Essays in Persuasion

Author: John Maynard Keynes

Originally published: 1931

Understanding the historical context is bound to make John Maynard Keynes’ “Essays in Persuasion” an even more compelling read. Keynes authored at least eight books before he wrote his magnum opus, “The General Theory of Employment, Interest Rates and Money” in 1936.  As the Great Depression of 1929 unraveled Keynes was busy discovering “dynamical laws” governing money. “Essays in Persuasion”, written in 1931, is a reflective response to prevalent socioeconomic issues.

The First World War, followed by the Treaty of Versailles in 1919, set a chain of “disastrous” consequences into motion. Hyperinflation and the need to pay war reparations were a significant economic burden for the German Reich (The Weimar Republic). France and the United Kingdom, too, faced severe hardships as they struggled to repay back war debts and interest. Waves of unrest, uncertainty, and a collapse in world trade, compounded the speculative excesses in America, creating the Great Depression.

Keynes’ “Essays in Persuasion” takes us through many of these issues. But the essays, barring a few, lack context. The reader needs to remember that the essays are an attempt to influence policymakers of the time. Some of the “persuasions” are self-contained. Particularly fascinating pieces include Keynes’ masterly take on economic concepts. His insights on inflation, deflation, fiat money, and gold, are a must-read for anybody who wants to understand finance. Keynes' charm in defining economic terms with elegance takes readers deep into complex economic theory and the real-life consequences of monetary decision-making. That unemployment exists because “employers are deprived of profit” may come across as a startling claim till Keynes explains the interconnected interests and roles stakeholders have in making the economy tick.

Musings in the book are not limited to economic theory. Keynes’ balanced take on communism and his well-articulated convictions on neither being a conservative nor a liberal show how well-reasoned and profound Keynes’ thoughts are. The last couple of chapters are perhaps the most important. Keynes takes us into the purpose of all economic activities. All human activities, as Keynes subtly suggests, are economic.

Investors and students of finance could benefit immensely from understanding the depth of two Keynesian prophecies. First, undue pessimism is bound to create unforced errors. But the future is certain to grow one’s investment at a compounded growth rate as technological advances bring even more economic prosperity. Second, economics can help solve the economic needs problem. But unless we are free of “avarice and vice”, the “tunnel of economic necessity” will miss taking us to true economic bliss.