two major treatises, one on the theory and history of law and one on the sciences and arts. The posthumously published Essays on Philosophical Subjects, a history of astronomy down to Smith’s era, plus some thoughts on ancient physics and metaphysics, probably contain that would have been the latter treatise. Lectures on Jurisprudence were notes taken from Smith’s early lectures, plus an early draft of The Wealth of Nations, published as part of the 1976 Glasgow Edition of the works and correspondence of Smith.

Other works, including some published posthumously, include Lectures on Justice, Police, Revenue, and Arms (1763) (first published in 1896); and Essays on Philosophical Subjects (1795).[189]

Smith’s Legacy

The Wealth of Nations was a precursor to the modern academic discipline of economics. In this and other works, Adam Smith expounded how rational self-interest and competition can lead to economic prosperity. In his day, he was controversial, and his general approach and writing style were often satirised by Tory writers in the moralising tradition of Hogarth and Swift, as a discussion at the University of Winchester suggests.[190] 

Notwithstanding all these things, in 2005, Smith’s The Wealth of Nations was named among the 100 Best Scottish Books of all time.[191]

In light of the arguments put forward by Smith and other economic theorists in Britain, academic belief in mercantilism began to decline in Britain in the late 18th century. During the Industrial Revolution, Britain embraced free trade and Smith’s laissez-faire economics, and via the British Empire, used its power to spread a broadly liberal economic model around the world, characterised by open markets and relatively barrier-free domestic and international trade.[192]

Picture Credit:Adam Smith” by duncan is licensed under CC BY-NC 2.0.


Karl Heinrich Marx[193]

Karl Heinrich Marx was born on 5th May 1818 in Trier, an ancient city then part of the Kingdom of Prussia‘s
Province of the Lower Rhine.[194] Marx’s family was originally non-religious Jewish but had converted formally to Christianity before his birth. His maternal grandfather was a Dutch rabbi, while his paternal line had supplied Trier’s rabbis since 1723.

Marx was a German-born philosopher, economist, historian, sociologist, political theorist, and journalist. He was also a critic of political economy and a socialist revolutionary. His best-known titles are the 1848 pamphlet The Communist Manifesto and the four-volume Das Kapital (1867–1883).

Marx’s political and philosophical thought had an enormous influence on subsequent intellectual, economic, and political history. His surname has been used as an adjective, a noun, and a school of social theory.

Marx studied law and philosophy at the universities of Bonn and Berlin. He married the German theatre critic and political activist Jenny von Westphalen in 1843. Due to his political publications, Marx became stateless and lived in exile with his wife and children in London for decades, where he continued to develop his thought in collaboration with German philosopher Friedrich Engels and publish his writing, using the British Museum Reading Room for his research.

Marx’s critical theories about society, economics, and politics, collectively understood as Marxism, hold that human societies develop through class conflict. In the capitalist mode of production, this manifests itself in the conflict between the ruling classes (known as the bourgeoisie) that control the means of production and the working classes (known as the proletariat) that enable these means by selling their labour-power in return for wages.[195]

Using a critical approach known as historical materialism[196], Marx argued that capitalism produced internal tensions like previous socio-economic systems and that those would lead to its self-destruction and replacement by a new system known as the socialist mode of production. For Marx, class antagonisms under capitalism—owing in part to its instability and crisis-prone nature—would eventuate the working class’s development of class consciousness, leading to their conquest of political power and eventually the establishment of a classlesscommunist society constituted by a free association of producers.[197] Marx actively pressed for its implementation, arguing that the working class should carry out organised proletarian revolutionary action to topple capitalism and bring about socio-economic emancipation.[198]

Marx’s most important contribution to sociological theory was his general mode of analysis, the so-called “dialectical” model, which regards every social system as having within it imminent forces that give rise to “contradictions” (disequilibria) that can be resolved only by a new social system. To explain further: the dialectical method[199] is a discourse between two or more people holding different points of view about a subject yet seeking to establish the truth through reasoned argumentation. Dialectic resembles debate, but the concept excludes subjective elements such as emotional appeal and the modern pejorative sense of rhetoric.[200] 

Dialectic may thus be contrasted with both the eristic, which refers to argument that aims to successfully dispute another’s argument (rather than searching for truth), and the didactic method, wherein one side of the conversation teaches the other. Dialectic is alternatively known as minor logic, as opposed to major logic or critique. The dialectics of Hegel and Marx were criticised in the 20th century by the philosophers Karl Popper and Mario Bunge.

Marx, the Writer

Kark Marx published (with Friedrich Engels) Manifest der Kommunistischen Partei (1848), commonly known as The Communist Manifesto, arguably the most celebrated pamphlet in the entire history of the socialist movement. He also was the author of the movement’s most important book, Das Kapital. These works and others by Marx and Engels form the basis of the body of thought and belief branded as Marxism.

In The Communist Manifesto, Marx argues that capitalism would inevitably self-destruct, to be replaced ultimately by Communism. Marx was writing at a time of unprecedented industrial and social change. As newly industrialised cities expanded, they became overcrowded by a dependent workforce, many of whom lived in abject poverty in contrast with the relative wealth of their employers. Against this backdrop, Marx formulated his theory of history, which he saw as a complex series of class struggles that would inevitably lead to the overthrow of the bourgeoisie (the ruling class) by the proletariat (the working class).[201]

Karl Marx and Friedrich Engels
Attribution: Photo of Karl Marx by Friedrich Karl WunderPhoto of Friedrich Engels by George Lester, Public domain, via Wikimedia Commons
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Das Kapital, also known as Capital: A Critique of Political Economy or sometimes simply Capital (German: Das Kapital. Kritik der politischen Ökonomie, 1867–1883), is a foundational theoretical text in materialist philosophy, critique of political economy and politics by Karl Marx.[202] Marx aimed to reveal the economic patterns underpinning the capitalist mode of production in contrast to classical political economists such as Adam Smith, Jean-Baptiste Say, David Ricardo and John Stuart Mill.  Marx died before he had time to publish the planned second, third and fourth parts, the second and third volumes, which were completed from his notes and published after his death by his colleague Friedrich Engels; the fourth volume was completed and published after Engels’s death by Marxist philosopher Karl Kautsky. Das Kapital is the most cited book published before 1950 in the social sciences.[203]

Marx’s Legacy

Marx has been described as one of the most influential figures in human history, and his work has been both lauded and criticised.[204] His work in economics laid the basis for some current theories about labour and its relation to capital.[205] Many intellectuals, labour unions, artists, and political parties worldwide have been influenced by Marx’s work, with many modifying or adapting his ideas. Marx is typically cited as one of the principal architects of modern social science.[206]

Marx’s ideas have had a profound impact on world politics and intellectual thought,[207] in particular in the aftermath of the 1917 Russian Revolution.[208] Followers of Marx frequently debate among themselves over how to interpret Marx’s writings and apply his concepts to the modern world.[209] The legacy of Marx’s thought has become contested between numerous tendencies, each of which sees itself as Marx’s most accurate interpreter. In the political realm, these tendencies include a host of political theories,
such as:

Historical materialism challenges the view that historical processes have come to a close and that capitalism is the end of history.[222] Although Marx never brought together a formal or comprehensive description of historical materialism in one published work, his key ideas are woven into various works from the 1840s onward.[223] Since Marx’s time, the theory has been modified and expanded, and it now has many Marxist and non-Marxist variants.

