Maynard Keynes and William Paley

Review of Keynesian Studies Vol.2 Rod O’Donnell

Maynard Keynes and William Paley:

Rarely Explored Connections

Rod O’Donnell

Abstract

Keynes and Paley are two names rarely conjoined in the literature of either figure. Keynes, however, made significant references to Paley in four of his essays. Most commentators treat these as historical ephemera, but closer investigations reveal that they illuminate key aspects of his thought. These include whether Paley or Malthus was the first Cambridge economist, methodological issues concerning the nature of economic theorising and how best to disseminate economic thought, and relationships between scientific and religious explanations. They also serve the useful task of clarifying and correcting certain errors in Keynes’s essays due to exaggeration or inaccuracy. In these contexts, Keynes’s remarks on Paley repay investigation.

Keywords: Keynes; Paley; Malthus; Darwin; Mary Marshall JEL Classification Number: B19; B22; B30; B31; E12

Review of Keynesian Studies Vol.2 Rod O’Donnell

I. Introduction

Keynes referred to Paley several times in significant ways, yet Keynes and Paley seldom appear together in the literatures of either figure. In exploring this largely uncharted territory, my aim is to examine Keynes’s references to Paley from 1922 to 1944, and to clarify the nature of the connections, positive and negative, arising therefrom in relation to economic, political and philosophical matters.1 The almost complete absence of analytical commentary in the Keynes literature is illustrated by the substantial intellectual biographies by Harrod, Skidelsky, Moggridge and Dostaler, none of which examine the issue. A similar absence appears characteristic of the Paley literature. That such connections are viewed as details in the intellectual contributions of both men is understandable given the many other important matters to discuss. Closer enquiry reveals that complete neglect is unjustified, however, and that, despite differences in historical eras and intellectual milieux, the connections highlight certain key themes in Keynes’s writings.

II. William Paley

Paley (1743-1805), Cambridge don, fellow of Christ’s College, clergyman, and moral and political philosopher, articulated a distinctive standpoint in morality, politics and economics. In 1766 he became a fellow of Christ’s and began lecturing on metaphysics, moral philosophy and the New Testament, his reputation being that of an engaging, thought-provoking, non-didactic teacher prepared to put unconventional ideas before his students.

1 One earlier explorer is Waterman (1996, 2017) who discusses one of Keynes’s references to Paley (see below).

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He often challenged the complacent assumptions of his undergraduates, himself advocating a position so extreme that his students were forced to clarify their own opinions in relation to it. ... At Cambridge, Paley associated himself with Latitudinarians ... and endorsed an open and tolerant marketplace of ideas. (Le Mahieu 2002, pp. xii-xiii) 2

This influenced his pupil, William Frend, who was Malthus’s tutor as an undergraduate. Malthus would have found the atmosphere highly congenial, having been previously educated by dissenters (i.e. those not conforming to official Anglican doctrine).3 Two of Paley’s books are relevant. His first, The Principles of Moral and Political Philosophy of 1785 (hereafter Principles), became a set text for Cambridge undergraduates into the Victorian era. His second, Natural Theology, appeared in 1802, subtitled Evidences of the Existences and Attributes of the Deity Collected from the Appearances of Nature. Prompted by a rise of scepticism about Christianity, it sought to demonstrate to a wide audience the existence of God and the credibility of biblical doctrine using appeals to “empirical” considerations rather than authority. His core argument for a designed universe derived from his famous watchmaker analogy. Just as a watch is a clever, complex and intricate object based on natural laws that is designed by humans for human purposes, so the universe is a far cleverer, more complex and more intricate object designed by God for divine purposes. In short, “Design must have a designer. That designer must have been a person. That person is God”.4 Several other aspects of Natural Theology are relevant. First, it revealed the impact of Malthus’s 1798 Population essay, for Paley now accepted Malthus’s arguments and abandoned the ‘greater population/greater happiness’ argument in his Principles. Second, it was read by Charles Darwin, a later member of Christs’s College. And third, his natural

2 Latitudinarianism emphasised the importance of reason and personal judgment, and hence tolerance towards divergent creeds and forms of worship in Christianity. 3 For a resumé of Paley’s life, see Waterman (2017, pp.209-211). 4 Paley (1854, ch.23 conclusion).

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theology arguments met with opposition from theologians as well as scientists.

III. Keynes’s Remarks concerning Paley

These appear in four essays in two volumes of The Collected Writings of John Maynard Keynes − Essays in Persuasion, first published in 1931 and then posthumously in 1951, with one relevant essay; and Essays in Biography published from 1933 onwards, with three relevant essays. In order of first composition, the essays are as follows.

(1) “Thomas Robert Malthus”, first read in 1922 prior to publication in 1933 (CW X, pp.71-108).5 (2) “The End of Laissez-Faire”, delivered as a 1924 Oxford lecture before being published in 1926 (CW IX, pp.272-294). (3) “My Early Beliefs”, first read in 1938 prior to posthumous publication in 1949 (CW X, pp.433-450), and (4) “Mary Paley Marshall”, Keynes’s obituary of whom appeared in 1944 (CW X, pp.232-250).6

Keynes regarded Paley as having an important place in the intellectual history of Cambridge. He regretted not having written about him, and awarded him two remarkable accolades.

I wish I could have included some account of Paley amongst these Essays [on Biography]. For Paley, so little appreciated now, was for a generation or more an

5 In what follows, all references to Keynes’s writings are to Keynes (1971-1989), and take the form of CW, followed by the volume number and page numbers. 6 Indirect references to Paley arise in Keynes’s Treatise on Probability. Arguments by design are found to be logically insufficient unless appreciable prior probabilities of designer existence are available (CW VIII, pp. 329-30, 334).

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intellectual influence on Cambridge only second to Newton. Perhaps, in a sense, he was the first of the Cambridge economists. If anyone will take up again Paley’s Principles he will find, contrary perhaps to his expectations, an immortal book. (CW X, p.79 n2, original emphasis)

It is unclear why Keynes chose the adjective immortal, for it would not have been based on the belief that the book’s central arguments were correct or enduring. It appears to have been used because the book was one that would ‘live on’ due to its significance in relation to the development of thought during the (English) Enlightenment, its synthesis of morality, politics, economics and religion, and its thought-provoking nature. That aside, to be placed second only to Newton in his influence on Cambridge, and possibly to have displaced Malthus as the first of the Cambridge economists was high praise indeed. Concerning Newton, Keynes’s essay on the natural philosopher suggests one possible reason.

