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KEYNES AND THE ETHICS OF CAPITALISM

I

Today capitalism -or the free enterprise system as it is called here - is everywhere triumphant, but its ethical basis is everywhere disputed. The paradox of course is on apparent. Ethical judgments are not made on the basis of success or failure. What succeeds is not necessarily good; and what fails is not necessarily bad. As has often been pointed out, the attempt to base ethics on success -what works best must be good - is riddled with fallacies, not least because it ignores Hume's classic distinction between what is and what ought to be. (For a brief introduction see AGN Flew, Evolutionary Ethics Macmillan, 1967)

Nevertheless, the present context of the ethical discussion is unique, because, for the first time in its history, the free enterprise system is not confronted by any coherent alternative project. One little-noticed consequence of the defeat of socialism is that economics is rapidly becoming synonymous with business economics, i.e., a celebration of free enterprise. Moral critics of free enterprise thus tend to reject economic logic as such -which is hardly surprising if economics has nothing to say of ethical significance. But nevertheless it marks a regression in thought and capacity to act sensibly.

I thought it might be helpful to insert John Maynard Keynes into the discussion, partly because I have just finished writing a book about him, partly because the way he talks about the relationship between ethics and economics is likely to be unfamiliar to a modern audience, but provocatively so. He lived from 1883 to 1946. Economists of his generation had the great advantage of being philosophically, and to a lesser extent historically, literate. This gave them an important vantage point from which to criticise the methodology of economics, but to apply ethical criteria to the aims, motives, and outcomes of particular economic systems. Keynes's economics was shaped by his ethical value, and he thought it right and inevitable that this should be so. 'Economics', he told Roy Harrod in 1938, 'is essentially a moral science and not a natural science. That is to say, it employs introspection and judgments of value'. (JMK, CW XIV, pp.296-7) Notice that he does not say that economists have values, which would be true and banal, but that economics is, or ought to be, part of moral discourse. As he explained to Archbishop Temple 'along the lines of origin at least, economics -more properly called political economy -is a side of ethics'. (KP: PP/45: JMK to Temple, 3 December 1941) Keynes also spanned the transition between a laissez-faire capitalist system and one managed by policy in the interests of full employment, stability and growth - in fact he was the chief intellectual architect of this regime change. But these 'Keynesian' policy aims come out of ethical concerns, which are partly unfamiliar today. We understand, or think we understand, why Keynesian policy partly failed, but have largely forgotten why it was tried. Keynes also had interesting things to say about the psychology and duties of businessmen. Here again one encounters a perspective both familiar and unfamiliar.

But before I come to what Keynes himself thought and said, I want to contrast, briefly, the classical and contemporary discussions on ethics in relation to economics.

II

Although criticism of commerce from the ethical standpoint goes back to earliest times, it emerges in its modern form with the commercial and industrial revolutions of the eighteenth and nineteenth centuries. The critique concentrated on three points: the relationship between economic welfare (an individual's or community's real income) and ethical welfare (an individual's or community's goodness), the moral value of money-making as a motive for action, and the relationship between efficiency in increasing wealth and the just distribution of the wealth created. The last was the nub of the socialist and social democratic critique of the capitalist system. As Amartya Sen notes: 'Capitalism has been distinctly less successful in shaping the political economy of a just society than in dramatically raising the average level of opulence'. (In Samuel Brittan and Alan Hamlin ed. Market Capitalism and Moral Values, Edward Elgar, 1995, p.27)

The classical political economists - the tradition from which Keynes sprang - were not uncritical supporters of the market system. They did not doubt that the state had a right, even a duty, to limit the scope of the market system, or interfere with its reward system, for the sake of non-economic aims. Adam Smith's contention that 'defence is of much more importance than opulence' may not unfairly be extended to cover a number of modern 'ethical' concerns -for the protection of the environment or community values, for example. Nineteenth century critics of political economy like Carlyle, Ruskin, Mathew Arnold and William Morris did make exactly this kind of case.

