36th Annual Conference of the History of Economics Society June 26-29, University of Colorado Denver

KEYNES AND THE LOVE OF MONEY THE FREUDIAN CONNECTION1

GILLES DOSTALER Universit du Qubec Montral

Happiness is the belated fulfillment of a prehistoric wish. For this reason wealth brings so little happiness. Money was not a childhood wish.
Freud, letter to Wilhelm Fliess, 16 January 1898 The love of money as a possession -- as distinguished from the love of money as a means to the enjoyments and realities of life -- will be recognized for what it is, a somewhat disgusting morbidity, one of those semi-criminal, semi-pathological propensities which one hands over with a shudder to the specialists in mental disease. Keynes, Economic possibilities for our grandchildren, 1930

Few people, economists included, know that Keynes read Freud attentively and that, in turn, Freud read and was inspired by some of Keynes works, particularly The Economic Consequences of the Peace, published in 1919. Keynes open attitude to Freuds ideas is no surprise.2 On many subjects, Keynes developed perspectives, some even before the emergence of the Bloomsbury group, resembling the ideas of the founder of psychoanalysis. Uncertainty, anxiety, impulsiveness, seemed, to Keynes, to motivate the desire for money, rather than that rational calculation so dear to economists. Keynes introduced the desire for money, recognized by psychoanalysts but denied by most economists, into economic analysis. Money is not simply a stock of gold, coins, banknotes, or numbers circulating in accounts. Rather, it is a troubling reality, a double-edged sword. It introduces time. It interrupts barter, it hampers the simultaneity of exchange, it permits the revision of plans, and it casts a shadow of doubt over all human actions. People live in doubt. The future is unknown. Money calms our anxiety giving us a safety net yet worsens it at the same time. It allows us to change our minds, to be irrational. More profoundly, money depersonalizes human relations, recalling authoritarian societies based on servitude. People become subservient to merchandise and accumulation. Keynes was an economic theorist but, like Freud, he was above all a thinker preoccupied by man and society, uncertainty and anxiety. He also reflected on crowd psychology and mimicry, of a society of individuals each of whom is endeavoring to copy the others (19373, p. 114).

1 2

The ideas of this paper are developed at length in Dostaler and Maris (2009). On this subject see Dostaler (2007), interlude 1. 3 When Keynes is the author of the citation, we omit the name before the date.

2 Both Keynes and Freud wrote about the death instinct. For Keynes, it takes the form of the love of money: the love of money, acting through the pursuit of profit, as an adjuvant to natural selection (1926, p. 284). But he also considered the love of money to be the moral problem of our age (1925, p. 268). It shows up in the form of compound interest, money that begets more money. Keynes saw the roots of social conflict in competition and the love of money. In the opening pages of The Economic Consequences of the Peace, he quotes the following verses of Thomas Hardys The Dynasts: Observe that all wide sight and self-command Deserts these throngs now driven to demonry By the Immanent Unrecking. Nought remains But vindictiveness here amid the strong, And there amid the weak an impotent rage. (Keynes 1919, p. 3) Keynes identified two causes of conflict between nations, which he called the European civil war (1919, p. 21): 1) the competition between nations, resulting from the accumulation, during a century, of wealth that cannot be fully consumed and therefore must be destroyed; and 2) class struggle the desires of those excluded from the system and their subsequent resentment at only being able to pick at the crumbs of the unattainable, ever-expanding economic pie. This resentment on the part of the downtrodden exacerbates nationalism and fuels wars. The destructive nature of the love of money, embodied in financial calculations, menaces nature as well as man: The same rule of self-destructive financial calculation governs every walk of life. We destroy the beauty of the countryside because the unappropriated splendours of nature have no economic value. We are capable of shutting off the sun and the stars because they do not pay a dividend (1933b, p. 242). And despite this lucid assessment, the cycle continues. We no longer see the sun because of smog, and the stars are overshadowed by light pollution. Auri sacra fames: Midas In Keynes early writings, particularly in the texts written for the Cambridge Society of Apostles, we find reflections on the fragility of monetary wealth and an expression of scorn for the love of money. These ideas appear in his first course notes, as well: The ethical value of wealth is not easily justified unless we regard the present state of affairs as purely transitional (KP,4 UA/6/15, p. 45). Money, as envisioned by classical economists, was a neutral object, created by man to facilitate exchange. It was not an object of desire, except in the case of the mentally troubled, those stricken with perversions like avarice. In contrast, Keynes came to believe that these phenomena were not only common, but that the irrational love of money was the very motor of capitalism. The majority of human beings desire money for itself, and some prove themselves willing to transgress all moral boundaries to acquire it. Where does money come from? Coinage is considered to have originated in Lydia, an ancient kingdom in Asia Minor on the Aegean Sea, situated in present-day Turkey, in the seventh century B.C. Lydias last king, Croesus, reigned from 561 to 546 and greatly extended its borders before being vanquished by the founder of the Achaemenid Persian Empire, Cyrus the Great. The
4

For Keynes Papers, Kings College Library, Cambridge, followed by the archive catalogue number.