[Newton] looked on the whole universe ... as a secret which could be read by applying pure thought to certain evidence, certain mystic clues which God had laid about the world [that] were to be found partly in the evidence of the heavens [and] partly in certain papers ... handed down ... in an unbroken chain back to the original...revelation... He regarded the universe as a cryptogram set by the Almighty (CW X, p.366; also p.377).

In their different ways, both Newton and Paley sought decipherment. Concerning the possible displacement of Malthus as the title-holder, Paley’s Principles is the key work. Although focused on moral and political philosophy, it contained significant economic content. Moral philosophy might set ends, but political philosophy is related to means and so involves economics. In addition, Paley’s work is related to other issues in Keynes’s writings (see below). While not highly significant, Keynes’s remarks on Paley are still far from insignificant and repay exploration. The key analytical themes in the Keynes-Paley links are as follows.

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(i) The degrees of consilience between private and public interests. (ii) The respective roles of markets and the state. (iii) Whether current economic systems require significant change. (iv) The reasons for such changes. (v) The connections, if any, between economic and religious explanations.

IV. Paley on Happiness, Population and Economic Policy

The scope of Paley’s thought ranged from God’s design of the universe and its inhabitants; how individuals do, and should, use their faculties to make rational choices; how society should be constituted to better serve God’s purpose; and reflections on current issues. However, in discussing these, he used ideas that were not always internally compatible. The views in his Principles may be summarised as follows. First, the argument is teleological. It bases itself on God’s purposeful design of the universe, this purposiveness being revealed by natural religion (the evidence provided by nature) and revealed religion (the evidence provided by the bible). Concerning humans, Paley saw God’s purpose as having two primary elements: the happiness of humans, the beings placed at the pinnacle of living creatures; and the endowment of humans with intelligence and free will, such faculties ensuring that choice becomes a necessity. Second, in explaining how humans go about making choices, he was influenced by Bentham’s utilitarianism. As self-interested, rational beings, humans made choices based on assessed benefits and costs. Intelligent (far-sighted) agents would then choose to maximise happiness over their entire life-time, which meant choosing to follow God’s will for their finite time on earth in order to be rewarded with the far greater happiness of everlasting life in heaven (and to avoid the eternal torment of hell which would obliterate any happiness from an ungodly life on earth). Further, it enhanced everyone else’s happiness on earth, for obedience to God’s will meant accepting moral duties such as loving one neighbour and obeying the ten commandments. The result was a neat alignment between individual self-interest and the public interest. Rational agents served their own self-interest (in this life and the after-life), and the social

Review of Keynesian Studies Vol.2 Rod O’Donnell

interest (in this life).7 With God intending human happiness, Paley reasoned as follows. Total human happiness is directly proportional to the number of happy human beings and their levels of happiness. Both then need maximisation. The supreme goal became growth in population and the provision of sufficient material security, these views being outlined in Book 6, Chapter 11, “Of Population and Provision; and of Agriculture and Commerce as Subservient Thereto”.

The final view of all rational politics is, to produce the greatest quantity of happiness in a given tract of country. [Those things that] contribute to this end [have value, and those that] interfere with it ... are evils.

... within certain limits, and within those...to which civil life is diversified under the temperate governments that obtain in Europe, it may be affirmed, I think, with certainty, that ... the collective happiness will be nearly in the exact proportion of the numbers ... of inhabitants.

... the decay of population is the greatest evil that a state can suffer; and the improvement of it the object which ought, in all countries, to be aimed at in preference to every other political purpose whatsoever.

Let it be remembered then, that agriculture is the immediate source of human provision; that trade conduces to the production of provision only as it promotes agriculture; that the whole system of commerce, vast and various as it is, hath no other public importance than its subserviency to this end. (Paley 2002, pp.419, 419-420, 420, 437 respectively)

The injunction to maximise happiness has direct implications for political philosophy. As

7 As Keynes put it, “obedience to the will of God”, brought “I and others to a parity” (CW IX, p.273).

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rational beings, men will not marry unless they can support their families and, as free- willed beings, they can choose to marry or not. The object of statecraft is then to provide policies that provide sufficient material security, encourage procreation within marriage, and discourage it outside marriage. In the economy, this meant a primary emphasis on agriculture (tillage was preferred to pasturage), treating all other economic sectors as subsidiary to agriculture, the removal of gross inequalities in land distribution, and a progressive income tax. However, Paley’s proposals were mixed with a good dose of aristocratic paternalism. First, in their own interest, humans were receiving instruction. Rational free-willed beings were told how to exercise their free will and rationality. Second, no upheaval of the social structure was sought – there would still be a class system based on property (including land), and stable constitutional government. All that was advanced was sufficient reduction in inequality to assist the material security necessary for population expansion.8

V. Keynes’s Malthus Essay

Malthus went up to Cambridge in 1784. Paley himself had left Cambridge, with his Principles appearing in 1785 in Malthus’s first year, Keynes’s view being that this work ‘must be placed high...amongst the intellectual influences on the [future] author of the Essay on Population’ (CW X, p.79). In Malthus’s third year (1786-87), controversy erupted when Frend scandalously advocated Unitarianism, the doctrine that God was one being and not three, this leading the university in 1788 to declare him unfit to hold the office of tutor.9 By 1796, Malthus’s interest in population was evident in a manuscript that failed to find a publisher.

8 See also Waterman (1991, pp.117-119). 9 Incidentally, Frend’s daughter married Augustus de Morgan, author of books and papers on logic and probability, whose views Keynes discussed in the Treatise on Probability.

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On the subject of population ... I cannot agree with Archdeacon Paley, who says, that the quantity of happiness in any country is best measured by the number of people. (CW X, p.83)

His celebrated Essay on the Principles of Population (hereafter Population) appeared shortly after in 1798, generated partly by debates with his father over the “doctrine of a future age of perfect equality and happiness”. Malthus rejected “perfectibilism”, but at the same time justified “the methods of the Creator” (CW X, p.84).

Keynes hailed the work as follows.

The voice of objective reason had been raised against a deeper instinct ...; and man’s mind, in the conscious pursuit of happiness, was daring to demand the reins of government from out of the hands of unconscious urge for mere predominant survival. ... Malthus believed he had found the clue to human misery.