Similarly the classical economists were wont to make a sharp distinction between the principles of production and exchange and the principles of distribution. The former were logical deductions from the maximising axiom; the latter more in the nature of acceptable social arrangements. To be sure, an attempt was made by Keynes's Cambridge colleague, Arthur Pigou, to use a scientific hypothesis -the concept of the diminishing marginal utility of money -as the basis for a policy of income redistribution. This attempt foundered (for reasons explained most notably by Ian Little, in A Critique of Welfare Economics, Oxford, 1957 ed.esp. Ch.5), but the value judgment in favour of a more equal distribution of incomes till recently remained the cornerstone of 'redistributive market liberalism', according to which 'self-interest is the driving force of commercial activity, social welfare is the proper concern of political action'. (John Kay, Community Values and the Market Economy, Social Market Foundation, 1997, p. 6)

Classical political economy thought naturally in terms of a trade-off between efficiency and ethics: ethical considerations should not be carried so far as to destroy incentives to wealth creation, for, as Bentham argued, 'If the condition of the industrious were not better than the condition of the idle, there would be no reason for being industrious'. (q. Robbins, ibid, p.63)

Today economics has little to say about the ethical value of our current economic system. Ethics is the domain of values, and economics has declared itself to be value free. (One could argue that certain technical issues to do with market imperfections and how to overcome them have a submerged ethical content.)

Ethics does impact importantly on economics in one area, which concerns business behaviour. The study of business behaviour is partly empirical and sociological, in that it aims to provide a more realistic account of business motives than that of the standard model of profit maximisation. It is ethical in that it prescribes how businessmen ought to behave if capitalism is to be morally acceptable. In this latter aspect it seems almost tailor-made to fit the self-perception of businessmen about how they do actually behave. The mission statements of large corporations rival the Sermon on the Mount in the benevolence of their intent and their range of social concerns. One could be forgiven for thinking that profits are the last thing in the world they care about.

It is worth pausing for a moment to consider why ideas like 'responsible business', 'stakeholding'; 'ethical investment' and so on enjoy such a contemporary vogue. Of course, the theme of 'responsible business' has a long history. Drawing on the medieval tradition of qualified property rights -rights contingent on the performance of specific duties - it was revived in the 19'h century in reaction to the low view of commercial motives and morality held by the classical economists. By means of a paradox, which retains its power to astonish, Adam Smith demonstrated that self-interest, or what he called 'self-love', could be made the efficient cause of wealth creation, if it was restrained by market competition, law, and customary morals. Competition, in particular, was necessary and sufficient to prevent the exploitation of consumer and worker by capitalists. Smith's paradox was anticipated by Bernard Mandeville in his famous ironic poem The Fable of the Bees, subtitled Private Vices, Publick Benefits.

However, making capitalism's success depend on selfish motives left it dangerously exposed to moral attack, especially if it could be shown that competition was giving way to concentration and oligopoly. Adam Smith's paradoxical defence of egoism carried the disturbing implication that the state might be required to compensate for the diminishing supply of benevolence as the scope of the market exchanges expanded. Hence the attempt, which gathered pace in the late 19th century, to drop the unlovely characterisation of the businessman as a 'self-contained globule of desire' as Veblen put it, and equip business life and businessmen with a more attractive set of moral qualities. In this sociological reworking of classical economics, the business corporation was portrayed as a distinctive, not ignoble form of social organisation; the businessman as enterprising, socially responsible, even heroic, and not just acquisitive.

The notion of business life as an arena for the play of the virtues rather than the vices has always had more appeal in the United States than in Europe. What in Europe is pejoratively called capitalism in America is approvingly called the free enterprise system. This difference of name is not accidental. In America the usual justification of a free economy is the scope it gives to the spirit of enterprise and its associated activist virtues. In Europe capitalism is so called because it is an engine for the accumulation of capital, driven by acqusitiveness and kept honest by competition. In the American vision capitalism is invested with a kind of ethical splendour; in the more usual European view the ethics need to be provided from outside, which in practice has meant the state.

The 'responsible business' movement of today is a direct heir to the more expansive American interpretation of business motives. Only today it is promoted outside America not as a response to the threat of socialism, but as a response to its collapse. It is not difficult to understand why. It is simply that the post-war division of labour between business and the state, whereby business was left free to create wealth, while the state took care of social policy, has broken down in face of the waning belief in the efficacy of state action and the weakening of the national state in face of globalisation. The new business ethics argues that corporations must take over or at least share with governments social tasks hitherto regarded (at least in Europe) as primarily state duties, in respect of such things as employment, investment, education and training, social security, environmental protection, support for the arts and so on. Ethical business is good for business is the new slogan of corporate responsibility.