3 expression rich as Croesus refers to his great wealth, coming from the golden sands of the Khrusurrhoas River, the river of gold. The river is also referred to as the Pactolus, after the god by that name who he ended his life in its waters. According to the myth, King Midas left the gold on the banks of the Pactolus there when he washed himself at the rivers source to escape death. Midas is a historical character: king of Phrygia, a territory neighboring Lydia, during the eighth century B.C. The kingdom controlled important gold and iron mines that ensured its prosperity until the beginning of the seventh century B.C. when the Cimmerians invaded. Finally, in 546 B.C, both Phrygia and Lydia fell to the domination of the Persian Empire. Legend tells us that Midas who took in Silenus, also known as Bacchus, Dionysus tutor, who got lost in Phrygia while brink drunk. Dionysus offered Midas one wish as a reward, and Midas a greedy king wished for the power to transform everything he touched into gold. Dionysus acquiesced. Midas would soon be horrified to discover that even what he sought to eat and drink became gold. Hungry and thirsty, and surrounded by his mountain of gold, he foresaw his fate and pleaded with Dionysus to free him from his wish. Dionysus agreed, and instructed Midas to wash himself at the source of the Pactolus and thus liberate himself from his malediction. Between 1920 and 1926, Keynes dedicated much of his time to studying the history of ancient currencies. He was particularly fascinated by Solons monetary reforms. Solon, a poet as well as a statesman, was elected archon of Athens in 594 B.C. He exonerated peasants, who had lost their land and were threatened with slavery, from heir debts. He wrote poems detailing his reforms, proclaiming: In wealth no limit is set up within man's view; those of us who now have the largest fortune are doubling our efforts; what amount would satisfy the greed of all? Gain is granted to mankind by the immortals; but from it arises disastrous Folly, and when Zeus sends her to exact retribution, she comes now to this man, now to that. (Solon, Prayer to the Muses) Keynes considered the history of money to begin with Solon, the first statesman to use the force of law to modify the value of money. The scarcity of precious metals in Greece caused prices to fall dramatically, which threatened those who cultivated their lands with borrowed money. In a passage of his manuscript, Keynes evoked Croesus, Midas, and Lenin: As in all later stages, the appreciation of the standard called for the remedy of debasement. Solon, perceiving in his wisdom, that in such circumstances the interests of society required that the weight of capitalism and the dead hand upon the active workers should be lightened, so became the first of the long line of statesmen, of whom the latest is Lenin, who, throughout the ages of private capitalism, have employed debasement wisely to diminish its weight or rashly to sap its foundations. The sage who first debased the currency for the social good of the citizens was suitably selected by legend to admonish Croesus of hoarded riches. Solon represents the genius of Europe, as permanently as Midas depicts the bullionist propensities of Asia. (JMK5 28, p. 227) Throughout his works, Keynes highlights the conflict between enterprise and finance, between those who make money by producing and those who make it in their sleep, between the active and passive poles of the economy. This conflict is represented here by Solon and Midas
5

For The Collected Papers of John Maynard Keynes, followed by the volume number.

4 and thus West and East. More than two centuries after Solon, one of historys greatest thinkers considered the causes of the Athenian empires decadence. For Aristotle, the corrosion of society by money played a central role in this process. Aristotle considered money to be a useful invention that eased exchanges. Adam Smith and Karl Marx took up his cogent description of the emergence of money in their own writings. Keynes also had great admiration for the Stagirite. He wrote to Strachey on January 23, 1906, regarding superb Aristotle and his Nicomachean Ethics: There never was such good sense talked -- before or since. Aristotle illuminates the many functions of money, in the same way that they are today described in textbooks: a measure of value and a means of exchange, payment, and reserve of value. It is the latter which opens the door to disorder and perversion. Aristotle sets economics, the natural means of fulfilling ones needs, apart from chrematistics, the accumulation of money wealth. Chremata is a Greek word that designates money or wealth. By its nature, consumption is necessarily limited, but there is not limit to the accumulation of wealth. Money is therefore a dangerous invention and can lead to the worst in human excesses when the intermediary in exchange transforms itself into the finality of human action. To enrich oneself becomes to accumulate without end. There is no limit to the amount of money one can possess. The mark of success, of power, of notoriety, becomes a sum of money. We are worth that sum. Aristotle, a man generally measured in his proposals, is wary of money and harshly condemns those who dedicate themselves to its perverse activities. He decries commerce, an occupation which consists of constantly buying goods with the goal of selling them for a profit, as a profession that dreams constantly of money, for which there is no end where its greed can stop. Even worse than commerce is money lending, which permit the creditor to gain, from a certain sum of money, an even greater sum, simply by divesting himself from his money for a time. This type of gain goes against nature. In the thirteenth century, Thomas Aquinas, in order to justify his condemnation of interest, developed a theory that foreshadowed Keynes. The Angelic Doctor considered that interest, which he calls usury, was the rent of money. Recalling Aristotles ideas, he affirmed that money, by its very nature, cannot be loaned. Usury is therefore reprehensible. This view became official doctrine of the Catholic Church until the nineteenth century. To the classical view, where interest rewards the lender for his abstinence from consumption, Keynes opposed the view of interest as a reward for the renunciation to liquidity, and thus as the rent of money. He writes of the Scholastics that their doctrine deserves rehabilitation and honor (1936, p. 351). They had understood that renters interest posed a hurdle to enterprise. A parallel has often been drawn between early Christianity and communism. Keynes visited the USSR in 1925 on his honeymoon with Lydia Lopokova, who was Russian and whose parents still lived in their native country. Keynes was extremely critical of the absence of liberty under the Bolshevik system, but he conceded that Bolshevism, which he described as a combination of religion, idealism, and pragmatism, had one virtue: it had displaced the love of money from the central position it occupies in capitalism. The Soviet communists can be likened to the early Christians led by Attila . . . using the equipment of the Holy Inquisition and the Jesuit missions to enforce the literal economics of the New Testament (1925, p. 257). In Russia, motivation based on monetary considerations ceased to dictate social action: But in the Russia of the future it is intended that the career of money-making, as such, will simply not occur to a respectable young man as a possible opening, any more than the career of a gentleman burglar or acquiring skill in forgery and embezzlement (ibid., p. 260). This constitutes a tremendous innovation (ibid., p. 261) while modern capitalism is absolutely irreligious, without internal