The book can claim a place amongst those which have had a great influence on the progress of thought. It is profoundly in the tradition of...humane science ... – the tradition which is suggested by the names of Locke, Hume, Adam Smith, Paley, Bentham, Darwin, and Mill, a tradition marked by a love of truth and a ... noble lucidity, by a prosaic sanity free from sentiment or metaphysic, and by an immense disinterestedness and public spirit. There is a continuity in these writings, not only of feeling, but of actual matter. It is in this company that Malthus belongs. (CW X, pp.85-86, emphases added)

The presence of the relatively forgotten Paley in this eminent company is somewhat surprising. And while his Principles possessed some of the above characteristics, it was certainly not free of immense disinterestedness or metaphysic. One instance of Paley’s love of truth, immediately conjoined with immense

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“interestedness”, was the recantation of his previous views on population after reading Malthus. His altered views were advanced in Natural Theology, in Chapter 26 on “The Goodness of the Deity”, part of which discussed “the evils of civil life”.

Mankind will in every country breed up to a certain point of distress. ... The order of generation proceeds by something like a geometrical progression. The increase in provision ... can only assume the form of an arithmetic series. Whence it follows, that the population will always overtake the provision, will pass beyond the line of plenty, and will continue to increase till checked by the difficulty of procuring subsistence. ... [T]hese circumstances constitute what we call poverty, which necessarily imposes labour, servitude, and restraint. (Paley 1854, pp.276-77).

Paley nevertheless continued to uphold the idea of a benevolent Creator. No social change was required to alleviate poverty because the unhappiness caused by material distress was compensated by the happiness derived from non-material sources, including non-tyrannic government, religion, and the habits of virtue, sobriety and moderation. And even if the “distinctions” evident in social life were “regarded” as evils by those suffering from them, they had “little reason” to complain. Melioration was not ruled out, but significant social change was.10 After Population, Malthus tackled other current issues. His pamphlet of 1800 on the high price of provision located the cause in the notion of “effective demand”, an idea that Keynes described as “the beginning of systematic economic thinking”. This overly enthusiastic remark is unsustainable, however, because it omits all of Malthus’s predecessors. The writings of many earlier theorists, including Adam Smith, certainly indicated systematic thinking in being grounded on logic and observation, and/or on economies as systems. A more qualified remark was needed – possibly, that it was the start of systematic English economic thinking in the 19th century.

10 In other chapters, Paley presumed to discuss The Personality of the Deity, The Natural Attributes of the Deity and The Unity (that is, uniformity of plan) of the Deity.

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Following new editions of Population, and the start of his friendship with Ricardo in 1811, Malthus produced his Principles of Political Economy in 1820. This referred to “effectual demand”, also called therein “effective demand”, a notion central to Keynes’s theorising. And just as Smith had done in the Wealth of Nations, Malthus recognised that the “sovereign” (or government) had a “class of duties” including not only public works (such as the construction and maintenance of roads, canals and docks), but also the education of the poor, taxation, and installing a body of commercial law.11

VI. Who was the First Cambridge Economist?

Waterman (1996, 673-4) argues that Keynes was right to view Paley as the first of the Cambridge economists, the actual originator of the “Cambridge”, non-classical way of thinking, even if Keynes himself didn’t fully appreciate why the appellation was appropriate.12 Although his paper aims to elucidate the “sense” in which Keynes bestowed the title, this only becomes clear in its final section where two remarkable reasons are advanced. First, that “Virtually the whole of Malthus’s population theory, narrowly considered, is to be found in Paley’s brief exposition”. And second, that in Paley “demand determines supply in the long period” (ibid, pp.681-682). The last claim reposes on two sentences in Book 6, Chapter 11 of the Principles. These refer not to total output, but to the output of provision (primarily of food). Here it is said that “the production [of provision] depends...on the distribution [of provision]”, and that the “quantity of provision raised out of the ground ... will evidently be regulated by the demand’ of those with the ability to pay (Paley 2002, p.432, emphases added). While the last proposition could be extended to total output, Paley restricts it primarily to agricultural output, which raises the question as to whether it is properly comparable to Keynes’s effective demand.

11 On effectual/effective demand, see Malthus (1989, pp.348-349, 355-356, 490-495, 569-571, 589, 592), and on the government’s duties, ibid, pp.18-21, 511-512, 525, 591. 12 Waterman (2017), drawing heavily on Waterman (1996), also maintains this thesis.

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Keynes’s own reasons for placing Malthus first, however, are made clear in his 1933 essay.

I have long claimed Robert Malthus as the first of the Cambridge economists, and can do so, after the publication of these letters, with increased sympathy and admiration. (CW X, p.101, emphases added)13

The letters in question are missing Malthus letters, discovered by Sraffa in 1930, in the Malthus-Ricardo correspondence. Previously, Malthus may have been so regarded with roughly equal weight given to population and effective demand. Keynes’s interest in population went back to 1919 at least (CW II, pp.6, 12-13), and his theorising in the Treatise on Money of 1930 sought to use effective demand to explain changes in output. The latter, often overlooked, link is stated in his General Theory:

The significance of both my present and my former arguments lies in the their attempt to show that the volume of employment is determined by the estimates of effective demand made by the entrepreneurs. (CW VII, p.78).14

But from 1932 onwards, his General Theory framework gave high prominence to effective demand. Malthus’s double concern – “the actual check to produce and population arises more from want of stimulus than want of power to produce” (CW X, p.98) – was also Keynes’s double concern, which put Malthus first on both counts. But with effective demand the organising concept in a theory explaining levels of aggregate output and employment, it was effective demand, not population, that became central. As interesting as Waterman’s propositions are, they are difficult to sustain for the following reasons.

13 The claim was repeated in 1935 (see below). 14 See, for example, CW V, Ch.12, and CW VI, Chs.27-30, even if neither Malthus nor effective demand are mentioned in the Treatise on Money.

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1. Reframing the question

In Keynes’s remark, “Perhaps, in a sense, [Paley] was the first of the Cambridge economists”, the first four words are effectively expunged. What for Keynes was a possibility is replaced with an actuality, with Waterman then searching for arguments in Paley resembling what are taken to be arguments in Keynes.

2. Historical considerations

(i) Keynes gave no hint that Paley preceded Malthus concerning effective demand (or population immiseration). If he had thought this, it is virtually certain it would have been mentioned for he was interested in the evolution of ideas, including his own.