It is hard to say how far the attempt to 'moralise' business can go without self-contradiction. I incline to Samuel Brittan's view that it is the duty of managers to make money for their shareholders and 'not set themselves up as taxing authorities over funds which belong to shareholders' and that it is up to government to remedy market failures not for corporations to undertake para-statal roles. (In Samuel Brittan and Alan Hamlin eds. Market Capitalism and Moral Values, Edward Elgar, 1995, pp.16-18

What I would emphasise, though, is that the roots of the business responsibility movement lie in the decline in the state's capacity to regulate, override, or manage private property rights. This explains the different emphasis in the current discussion of the ethics of capitalism from the one Keynes gave it. It is to the differences and overlaps between the two discussions that I turn in the concluding part of this lecture.

III

I want to consider Keynes's thinking on ethics and economics under three heads: the relationship between economics and goodness, the role of justice in economics, and the duties of business. Keynes is a person who was famously accused of constantly changing his mind. The joke was that whenever two economists met there would be three opinions and two of them would be Keynes's. But I hope to demonstrate that his ethical thinking over the domain I have set out was remarkably coherent or self consistent, and more or less constant over time.

Keynes's ethical beliefs were profoundly and permanently influenced by G.E. Moore's Principia Ethica, published in 1902, Keynes's first year as a Cambridge undergraduate. Two points about Moore's doctrine deserve special notice here. The first was the sharp distinction Moore made between ethics and morals, and the subordination of the latter to the former. The primary ethical question is 'what is good? or 'What things should exist for their own sake'? The moral question, 'what ought I to do, 'How ought I to behave' can be answered only by reference to the question 'what is good'? As well as to the probable consequences of action. Arthur Pigou wrote of Keynes as a young man that 'never in his presence shall the confusion between 'good as means' and 'good as end' pass without challenge'. (q. Robert Skidelsky, John Maynard Keynes, vol.1, Macmillan, 1983, p. 127) And never did it thereafter.

Moore's doctrine is both startling and austere:

By far the most valuable things we know or can imagine are certain states of consciousness which may be roughly described as the pleasures of human intercourse and the enjoyment of beautiful objects ... It is only for the sake of these things -in order that as much of them as possible may at some time exist -that one can be justified in performing any public or private duty; ... it is they, that form the rational ultimate end of human action and the sole criterion of social progress. (GE Moore, Principa Ethica, Cambridge, 1959 ed. Pp. 188-9.)

Keynes was wont to add love of 'truth' or, knowledge' to the short list of intrinsically valuable goods. We should notice here that things 'good in themselves' are states of mind; actions are good only as means -only if they contributed to bring about good states of mind.

Today we would say that the goal of maximising the quantity of ethical goods cannot provide an agreed criterion for economic action, because rational people disagree about what is good. Economics therefore is bound to take wants as data and treat the maximisation problem in terms of want satisfaction. However -and here we come to the second point to notice about Principia Ethica -Moore's distinctive philosophical doctrine is that good is an objective, indefinable property, intuitively known to be present or absent in any object or state of affairs. We perceive a state of affairs to be good in exactly the same way, as we perceive grass to be green. We can no more define goodness than we can greenness. The important consequence of holding this belief was that rationality attaches to ends and not just to means. It is this belief more than any other which distances Keynes qua economist from the economics (and indeed the ethical philosophy) of today. Hence the importance of his remark, quoted earlier, about economics being a 'moral' and not a 'natural science', employing 'introspection and judgments of value'.

What is to be maximised in Moore's system is not happiness but goodness. Moore feared any attempt to define goodness in terms of happiness as an example of the 'naturalistic fallacy'-that is, deducing what ought to be from what is. Keynes later counted it as one of the most important advantages enjoyed by his generation to have escaped from the Benthamite tradition, which he regarded as 'the worm that has been gnawing at the insides of modern civilisation and is responsible for its present moral decay', precisely because it led to the 'over-valuation of the economic criterion' -or as one might now say because it led to setting up the growth of GDP as the main measure of social progress. (JMK, CW, X, pp.445-6)

The central issue for economics raised but Moore's ethics concerns the connection between wealth and goodness. This has two aspects. The first is the relationship between goodness and want satisfaction. The view that people are ethically better off by being materially better off is self-evident only to a hedonist. In Keynes's ethics, the link is indirect, and always has to be argued. Secondly, the focus on states of mind as criteria of goodness draws attention to the conflict between the states of mind required for economic gain, involving 'love of money' and economic calculation, and those required for the enjoyment of ethical goods. Much of Keynes overt ethical reasoning in economics centres on these two questions.