  • Phenomenological Marxism (and Marxian analysis): have both been considered as the source of basic criticisms of classical and con­temporary sociological approaches, producing a ‘new direction’ for sociology and yet another re-birth of Marxism as the only science of society, in contra-distinction to ‘bourgeois’ sociology. Phenomenology is the philosophical study of the structure of experience and consciousness. As a philosophical movement, it was founded in the early part of the 20th century by Edmund Husserl and was later expanded upon by a circle of his followers at the German universities of Göttingen and Munich. It then spread to France, the US, and elsewhere, often in contexts far removed from Husserl’s early work. Phenomenology, in Husserl’s conception, is primarily concerned with the systematic reflection on and study of the structures of consciousness and the
  • phenomena that appear in acts of consciousness. Phenomenology can be clearly differentiated from the Cartesian analysis method, which sees the world as objects, sets of objects, and objects acting and reacting upon one another.[224]
  • Analytical Marxism[225]: an approach to Marxist theory prominent amongst English-speaking philosophers and social scientists during the 1980s. G A Cohen described it as “non-bullshit Marxism[226]. Members of this school seek to apply the techniques of analytic philosophy, along with tools of modern social science such as rational choice theory, to elucidate the theories of Karl Marx and his successors. It was mainly associated with the September Group, which was organised on the initiative of the social and political theorist Jon Elster, the economist and political scientist John Roemer, and G A Cohen.[227] The group was characterised, in the words of David Miller, by “clear and rigorous thinking about questions that are usually blanketed by ideological fog.”[228] Other prominent analytical Marxists include the sociologist Erik Olin Wright and the political scientist Adam Przeworski. Cohen’s book, Karl Marx’s Theory of History: A Defence (1978 edition), in which he attempts to apply the tools of logical and linguistic analysis to the elucidation and defence of Marx’s materialist conception of history, is generally regarded as having started the analytical Marxist approach.[229]
  • Hegelian Marxism: The Hegelian Marxism of the Hungarian philosopher György Lukács and Italian Communist Party (PCI) leader Antonio Gramsci heralded the renaissance in Marxism that followed the Russian Revolution. Alongside many other Marxist thinkers at the time, Lukács and Gramsci returned to the Hegelian roots of Marx’s theory to rethink its conclusions. Dissatisfaction with orthodox Marxism’s combination of evolutionary gradualism and scientific socialism was widespread.[230]

From an academic perspective, Marx’s work contributed to the birth of modern sociology. He has been cited as one of the 19th century’s three masters of the “school of suspicion” – alongside Friedrich Nietzsche and Sigmund Freud,[231] and as one of the three principal architects of modern social science alongside Émile Durkheim and Max Weber.[232]

In contrast to other philosophers, Marx offered theories that could often be tested with the scientific method.[233]/[234]  Politically, Marx’s legacy is complex. Throughout the 20th century, revolutions in dozens of countries labelled themselves “Marxist”—most notably the Russian Revolution, which led to the founding of the Soviet Union. Major world leaders, including Vladimir Lenin, Mao ZedongFidel CastroSalvador AllendeJosip Broz TitoKwame NkrumahJawaharlal NehruNelson MandelaXi JinpingJean-Claude Juncker, and Thomas Sankara have all cited Marx as an influence.

Beyond where Marxist revolutions took place, Marx’s ideas have informed political parties worldwide.[235] In countries associated with Marxism, some events have led political opponents to blame Marx for millions of deaths[236], while others argue for a distinction between the legacy and influence of Marx specifically and the legacy and influence of those who have shaped his ideas for political purposes.[237] 

The late intellectual historian and academic Arthur Lipow described Marx and his collaborator Friedrich Engels as “the founders of modern revolutionary democratic socialism”. Lipow wrote[238]:

“We are not among those communists who are out to destroy personal liberty, who wish to turn the world into one huge barrack or into a gigantic workhouse. There certainly are some communists who, with an easy conscience, refuse to countenance personal liberty and would like to shuffle it out of the world because they consider that it is a hindrance to complete harmony. But we have no desire to exchange freedom for equality. We are convinced … that in no social order will freedom be assured as in a society based upon communal ownership.’: Thus wrote the editors of the Journal of the Communist League in 1847, under the direct influence of the founders of modern revolutionary democratic socialism, Karl Marx and Frederick Engels.”

Marx remains both relevant on some matters and controversial, as ever.

He was undoubtedly the most influential socialist thinker to emerge in the 19th century. Although scholars largely ignored him in his lifetime, his social, economic and political ideas gained rapid acceptance in the socialist movement after his death in 1883.[239]


There are many other worthy economists not profiled in this paper, although several are mentioned in the text. They include (in alphabetical order) the people listed below about whom I hope to find the time to research and write about in the future. My humble apologies for any glaring omissions from the list:

  • Ben Shalom Bernanke (1953-present)
  • Eugen von Böhm-Bawerk (1851-1914)
  • Olivier Jean Blanchard (1948-present)
  • John Bates Clark (1847-1938)
  • Esther Duflo (1972–present)
  • Friedrich Engels (1820-1895)
  • Millicent Fawcett (1847–1929)
  • Irving Fisher (1867-1947)
  • Robert Fogel (1926-2013)
  • Milton Friedman (1912-2006)
  • John Kenneth Galbraith (1908-2006)
  • Alan Greenspan (1926-present)
  • Friedrich August von Hayek (1899-1992)
  • James Joseph Heckman (1944-present)
  • William Stanley Jevons (1835-1882)
  • Daniel Kahneman (1934-present)
  • Nicholas Kaldor, Baron Kaldor (1908-1986)
  • Lawrence Robert Klein (1920-2013)
  • Anne Osborn Krueger (1934-present)
  • Paul Krugman (1953-present)
  • Finn E. Kydland (1943-present)
  • Arthur Laffer (1940-Present)
  • Oskar Ryszard Lange (1904-1965)
  • W. Arthur Lewis (1915–1991)
  • Robert Lucas Jr. (1937-Present)
  • Thomas Robert Malthus (1766-1834)
  • Alfred Marshall (1842-1924)
  • Xavier X. Sala i Martín (1962-present)
  • Ludwig Heinrich Edler von Mises (1881-1973)
  • Dambisa Moyo (1969–Present)
  • Karl Gunnar Myrdal (1898-1987)
  • Elinor Ostrom (1933-2012)
  • Vilfredo Pareto (1848-1923)
  • Thomas Piketty (1971-present)
  • Arthur Cecil Pigou (1877-1959)
  • Christopher Antoniou Pissarides (1948-present)
  • Edward Christian Prescott (1940-2022)
  • François Quesnay (1694-1774)
  • Matthew Joel Rabin (1963-present)
  • Carmen Reinhart (1955-present)
  • David Ricardo (1772-1823)
  • Joan Violet Robinson (née Maurice,1903-1983)
  • Murray Newton Rothbard (1926-1995)
  • Jean-Baptiste Say (1767-1832)
  • Thomas John Sargent (1943-present)
  • Paul Anthony Samuelson (1915-2009)
  • Joseph Alois Schumpeter (1883-1950)
  • Anna Jacobson Schwartz (1915-2012)
  • William Forsyth Sharpe (1934-present)
  • Robert Merton Solow (1924-present) 
  • Joseph Stiglitz (1943-present)
  • Lawrence Henry Summers (1954-present) 
  • Frank William Taussig (1859–1940)
  • Jan Tinbergen (1903-1994)
  • James Tobin (1918-2002)
  • Thorstein Bunde Veblen (1857-1929)
  • Paul Adolph Volcker Jr. (1927-2019)
  • Leon Walras (1834-1910)
  • Maximilian Karl Emil Weber (1864-1920)
  • Johan Gustaf Knut Wicksell (1851-1926)
  • Muhammad Yunus (1940-present)

(compiled from and with acknowledgement to:

Sources and Further Reading

John Maynard Keynes

Michael Eugene Porter

Adam Smith

Karl Heinrich Marx

[1], a project of the Governor’s Woods Foundation, can be accessed at:

[2], a project of the Governor’s Woods Foundation, can be accessed at:

[3], a project of the Governor’s Woods Foundation, can be accessed at:

[4] © copyright 1987, 1989, 1995, published by Touchstone.