(ii) More significantly, Keynes’s essay was published in early 1933 not long after Sraffa’s discovery, its full title being “Robert Malthus: The First of the Cambridge Economists”. Having explicitly awarded the title to Malthus, it was then appropriate to insert the Paley footnote suggesting that, in some other unspecified (but necessarily non-Malthus- related) sense, Paley might possibly be so regarded.

(iii) Further, as the editorial note to the essay indicates (CW X, p.71), the new sections added in creating the 1933 version are located at CW X, pp. 87-91 and 94-103. Both new sections explicitly emphasise Malthus and effective demand, so that this becomes the main sense in which Malthus is regarded as first.

(iv) In Keynes’s lectures of late 1932, which first exposited the rudiments of the General Theory, Malthus receives positive mention with Paley absent.15

15 Rymes (1988, p.A51). For 1933-34, see ibid, pp. B12, C8, and CW XXIX, pp.67, 81.

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(v) In Keynes’s 1935 paean of praise to Malthus, he is reaffirmed as title-holder with Paley again invisible.

Let us, however, think of Malthus to-day as the first of the Cambridge economists – as, above all, a great pioneer ... I claim for Malthus a profound intuition and an unusual combination of [being open] to the shifting picture of experience and of constantly applying to its interpretation the principles of formal thought. (CW X, pp. 107-8)

3. Analytical reasons

(i) Paley’s remarks often implicitly assume full employment, or at least fairly quick adjustment to full employment. One example is his proportionality principle that twice the number of inhabitants will produce twice the quantity of happiness. This presumes every new inhabitant will be happy, which then requires sufficient provision for all inhabitants, and hence jobs for all job-seekers. A second is that the limit on provision set by soil fertility (natural or assisted) far exceeds the demands of a growing population. A third is Paley’s account of labour-saving technical progress (or “abridgement of labour”), where the initial increase in unemployment is only temporary with later effects causing a return to the previous level of employment (Paley 2002, pp.450-452), this being a quite orthodox argument not following from Keynes’s treatment of effective demand.

(ii) However, if shortages of provision were to arise, Paley has population control mechanisms ensuring, directly or indirectly, the elimination of pools of unemployed labour. Given that population adjusts to the limit of provision, individuals unable to gain provision will either quit the country by emigration or colonisation; or remain at home but cease seeking marriage which, according to Paley, results in fewer children.16

16 Paley is too circumspect to mention labour force withdrawals due to criminality, begging or charity.

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(iii) It is difficult to see how a theory linking greater population to greater misery could be found in a theory linking greater population to greater happiness, for the former can only arise in reaction to the latter. Paley certainly considered checks on population, but his Principles did not view them as insuperable along Malthus’s or any other lines.17

(iv) Much in Waterman (1996) and (2017) concerns a mathematical model based on Paley’s interdependence between provisions and luxuries. Such interdependence, however, plays no significant role in Keynes’s arguments.

(v) Waterman argues that Paley’s model is purely demand-driven. But like his predecessors, Paley used both supply and demand, with most of his discussion concerning aggregate supply (and its abundance) rather than aggregate demand (and any deficiencies it may have). As noted, his two demand-related sentences apply only to one sector of the economy. In any case, the general idea that demand influences supply is not Keynes- specific. It is central, for example, to orthodox theory where, combined with its twin, supply influences demand, it generates market-clearing. By itself, it does not imply (long period) demand deficiency and unemployment.

(vi) Waterman calls the non-Malthus-related sense of the “Paley-first” argument methodological. This not entirely transparent label reposes on equivalence between Keynes’s General Theory and 1950s “Keynesianism”, the latter providing the distorted orthodox interpretations that reduce Keynes’s theory to the proposition that nothing matters except aggregate demand. With both Paley and Keynes cast as purely demand- driven theorists, they share the same one-sided (and mistaken) approach, as against Malthus whose model was “more than merely demand driven” and sought to do “justice to the whole of economic reality” (Waterman 1996, pp.682-3, 2017, p.227).

17 While both Paley and Malthus saw a contest between population and provision, their theories and conclusions were strongly opposed, even when narrowly considered. The former theory cannot contain the latter.

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This unusual argument results in Keynes being, not only aligned with Paley, but also opposed to Malthus. The crucial caveats, that there is more to the General Theory than “crude” Keynesianism, and that such an argument only applies “insofar as the latter may truly be discovered in … parts [of the former]”, are acknowledged, but do not deter Waterman from upholding his argument. The outcome, however, is internal inconsistency. The “Paley first” position requires that the above equivalence holds. The admission of definite or possible non-equivalence means that equivalence definitely or possibly does not hold. Both cannot be true.

(vii) A similar substitution of Paley for Malthus occurs in Waterman’s earlier book (1991, p.121). Here it is suggested that Paley’s Principles related “employment to effective demand and effective demand to income distribution”, and that these were probably the ideas that inspired Keynes to remark that perhaps it was “actually” Paley rather than Malthus who was the first. Again this conflicts with Keynes’s declared position. “Rational reconstructions” have their dubious sides.

(viii) In 1937 Keynes saw Malthus as warning of two devils: devil P (population) and devil U (unemployment due to insufficient effective demand). Importantly, the latter was Malthusian ‘since it was Malthus himself who first told us about him’, not the unmentioned Paley (CW XIV, pp.131-32, emphasis added).

(ix) Waterman (2017) adds two note-worthy remarks. First, that Paley’s 18th century individualism foreshadows the extreme 20th century individualism of the strongly anti- Keynesian politician, Margaret Thatcher (ibid, p.215). This strikes an odd note. Having first aligned Paley and Keynes, and now Paley and Thatcher, it implies an alignment between Keynes and Thatcher. Second, and more importantly, in clarifying the methodological sense of his ‘Paley first’ argument, Waterman significantly re-phrases Keynes’s original conjecture as follows: Paley was “the first of the Cambridge [or at any rate, ‘Keynesian’] economists” (ibid, p.226). As before, this assumes that Keynes saw Paley as a purely demand-driven economist, that this coincided with his own

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position, and that he had consciously embedded in the General Theory the crude Keynesian notions that later emerged in orthodox interpretations from the 1950s onwards. These propositions effectively assume what is to be proved.

(x) A further reason why Keynes distanced his economics from Paley’s (but not Malthus’s) is outlined in the next section.