5 union, without much public spirit, often, though not always, a mere congeries of possessors and pursuers (p. 267). Gold, barbarous relic The year Keynes traveled to the USSR is also the year that England returned to the gold standard, a policy Keynes had fought against since the beginning of the 1920s.6 Gold is a metal with properties similar to those of silver, but because of its color, its brilliancy, and its superior malleability and ductility, it has always been more highly prized. It has become the emblematic precious metal. Since antiquity, it has served to make precious objects, jewels, ornaments, dishes, clothes, and religious symbols. It is associated with religious and political power. It was in 1771 that the value of the pound sterling was officially tied to gold, with 123.274 grains of gold of 22/24 carats giving a price of 3 pounds 17 shillings 10,5 pence per ounce of gold. The Master of money who determined this rate is a well-known character, Isaac Newton. With the exception of certain troubled times, the Napoleonic wars and the First World War, this exchange rate from pound to gold would remain until 1931. The gold standard eventually imposed itself in most countries during the last quarter of the nineteenth century. Keynes associated its triumph with the triumphs of free trade and laisserfaire, which coincided with Britains domination of the world economy. In Keynes view, a series of exceptional circumstances can explain the stability of golds value during the nineteenth century, which made for simultaneous stability of prices and exchange rates. It also gave the impression that gold has an intrinsic value. A key element was the discovery of gold, first in California in 1848 and then in Australia in 1851, followed by the exploitation of mines in South Africa: The considerable success with which gold maintained its stability in the changing world of the nineteenth century was certainly remarkable (1923, p. 132). Keynes first book, Indian Currency and Finance, already contained the beginnings of his ideas for reforming the international monetary system, which he would defend forty years later, during the preparation for the Breton Woods accords: The time may not be far distant when Europe, having perfected her mechanism of exchange on the basis of a gold standard, will find it possible to regulate her standard of value on a more rational and stable basis. It is not likely that we shall leave permanently the most intimate adjustments of our economic organism at the mercy of a lucky prospector, a new chemical process, or a change of ideas in Asia. (Keynes 1913, p. 71) The First World War led to the suspension of the gold standard; the United States was the only country able to maintain parity between its national money and gold. Keynes thought that the repeal of the gold standard presented the opportunity for interesting changes: If it proves one of the after effects of the present struggle, that gold is at last deposed from its despotic control over us and reduced to the position of a constitutional monarch, a new chapter of history will be opened. Man will have made another step forward in the attainment of self-government, in the power to control his fortunes according to his own wishes (1914, p. 320). Keynes criticized the widespread tendency to hoard gold: it should circulate and be used, to support exchanges and to make purchases abroad. Bankers acted like maharajas: It would be consistent with these ideas to
6

On this, see Dostaler (2007), chapter 8.

6 melt the reserve into a great golden image of the chief cashier and place it on a monument so high that it could never be got down again. If any doubt comes to be felt about the financial stability of the country, a glance upwards at the image will, it is thought, restore confidence (ibid., p. 31314). The Cunliffe commission established in Great Britain in 1918, followed by the Genoa conference that brought 39 countries together in 1922, proposed a return to the gold standard. For England, this meant a re-evaluation of 7% for the pound sterling, which necessitated wages cut by the same fraction in order to stay competitive in the world market. The gold standard sacrificed full employment and price stability in favor of a stable exchange rate, and linked Englands economic situation to the United States, from that point on the worlds largest economy. Keynes fought hard against the suicidal decision, announced by the Chancellor of the Exchequer Winston Churchill on April 29, 1925. As he had predicted, the return to the gold standard caused serious social problems. Coal miners, refusing the proposal of lower wages and increased hours, faced a lockout that prompted a general strike on May 3, 1926. The fateful decision was one of the underlying causes of World War II, Keynes argued, alongside the clauses in the Treaty of Versailles that imposed burdensome reparations payments on Germany. Gold, he said, is a barbarous relic (1923, p. 138), a fetish (1929, p. 776), an object of superstition that still enjoys the prestige of its smell and colour (1923, p. 132). Keynes devotes a chapter to gold in his Treatise on Money, published the following year, and in it he refers to Freud, Ferenczi and Jones: Dr Freud relates that there are peculiar reasons deep in our subconsciousness why gold in particular should satisfy strong instincts and serve as a symbol. The magical properties, with which Egyptian priestcraft anciently imbued the yellow metal, it has never altogether lost. . . . Of late years the auri sacra fames has sought to envelop itself in a garment of respectability as densely respectable as was ever met with, even in the realms of sex or religion. Whether this was first put on as a necessary armour to win the hard-won fight against bimetallism and is still worn, as the gold-advocates allege, because gold is the sole prophylactic against the plague of fiat moneys, or whether it is a furtive Freudian cloak, we need not be curious to inquire. (Keynes 1930, vol. 2, p. 258-9) Keynes does not detail the nature of these deep-seated reasons, perhaps to avoid shocking his readers, but he was acquainted with the relations Freud had established between anal eroticism and the propensity to hoard, as well as the links between money and excrement. Gold, the Hebrews golden calf, and Mammon, one of the incarnations of the devil: these always inspired an irrational fascination, which is simply a fascination with evil. In a note for the passage cited above, Keynes refers the reader to the following texts: Freud (1908), Ferenczi (1914) and Jones (1916, 1919). He includes this remarkable passage by Ernest Jones, Freuds British lieutenant: The ideas of possession and wealth, therefore, obstinately adhere to the idea of money and gold for definite psychological reasons. This superstitious attitude will cost England in particular many sacrifices after the war, when efforts will probably be made at all costs to reintroduce a gold currency (Jones 1916, p. 172). For Keynes, this prophecy was an example of the success of psychoanalysis. We should note that the passage is preceded by this phrase: Metal coins, however, and particularly gold, are unconscious symbols for excrement, the material from which most of our sense of possession, in infantile time, was derived. In The General Theory, Keynes makes a comparison between money and filth, by comparing an activity of digging

7 holes in the ground known as gold-mining to an activity in which the Treasury fill old bottles with banknotes, bury them at suitable depths in disused coalmines which are then filled up to the surface with town rubbish, and leave it to private enterprise on well-tried principles of laissezfaire to dig the notes up again [] It would, indeed, be more sensible to build houses and the like; but if there are political and practical difficulties in the way of this, the above would be better than nothing (1936, p 129). Keynes hoped that this gold fetishism might disappear, and that we would recognize the need to manage the international monetary system in a rational manner: Thus gold, originally stationed in heaven with his consort silver, as Sun and Moon, having first doffed his sacred attributes and come to earth as an autocrat, may next descend to the sober status of a constitutional king with a cabinet of banks ; and it may never be necessary to proclaim a republic. But this is not jest the evolution may be quite otherwise. The friends of gold will have to be extremely wise and moderate if they are to avoid a revolution. (Keynes 1930, vol. 2, p. 261) Great Britain was finally forced to abandon the gold standard in 1931. This change in policy was welcomed by Keynes, who contended that the curse of Midas would befall the few countries who chose to remain faithful to the gold standard, primarily France and the United States: Now, in so far as this is the case, we and all the countries following our example will gain the benefits of higher prices. But none of us will secure a competitive advantage at the expense of the others. Thus the competitive disadvantage will be concentrated on those few countries that remain on the gold standard. On these will fall the curse of Midas (1931a, p. 2478). The United States abandoned the gold standard in 1936. Keynes devoted much of his time and energy, beginning in 1941, to discussing, negotiating, and writing proposals with the aim of installing a new international monetary system, rational and freed from its gold fetishism. This new system would be based on an international central bank that would issue a currency he proposed, in December 1941, to call bancor. The value of this new money could vary, but it would be pegged to gold. For psychological reasons tied to old traditions, Keynes saw the necessity of maintaining a symbolic link to ensure the prestige of the new money. A few weeks before the Bretton Woods negotiations, rumors spread that Keynes had discussed a return to the gold standard with representatives of the United States. In a speech in the House of Lords, of which he was a member after being ennobled in 1942, Keynes declared: Was it not I, when many of to-days iconoclasts were still worshippers of the Calf, who wrote that Gold is a barbarous relic? Am I so faithless, so forgetful, so senile that, at the very moment of the triumph of these ideas when, with gathering momentum, Governments, parliaments, banks, the Press, the public, and even economists, have at last accepted the new doctrines, I go off to help forge new chains to hold us fast in the old dungeon? I trust, my Lords, that you will not believe it. (Keynes 1944, p. 16-17) Keynes was a man of contradiction and paradox. He gained his wealth by speculation, which he condemned elsewhere. He denounced the fetishism of gold, yet was fascinated by alchemy. In April 1930, his friend Reginald McKenna, a politician and banker, revealed him, on secret oath, a new procedure for producing and unlimited quantity of gold for only 1 shilling per ounce. In 1979, a sealed envelope was found in Keynes archives that contained a 19-page