On the first point, Moore offered a bridge, in the form of his doctrine of 'organic unities', to other moral aims, including Bentham's 'felicific calculus'. That is, he thought of good states of mind as 'complex organic unities', the ethical value of which could be more or less than the sum of its parts. Keynes proposed an alternative: only states of mind are good 'in themselves', but the goodness of states of mind could be increased or diminished by what he called the 'fitness' of states of affairs. For example, it might be harder to enjoy a good state of mind if suffering from a painful disease or in the presence of an overpowering bad smell, though the obverse is not necessarily the case-better health or sanitation does not automatically lead to better states of mind. On the other hand, public action can more directly increase the goodness of the universe by creating fit objects of contemplation. The social reformer can claim that by improving the quality of the objects of experience he is increasing the ethical goodness of the universe, even though his policies do not at all improve good states of mind in isolation. This is a cogent doctrine, and Keynes acted on it in a personal capacity as patron of the arts and theatre builder, by public advocacy of the beautification of cities and the preservation of the countryside, and most notably by setting up the Arts Council of Great Britain at the end of his life. A follower of Moore might also interest himself in raising standards of education and comfort insofar as these improved the knowledge, sensibility, and comeliness of the population.

The problem for the Moorite who would also be a social reformer is most acute with Moore's class of 'mixed goods' in which good states of mind depend on the existence of bad states of affairs. Moore gave as an example the dependence of pity on suffering. Feelings of compassion, courage, justice, which have positive ethical value, could be said to depend on the existence of suffering, danger and injustice: war is a prime example of the 'mixed goods' dilemma. To the extent that social reform rids the world of bad states of affairs, it may be decreasing rather than increasing the total of ethical goodness. Keynes's hesitating line of argument in face of this dilemma isillustrated by a paper on Tragedy he read to the Apostles the famous (and exclusive) Cambridge philosophical society, in 1921:

I am not certain that all tragic states of affairs are bad on the whole, when everything has been taken into account, or that the goodness of the states of mind, if it is very great, may not outweigh the badness of states of affairs. [But] it is possible, I think, to imagine two states of affairs, one of which is tragic or unjust, and the other not, such that the states of mind in each are exactly of equal value, and to believe that the tragic state of affairs is less desirable than the others. (q. Skidelsky, vol.2, p.65)

This line of thought led to a quasi-Aristotelian argument for the importance of the dramatic arts in an ethically progressive civilisation:

In actual life many of the feelings which we deem noblest and most worth having are apt to be associated with troubles, misfortunes, and disasters. In itself we generally judge the state of mind of the hero going into battle as good -but it is such a pity that he should be killed .... If, on the other hand, it were possible to sympathise with, enjoy at second hand, or admire the noble feelings without the evil happenings which generally accompany them in real life, we would get the best of both worlds. Now, as it seems to me, the object of Tragedy is precisely to secure for us a conjuncture in which this comes about. We come into contact with noble feelings and escape the bad practical consequences .... (Skidelsky, vol.2, pp.65-6)

The cost of heroism, or pity, in other words, can be reduced to the price of a theatre ticket: a good bargain for the social reformer, but hardly likely to convince the sceptic that the states of mind of the spectator hero and the real hero are of equal value. Into such riddles does the schlolastic method of Moore, which entranced Keynes, lead.

The second problem arising from the loose connection, in Moore's system, between wealth and goodness, concerned the ethical value to be attached to a life of 'moneymaking and bridge' as Keynes contemptuously called it. Business life was at best only good as a means, but even as a means Keynes ranked it well below public service. This was because it overturned the correct hierarchy of values, teaching society to value 'love of money', which was bad in itself, and only good as a possible means to the good, above love of goodness, and producing in consequence bad characters. Keynes's characterisation -and condemnation - of capitalism as based on 'love of money' echoes the Biblical statement 'The love of money is the root of all evil'. (I Timothy 6:10) Keynes's solution was not to abolish capitalism, or to invest it with quasi -governmental responsibilities -both of which he believed would retard wealth-creation -but to get society as quickly as possible into a situation of abundance in which the qualities needed for accumulation would become redundant. The following passage from his essay Economic Possibilities for our Grandchildren (1930) is only slightly tongue in cheek:

When the accumulation of wealth is no longer of high social importance, there will be great changes in the code of morals. We shall be able to rid ourselves of many of the pseudo-moral principles which have hag-ridden us for two hundred years, by which we have exalted some of the most distasteful of human qualities into the position of the highest virtues. We shall be able to afford to dare to assess the money-motive at its true value. 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 recognised 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 ... But beware! The time for all this is not yet. For at least another hundred years we must pretend to ourselves and to everyone that fair is foul and foul is fair; for foul is useful and fair is not. Avarice and usury and precaution must be our gods for a little longer still. For only they can lead us out of the tunnel of economic necessity into daylight. (JMK, CW, IX, pp.329, 331)