Overall, the Keynes-Paley connection raised by the Malthus essay is predominantly negative. On the smaller, positive side, the Paley-influenced Cambridge environment supported Malthus’s existing disposition to being open to challenges to received opinion, which indirectly assisted his critique of Paley’s views and the development of his own. On the larger, negative side, Paley’s optimistic stance that higher population is desirable, that it deserves state promotion, and that the happiest of worlds would result, was rejected. For Malthus, higher population was the main cause of misery, to which he later added insufficient effective demand. Paley’s views in the Principles were thus a direct, negative stimulus for Malthus’s thought and, with Keynes siding with Malthus, an indirect, negative influence on Keynes’s thought.18

VII. The End of Laissez-Faire

This quite complex 1926 essay contains several Paley-related remarks, of which the most significant are the following.

The idea of a divine harmony between private advantage and the public good is already apparent in Paley. (CW IX, p.274).

18 For Keynes’s advocacy of a managed population, see his “The Underlying Principles” of 1923 (CW XVII, pp.448-54), “The End of Laissez-Faire” of 1926 (CW IX, p.292), “Economic Possibilities for our Grandchildren” of 1928-30 (CW IX, pp.326, 331), and his 1937 Galton Lecture on “Some Economic Consequences of a Declining Population” (CW XIV, p.124).

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The phrase laissez-faire is not to be found in the works of Adam Smith, of Ricardo or of Malthus. Even the idea is not present in a dogmatic form ... Smith, of course, was a Free Trader and an opponent of many 18th century restrictions on trade [but] he was not dogmatic. Even his famous passage about the “invisible hand” reflects the philosophy which we associate with Paley rather than the economic dogma of laissez-faire. (CW IX, p.279).

Two things are distinguished here: laissez-faire (in an economic dogma sense), and invisible hands (in a religious sense), with Smith associated with neither. On the one hand, he is not linked to laissez-faire because he never used the term and was not viewed as dogmatic. On the other, the idea of a divine invisible hand fostering a harmony of interests is clearly, and rightly, associated with Paley, not the author of The Wealth of Nations.19 The key issue is the alleged presence of an invisible hand or mechanism promoting maximum happiness. Is this the direct purposeful hand of the deity; the deity operating at one remove through a free market mechanism; or simply a harmonising property of free markets on their own? In his Principles, Paley adopted the first. His “double the people/double the happiness” principle, combined with his “soil fertility exceeds human fecundity” proposition and other remarks, imply full employment. Careful examination of Smith’s arguments, however, shows that Keynes was correct in dissociating Smith’s economics from both invisible hands and laissez-faire. The numerous free-market, ideological renditions of Smith’s phrase derive from superficial readings of his Theory of Moral Sentiments and Wealth of Nations. Closer inspection reveals three things. First, the omission of the invisible hand phrase leaves the logic of Smith’s actual arguments intact. Second, his argument does not lead to a full employment conclusion, but only to higher, not necessarily optimal, output levels. And third, a significant state sector is needed to ensure, inter alia, that self-interested individuals are constrained to serve the

19 Following Cliffe Leslie and Sidgwick, Keynes suggests the idea derives from Smith’s Theory of Moral Sentiments (CW IX, p.279), a view criticised below.

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national interest, and that the state undertakes public works as a supplement to private sector activity. There are in fact several important parallels between Smith and Keynes, including sub-optimal equilibria, the need for institutional reform, and the necessity of significant government involvement, direct and indirect, in the economy. Keynes’s propositions that the doctrine of an invisible hand belongs to Paley rather than Smith, and that Smith’s system could not be conceptualised in terms of laissez-faire, are thus entirely justified. Whatever Smith’s stance on religion, he and the non-religious Keynes had more affinities in economic theorising than either had with Paley.20 Keynes’s overall thesis in his essay is that current biases towards laissez-faire and against state action in economic matters derive from the writings of political philosophers (such as Paley) and economics popularisers (such as Martineau), not from “the greatest authorities” in economics. The preceding discussion, combined with Keynes’s aversion to the Benthamite utilitarianism adopted by Paley – for Keynes, it was “the worm...gnawing at the insides of modern civilisation and ... responsible for its present moral decay” (CW X, pp.445, 447) – mean that the Keynes-Paley connection is again negative.21

VIII. “My Early Beliefs”

This 1938 paper was read to the Memoir Club whose members came primarily from Cambridge (university members, usually Apostles) and Bloomsbury (writers and artists). Although an important document that reads well, Keynes’s memoir is quite complex, misleading and inconsistent in various respects.22 As always, context is important. The period designated as ‘early’ began with Keynes’s

20 Keynes’s remark linking Paley to socialism and democratic egalitarianism, on the other hand, is surely misconceived (CW IX, pp.273-274). 21 For further examination of Keynes’s and Smith’s arguments on these matters, see O’Donnell (2020a, 2020b). On Smith not being a Christian or indeed even religious, see Rothschild (2001, pp.68, 129-35, 295n49, 298-301). 22 For earlier commentary on this theme, see O’Donnell (1989, pp.148-54; and 1991, pp.92-94)

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reading of Moore’s Principia Ethica in October 1903, and ended in late 1914 when the unsuccessful (pre-war) breakfast party occurred. Only three people were present, D.H. Lawrence, Bertrand Russell and Keynes (aged 27). Lawrence, who came from an unhappy working class background, was a writer whose life and literary works were deeply imbued with emotion. At breakfast, he was sullen, irritable and non-participatory, his later meeting with Moore being no better. Although friends with David (“Bunny”) Garnett, he disliked this circle of Garnett’s friends, especially its intellectualism, cynicism and rationalism. In retrospect, Keynes, remembering nothing of the content of the conversation, and little of the negative feelings associated with it (even though the latter constituted the rationale for his memoir), opened as follows.