8 manuscript titled New Process. Though he admitted to not having understood the process, Keynes was fascinated by this discovery that would have ended the reign of the barbarous relic, permitted England to settle its debts to the United States, and ended the problem of German reparations. Thanks to this discovery, England would regain the role of world financial leader usurped by New York: It will be a wonderful last chapter to the long history of golds dominion over our greedy mind (1930b, p. 164). Money as insurance against death Even if we can dispose of gold, the problem of money the love of money remains. We know it is a morbid desire, so why does it persist? Keynes illuminates this enigma. Like Freud, Keynes saw the connection between libido and sublimation. Civilization progresses in part because people are able to sublimate their impulses and turn them into literary and artistic works. But not all have the necessary capacity and talent. This is the case, in particular, among businessmen. In general, these are people doted with considerable energy, those we call in our days workaholic. But they do not have sufficient moral and intellectual capacities to rise above their vulgar impulses, and so they seek money rather than love, beauty and truth: Unless they have the luck to be scientists or artists, they fall back on the grand substitute motive, the perfect ersatz, the anodyne for those who, in fact, want nothing at all -- money. . . . Clissold and his brother Dickon, the advertising expert, flutter about the world seeking for something to which they can attach their abundant libido. But they have not found it. They would so like to be apostles. But they cannot. They remain business men. (Keynes 1927, 319-20) We must accept the reality that libido can degenerate into more aggressive and sadistic impulses, which push some individuals to transform others into objects, and to use, humiliate, injure, and kill them, as Freud wrote. The pursuit of money is a means of channeling these desires: Moreover, dangerous human proclivities can be canalised into comparatively harmless channels by the existence of opportunities for money-making and private wealth, which, if they cannot be satisfied in this way, may find their outlet in cruelty, the reckless pursuit of personal power and authority, and other forms of self-aggrandissement. It is better that a man should tyrannise over his bank balance than over his fellow-citizens; and whilst the former is sometimes denounced as being but a means to the latter, sometimes at least it is an alternative. (Keynes 1936, p. 374) The quest for money functions as a substitute for these sadistic impulses, which, in their extreme form, can go as far as the impulse to kill. Keynes often comes back to the irrational and pathological nature of hoarding, the impulse to accumulate money. It is profoundly neurotic, a somewhat disgusting morbidity, one of those semi-criminal, semi-pathological propensities which one hands over with a shudder to the specialists in mental disease (1930a, p. 329). The love money is infantile and can conjure a fear of death in the person who succumbs to it. Capitalism, a system founded on the love of money, has proven itself incapable of confronting the question of death, which like a child it refuses. It can only survive through accumulation,

9 so that the thought of ultimate loss which often overtakes pioneers, as experience undoubtedly tells us and them, is put aside as a healthy man puts aside the expectation of death (1936, p. 162). Death is inexorable, but money, which Keynes describes as above all, a subtle device for linking the present to the future (1936, p. 294), acts as a shield from the inevitable: The purposive man is always trying to secure a spurious and delusive immortality for his acts by pushing his interest in them forward into time. He does not love his cat, but his cats kittens; nor, in truth, the kittens, but only the kittens kittens, and so on forward for ever to the end of catdom. For him jam is not jam unless it is a case of jam tomorrow and never jam today. Thus by pushing his jam always forward into the future, he strives to secure for his act of boiling it an immortality. (Keynes 1930a, p. 330) The accumulation of money, hoarding and avarice are also related to the postponement of consumption, to abstinence and the refusal of pleasure. Here, economics joins Puritanism and Victorian morality, which Keynes and his friends of the Bloomsbury group struggled against since the beginning of the century. Keynes associated Puritanism and the praise of savings: Thus this remarkable system depended for its growth on a double bluff or deception. . . . The duty of saving became nine-tenths of virtue and the growth of the cake the object of true religion. There grew round the non-consumption of the cake all those instincts of Puritanism which in other ages has withdrawn itself from the world and has neglected the arts of production as well as those of enjoyment. (Keynes 1919, pp. 11-2) Greedy Midas was not only guilty of endangering his own life, but of killing the society to which he refused the circulation of his money. The hoarder perverts all of societys exchanges. Anguish and the rate of interest Starting in A Treatise on Money, Keynes examines the speculative factor in investment decisions, which is related to the uncertainty concerning future prices. Given this uncertainty, investment is in large part a question of emotions, rather than a mathematical comparison of cost and benefit. It is related to what Keynes calls, in the General Theory, animal spirits. For Keynes, as for Schumpeter, the entrepreneur is a fundamentally abnormal and neurotic person, who has an exaggerated proclivity for risk, which is inherent in human nature, albeit to a smaller degree. Human beings manifest a spontaneous urge to action rather than inaction (Keynes 1936 p. 161) and it is our innate urge to activity which makes the wheels go round (p. 163): Thus, in estimating the prospects of investment, we must have regard, therefore, to the nerves and hysteria and even the digestions and reactions to the weather of those upon whose spontaneous activity it largely depends (p. 162). Entrepreneurs are individuals of sanguine temperament and constructive impulses who embarked on business as a way of life, not really relying on a precise calculation of prospective profit (p. 150), eccentrics who satisfy their spontaneous urge to action by putting aside ration calculation and falling back . . . on whim or sentiment or chance (p. 163). But alongside these adventurers, Sinbad the sailor merchant from Basra or Drake the oil prospector, are the others, the majority, for whom the future is troubling. These people wish to stay liquid, as the stock market saying goes, to play without risks and be able to leave to game at any time.