Endnotes and Explanations

[1] Source:

[2] Source:

[3] At:

[4] Ibid

[5] Source: “The General Theory of Employment, Interest, and Money” (PDF)

[6] Source: Mostly from Referenced at:

[7] Source: Krugman, Paul (1995). Peddling Prosperity: Economic Sense and Nonsense in the Age of Diminished Expectations. W.W. Norton. p. 43. ISBN 978-0-393-31292-8. In 1968, in one of the decisive intellectual achievements of postwar economics, Friedman not only showed why the apparent tradeoff embodied in the idea of the Phillips curve was wrong; he also predicted the emergence of combined inflation and high unemployment … dubbed ‘stagflation’. Referenced at:

[8] Source:  “To Set the Economy Right”Time. 27th August 1979. Referenced at:

[9] See:

[10] Source: Chris Giles; Ralph Atkins; Krishna Guha. “The undeniable shift to Keynes”. Financial Times. Referenced at:

[11] Source: Reich, Robert (29 March 1999). “The Time 100: John Maynard Keynes”Time. Referenced at:

[12] Source: “The IMF in Britain: Toothless truth tellers”The Economist. 11th May 2013. Referenced at:

[13] Source: “Maynard Keynes”. The Bloomsbury Group. 22nd August 2007. Referenced at:

[14] Acknowledgment: The author of The Worldly Philosophers: The Lives, Times, and Ideas of the Great Economic Thinkers is Robert L. Heilbroner. The book was published by Touchstone. The excerpt is on pages: 257-259. © Copyright 1987, 1989, 1995 by Robert L. Heilbroner. The 25th May 2000 edition, published by Penguin, is available on Amazon at:

[15] Source: David Gowland – “Biography of Baron John Maynard Keynes”. 

[16] Source: Aschheim, J.; Tavlas, G. S.; Heinsohn, G.; Steiger, O. (1994). “The Monetary Thought-Ideology Nexus: Simons versus Keynes; Marx and Keynes – Private Property and Money”. In Wood, John Cunningham (ed.). John Maynard Keynes: Critical Assessments. Second. pp. 101–120, 135. ISBN 978-0-415-11415-8. Referenced at:

[17] Source: Skidelsky, Robert (2003). John Maynard Keynes: 1883–1946: Economist, Philosopher, Statesman. Pan MacMillan Ltd. pp. 14, 43–46, 456, 263, 834. ISBN 0-330-48867-8. Referenced at:

[18] Source:  “No. 11879”The London Gazette. 6th November 1906. p. 1124.

[19] Source:  Skidelsky, Robert (1983). John Maynard Keynes vol 1: Hopes Betrayed. Macmillan. p. 205. ISBN 0-333-11599-6. Referenced at:

[20] Source: Hyman Minsky (16th April 2008). John Maynard Keynes, chapter 1. and McGraw-Hill Professional. ISBN 978-0-07-159301-4. Referenced at:

[21] Source: Keynes, John Maynard (1913). Indian Currency and Finance. London: Macmillan & Co.

[22] Source: “No. 28711”The London Gazette. 18th April 1913. p. 2809. Referenced at:

[23] Source: Spiegel, Henry William (1991). The Growth of Economic Thought. Durham, UK: Duke University Press. p. 602. ISBN 0-8223-0973-4. Referenced at:

[24] Explanation: In 1918, the UKgeneral election was called immediately after the Armistice with Germany which ended World War I. The governing coalition in the UK, under Prime Minister David Lloyd George, sent letters of endorsement to candidates who supported the coalition government. These were nicknamed “Coalition Coupons” and led to the election being known as the “coupon election“. Source:

[25] Source: McDonough, Frank (1997). The Origins of the First and Second World Wars. Cambridge University Press. pp. 43–46. ISBN 1-4051-0664-6. . Referenced at:

[26] Source:  “John Maynard Keynes”. Policonomics. Referenced at:

[27] Source: Skidelsky, Robert (2003). John Maynard Keynes: 1883–1946: Economist, Philosopher, Statesman. Pan MacMillan Ltd. pp. 217–220, 245, 260–265, 283, 342–355. ISBN 0-330-48867-8. Referenced at:

[28] Ibid

[29] Source:  Hyman Minsky (16th April 2008). John Maynard Keynes, chapter 1. and McGraw-Hill Professional. ISBN 978-0-07-159301-4. Referenced at:

[30] Source: Skidelsky, Robert (2003). John Maynard Keynes: 1883–1946: Economist, Philosopher, Statesman. Pan MacMillan Ltd. pp. 217–220, 245, 260–265, 283, 342–355. ISBN 0-330-48867-8. Referenced at:

[31] Source: Pressman, Steven (1999). Fifty Major Economists. Routledge. pp. 99–104. ISBN 978-1-134-78082-2. Referenced at:

[32] Source: Cassidy, John (10th October 2011). “The Demand Doctor”The New Yorker. Referenced at:

[33] Source:  Skidelsky, Robert (2003). John Maynard Keynes: 1883–1946: Economist, Philosopher, Statesman. Pan MacMillan Ltd. pp. 494–500, 504, 509–510. ISBN 0-330-48867-8. Referenced at:

[34]  Ibid

[35] Sources: (1) Skidelsky, as above and (2) Hyman Minsky (16th April 2008). John Maynard Keynes , chapter 1. and McGraw-Hill Professional. ISBN 978-0-07-159301-4. Referenced at:

[36] Source: Hyman Minsky, as above.

[37] Source: Skidelsky, as above

[38] Source: Skidelsky, as above

[39] Source: “The General Theory of Employment, Interest, and Money” (PDF)

[40] Source:  Tribe, Keith (1997). Economic Careers: Economics and Economists in Britain, 1930–1970. London: Routledge. p. 61. ISBN 0-415-14708-5. Referenced at:

[41] Source:  Sangkuhl, Elfriede (January 2015). “How the Macroeconomic Theories of Keynes influenced the Development of Government Economic Finance Policy after the Great Depression of the 1930’s: Using Australia as the Εxample”. Athens Journal of Law. 1 (1): 34. doi:10.30958/ajl.1.1.3. . Referenced at:

[42] Source:  Clarida, Richard (1999). “The Science of Monetary Policy: a New Keynesian Perspective”. Journal of Economic Literature. 37 (4): 1661–1707. doi:10.1257/jel.37.4.1661hdl:10230/360S2CID 55045787. Referenced at:

[43] Explanation: In classical economics, Say’s law, or the law of markets, is the claim that the production of a product creates demand for another product by providing something of value which can be exchanged for that other product. So, production is the source of demand. In his principal work, A Treatise on Political Economy (Traité d’économie politique, 1803), Jean-Baptiste Say wrote: “A product is no sooner created, than it, from that instant, affords a market for other products to the full extent of its own value.” And also: “As each of us can only purchase the productions of others with his own productions – as the value we can buy is equal to the value we can produce, the more [that] men can produce, the more they will purchase.”  Source: Further reference: Say, Jean-Baptiste (1834). A Treatise on Political Economy (sixth American ed.). p.2 and 3. Philadelphia: Grigg & Elliott (this is an English translation of Say’s Traité d’economie politique, first published in 1803.

[44] Source:  Kishtainy, Niall (2017). A little history of economics. Yale University Press. ISBN 978-0-300-20636-4OCLC 980872123. Referenced at:

[45] Source: Skidelsky, Robert (2003). John Maynard Keynes: 1883–1946: Economist, Philosopher, Statesman. Pan MacMillan Ltd. pp. 530, 572, 586, 750, 789, 833. ISBN 0-330-48867-8. Referenced at:

[46] Source: Cassidy, John (10th October 2011). “The Demand Doctor”The New Yorker.  Referenced at:

[47] Source:  Hazlitt, Henry (1995) [1960]. The critics of Keynesian Economics. Irvington-on-Hudson, N.Y.: Foundation for Economic EducationISBN 978-1-57246-013-3. Referenced at:

[48] Sources: (1) Harris, Seymour E. (2005). The New Economics: Keynes’s Influence on Theory and Public Policy. Kessinger Publishing. p. xxii, 46. ISBN 1-4191-4534-7, (2) Martin, Kingsley (16th March 1940). “Mr Keynes Has A Plan”. Picture Post, and (3)  Fletcher, Gordon A. (1989). Keynesian Revolution and Its Critics: Issues of Theory and Policy for the Monetary Production Economy (second ed.), Palgrave Macmillan UK. pp. xix–xxi, 88, 189–191, 234–238, 256–261. ISBN 978-1-349-20108-2. Referenced at:

[49] Sources: (1) Hyman Minsky (16th April 2008). John Maynard Keynes, chapter 1. and McGraw-Hill Professional. ISBN 978-0-07-159301-4, and (2) Fletcher, Gordon A. (1989). Keynesian Revolution and Its Critics: Issues of Theory and Policy for the Monetary Production Economy (second ed.), Palgrave Macmillan UK. pp. xix–xxi, 88, 189–191, 234–238, 256–261. ISBN 978-1-349-20108-2. Referenced at:

[50] Source: See Donald MarkwellJohn Maynard Keynes and International Relations: Economic Paths to War and Peace, Oxford University Press, 2006. Referenced at:

[51] Source: Universal Man Richard Davenport-Hines Collins 2015. Referenced at:

[52] Source: “No. 35279”The London Gazette. 19th September 1941. p. 5489. Referenced at:

[53] Source: “No. 35586”The London Gazette. 5th June 1942. p. 2475. Referenced at:

[54] Source: “No. 35623”The London Gazette. 7th July 1942. p. 2987. Referenced at:

[55] Source: Duggan, M. C. “Taking Back Globalization: A China-United States Counterfactual Using Keynes’s 1941 International Clearing Union”Review of Radical Political Economics45 (4): 508–516. doi:10.1177/0486613412475191ISSN 0486-6134.  Referenced at:

[56] Source: “Review of Robert Skidelsky, John Maynard Keynes: Fighting for Britain 1937–1946”. Brad Delong, Berkeley university. Referenced at:

[57] Sources: (1) Keynes, J.M. (1980). Donald Moggridge (ed.). The Collected Writings of John Maynard Keynes. Vol. 26. London: Macmillan. p. 103. ISBN 0-333-10736-5. Speech by Lord Keynes in Moving to Accept the Final Act at the Closing Plenary Session, Bretton Woods, 22 July 1944, and (2) Griffin, G. Edward (2004). The Creature from Jekyll Island: A Second Look at the Federal Reserve. American Media. pp. 85–106. ISBN 0-912986-40-9. Referenced at:

[58] Source: Sayers, Richard (1976). The Bank of England, 1891–1944, Volume 1ISBN 978-0-521-21067-6. Referenced at:

[59] Source: “After the War, The World Bank, the IMF, and the End, 1945 to 1946”. Referenced at:

[60] Sources: (1) Paul Davidson“Crash: Reforming the world’s international money” (PDF). The New School, and (2) Davidson, Paul (2009). The Keynes Solution:

The Path to Global Economic Prosperity. St. Martin’s Press. ISBN 978-0-230-10101-2. Referenced at:

[61] Source:  Fletcher, Gordon A. (1989). Keynesian Revolution and Its Critics: Issues of Theory and Policy for the Monetary Production Economy (second ed.).

 Palgrave Macmillan UK. pp. xix–xxi, 88, 189–191, 234–238, 256–261. ISBN 978-1-349-20108-2. Referenced at:

[62] Source: Wolf, Martin (25th March 2008). “The Rescue of Bear Stearns Marks Liberalization’s Limit”. Financial Times. Referenced at:

[63] Source: James K. Galbraith. “The Collapse of Monetarism and the Irrelevance of the New Monetary Consensus” (PDF). The University of Texas. Referenced at:

[64] Sources: (1)  Robert Shiller: The sub prime solution. Google Video, (2) “The Subprime Solution: How Today’s Global Financial Crisis Happened, and What to Do about It”. Princeton University Press, and (3) Shiller, Robert (19th May 2012). “Reviving ‘animal spirits’ to raise confidence”. Taipei Times. Referenced at:

[65] Sources: (1) Krugman, Paul (5th January 2009). “Fighting Off Depression”. The New York Times, (2) Krugman, Paul (23rd January 2009). “Stuck in the Muddle”. The New York Times, and (3) Krugman, Paul (15th June 2009). “Stay the Course”. The New York Times. Referenced at:

[66] Source: Coy, Peter (22nd March 2009). “Kill or cure? US stimulus kicks up a storm”. The Independent, UK. Referenced at:

[67] Source: “Is Obama’s stimulus working?”. Los Angeles Times. 19th August 2009.  Referenced at:

[68] Source: “EconoMonitor ” The Mini Depression and the Maximum-Strength Remedy”. 9th November 2008. Referenced at:

[69] Source:  “Chasing Stiglitz: Obama’s economic team is missing the one guy who’s been right all along”. Newsweek. 3rd December 2008. Referenced at:

[70] Sources: (1) Stratton, Allegra (20th October 2008). “Darling invokes Keynes as he eases spending rules to fight recession”. The Guardian. London, and (2) Sam Coates (20th October 2008). “Spend, spend, spend: Alistair Darling adopts John Maynard Keynes doctrine”. The Times. London. Referenced at:

[71] Source: Chris Giles; Ralph Atkins; Krishna Guha“The undeniable shift to Keynes”. Financial Times. Referenced at:

[72] Source: Norma Cohen (24th June 2009). “OECD foresees end to global slide”. Financial Times. Referenced at:

[73] Sources: (1)  Krishna Guha; Sarah O’Connor; Michael Mackenzie (8th July 2009). “IMF says world is pulling out of recession”. Financial Times, and (2)

“Recession Loosens Grip But Weak Recovery Ahead”International Monetary Fund. Referenced at:

[74] Source:  “The other-worldly philosophers”. The Economist. 16th July 2009.   Referenced at:

[75] Source:  Robert J. Barro, Gary Becker, Wall Street Journal editorials, 24th August 2011, and 2nd September 2011. Referenced at:

[76] Sources: (1) Romer, Christina D. (7th November 2011). “What do we know about the effects of fiscal policy? Separating evidence from ideology” (PDF). Lecture at Hamilton College, and (2) Guajardo, Jaime; Leigh, Daniel; Pescatori, Andrea (July 2011). “Expansionary Austerity: New International Evidence” (PDF). IMF Working Paper, WP/11/158. International Monetary Fund. SSRN 1886910. “Using this new dataset, our estimates suggest fiscal consolidation has contractionary effects on private domestic demand and GDP.”  Referenced at:

[77] Source: McCann, Charles Robert (1998). John Maynard Keynes – critical responses. Vol. 4. Taylor & Francis. p. 21. ISBN 0-415-15193-7. Referenced at:

[78] Source:    Referenced at:

[79] Source: Wapshott, Nicholas (2011). Keynes Hayek: The Clash that Defined Modern Economics. W. W. Norton. p. 206. ISBN 978-0-393-08311-8. Referenced at:

[80] Source: Nicholas, Davenport (1974). Memoirs of a city radical. Weidenfeld and Nicolson. p. 48. ISBN 0-297-76796-8. Referenced at:

[81] Ibid

[82] Source: Skidelsky, Robert (2003). John Maynard Keynes: 1883–1946: Economist, Philosopher, Statesman. Pan MacMillan Ltd. pp. 530, 572, 586, 750, 789, 833. ISBN 0-330-48867-8. Referenced at:

[83] Ibid

[84] SourceHoggard, Liz (21st October 2008). “Ten things you didn’t know about Mr Keynes”Evening Standard.  Referenced at:

[85] Source: Russell, Bertrand (1967). The Autobiography of Bertrand Russell: 1872–1914. Unwin Paperbacks. p. 97. Referenced at:

[86] Source: Harris, Seymour E. (2005). The New Economics: Keynes’s Influence on Theory and Public Policy. Kessinger Publishing. p. xxii, 46. ISBN 1-4191-4534-7. Referenced at:

[87] Sources: (1) Skidelsky, Robert (2003). John Maynard Keynes: 1883–1946: Economist, Philosopher, Statesman. Pan MacMillan Ltd. pp. 14, 43–46, 456, 263, 834. ISBN 0-330-48867-8, and (2) “Lord Keynes Dies of Heart Attack. Noted Economist Exhausted by Strain of Recent Savannah Monetary Conference”. The New York Times. 22nd April 1946. Referenced at:

[88] Source: Wilson, Scott. Resting Places: The Burial Sites of More Than 14,000 Famous Persons, 3d ed.: 2 (Kindle Location 25430). McFarland & Company, Inc., Publishers. Kindle Edition. Referenced at:

[89] See:

[90] Acknowledgment: The author of The Competitive Advantage of Nations is Michael E Porter. The book was published by The Free Press. The excerpt is on pages: 482-499. © Copyright 1990, by Michael E Porter. The 26th April 1998 edition (which I have), was published by Macmillan, is available on Amazon at:

[91] Source: Ascend, H. B. R. (September 21, 2017). “The job of a leader is just to keep learning, says Harvard’s Michael Porter”. Referenced at:

[92] Sources: (1) Schawbel, Dan. “Michael E. Porter on Why Companies Must Address Social Issues”. Forbes, and (2) Weinreb, James Epstein-Reeves and Ellen (25th September 2013). “Michael Porter: coining vital business strategies for sustainability”. the Guardian. Referenced at:

[93] Source: “Michael E. Porter – Faculty & Research – Harvard Business School” Referenced at:

[94] Source: Kiechel, Walter (2010). The Lords of Strategy. Harvard Business Press. ISBN 978-1-59139-782-3. Referenced at:

[95] Ibid

[96] Ibid

[97] Aktouf, Omar (24th January 2008). “The False Expectations of Michael Porter’s Strategic Management Framework”. Gestão & Planejamento – G&P. 1 (11). Referenced at:

[98] Source:  Kiechel, Walter (2010), see above.

[99] Sources: (1) Warsia, Noor Fathima. “The Essence Of Strategy Is Making Choices: Michael E Porter”. BW Businessworld, and (2) Denning, Stephanie. “The Collapse Of Strategy And Its Implications”. Forbes. Referenced at:

[100] Explanation: Non-governmental organisations, or NGOs, were first called such in Article 71 in the Charter of the newly formed United Nations in 1945. While NGOs have no fixed or formal definition, they are generally defined as nonprofit entities independent of governmental influence (although they may receive government funding).

[101] Source:  Porter, Michael E. (March 1, 1990). “The Competitive Advantage of Nations”. Harvard Business Review. ISSN 0017-8012. Referenced at:

[102] Source: Porter, Michael E. Porter (1990). The Competitive Advantage of Nations. Free Press. ISBN 978-0-684-84147-2. Referenced at:

[103] Source: Michael Porter on GPS: Is the U.S. #1?”. Referenced at:

[104] The Social Progress Index for 2021 is available online at:

[105]  Source: Porter, Michael E. (1985). Competitive Advantage. Free Press. ISBN 978-0-684-84146-5. Referenced at:

[106] Source: “Analyzing the Competition with Porter’s Five Forces –”. Business News Daily. Referenced at:

[107] Source: “‘Five Forces’ That Make or Break Consumer Brands”. Practical Ecommerce. 26th August 2021. Referenced at:

[108] Source: Francis, Abey (18th March 2016). “Market-Based and Resource-Based Theories of Competitive Advantage”. MBA Knowledge Base. Referenced at:

[109] Source: Porter, Michael E, (1985). Competitive Advantage: Creating and Sustaining Superior Performance. Free Press. ISBN 978-0-02-925090-7. Referenced at:

[110] Sources: (1) “Porter’s Value Chain: Understanding How Value is Created Within Organizations”., and (2) “What Is Value Chain Analysis and How Do You Use It?”. Business News Daily. . Referenced at:

[111] The Book, Redefining Healthcare is available from Amazon at:

[112] Source:  Playing to Win: How Strategy Really Works. Harvard Business Review Press. Referenced at:

[113] Source: Prasad, Sakthi (8th November 2012). “Monitor Company files for Chapter 11; Deloitte to buy assets”. Market news. Reuters. Reuters. US consulting and advisory firm Monitor Company Group and its affiliates filed for Chapter 11 bankruptcy protection, court documents showed, and said it has agreed to sell its assets to global consultancy firm Deloitte. Referenced at:

[114] Explanation: Complementors are businesses that directly sell a product or service that complement the product or service of another company by adding value to mutual customers; for example, Intel and Microsoft, or Microsoft and McAfee. Source:

[115] Source: Porter, Michael (7th October 2013), The case for letting business solve social problems, TED video, recorded in Edinburgh, Scotland, in June 2013.  Referenced at:

[116] Source:

[117] The book, The Worldly Philosophers: The Lives, Times, and Ideas of the Great Economic Thinkers by Robert L. Heilbroner,  is available on Amazon at:

[118] Explanation: The Society of Writers to His/Her Majesty’s Signet is a private society of Scottish solicitors, dating back to 1594 and part of the College of Justice. Writers to the Signet originally had special privileges in relation to the drawing up of documents required to be signeted, but these have since disappeared and the Society is now an independent, non-regulatory association of solicitors. Source:

[119] Source: Rae, John (1895). Life of Adam Smith. p.1. London & New York: Macmillan. ISBN 0-7222-2658-6. Referenced at:

[120] Explanation: The Scottish Enlightenment was the period in 18th- and early-19th-century Scotland characterised by an outpouring of intellectual and scientific accomplishments. By the 18th century, Scotland had a network of parish schools in the Scottish Lowlands and five universities. The Enlightenment culture was based on close readings of new books, and intense discussions took place daily at such intellectual gathering places in Edinburgh as The Select Society and, later, The Poker Club, as well as within Scotland’s ancient universities (St AndrewsGlasgowEdinburghKing’s College, and Marischal College). Referenced at:

[121] Sources: (1) Brown, Vivienne (5 December 2008). “Mere Inventions of the Imagination’: A Survey of Recent Literature on Adam Smith”Cambridge University Press13 (2): 281–312. doi:10.1017/S0266267100004521S2CID 145093382, (2) Berry, Christopher J. (2018). Adam Smith Very Short Introductions SeriesOxford University Press. p. 101. ISBN 978-0-198-78445-6, and (3) Sharma, Rakesh. “Adam Smith: The Father of Economics”. Investopedia.  Referenced at:

[122] Sources: (1) Adam Smith: Father of Capitalism”., (2) Bassiry, G. R.; Jones, Marc (1993). “Adam Smith and the ethics of contemporary capitalism”. Journal of Business Ethics12 (1026): 621–627. doi:10.1007/BF01845899S2CID 51746709, (3) Newbert, Scott L. (30th November 2017). “Lessons on social enterprise from the father of capitalism: A dialectical analysis of Adam Smith”. Academy of Management Journal2016 (1): 12046.

doi:10.5465/ambpp.2016.12046abstractISSN 2151-6561, and (4) Rasmussen, Dennis C. (2017). The Infidel and the Professor: David Hume, Adam Smith, and the Friendship That Shaped Modern Thought. Princeton University Press. p. 12. ISBN 978-1-400-88846-7. Referenced at:

[123] Source:

[124] Source: Scott, W. R. “The Never to Be Forgotten Hutcheson: Excerpts from W. R. Scott,” Econ Journal Watch 8(1): 96–109, January 2011. Referenced at:

[125] Source: Buchholz, Todd (1999). New Ideas from Dead Economists: An Introduction to Modern Economic Thought. p.15, Penguin Books. ISBN 0-14-028313-7. Referenced at:

[126] Source: Buchan, James (2006). The Authentic Adam Smith: His Life and Ideas. p.67, W.W. Norton & Company. ISBN 0-393-06121-3. Referenced at:

[127] Source: Buchholz, Todd (1999). New Ideas from Dead Economists: An Introduction to Modern Economic Thought. p.13, Penguin Books. ISBN 0-14-028313-7. Referenced at:

[128] Source:  “MyGlasgow – Archive Services – Exhibitions – Adam Smith in Glasgow – Photo Gallery – Honorary degree”. The University of Glasgow. Referenced at:

[129] Ibid

[130] Ibid, p.17/17.