... was there something true and right in what Lawrence felt? There generally was. His reactions were incomplete and unfair, but they were not usually baseless. ... And ... did the way of responding to life which lay behind [our conversation] lack something important? Lawrence was oblivious of anything valuable it may have offered – it was a lack that he was violently apprehending. So Bunny’s memoir has thrown my mind back to reflections about our mental history in the dozen years before the war ... I should like in this contribution ... to try and recall the principal impacts on one’s virgin mind and to wonder ... whether one still holds by that youthful religion. (CW X, pp.434-35, original emphasis)

This passage requires careful consideration. First, it runs together two distinct things – beliefs and feelings, or intellectual views and emotional states. Although proposing an investigation into Lawrence’s emotional reactions to the intellectualism confronting him, Keynes’s memoir is less concerned with emotional states than with his own “religion”, that is, his beliefs about ethics and morality, or about goodness and right conduct. Second, these philosophical beliefs were far from all his beliefs. By late 1914, he had encountered worlds beyond undergraduate academia, those of work, economics, politics, public affairs and administration. Inter alia, he had worked two years in the India Office, supported himself

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by lecturing on economics, become politically active, participated in a 1911 Liberal Party trip to Ireland, been appointed to a Royal Commission, and written his first book (Indian Currency and Finance). And third, the memoir was a set of impressions aiming to stimulate private, amicable discussion among old friends, not an academic paper seeking (internal and external) analytical soundness. Moore’s book discussed ethics (the nature of goodness, what things were good, and the maximisation of goodness as the objective of human behaviour), and morality (how individuals should behave in the pursuit of increased goodness). It presented doctrines of both ends and means. In a 1904 Apostles paper, Keynes strongly criticised Moore’s conservative theory of morality using his nascent ideas on probability which eventually resulted in his Treatise on Probability. The 1938 memoir extended his early criticisms about means to questions of ends by expanding the range of things which he surmised had intrinsic value. In both cases, the criticisms were internal, not external rejections of Moore’s framework. It is in closing the memoir, in this context, that Keynes quotes Paley, the quotation again coming from chapter 11 in the Principles.

Secondly, although we speak of communities as of sentient beings; although we ascribe to them happiness and misery, desires, interests and passions; nothing really exists or feels but individuals. The happiness of a people is made up of the happiness of single persons; and the quantity of happiness can only be augmented by increasing the number of percipients, or the pleasure of their perceptions. (Paley 2002, p.419, original emphasis)

Evidently, this greatest happiness principle reposes on theoretical individualism − wholes are sums of parts, with parts independent of wholes. Now consider Keynes’s paragraph, here quoted in full because his prior remarks are important to his conclusion.

I have said that this pseudo-rational view of human nature led us to a thinness, a

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superficiality, not only of judgement, but also of feeling. It seems to me that Moore’s chapter on ‘The Ideal’ left out altogether some whole categories of valuable emotion. The attribution of rationality to human nature instead of enriching it, now it seems to me to have impoverished it. It ignored certain powerful and valuable springs of feeling. Some of the spontaneous, irrational outbursts of human nature can have a sort of value from which our schematism was cut off. Even some of the feelings associated with wickedness can have value. And in addition to the values arising out of spontaneous, volcanic and even wicked impulses, there are many objects of valuable contemplation and communion beyond those we knew of – those concerned with the order and pattern of life amongst communities and the emotions they can inspire. Though one must ever remember Paley’s dictum that ‘although we speak of communities as of sentient beings and ascribe to them happiness and misery, desires, interests and passions, nothing really exists or feels but individuals’, yet we carried the individualism of our individuals too far. (CW X, p.449, original emphasis)

Considered as a whole, Keynes’s remarks are variously mistaken, misleading and unconvincing. Given later beliefs, it is perfectly legitimate to criticise earlier beliefs – say about human nature, its rationality or Moore’s chapter – but it is wrong to base the critique on misrepresentations of earlier beliefs and Moore’s propositions. Some misrepresentations are the following. On rationality, he viewed Moore and himself as assuming that all humans are rational. This cannot be sustained. Moore sought a rational investigation of ethics and morality, of goodness and wickedness, and of ways of increasing the goodness of wholes. He provided prescriptions to be followed not descriptions of actual behaviour. In believing that rational analysis and answers were possible, he never assumed that all individuals were rational. His assumptions were simply that humans had capacities for rationality, theoretically and practically, and that the initial step to greater goodness was persuasion. The same applies, with equal force, to Keynes. The author of the Economic Consequences of the Peace protested rationally, and with powerful feeling, against what he saw as the irrational, unjust settlement of World War I.

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Similarly, Keynes’s derision of Russell as simultaneously holding two “ludicrously incompatible” ideas − that most human affairs were carried on irrationally, and that the solution was to carry them on rationally − is again unsustainable, for these ideas are logically connected. And it likewise applies to Keynes. Most of his subsequent writings, including the General Theory, were appeals to reason aimed at replacing mistaken theoretical and policy beliefs with more rational analyses encouraging ethically better outcomes. His past failures were ever-present reminders that many people disagreed with his reasoned views. As he put it in 1931 in Essays in Persuasion, “Here are ... the croakings of a Cassandra who could never influence the course of events in time” (CW IX, p.xvii). The tasks of rational analysis are always preliminary to the tasks of intellectual persuasion (successful or unsuccessful). On morality, Keynes states that “we set on one side” key parts of Moore’s chapter on “Ethics in Relation to Conduct”, namely, the injunctions to act to produce “the most probable maximum of eventual good” and to obey “general rules”. This is partly correct but misleadingly put, for it was Moore’s conclusions that were rejected, not his questions. Keynes thought better answers could be given by substituting a better theory of probability for the frequency theory Moore had implicitly used. This was the primary reason why he spent ‘all the leisure of many years’ in studying probability (CW IX, pp.445-446, emphasis added). In morality, this led him to advance maximum probable goodness as the goal (a subtly different point), and adherence to individual judgment in each case, not unreflective rule-following in all cases. More importantly, it is difficult to see how wickedness can have any sort of positive ethical value. Unfortunately Keynes gives no examples. And his own experiences from 1914 to 1938 had given him multiple counter-examples. Further, the claim is self- contradictory. In Moore’s ethics, goodness and evil (or wickedness) are opposites, the former having positive, and the latter negative, intrinsic value. In Moore’s philosophy, it is impossible to conclude that an intrinsically wicked state can have positive intrinsic value.23

23 The method for determining intrinsic value was reflection on the value of a state of affairs in isolation from all others.