10 With the preference for liquidity, we fall back on the love of money. The question is: unless plagued by mental illness, why would a person keep money in liquid form? Keynes said that he first discovered the marginal propensity to consume, which led him to develop his concept of interest and finally the marginal efficiency of capital. In reality, the preference for liquidity is already outlined in the Treatise on Money. Liquidity designates the ease with which a good may be exchanged for any other, thus transformed quickly into means of payment, without loss or cost. Money embodies this idea, for it permits us to obtain all other merchandise, to pay wages and revenues, and to reimburse debts. The preference for liquidity is a psychological propensity, tied to individuals insecurity, which leads them to keep a portion of their assets in a liquid form. It is linked to our fear of the future and of the uncertain, of the precariousness of all things; it transforms our worries: The possession of actual money lulls our disquietude; and the premium which we require to make us part with money is the measure of the degree of our disquietude (1937, p. 116). This premium is the interest rate, which is an index of fear. Anxiety and uncertainty always lie beneath our conscience: New fears and hopes will, without warning, take charge of human conduct. . . . At all times the vague panic fears and equally vague and unreasoned hopes are not fully lulled, and lie but a little way below the surface (p. 114-5): . . . partly on reasonable and partly on instinctive grounds, our desire to hold money as a store of wealth is a barometer of the degree of our distrust of our own calculations and conventions concerning the future. Even though this feeling about money is itself conventional or instinctive, it operates, so to speak, at a deeper level of our motivation. It takes charge at the moments when the higher, more precarious conventions have weakened. (Keynes 1937, p. 116) According to the classical view, the interest rate is a reward for abstinence, and it is fixed by the conjunction of the supply and demand of capital. In Keynes view, the interest rate compensates the renunciation of liquidity. It is a psychological factor based on our own projections of its future value; there is no objective or natural value that comes from the agents intertemporal preferences or the productivity of capital: The current long-term rate of interest is a highly psychological phenomenon which must necessarily depend on what expectations we hold concerning the future rate of interest (1935, p. 212). Capitalisms problems stem from the low propensity to consume, the low marginal efficiency of capital, and the gradual increase in the preference for liquidity that pushes up interest rates. This rise in interest rates has been present throughout human history, and explains why interest has often been condemned: That the world after several millennia of steady individual saving, is so poor as it is in accumulated capitalassets, is to be explained, in my opinion, neither by the improvident propensities of mankind, nor even by the destruction of war, but by the high liquidity-premiums formerly attaching to the ownership of land and now attaching to money (1936, p. 242). The short-term consequences are drastic as well. Unemployment is closely linked to monetary phenomena: Unemployment develops, that is to say, because people want the moon; -- men cannot be employed when the object of desire (i.e., money) is something which cannot be produced and the demand for which cannot be readily choked off (ibid., p. 235). This is the paradox: the desire for liquidity is morbid, an instinct that leads to death. And yet, it because we fear death that we desire liquidity. We approach death even as we believe to be fighting against it; we drown as we attempt to cross the river of time in a leaking raft. But

11 individuals do not exist in isolation; they are drowned in the crowd. Therefore, the psychology of man is the same as that of the masses: blind, infantile, conformist. Like Freud, Keynes gave the group actions an essential role in economics and in society. Group psychology and speculation This idea of a the psychology of masses is elaborated in chapter twelve of the General Theory, the chapter dedicated to long-term anticipations and speculation. This chapter is the most prophetic of the book, because it describes the contemporary economic reality in which finance and speculation triumph. Keynes also explicitly refers to epistemological reflections of his previous philosophical works, particularly the Treatise on Probability. He warns, As the organization of investment markets improves, the risk of the predominance of speculation does, however, increase (1936, p. 158). The risk of entrepreneurs becoming speculators reveals their motivations to be the same. They are of the same creed, contrary to shareholders. They are players and punters. They often play with the future which terrorizes the common man. Their animal spirits are the opposite of Midas love of money. In their case, the appropriate myth is Hermes, the Olympian god of players (he invented the game of jacks), who did not tell the whole truth. He succeeded in tricking other gods. He was the god of robbers, merchants, and wanderers. Speculators are magicians. Like entrepreneurs, they are better informed than the ignorant and stupid crowds: they anticipate. Some are inside traders. They are the driving forces of material life just as artists are for cultural life. The irrational motivations and impulses that lead individuals to keep they money in liquid form are part of an infantile regression, a symptom of latent depression, which corresponds to societys depression. Midas, beyond warning us about individual comportment, speaks of collective actions during a societys depression. If all people act like Midas, with an unquenchable thirst for money, society heads toward catastrophe. For Keynes, it was entirely possible to transpose individual behavior on collective behavior. Groups also have a psychology, the psychology of a society of individuals each of whom is endeavoring to copy the others (1937, p. 114). This view opposes methodological individualism, the view according to which all collective phenomena can be explained through individual behaviour, that most economists adhere to. Psychology of the masses exists beyond the individual, it is the mass psychology of a large number of ignorant individuals (1936, p 154). They are ignorant, and they are also powerless when compared with their own unconscious. In Group Psychology and Analysis of the Ego, Freud analyzes two behaviors that lie at the heart of stock market phenomena: mimicry and contagion. In Totem and Taboo he describes man as a contagious being: Anyone who has violated a taboo becomes taboo himself because he possesses the dangerous quality of tempting others to follow his example [] ; why should he be allowed to do what is forbidden to others ? Thus he is truly contagious (Freud 1913, p. 32). This contagious man appears in the twelfth chapter of the General Theory. The Keynesian theory of markets is opposed Walras; the Keynesian market is a collective object. It is not the result of the addition of all individuals and the laws of supply and demand. It is the crowd: blind, ignorant, stupid, sheep-like followers who are prone to panic and sensitive to their own movements and false rumors. This theory of the mass market is epitomized by the famous beauty contest experiment, which describes a system that is constantly changing, without equilibrium, where each is unduly interested in discovering what average opinion believes average opinion to be