[131] Explanation: Physiocracy is an economic theory developed by a group of 18th-century Age of Enlightenment French economists who believed that the wealth of nations derived solely from the value of “land agriculture” or “land development” and that agricultural products should be highly-priced. It originated in France and was most popular during the second half of the 18th century. Physiocracy became one of the first well-developed theories of economics. François Quesnay (1694–1774), the marquis de Mirabeau (1715–1789) and Anne-Robert-Jacques Turgot (1727–1781) dominated the movement,[2] which immediately preceded the first modern school, classical economics, which began with the publication of Adam Smith‘s The Wealth of Nations in 1776. Source:

[132] Source: Buchholz, Todd (1999). New Ideas from Dead Economists: An Introduction to Modern Economic Thought. p.17, Penguin Books. ISBN 0-14-028313-7. Referenced at:

[133] Explanation: During the reign of Louis XIV, the population shrunk by 4 million and agricultural productivity was reduced by one-third while the taxes had increased. Cusminsky, Rosa, de Cendrero, 1967, Los Fisiócratas, Buenos Aires: Centro Editor de América Latina, p. 6. Source:

[134] Explanation: Caused by the 1701–1714 War of the Spanish Succession, 1688–1697 War of the Grand Alliance, 1672–1678 Franco-Dutch War, 1667–1668 War of Devolution, 1618–1648 Thirty Years’ War. Referenced at:

[135] Source: Smith, A., 1976, The Wealth of Nations, edited by R. H. Campbell and A. S. Skinner, The Glasgow edition of the Works and Correspondence of Adam Smith, vol. 2b, p. 678.

[136] Source:  The Wealth of Nations, Book 5, Chapter 1, Part 2. . Referenced at:

[137] Source: “Absolute Advantage – Ability to Produce More than Anyone Else”. Corporate Finance Institute

[138] Source: “Absolute advantage | economics”. Encyclopaedia Britannica. Referenced at:

[139] Source: “Absolute And Comparative Advantage” (Pdf). International Encyclopaedia Of The Social Sciences, 2nd Edition. pp. 1–2. Referenced at:

[140] Source:  Bockman, Johanna (2011). Markets in the name of Socialism: The Left-Wing origins of Neoliberalism. Stanford University Press. ISBN 978-0804775663. Referenced at:

[141] Source:  John, McMurray (19 March 2017). “Capitalism’s ‘Founding Father’ Often Quoted, Frequently Misconstrued”. Investor’s Business Daily. Referenced at:

[142] Adam Smith said:“The man whose whole life is spent in performing a few simple operations, of which the effects are perhaps always the same, or very nearly the same, has no occasion to exert his understanding or to exercise his invention in finding out expedients for removing difficulties which never occur. He naturally loses, therefore, the habit of such exertion, and generally becomes as stupid and ignorant as it is possible for a human creature to become. The torpor of his mind renders him not only incapable of relishing or bearing a part in any rational conversation, but of conceiving any generous, noble, or tender sentiment, and consequently of forming any just judgement concerning many even of the ordinary duties of private life… But in every improved and civilised society, this is the state into which the labouring poor, that is, the great body of the people, must necessarily fall unless the government takes some pains to prevent it.”, An Inquiry into the Nature and Causes of the Wealth of Nations (1776). Referenced at:

[143] Source:  Rothbard, Murray. “The Celebrated Adam Smith”. An Austrian Perspective on the History of Economic Thought. Mises Institute. Referenced at:

[144] Source:  Tocqueville, Alexis de (1841). Democracy in America: Volume I. New York, NY: J. & H. G. Langley. p. 460. Referenced at:

[145] Source: Hill, Lisa (2004). “Adam Smith, Adam Ferguson and the Division of Labor” (PDF). ). Referenced at:

[146] Source:  O’Rourke, P.J. (2008). On the Wealth of Nations. London: Atlantic Books. ISBN 9781843543893. Referenced at:

[147] Source: “An Inquiry into the Nature and Causes of the Wealth of Nations, by Adam Smith” Referenced at:

[148] Source: Ross, Ian Simpson (1995). p.15, The Life of Adam Smith. Oxford University Press. ISBN 0-19-828821-2. Referenced at:

[149] Explanation: The Snell Exhibition is an annual scholarship awarded to students of the University of Glasgow to allow them to undertake postgraduate study at Balliol College, Oxford. The award was founded by the bequest of Sir John Snell in a will made in 1677, although the original stipulation referred to the University of Oxford, rather than Balliol in particular. It was intended the bequest should be used to educate Scottish clergymen for the then-established Scottish Episcopal Church, but by the time of Adam Smith, the bequest was mostly regarded as an educational charity, though its exact status was not settled until later. “By the will of John Snell his exhibitors were under bond to take Anglican orders and return to Scotland, but the penalty was not enforced in the case of Adam Smith and numerous others.” (C. R. Fay, quoting The Times obituary of Smith.) Source:

[150] Source:

[151] Explanation: Belief in God based on reason rather than revelation or the teaching of any specific religion is known as deism. The word originated in England in the early 17th century as a rejection of orthodox Christianity. Source:

[152] Source: Coase, R.H. (October 1976). “Adam Smith’s View of Man”The Journal of Law and Economics, p.538. Referenced at:   

[153] Explanation: A theist is a person who believes in the existence of a god or gods, specifically of a creator who intervenes in the universe. Theism is more fully explained at: 

[154] Source: Kennedy, Gavin (2011). “The Hidden Adam Smith In His Alleged Theology”. Journal of the History of Economic Thought. 33 (3): 385–402. Referenced at:   

[155] Source: “Hume on ReligionStanford Encyclopedia of Philosophy. Referenced at:

[156] Source:  Eric Schliesser (2003). “The Obituary of a Vain Philosopher: Adam Smith’s Reflections on Hume’s Life” (PDF). Hume Studies. 29 (2): 327–362. Referenced at:

[157] Source: “Andrew Millar Project, University of Edinburgh”. Referenced at:

[158] Commentary: The six editions of The Theory of Moral Sentiments were published in 1759, 1761, 1767, 1774, 1781, and 1790, respectively. Mentioned at:   

[159] Source: Rae, John (1895). Life of Adam Smith. London & New York: Macmillan. ISBN 0-7222-2658-6. Referenced at:   

[160] Source:  Falkner, Robert (1997). “Biography of Smith” Liberal Democrat History Group. Referenced at:

[161] Source: Smith, Adam (2002) [1759]. Knud Haakonssen (ed.). The Theory of Moral Sentiments. Cambridge University Press. ISBN 0-521-59847-8.

[162] Source:, which contains an excellent summary of Adam Smith’s Moral and Political Philosophy. First published 15th February 2013; substantive revision 11th November 2020.

[163] Source: Van Schie, Patrick. “The Theory of Moral Sentiments”. European Liberal Forum. Referenced at:   

[164] Source: Theory Of Moral Sentiments, Part II Section II Chapter III, p. 86, para.4. Referenced at:

[165] Source:  Smith, A., 1976, The Wealth of Nations edited by R. H. Campbell and A. S. Skinner, The Glasgow edition of the Works and Correspondence of Adam Smith, vol. 2a, p. 456. Referenced at:   

[166] Explanation: “The Invisible Hand is perhaps the most important—and most controversial—metaphor in economics. For fans of markets, it is synonymous with free individuals having their commercial interactions informed and guided by the feedback mechanism of the price system. Market critics, by contrast, refute the notion that even good results—let alone the best—could come from myriad disjointed individual decisions guided by some mystical-sounding metaphor. They claim that the Hand is tainted by greed and exploitation, leads to inequity and dangerous corporate power, and threatens not merely resource depletion but planetary disaster.” Source:

[167] Source:  Smith, A., 1980, The Glasgow edition of the Works and Correspondence of Adam Smith, vol. 3, p. 49, edited by W. P. D. Wightman and J. C. Bryce, Oxford: Clarendon Press. Referenced at:

[168] Source: Smith, A., 1976, vol. 2a, p. 10, idem. Referenced at:

[169] Source: Smith, A., 1976, vol. 1, p. 10, para. 4. Referenced at:

[170] Explanation: George Joseph Stigler was an American economist. He was the 1982 laureate in Nobel Memorial Prize in Economic Sciences and is considered a key leader of the Chicago school of economics. Source:

[171] Source: Stigler, George J. (1976). “The Successes and Failures of Professor Smith,” Journal of Political Economy, 84(6), pp. 1199–1213 [1202]. Also published as Selected Papers, No. 50, Graduate School of Business, University of Chicago. Referenced at:

[172] Source: Samuelson, Paul A. (1977). “A Modern Theorist’s Vindication of Adam Smith,” American Economic Review, 67(1), p. 42. Reprinted in J.C. Wood, ed., Adam Smith: Critical Assessments, pp. 498–509. Preview. Referenced at:

[173] Explanation: Joseph Alois Schumpeter was an Austrian-born political economist. He served briefly as Finance Minister of German-Austria in 1919. In 1932, he emigrated to the US to become a professor at Harvard University, where he remained until the end of his career, and in 1939 obtained American citizenship. Source:

[174] Source:  Schumpeter History of Economic Analysis. New York: Oxford University Press. p. 185. Referenced at:

[175] Source: “FRB: Speech, Greenspan – Adam Smith – 6 February 2005”. Referenced at:

[176] Source: “Adam Smith: Web Junkie”. Forbes. 5 July 2007. Referenced at:

[177] Source: Viner, Jacob (April 1927). “Adam Smith and Laissez-faire”The Journal of Political Economy35 (2): 198–232. Referenced at:

[178] Sources:  Klein, Daniel B. (2008). “Toward a Public and Professional Identity for Our Economics”. Econ Journal Watch. 5 (3): 358–372, and (2) Klein, Daniel B. (2009). “Desperately Seeking Smithians: Responses to the Questionnaire about Building an Identity”. Econ Journal Watch. 6 (1): 113–180. Referenced at:

[179] Source: Buchholz, Todd (December 1990). pp. 38–39. Referenced at:

[180] Source:  Durant, Will; Durant, Ariel (1967). The Story of Civilization: Rousseau and Revolution. MJF Books. ISBN 1567310214. Referenced at:

[181] Source: Buchan, James (2006). The Authentic Adam Smith: His Life and Ideas. p.128. W.W. Norton & Company. ISBN 0-393-06121-3. Referenced at:

[182] Source: Ibid, p.133.

[183] Ibid, p.137.

[184] Ibid, p.145.

[185] Source: Bussing-Burks, Marie (2003). Influential Economists. Minneapolis: The Oliver Press. ISBN 1-881508-72-2. Referenced at:

[186] Source: Buchan, James (2006). The Authentic Adam Smith: His Life and Ideas. p.11. W.W. Norton & Company. ISBN 0-393-06121-3. Referenced at:

[187] Ibid, p.134.

[188] Ibid. p.88.

[189] Source: The Glasgow edition of the Works and Correspondence of Adam Smith, 1982, 6 volumes. Referenced at:

[190] Source: “Adam Smith – Jonathan Swift”. The University of Winchester. Referenced at:

[191] Source: 100 Best Scottish Books, Adam Smith. Referenced at:

[192] Source:  L.Seabrooke (2006). “Global Standards of Market Civilization”. p. 192. Taylor & Francis 2006. Referenced at:

[193] Source: Mainly from

[194] Sources: Nicolaievsky & Maenchen-Helfen 1976, p. 7; Wheen 2001, pp. 8, 12; McLellan 2006, p. 1.

[195] Source:  Marx, Karl and Engels, F. (1848).The Communist Manifesto. Referenced at:

[196] Explanation: Historical materialism is the term used to describe Karl Marx‘s theory of history. Marx locates historical change in the rise of class societies and the way humans labor together to make their livelihoods.  For Marx and his lifetime collaborator, Engels, the ultimate cause and moving power of historical events are to be found in the economic development of society and the social and political upheavals wrought by changes to the mode of production. Source: See also: Baur, Michael (January 2017). “Marx on Historical Materialism” (PDF). ResearchGate: 1–2, and “Socialism: Utopian and Scientific (Introduction – Materialism)”

[197] Source:  Marx, Karl. Critique of the Gotha Program. Referenced at:

[198] Source: Calhoun, Craig J. (2002). Classical Sociological Theory. Oxford: Wiley-Blackwell. ISBN 978-0-631-21348-2. p.23, 24.

[199] Source:

[200] Sources:  (1) See Gorgias, 449B: “Socrates: Would you be willing then, Gorgias, to continue the discussion as we are now doing [Dialectic], by way of question and answer, and to put off to another occasion the (emotional) speeches [Rhetoric] that [the Sophist] Polus began?”, and (2) Corbett, Edward P. J.; Robert J. Connors (1999). Classical Rhetoric For the Modern Student (4th ed.). New York: Oxford University Press. pp. 1, 18. ISBN 9780195115420.

[201] Source and Accreditation: British Library at:

[202] Sources: See Footnotes 1, 2 and 3 at:

[203] Source:  Green, Elliott (12th May 2016). “What are the most-cited publications in the social sciences (according to Google Scholar)?”. LSE Impact Blog. London School of Economics. Referenced at:

[204] Source: “Marx the millennium’s ‘greatest thinker’”. BBC News World Online. 1st October 1999

[205] Sources: (1) Unger, Roberto Mangabeira (2007). Free Trade Reimagined: The World Division of Labor and the Method of Economics. Princeton University Press, (2) Hicks, John (May 1974). “Capital Controversies: Ancient and Modern”The American Economic Review64 (2): 307. The greatest economists, Smith or Marx or Keynes, have changed the course of history …, and (3) Joseph SchumpeterTen Great Economists: From Marx to Keynes. Volume 26 of Unwin University books. Edition 4, Taylor & Francis Group, 1952 ISBN 0-415-11078-5978-0-415-11078-5. Referenced at:

[206] Sources: (1) Little, Daniel. “Marxism and Method”, and (2) Kim, Sung Ho (2017). “Max Weber”. In Zalta, Edward N. (ed.). Stanford Encyclopaedia of Philosophy. Metaphysics Research Lab, Stanford University. Max Weber is known as a principal architect of modern social science along with Karl Marx and Emil Durkheim. Referenced at:

[207] Sources: (1) Calhoun, Craig J. (2002). Classical Sociological Theory. Oxford: Wiley-Blackwell. ISBN 978-0-631-21348-2. 2002, pp. 23–24, (2) “Marx the millennium’s ‘greatest thinker’”. BBC News World Online. 1st October 1999, (3) Wheen, Francis (17th July 2005). “Why Marx is man of the moment”  The Observer, and (4) Allan, Kenneth (2010). The Social Lens: An Invitation to Social and Sociological Theory. Pine Forge Press. p. 68. ISBN 978-1-4129-7834-7. Referenced at: 

[208] Source: Magness, Phil; Makovi, Michael (2022). “The Mainstreaming of Marx: Measuring the Effect of the Russian Revolution on Karl Marx’s Influence”. Journal of Political Economy. doi:10.1086/722933ISSN 0022-3808. Referenced at: 

[209] Source: Heine Andersen; Lars Bo Kaspersen (2000). Classical and modern social theory. Wiley-Blackwell. pp. 123–. ISBN 978-0-631-21288-1. Referenced at: 

[210] Source:

[211] Source:  Evans, Alfred B. (1993). Soviet Marxism-Leninism: The Decline of an Ideology. Santa Barbara: ABC-CLIO. pp. 1–2. ISBN 9780275947637. Referenced at:

[212] Source: Bottomore, Thomas B. (1991). A Dictionary of Marxist Thought. Malden, Massachusetts; Oxford, England; Melbourne, Victoria; Berlin, Germany:  Wiley-BlackwellISBN 0631180826. Referenced at:

[213] Sources: Wilczynski, J. (2008). The Economics of Socialism after World War Two: 1945-1990. Aldine Transaction. p. 21. ISBN 978-0202362281.Contrary to Western usage, these countries describe themselves as ‘Socialist’ (not ‘Communist’). The second stage (Marx’s ‘higher phase’), or ‘Communism’, is to be marked by the age of plenty, distribution according to needs (not work), the absence of money and the market mechanism, the disappearance of the last vestiges of capitalism and the ultimate ‘withering away’ of the State,(2) Steele, David Ramsay (September 1999). From Marx to Mises: Post Capitalist Society and the Challenge of Economic Calculation. Open Court. p. 45. ISBN 978-0875484495. Among Western journalists, the term ‘Communist’ came to refer exclusively to regimes and movements associated with the Communist International and its offspring: regimes which insisted that they were not communist but socialist, and movements which were barely communist in any sense at all, (3) Rosser, Mariana V.; Barkley, J. Jr. (23rd July 2003). Comparative Economics in a Transforming World Economy. MIT Press. p. 14. ISBN 978-0262182348, and (4) Williams, Raymond (1983). “Socialism”Oxford University Press. p. 289ISBN 978-0-19-520469-8. The decisive distinction between socialist and communist, as in one sense these terms are now ordinarily used, came with the renaming, in 1918, of the Russian Social-Democratic Labour Party (Bolsheviks) as the All-Russian Communist Party (Bolsheviks). From that time on, a distinction between socialist from communist, often with supporting definitions such as social democrat or democratic socialist, became widely current, although it is significant that all communist parties, in line with earlier usage, continued to describe themselves as socialist and dedicated to socialism. Referenced at:

[214] Sources: (1) Cooke, Chris, ed. (1998). Dictionary of Historical Terms (2nd ed.). Palgrave Macmillan. pp. 221–222. ISBN 978-0-333-67347-8, (2) Morgan 2015, pp. 657, 659: “Lenin argued that power could be secured on behalf of the proletariat through the so-called vanguard leadership of a disciplined and revolutionary communist party, organised according to what was effectively the military principle of democratic centralism. … The basics of Marxism-Leninism were in place by the time of Lenin’s death in 1924. … The revolution was to be accomplished in two stages. First, a ‘dictatorship of the proletariat,’ managed by the élite ‘vanguard’ communist party, would suppress counter-revolution, and ensure that natural economic resources and the means of production and distribution were in common ownership. Finally, communism would be achieved in a classless society in which Party and State would have ‘withered away’.”, (3) Busky, Donald F. (2002).Communism in History and Theory: From Utopian Socialism to the Fall of the Soviet Union.Greenwood Publishing. pp. 163–165.ISBN 978-0275977481, (4) Albert, MichaelHahnel, Robin (1981).Socialism Today and Tomorrow. Boston, Massachusetts: South End Press. pp. 24–26. ISBN 978-0896080775, (5) Andrain, Charles F. (1994). Comparative Political Systems: Policy Performance and Social Change. Armonk, New York: M. E. Sharpe. p. 140.ISBN 978-1563242809. The communist party-states collapsed because they no longer fulfilled the essence of a Leninist model: a strong commitment to Marxist-Leninist ideology, rule by the vanguard communist party, and the operation of a centrally planned state socialist economy. Before the mid-1980s, the communist party controlled the military, police, mass media, and state enterprises. Government coercive agencies employed physical sanctions against political dissidents who denounced Marxism-Leninism, (6) Evans, Alfred (1993). Soviet Marxism-Leninism: The Decline of an Ideology. ABC-CLIO. p. 24. ISBN 978-0275947637Lenin defended the dictatorial organisation of the workers’ state. Several years before the revolution, he had bluntly characterised dictatorship as ‘unlimited power based on force, and not on law’, leaving no doubt that those terms were intended to apply to the dictatorship of the proletariat. … To socialists who accused the Bolshevik state of violating the principles of democracy by forcibly suppressing opposition, he replied: you are taking a formal, abstract view of democracy. … The proletarian dictatorship was described by Lenin as a single-party state. Referenced at:

[215] Sources: (1) Lenman, B. P.; Anderson, T., eds. (2000). Chambers Dictionary of World History. p. 769., (2) “The five main contributions of Maoism to communist thought”. Nuovo PCI. Nuovo Partito Comunista Italiano. 18th October 2007, (3) Brown, Nikolai (5th August 2011). “What is Maoism?”. Anti-imperialism. Revolutionary Anti-Imperialist Movement, (4)  “Marxism-Leninism-Maoism Basic Course”. Massalijn. Communist Party of India (Maoist). 11th June 2014, (5) Moufawad-Paul, J. (2016). Continuity and Rupture: Philosophy in the Maoist Terrain. New York City: Zero Books. ISBN 978-1785354762, and (6) Lovell, Julia (2019). Maoism: A Global History. Knopf Doubleday Publishing Group. ISBN 978-0-525-65605-0. All referenced at: 

[216] Source:

[217] Source:

[218] See:

[219] Sources:, Benton, Ted. The Rise and Fall of Structural Marxism: Althusser and His Influence. Palgrave Macmillan, and Smith, Steven. Reading Althusser: An Essay on Structural Marxism.

[220] Source: Baur, Michael (January 2017). “Marx on Historical Materialism” (PDF). ResearchGate: 1–2. Referenced at:

[221] Source: “Socialism: Utopian and Scientific (Introduction – Materialism)”. Referenced at:

[222] Source: Marx, Karl (1845). “Idealism and Materialism”. The German Ideology. Referenced at:

[223] Source: Berlin, Isaiah (2013). Karl Marx with a foreword by Alan Ryan (5th ed.). Princeton University Press. p. 112. ISBN 9780691156507. Referenced at:

[224] Source:

[225] Source:

[226] Source: Cohen, G. A. (25th March 2001). Karl Marx’s Theory of History: A Defence (Expanded ed.). Princeton University Press. p. XXV. ISBN 978-0-691-07068-1.

[227] Source:  Tarrit, Fabien (1st December 2006). “A Brief History, Scope, and Peculiarities of “Analytical Marxism”” (PDF). Review of Radical Political Economics. SAGE Publications. 38 (4): 595–618. doi:10.1177/0486613406293223.

[228] Source:  Miller, David (31st October 1996). “My body is my own”. London Review of Books. Vol. 18, no. 21. ISSN 0260-9592

[229] Source: Farmelant, James (8th August 2009). “G. A. Cohen, 1941-2009”. Monthly Review. ISSN 0027-0520.

[230] Source and Credit: Geoff Boucher, Cambridge University Press, Understanding Marxism, pp. 79 – 102, Publisher: Acumen Publishing, Published 2012, cited at:

[231] Source: Ricoeur, Paul. Freud and Philosophy: An Essay on Interpretation. New Haven and London: Yale University Press, 1970, p. 32

[232] Source:  “Max Weber”. Stanford Encyclopaedia of Philosophy. Metaphysics Research Lab, Stanford University. 2017

[233] Source: Calhoun, Craig J. (2002). Classical Sociological Theory. p.23-24. Oxford: Wiley-Blackwell. ISBN 978-0-631-21348-2. Referenced at:

[234] Explanation: The scientific method is an empirical method for acquiring knowledge that has characterised the development of science since at least the 17th century It involves careful observation and applying rigorous scepticism about what is observed, given that cognitive assumptions can distort how one interprets the observation (Source: Aristotle is recognised as the inventor of the scientific method because of his refined analysis of logical implications contained in demonstrative discourse, which goes well beyond natural logic and does not owe anything to the ones who philosophised before him.

[235] Source: Jeffries, Stuart (4th July 2012). “Why Marxism is on the rise again”. The Guardian. Referenced at:

[236] Source:  Stanley, Tim. “The Left is trying to rehabilitate Karl Marx. Let’s remind them of the millions who died in his name”. The Daily Telegraph. Referenced at:

[237] Source: Elbe, Indigo (21st October 2013). “Between Marx, Marxism, and Marxisms – Ways of Reading Marx’s Theory”. Viewpoint Magazine.

[238] Source: Lipow, Arthur (1991). Authoritarian Socialism in America: Edward Bellamy and the Nationalist Movement. University of California Press. p. 1. ISBN 978-0-520-07543-6. Referenced at:

[239] Source: The History Guide

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