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On the other hand, there is no inconsistency in saying that something bad in itself may also be a means to goodness. But goodness as a means is forever different from goodness as an end.24 Keynes’s remark is also inconsistent concerning the principle of organic unity. The theme that wholes are not always the sum of their parts is a constant one in Moore’s and Keynes’s thought, as Keynes’s remarks in the memoir (CW X, pp.436-37, 449-50) and elsewhere (CW VII, p.xxxii; X, p.262) indicate. Just as Paley’s remark in isolation does not accurately reflect Paley’s own beliefs (surely the deity really exists), so the idea that only individuals exist does not accurately reflect Keynes’s beliefs. In both his early and late writings, he accepted the existence of societies, economies and institutions as wholes, as systems of interacting parts with properties different from those of the parts (and their simple sums). Anyone holding such views cannot be accused of carrying individualism ‘too far’. Several key claims in the memoir are thus entirely inconsistent with Keynes’s views from the 1910s to the 1940s, including the General Theory. Insofar as the memoir deals with emotions rather than beliefs, Moore certainly did not ignore feelings. Love and friendship between humans belonged to some of the highest states of goodness. And what was it that was “true and right” in Lawrence’s distaste? Keynes presents this as a “thin rationalism skipping on the crust of the lava, ignoring both the reality and the value of the vulgar passions, joined to libertinism and comprehensive irreverence” (CW X, p.450). From Lawrence’s viewpoint, this was very likely true, but it is a quite inaccurate and muddled portrait of Keynes’s actual early beliefs. Finally, it is important to be remember that, alongside his internal critique, Moore’s philosophy remained foundational to Keynes’s later beliefs, even if it might need modification in certain respects.

... looking back, this religion of ours was a very good one to grow up under. It remains nearer the truth than any other that I know...with nothing to be ashamed of; though it is a comfort...to discard [certain aspects]. ... It is still my religion

24 Justifiable punishment is an example.

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under the surface,

I see no reason to shift from the fundamental intuitions of Principia Ethica; though they are much too few and too narrow to fit actual experience which provides a richer and more various content. (CW X, pp.442, 444, respectively)

In this essay, the Paley quotation was a poorly conceived prop to support some (inaccurately portrayed) criticisms by Keynes of his earlier beliefs. However, for Keynes’s readers, it plays a positive role in revealing how seriously he misrepresented some of his earlier and later beliefs. This assists us in understanding that the memoir is a complex document mixing truth and error and needing careful treatment. In hindsight, it would have been better entitled “My partly unreliable recollections of some of my early beliefs”.25

IX. Mary Paley Marshall’s Obituary

Keynes’s 1944 tribute to William Paley’s great-granddaughter not only has historical interest but also unexpected analytical significance. In October 1871, Mary Paley was one of the first five women to study at Cambridge and one of the first two women to sit for the Moral Sciences Tripos, a degree including Political Economy taught at the time by her future husband, Alfred Marshall. After passing with honours in 1874, she became the first female lecturer in economics in 1875, taking over Alfred’s class of women students at Newnham College.26 That year she was invited to write an introductory economics textbook, in which venture she was joined by Alfred after their engagement in May 1876. The result was The Economics of Industry, first published in 1879. Mary also opposed the policy of excluding women from university

25 For another critical account, see Braithwaite (1975, pp.237, 242-245); for additional background, see Crabtree and Thirlwall (1980) and Bell (1986, Ch3). 26 Later, she lectured on economics at Bristol University College in 1878-1879, and at Oxford during their Balliol College period in 1883-1884

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entrance, and played important roles in establishing, administering and endowing the Marshall Library. In keeping with the dominant culture of the time, this highly intelligent woman also bore, with fortitude and without open complaint, a significant academic tribulation visited on her by her husband. This concerned their joint work that appeared under both names from 1879 to 1892. Then Alfred “suppressed” it, even though demand was high and sales good, replacing it with his own similarly named book, Elements of Economics of Industry, in 1892 which was an adaptation of the first volume of his Principles of Economics for junior students.27 In the obituary, Keynes made two comments relating to his own approach to economics, one involving Alfred, the other Paley.

1. Methodological stances

Mary had commented as follows on the joint work.

He [Alfred] never liked the little book because it offended against his belief that “every dogma that is short and simple is false”, and he said about it “you can’t afford to tell the truth for half a crown.” (CW X, p.239)

On both counts, Keynes’s methodological stance differed significantly from his former teacher’s. Regarding Alfred’s first remark, Keynes’s position may be described as follows. Economics is a complex subject in which some conclusions can be expressed as short and simple propositions but certainly not all, and dogmas divide into the false and the true (at least). For Keynes, false dogmas included assertions that a harmony of interests is generated by laissez-faire, that competitive market systems always self-adjust to full employment, that supply creates its own demand, that the interest rate is determined by saving and investment, and that direct proportionality exists between money supply

27 Mary was merely thanked for assistance and advice. See also Keynes’s remarks (CW X, p.239), Marshall M.P. (1947), and Groenewegen (1995, Ch.8) which is most informative and contains further references.

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changes and price level changes. True dogmas included the propositions that effective demand is a key determinant of aggregate output, that market economies generate a range of equilibrium employment levels, that investment decisions depend on comparisons of expected returns, that fundamental uncertainty matters, and that rationality is not destroyed by absences of relevant knowledge. Alfred’s second one-liner implies that the pursuit of truth in economics requires laborious investigation and extended discussion, so that large books at higher prices are essential to expound its key principles, not shorter ones at lower prices. One of Marshall’s students recorded some of his epigrams, one being the following.

A difficult sentence in Economics is one which is difficult to understand, a simple sentence is one which is it is impossible to understand.28

I leave readers to ponder self-referential issues. By contrast, instead of long and laborious constructions of lengthy works, Keynes preferred more rapid publication, especially of innovative work, to promote the scientific progress and current usefulness of economics. The difficult process of writing the General Theory may have taken around three years but once done, he insisted, in keeping with his exhortation to economists to “fling pamphlets to the wind”, that it be priced cheaply at five shillings for wide circulation, at which price his royalties were virtually zero.29

2. Religious and scientific accounts of nature, society and the economy

Keynes’s second comment concerns Paley’s influence on Charles Darwin and his theory of descent with modification by natural selection. . ... the reading of [Paley’s Natural Theology] a generation later by another

28 See Groenewegen (1995, p.321) for this Zen-like remark. 29 For fuller discussion of Keynes’s approach to writing and his critique of Marshall’s, see O’Donnell (2006).

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Christ’s man, Charles Darwin, put him on the right track. (CW X, p.232).

In Chapter 26 of Natural Theology, “The Goodness of the Deity”, Paley argued that God’s design was always beneficent despite any appearances to the contrary: “the world was made with a benevolent design. It is a happy world after all”. Earlier, chapter 19 had discussed the benefits of bee stings: the “properties of the sting” are “to be admired”, for its purpose is “the protection of a treasure [honey] which invites so many robbers”. In the sole direct reference to Paley in The Origin of Species, Darwin criticised this benevolence argument using several examples, including bee stings. Due to the design of the sting, the bee necessarily dies in its deployment.