12 (1936, p. 159). To illustrate how the interest rate is determined, Keynes describes a contest where the participants must choose the six most beautiful faces from a group of photographs. The winner is the one whose choices most closely resemble the average of all other participants choices. What is important in this simulation is not what the participant actually thinks, but what he presumes the others will think. The best players of this game will be able to extend this to the third and fourth degree. Faced with uncertainty, as man is blind with regard to his destiny, submerged in the crowd, only one thing is feasible: Knowing that our own individual judgment is worthless, we endeavour to fall back on the judgment of the rest of the world which is perhaps better informed. That is, we endeavour to conform with the behaviour of the majority or the average (1937, p. 114). This original theory of the mass market, a theory of human mimicry where the desire of others serves as the model for ones own desire, can be considered Freudian, Freud himself relying on Le Bon (1895), Trotter (1916) and MacDougall (1920). Man becomes a child again, lost among the crowd: It is clearly perilous for him to put himself in opposition to it [the group], and it will be safer to follow the example of those around him and perhaps even hunt with the pack (Freud 1921, p. 85). Keynes also believed that individuals abandon their ego for the ideals of the masses. It is better to be wrong, and in agreement with the crowd, than to be right against it: Wordly wisdom teaches that it is better for reputation to fail conventionally than to succeed unconventionnally (1936, p. 158). In the pack, one must howl with the wolves. Average opinion, tyranny of opinion, mimicry, self-referential systems: Keynesian analysis of finance founded on the notions of convention give life to another being altogether, a collective being, an irrational and impulsive lemming known as the stock market. The mass market is a collective individual subject to opinions, impulses, and depressions just like humans. It denies anxiety and death by turning to the morbid desire for liquidity and accumulation. The concept of convention helps to understand the transition from the individual to the collective. What does the crowd grab onto, given the mystery of its future? To crowd opinion and, in a self-referential process, to the idea that the status quo will perpetuate itself. That tomorrow, the sun will rise. That the growth rate and the exchange rate will remain unchanged, that things will continue as they have been, that time does not exist. This is the meaning of Keynes convention: The essence of this convention though it does not, of course, work out quite so simply lies in assuming that the existing state of affairs will continue indefinitely, except in so far as we have specific reasons to expect a change (1936, p 152). When faced with so much uncertainty, speculators and businessmen adopt the only attitude possible: to act as though the past repeats itself. As though the state of affairs perpetuates itself. This is denying the future. In a crowd, predictions will come true as soon as there is unanimity within the group. This is what Keynes saw, as applied to the interest rate: For its actual value is largely governed by the prevailing view as to what its value is expected to be. Any level of interest which is accepted with sufficient conviction as likely to be durable will be durable (1936, p. 203). But this phenomenon is not merely generalized ignorance. The conventional evaluation of markets is a pseudo-certainty that comes from the interactions between a mass of ignorant individuals. This is why success in the stock market means anticipating the groups changes: it may often profit the wisest to anticipate mob psychology rather than the real trend of events, and to ape reason proleptically (Keynes 1930, vol. 6, p. 323). Thus the interest rate, a psychological phenomenon determined by its future value and group psychology, is a conventional and self-referential phenomenon. It relies on individuals psychological relationship to time, to future rates. But the

13 future rate depends on the convention. The convention depends on the present rate, and thus the abolition of time. Like a child, the crowd does away with time. For Freud, the crowd demands to be controlled by an authority who can be admired, before whom one bows down, by whom one is ruled and perhaps even ill-treated (Freud 1939, p. 109). Which figure can reassure the speculator faced with destiny? A father figure, a head of state, the president of a central bank, for example, who speaks of confidence, the stability of the current favorable state of affairs, and who assures us that tomorrow will be just another day and that our peace will endure: it is the convention of stability. Who defines this convention, whose symbol is the stable interest rate? In Keynes view, the crowd and its group psychology. It is stronger than individual psychology, according to Freud a skeptic of individual rationality and to Keynes, who did not believe in mans rational calculation. Competition and death The competition Keynes writes of is not Montesquieus soft commerce, despite his great respect for this thinker7. It refers instead to Darwin, for whom he has an even greater admiration, as did Freud. This competition is the law of the jungle, Darwinism without Darwin. It is the Darwinism revisited by Spencer (1926, p. 284), social Darwinism, the survival of the fittest through aggression. Darwinism, in its true sense, describes how the collective survival instinct of a species struggles against and overcomes the death wish in all individuals, in the process of natural selection. Keynes competition is, even before Girard (1972), competition of mimicry and envy. Envy, the poison of uniform, indifferent, homogenous, modern societies, is at the origin of group behavior, dictated by mimicry and envy. It is born from equality. Many nineteenth-century authors, who saw the rise of democracys crowds and governments, express this fear. The mob is the new character of modern society, subject to being manipulated, fooled, exalted, or massacred. The fourth passage of The Economic Consequences of the Peace denounces underconsumption and saving by associating them with Puritanism. Accumulation and inequality prepare the way for war: It was not natural for a population, of whom so few enjoyed the comforts of life, to accumulate so hugely. The war has disclosed the possibility of consumption to all and the vanity of abstinence to many (1919, p. 13). What is abstinence in the face of the fields of corpses at the Somme, where British youths were sacrificed? The abstinence of compound interests, of accumulation, of man who is always trying to secure a spurious and delusive immortality for his acts (1930a, p. 330), the self-centered nature of men and nations drove to one massacre, and would drive us to a second one so predicts the Economic Consequences of the Peace. Selfishness and economic narcissism put society in peril. On the subject of the 1929 crisis, Keynes wrote: The present signs suggest that the bankers of the world are bent on suicide (1932, p. 157). The bankers, following an instinct for short term profit, argued for saving during the Depression instead of freeing the monetary system. Nations closed in on themselves and held onto gold and savings, and the world teetered on the brink of implosion. Keynes associates the curse of Midas to this international competition, which destroys the collective spirit and threatens humanitys survival. The desire for gold that transforms everything into gold and kills those who seek, it is representative of societys death instinct, the competition that can dissolve our social fabric. In constantly adding to goods that are, in fact, only a hindrance, man advances
7

See his preface to the French edition of the General Theory.