Let me turn next to Keynes's view of the justice of capitalism. Justice does not figure in Moore's list of ultimate ethical goods, though he implies that it is good as a means to such goods. (Principia Ethica, p. 176) This is its role in Keynes's thought. But what did he mean by a 'just' economic system. It has to be emphasised that Keynes was not a socialist, he hated Marxism, he loved liberty, he regarded state ownership of the economy, or any important chunk of it, as a monstrosity. Nor was he an egalitarian, or even a serious redistributionist; the phrase 'social justice' rarely crossed his lips, and he frequently expressed his disgust at the politics of envy. These positions were all based on a conception of justice which is worth recalling.

Keynes accepted the classic view of justice that desert or reward should be proportioned to merit or contribution, with its Aristotelian corollary that 'nothing is more unjust than to treat unequals equally'. Justice then is associated with equity, not equality, and just prices are those which correctly value economic contributions. Keynes felt no acute moral discomfort at the reward structure of the market system of his day, though he did remark once that 'the game can be played for lower stakes'. (JMK,CWVII,p. ) Certainly no one who could write as he did of the pre-1914 word that 'escape was possible for any man of capacity or character at all exceeding the average, into the middle and upper classes...', or who could announced, before a socialist audience, that 'man for man the middle and even the upper class is very much superior to the working-class' (q. Skidelsky, vol.2, pp.223,233) can be said to have a burning sense of social injustice. Keynes was a meritocratic elitist. It was 4most unjust and most unwise', he wrote, 'to put on an appearance of being against anyone who is more successful, more skilful, and more industrious, more thrifty than the average...', and elsewhere 'I do not want to level individuals, I want to give encouragement to all exceptional effort, ability, courage, character'. (Ibid. p.223) None of these positions distinguished Keynes from the classical liberals of his day though he stated them more robustly than the political correctness even of that time required.

Nevertheless, Keynes did accept that the economic system of his day lacked important elements of justice. It was a corollary of his general position that to be justified wealth should be earned, and so he favoured taxing inherited wealth at a higher rate than earned wealth-contrary to the modern trend to reduce or even abolish inheritance taxes or estate duties. But this, too, was a standard nineteenth century liberal argument.

More interestingly, in the General Theory Keynes argued that over saving in relation to investment opportunities was the important cause of slumps, and that if money was redistributed from those with a high to those with a low propensity to save -that is, from the rich to the poor -the economic system would be more stable. But as he explained, this was only one possible application of an intellectual theorem. (JMK to T.S.Eliot 5 April 1945, q. Skidelsky, vol.3, p.274) He preferred a full employment policy by means of investment -at least till wants were sufficiently satiated.

Significantly, Keynes has no patience with Pigou's attempt to justify redistributionist policy by the principle of the declining marginal utility of money-the view that because the marginal dollar meant more to the poor man than to the rich man society would be better off with a more equal income distribution. He thought that to equate welfare and goodness in such a direct way was to commit the 'naturalistic fallacy' and to ignore 'the whole complication and fascination (and truth) of the ethical doctrine of organic unity'. (KP: L/44, JMK to Abba Lerner, 27 September 1944).

Keynes's position becomes distinctive when he identifies injustice with instability in the value of money. Virtuous behaviour, it will be recalled, should not only have reference to what was good, but also to the probable consequences of action. But people could not be expected to take proper account of the economic consequences of their acts if the standard of value was constantly fluctuating. That is why Keynes attached such importance to stabilising the price level: 'Unemployment, the precarious life of the worker, the disappointment of expectation, the sudden loss of savings, the excessive windfalls of individuals, the speculator, the profiteer -all these proceed, in large measure from the instability of the standard of value'. Specifically, sound money would 'diminish the wastes of risk, which consume too much of our estate'. (JMK, CW, IV, p.xiv)

Instability of the price level diminishes not just the efficiency of economic activity but also the justice of economic exchanges, by disturbing the connection between expectation and outcome, contribution and reward. Thus inflation and deflation are both unjust to all those whose contributions are made in the expectation of receiving a certain real reward for them, and find that part of it accrues as windfall gains to those who have done nothing to earn them. For Keynes then, a stable general price level was a necessary condition for justice of relative prices.