Can we consider the sting of the bee as perfect, which, when used against many kinds of enemies, cannot be withdrawn, owing to the backward serratures, and thus inevitably causes the death of the insect by tearing out its viscera?30

A weapon that kills its owner is hardly a benevolent possession. According to Darwin, the sting may have evolved to suit other useful purposes, such as a boring instrument and gall producer, but it happened to include a major imperfection, one controverting Paley but not natural selection. Although destructive of individuals, it was, in killing or deterring enemies, good for the community and hence survival of the species. Like Paley, Darwin believed in a Creator, but understood that the study of nature may reveal deficiencies in a priori accounts commencing with religion. In Dawkins’s (1988) later contrast, Paley believed in the purposeful and perfect watchmaker of the deity, whereas Darwin believed in the blind and imperfect watchmaker of evolution.31 While Darwin and Dawkins shared Paley’s reverence for the complexity and marvels of nature, they replaced his religious conjectures with scientific hypotheses. Is

30 More generally, see the end of Chapter VI in Darwin (1928). 31 See Dawkins (1988, pp.4-5, 15, 21, 37). His view that evolution is blind and with “no purpose in view” is an overstatement. While evolution is not self-conscious and can make mistakes, it is not, as a process, without an aim or purpose, namely, the survival of life.

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the design of life finished and perfect due to being created by an omnipotent deity possessed of benevolence to every creature? Or is life the manifestation of an imperfect, ongoing, unfinished process concerned with evolutionary survival and far from benevolent to each and every creature?32 These issues link up with Smith’s “invisible hand” phrase. Of his three uses, the first in History of Astronomy has religious connotations as it refers to the hand of Jupiter. His next in The Theory of Moral Sentiments is ambiguous. It uses the near uniformity of the size of adult human stomachs to show that, regardless of extreme inequalities elsewhere, everyone necessarily consumes roughly the same quantity of the necessaries of life. This might refer to the plan of a divine designer, or it might just be a current fact of nature independently of whether a deity exists or not. The third, in The Wealth of Nations, occurs in a scientific argument independent of religion. This argument is simply that, within Smith’s proposed new institutional framework, the pursuit of self-interest by profit-driven agents seeking only their own personal wealth will result in increases in national wealth and the public interest that were not intended by the agents themselves (but were certainly intended by Smith, and others supporting his proposed new framework).33 Possibly the establishment of the new framework and its beneficial outcomes formed part of a divine plan. This scientifically-unanswerable proposition only provokes scepticism, however. It means the deity refrained from implementing the divine plan for millennia, apparently waiting for one or more humans at a particular place and time to formulate the conception, to persuade others of its desirability, and for the resulting coalition to agitate for implementation. And when the initiative as a whole was unsuccessful, no further intervention occurred. In short, the deity left all the work to humans, and, when long delays or imperfect implementation over long periods of human time occurred, did not intervene to effect improvement or perfection. On the other hand, perhaps no divine agent was involved. One or more humans generated the idea by

32 For a scholarly account of natural theology from a Christian perspective that discusses Paley, Darwin, Dawkins and others, see McGrath (2011, especially Chs.1-6). 33 For further discussion, see O’Donnell (2020b).

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scientific processes such as observation, discussion and reflection. Then, although never implemented as planned, later writers borrowed the language of its originator to proclaim, for ideological or other reasons, that whatever market system had come into existence also possessed the same harmony of interests. The Keynes-Paley connections emerging from the obituary turn out to be indirect, methodological and fairly neutral. Two people whom Keynes admired, Mary Marshall and Charles Darwin, provided opportunities for him to comment on key issues related to methodology and progress in economics. Is it better to publish reasonably quickly even if a work is imperfect, rather than strive for greater perfection in a difficult subject? And is it better to do science (natural and social) independently of religious stances rather than in conformity with current religious belief? Keynes and Paley may have agreed on the former but were in disagreement on the latter. Nothing prevents scientists from being religious, but good science needs to be unconstrained by prior religious convictions.34

X. Conclusion

Keynes was well aware of Paley’s significance in the development of thought in Cambridge, and England more broadly. Even though scientific advances in economics and biology arose in strong reaction to his views, Paley’s forthright statements nevertheless indirectly contributed to the more fruitful ideas generated by others. And while Paley is far from a major figure in relation to Keynes’s theorising, Keynes’s comments on Paley and associated matters repay examination. Positively, they cast light on aspects of Keynes’s own views concerning Malthus’s significance, laissez-faire, Adam Smith and methodological questions, as well as assisting in clarifying remarks that otherwise might appear obscure. Negatively, his references to Paley serve the useful task of revealing that some of Keynes’s memory-based remarks are open to criticism as inaccurate,

34 The inadequacies of prior beliefs extend well beyond religion to analyses/reconstructions based on externally imposed frameworks rather than examinations of what authors actually write.

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this encouraging their correction so that we might better understand his thought and contributions.

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Record 82 (259): 396-407. O’Donnell, R. (2020a). “Karl Mittermaier, a Philosopher-Economist with a Penetrating Intellect and a Twinkling Eye”, in Mittermaier (2020). O’Donnell, R. (2020b). “Keynes and Smith: Opponents or Allies – Part II”, forthcoming. Paley, W. (1854). Natural Theology: Evidences of the Existence and Attributes of the Deity, collected from The Appearances of Nature. New York: Sheldon. Paley, W. (2002). Principles of Moral and Political Philosophy. Indianapolis: Liberty Fund. Rothschild, E. (2001). Economic Sentiments. Cambridge, Mass: Harvard University Press. Rymes, T. (1988). “Keynes’s Lectures, 1932-35: Notes of Students”, Working Paper. Ottawa: Economics Department, Carleton University. Waterman, A. (1991). Revolution, Economics and Religion. Cambridge: Cambridge University Press. Waterman, A. (1996). “Why William Paley was ‘the First of the Cambridge Economists’ ”, Cambridge Journal of Economics 20: 673-686. Waterman, A. (2017). “William Paley (1743-1805)”, in Cord (2017).

Rod O’Donnell Business School, University of Technology Sydney, Sydney, Australia.