14 through history without meaning. He merely channels his aggression. Competition is tied to his death wish. Men are literally caught in the wheels of the machine of economic growth. Technology applied to growth, technoscience, increases mans productivity and relieves him of the stresses of his immediate survival. This stress linked to nature was succeeded by technical stress and the stress of continued growth. Keynes is keenly aware that growth is a form of subjugation, a reaction to the violence of competition. Therefore, he opposes laisser-faire ideology and is wary of the notion of liberty brandished by liberals: It is not true that individuals possess a prescriptive natural liberty in their economic activities (1926, p. 287). For Freud, The liberty of the individual is no gift of civilization (1930, p. 95). Culture builds itself up against individual liberty, the brutish violence of the individual. Keynes and Freud agreed on where growth and technoscience would lead. Growth is a part of humanity plan, it is perhaps its natural path: Thus we have been expressly evolved by nature with all our impulses and deepest instincts for the purpose of solving the economic problem. If the economic problem is solved, mankind will be deprived of its traditional purpose (Keynes 1930a, p. 327). Soon societys needs will be met, and fighting against scarcity will lose its significance. Jealousy and envy, fuel of hatred and competition, and the desire to dominate our peers will gradually wane. What future would then be possible? The end of economy Keynes was fundamentally optimistic. He has not foreseen World War I, and when the fighting began to his great surprise he predicted a swift end to the conflict. The same was true for the Great Depression and World War II. His friends of the Bloomsbury group were amazed by his incorrigible optimism. Keynes thought that superior men, blessed with great intellectual, moral and psychological capacities, would be able to relieve societys suffering. But in the Economic Consequences of the Peace, he fears the return of conflict. Yet, he contends that men are ready to solve the economic problem, thanks to the fateful necessary evil, accumulation. It is in 1930, just when the world plunged fully into the Great Depression that would last until World War II, that Keynes published Economic Possibilities for our Grandchildren. He wrote that the present crisis provoked a bad attack of economic pessimism (1930a, p. 321). But the pessimism came not from the rheumatics of old age, but from the growing-pains of overrapid changes, from the painfulness of readjustment between one economic period and another (ibid.). Societys blindness with regard to the true causes of the crisis explains the reactionaries and revolutionaries pessimistic attitudes. The events of that period were a momentary interruption in the process of rapid technical advancement: All this means in the long run that mankind is solving its economic problem (p. 325). In Keynes estimation, this long run was one century. He envisioned a world where essential needs would be satisfied and where societys energies could be dedicated to non-economic goals. One major problem would, however, remain, if we had not learned by then how to use our freedom. It would be possible to produce the goods necessary for subsistence in three hours per day: Thus for the first time since his creation man will be faced with his real, his permanent problem-how to use his freedom from pressing economic cares, how to occupy the leisure, which science and compound interest will have won for him, to live wisely and agreeably and well. [] But it will be those peoples, who can keep alive, and cultivate into a fuller perfection, the art of life itself and do not sell themselves for the

15 means of life, who will be able to enjoy the abundance when it comes (p. 328). Keynes saw the Bloomsbury group as a laboratory for this future Eden: For Keynes the art of life itself, which in an age of abundance and leisure will have to replace the art of accumulating the means of life, is a difficult art requiring refined sensitivity of the kind possessed by the Bloomsbury group and immortalized in the work of Virginia Woolf (Brown 1959, p. 36). The economy would become secondary; economists would be humble, competent people, on a level with dentists (1930a, p. 332). Near the same time, he wrote in the preface to his Essays in Persuasion: And here emerges more clearly what is in truth his central thesis throughout the profound conviction that the economic problem, as one calls it for short, the problem of want and poverty and the economic struggle between classes and nations, is nothing but a frightful muddle, a transitory and an unnecessary muddle. For the western world has already the resources and the technique, if we could create the organisation to use them, capable of reducing the economic problem, which now absorbs our moral and practical energies, to a position of secondary importance. (1931, p. xviii) This long-term view bears some resemblance to those Marx and Engels described in The German Ideology. They too imagine a world in which it would possible to produce the necessities of life in a few hours per day, in order to have the leisure of fishing in the morning, hunting in the afternoon, tending to livestock in the evening, and discussing philosophy after dinner. Clearly Keynes had a different concept of leisure than did Marx and Engels. But nonetheless, the three thinkers yearned for a society in which the economy, and with it societys antagonism (exploitation of man by man, for Marx and Engels) would become obsolete. The resolution of the economic problem would then greatly increase liberty; it would free humanity from social hierarchy, exploitation, and oppression. Keynes thought that obstacles related to social structures kept society from solving the problems of poverty and under-development, causing them to alternate between periods of expansion and depression. Even so, intermediate measure could improve the situation before the arrival of the golden are. For Marx, it was the proletarian revolution and the bourgeoisies removal from power. In the dialectic of good and evil that guides history, good (the proletariat) triumphs over evil (the bourgeoisie) and unifies the world. Keynes also sought to rid the world of a parasitic social class, and spoke of euthanasia of the rentier. This idle capitalist is the last remnant of a social class, from priests to aristocrats to land owners, that has slowed progress and enterprise. Some have always gained wealth in their sleep and by taxing societys active elements. Keynes estimated that this was as true during Solons time as during his own. It is why Aristotle and Thomas Aquinas were right to condemn interest. They understood, instinctively, that interest rates menaced the economys health and therefore the health of society as a whole. Keynes rentier is a person who renders capital artificially scarce and increases the interest rate. In classical economics, that of Smith, Ricardo and Mill, we find the same condemnation of a parasitic class; the rentiers and landowners whose interests oppose those of the rest of society. Ricardo estimated that unrestrained importation of foreign wheat would improve the situation for workers and for capitalists, but it was against the interest of the landowners. Mill argued for the nationalization of the earth to cut into land holders monopolistic power. Veblen distinguished the artisan instinct and the greed of the leisure class, whose modern incarnations are bankers and financiers. Keynes predicted that a gradual decrease in the interest rate could provoke the disappearance of the parasitic class, the euthanasia of the rentier, and, consequently, the