Keynes's most important, but little noticed, use of the concept of the just price is in discussion of interest rates. In the General Theory, and elsewhere, he endorses the medieval laws against usury, or charging excessive interest for the loan of money. His liquidity preference theory of the rate of interest is an attempt to explain how usury comes about, and his policy of keeping interest rates permanently low is simply a modern way of applying the medieval anti-usury laws. The essence of Keynes's view was that the premium commanded by liquidity as such, due to a combination of uncertainty and the psychological disposition to hoard (or avarice) allowed the lender to charge a reward for parting with money greater than his contribution to production. In correspondence, Keynes emphasised the equivalence of his liquidity preference theory with the medieval definition of usury, and regretted that a recent work on th4e subject by a Jesuit priest had not 'kept to the scholastic lingo, as phrases like lucrum cessans and damnum emergens ... [bring out] the main point .. viz., that it is usury to extract from the borrower some amount addition to the true sacrifice of the lender...' [KP: General Correspondence, JMK to Cornelius Gregg, 9 April 1945). Thus slumps were the wages of sin, after all, but not the sin of extravagance, as the classical economists taught, but the sin of usury.

This brings me to my final topic, which I must again treat in a very abbreviated way. Keynes did not demand of the business class any great display public spirit, as the corporate responsibility people of today do, but he did insist that they had one overriding duty, which was to invest. In the General Theory he suggested, again only slightly tongue in cheek, that the relationship between the investor and his share should be as long lived as that between husband and wife (this was before marriage had started to resemble the stock market!) Even more remarkable is the following account of his own personal investment philosophy:

I feel no shame [he wrote in 1938 to a fellow-director of an insurance company] at being found still owning a share when the bottom of the market comes. I do not think it is the business of ... [a serious investor to cut and run on a falling market ... I would go much further than that. I should say that it is from time to time the duty of a serious investor to accept the depreciation of his holding with equanimity and without reproaching himself. Any other policy is anti-social, destructive of confidence, and incompatible with the working of the economic system. An investor is aiming or should be aiming primarily at long period results and should be solely judged by these. (Q. Skidelsky, vol.2, pp.525-6)

Keyes contrasted his doctrine of investment faithfulness unfavourably with the febrile atmosphere of the stock market where shares are valued not according to their real prospects but according to the day's news, and where the object of investment is not to 'defeat the dark forces of time and ignorance which envelop our future' but to guess better than the crowd. Keynes wrote: 'Speculators may be doing no harm as bubbles on a steady stream of enterprise. But the position is serious when enterprise becomes a bubble on whirpool of speculation'.

IV

Although I have given as faithful an account as I can manage of Keynes's ethics as they bear on economics, you would not expect me to endorse everything he said. Nevertheless, I believe his work contains a valuable message for today.

First of all, his approach brings out the relevance of philosophy for economics. Keynes was not an economic liberal, in today's sense, but a philosophical liberal: he constantly pondered on the relationship between economic and non-economic aims and behaviour. One of the greatest defects of economics today is that is has become a branch of applied mathematics. This is reflected in the way students are taught. Keynes thought of economics as part of the human discourse. He had, as he put it, been 'properly brought up' to do so.

Secondly, although Keynes's belief in the rationality of ends and the homogeneity of values may not now be accepted, he does force us to consider the question of what economic activity is for. Broadly speaking, he believed in an ethical Pareto-optimum: material progress will increase the goodness of the universe up to the point when it starts to diminish the quantity of ethical goodness. When it does so is a matter of judgment. Thus he provides an ethically-based argument for public action to influence the composition as well as the level of demand.

Thirdly, Keynes provides a continually interesting perspective on what is meant by the justice of economic arrangements.

Fourthly, he makes the point that private property is not a natural right but has to be justified by reference to duty. Here his ideas link up with the modem theory of 'corporate responsibility', but from a sharply different angle.

Finally, he reminds us that it is not enough for an economic system to pass the test of success. It must be conformable to our sense of whether it is good. In this era of free market triumphalism we should not forget this.

Conclusion
An ethical Pareto optimum: material progress will increase the goodness of the universe provided that the quantity of ethical goodness is not diminished. Although Keynes belief in the rationality of ends & the homogeneity of values within a culture may not now be accepted, he does force us to consider the question of what economic activity is for. Specifically he provides ethically based arguments not just for improving the level of demand, but for influencing the composition of demand.

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