16 euthanasia of the cumulative oppressive power of the capitalist to exploit the scarcity-value of capital (1936, p. 376). This process would not be sudden, it would be the prolonged continuance of what we have seen recently in Great Britain, and will need no revolution (ibid.). Beside lowering interest rate, Keynes proposed other measures, sometimes strange, like his new method for making unlimited quantities of gold. At the end of the General Theory, just before euthanizing the rentier, he cites the strange, unduly neglected prophet Silvio Gesell (p. 353): I believe that the future will learn more from the spirit of Gesell than from that of Marx (p. 355). Gesell developed, particularly in The Natural Economic Order, a theory melting money, unsuitable for accumulation. Keynes proposed to gracefully transform a society steered by the elite into a stationary, civilized society where intelligence, beauty and culture are at the disposal of people no longer at the mercy of scarcity. Freud is not so optimistic. He does not believe that technical progress and the accumulation of capital will be able to change human nature in the future: In consequence of this primary mutual hostility of human beings, civilized society is perpetually threatened with disintegration (Freud 1930, p. 112). The conflict between Eros and Thanatos is present since the origin of humanity and culture. Civilization and moral are born from an original violence, as recalled in Totem and Taboo. We dont know how this will end. The fateful question for the human species seems to me to be whether and to what extent their cultural development will succeed in mastering the disturbance of their communal life by the human instinct of aggression and self-destruction. It may be that in this respect precisely the present time deserves a special interest. Men have gained control over the forces of nature to such an extent that with their help they would have no difficulty in exterminating one another to the last man. They know this, and hence comes a large part of their current unrest, their unhappiness and their mood of anxiety. And now it is to be expected that the other of the two Heavenly Powers, eternal Eros, will make an effort to assert himself in the struggle with his equally immortal adversary. But who can foresee with what success and with what results. (Freud 1930, p. 145) The last sentence of Civilization and its Discontents was added in 1931, when Hitler was raising to power. References Abbreviations : JMK : The Collected Writings of John Maynard Keynes, London, Macmillan, 1971-1989, 30 volumes. KP : Keynes Papers, Kings College Library, Cambridge. SE : The Standard Edition of the Complete Psychological Works of Sigmund Freud, under the general editorship of James Strachey in collaboration with Anna Freud, London, Hogarth Press, 1953-1974, 24 volumes. Brown, Norman O. (1959), Life against Death: the Psychoanalytical Meaning of History, Middletown, Connecticut, Wesleyan University Press. Dostaler, Gilles (2007), Keynes and his Battles, Cheltenham, Edward Elgar; Japanese translation,

17 Tokyo, Fujiwara Shoten, 2009 [First French edition, Paris, Albin Michel, 2005]. _____, and Bernard Maris (2009), Capitalisme et pulsion de mort, Paris, Albin Michel. Ferenczi, Sandor (1914) The ontogenesis of the interest in money, in Borneman, Ernest (ed.), The Psychoanalysis of Money, New York, Urizen Books 1976, 81-90. Freud, Sigmund (1908), Character and anal erotism, SE 9, 169-75. _____ (1913), Totem and Taboo, SE 13, 1-161. _____ (1921), Group Psychology and the Analysis of the Ego, SE 18, 67-143. _____ (1930), Civilization and its Discontents, SE 21, 59-145. _____ (1939), Moses and Monotheism, SE 23, 3-137. Girard, Ren (1972), La Violence et le sacr, Paris, Hachette. Jones, Ernest (1916), The theory of symbolism, British Journal of Psychology, vol. 9; in Papers on Psychoanalysis, London: Bailliere, Tindall and Cox, 5th ed., 1951. _____ (1919), Anal-erotic character traits, Journal of Abnormal Psychology, vol. 13. Keynes, John Maynard (1913), Indian Currency and Finance, London, Macmillan; JMK 1. _____ (1914), The prospects of money, November 1914 , Economic Journal, vol. 24, December, 610-34 ; JMK 11, 299-328. _____ (1919), The Economic Consequences of the Peace, London, Macmillan; JMK 2. _____ (1923), A Tract on Monetary Reform, London, Macmillan; JMK 4. _____ (1925), A Short View of Russia, London, Hogarth Press; JMK 9, 253-71. _____ (1926), The End of Laissez-Faire, London, Hogarth Press; JMK 9, 272-94. _____ (1927), Clissold , Nation and Athenaeum, vol. 40, 22 January, 561-2; JMK 9, 315-20. _____ (1929), Is there enough gold? The League of Nations enquiry , Nation and Athenaeum, vol. 44, 19 January, 545-6 ; JMK 19, 775-80. _____ (1930), A Treatise on Money, London, Macmillan: vol. 1, The Pure Theory of Money; vol. 2: The Applied Theory of Money; JMK 5 et 6. _____ (1930a), Economic possibilities for our grandchildren , Nation and Athenaeum, vol. 48, 11 et 18 October, 36-7, 96-8; JMK 9, 321-32. _____ (1930b), New process, JMK 20, 157-65. _____ (1931), Essays in Persuasion, London : Macmillan; with additions, JMK 9. _____ (1931a), The future of the world , Sunday Express, 27 September; with title The end of the gold standard, JMK 9, 245-9. _____ (1932), Banks and the collapse of money values , Vanity Fair, January 21-3 ; JMK 9, 245-9. _____ (1933b), National self-sufficiency , New Statesman and Nation, vol. 6, 8 July, 36-7, 15 juillet, 65-7 ; JMK 21, 233-46. _____ (1935), Future interest rates : Mr J. M. Keynes on the outlook, speech given on 20 February at the National Mutual Life Assurance Society, Times, 21 February; JMK 12, 20816. _____ (1936), The General Theory of Employment, Interest and Money, London, Macmillan; JMK 7. _____ (1937), The general theory of employment , Quarterly Journal of Economics, vol. 51, February, 209-23 ; JMK 14, 109-23. _____ (1944), Speech to the House of Lords, 23 May; JMK 26, 9-21, 22-3. Le Bon, Gustave (1895), Psychologie des foules, Paris, Presses Universitaires de France, 1963.

18 MacDougall, William (1920), The Group Mind : a Sketch of the Principles of Collective Psychology with Some Attempt to Apply them to the Interpretation of National Life and Character, Cambridge, Cambridge University Press. Trotter, Wilfred (1916), Instincts of the Herd in Peace and War, New York, Macmillan.