On Skidelsky’s Keynes and Other Essays

This volume starts with the title essay, ‘On Skidelsky’s Keynes’ (2005) (Chapter 1). I wrote this with Sean Turnell, whose fine Ph.D dissertation, Turnell (1999)???, I had examined some years before and with whom I had become a close friend. My suggestion that we write a review article of Robert Skidelsky’s remarkable three volume biography of Keynes, Skidelsky (1983, 1992, 2000), led to four and more years of hard work by both of us. The article was published in 2005 in Economic and Political Weekly (EPW), the influential and widely read Indian journal, due to the encouragement of Jayati Ghosh, my former Ph.D student in Cambridge and continuing friend. The version published here is unexpurgated – because of a word limit, we had to remove from the EPW version what we thought were choice and relevant asides. In the essay we outline the extraordinary span and scope of Skidelsky’s achievement, set out our views on his evaluation of Keynes’s many dimensional life and works, indicate the few places where we took issue with Skidelsky, for example, on Étienne Mantoux’s assessment (1945; 1952) based on Lord Keynes of The General Theory, of Mr Keynes’s Marshallian-Pigovian analysis of The Economic Consequences of the Peace (1919), and also side with Skidelsky against the hostile American response in the person of Brad de Long (2000, 2002), to the analysis in volume III of Keynes’s and Britain’s wartime and postwar activities and relationship with the USA.

With the publication of the third volume of his life of John Maynard Keynes, Robert Skidelsky has brought to fruition probably the greatest biography of the twentieth century, certainly the greatest biography of an economist. We agree with Bradford De Long’s judgment: ‘as a whole, [it] is the finest biography of an economist that I have ever read, or that I expect ever to read’ (De Long, 2002, 155). Skidelsky’s fundamental aim in the three volumes is to reclaim Keynes for history and this he has done. In this review of the three volumes, Skidelsky (1983, 1992, 2000), though, we concentrate on Keynes, the economist, in particular, on the nature and extent of his contributions to economic theory and practice, how he did economics and what we may learn from this.

When I returned to Cambridge at the end of August 1997 after two terms of leave in my native Australia, I was delighted to find waiting for me a letter from Professor Szenberg asking me to contribute to his ongoing series on the life philosophies of economists. In recent years I have written a number of essays which circle around this theme. His request gave me the opportunity to bring the various strands together and, it is hoped, into focus. Let me begin at the beginning. I was born in Melbourne, Australia on 27 June 1931 at the height of the Great Depression, the younger of twin sons of Marjorie and Kenneth Harcourt. According to family lore, I was not expected. The doctor had packed his bag after delivering my brother, John, in the double bed of the home in which John still lives, when the midwife alerted the doctor to my presence, a presence he initially was reluctant to accept. Following a breach birth I spent my first minutes with no clothes on, until my grandmother was contacted to bring some spares. This experience may have something to do with my hedonism in later life.

The purpose of these notes is to outline for teaching purposes a version of the ‘Keynesian’ model of income-determination in the short period. A feature of the model is that it can handle with very simple algebra the interrelations between the money, goods and labour markets, oligopolistic pricing behaviour and the different consumption behaviour of profit-receivers and wage-earners. The two key expressions are those for the short-run, equilibrium levels of real output and the rate of interest. The model is, if you like, ‘Ackley in Algebra’1 (although the treatment of the price level and the production function differs from Ackley’s). The preference for the use of algebra rather than geometry arises from the view that the ‘quadrant’ approach can mislead students, who may settle for mechanical drill; it may confuse them about the applicability of their results and geometry does not always bring out clearly the limitations of the methodology used. These dangers are more easily avoided, it is believed, when algebra is used.

David Champernowne once told me that to introduce prices into a macroeconomic model requires that you choose the simplest possible model of pricing which still retained a link with reality, with real world practice.¹

When I wrote a book note for the Economic Journal in 1998 on Volume 2 of Tony Thirlwall’s splendid Selected Essays. Macroeconomic Issues From a Keynesian Perspective (1997), I said: With Tony Thirlwall what you see is what you get. He has strong views, well thought out and stuck to, he is lucid, humane and persuasive to those who have eyes to see and ears to hear – not many of us left, unfortunately. He is proud to be called, and to call himself, ‘an unreconstructed Keynesian’. He is; he is also an original and innovative economist who, within a broadly Keynesian framework, has with his papers illuminated our understanding of some of the most pressing modern issues.

I start with two propositions: first, that Maynard Keynes and Karl Marx, were they still with us, would have made far more sense of the happenings of modern capitalism of the past 30 to 40 years than do the more modern approaches to macroeconomics of the same period; and, second, that Keynes would have sat down and tried again to save capitalism from itself.† (Marx may have rubbed his hands and hoped that its demise, so often predicted by him and his followers, was at last on hand – but I would not bet on this.) It may surprise you that I couple Keynes and Marx together, but I would argue – the evidence is supplied in a fine book by Claudio Sardoni (1987) – that when Marx and Keynes examined the same issues in the capitalist process, they came up with much the same answers. Perhaps, on further reflection, this should not be surprising, for along with Michal Kalecki and Joseph

Well over 50 years ago, Kurt Rothschild (1947) published ‘Price Theory and Oligopoly’ in the Economic Journal.†,¹ In it Rothschild appraised the strengths, limitations and weaknesses of the imperfect and monopolistic competition theories, which were then only in their second decade, as illuminators of actual price and other behaviour. Finding them wanting, at least for considerable portions of observed, real world behaviour, especially when oligopolistic structures ruled, and because the then emerging theory of games was as yet unproven, he suggested that economists should turn to another set of principles for enlightenment.

Two of Luigi Pasinetti’s mentors – Nicholas Kaldor and Richard Goodwin – published major volumes in their seventies.† Kaldor’s 1985 Raffaele Mattiole Lectures, Causes of Growth and Stagnation in the Word Economy, (1996) were given just over one year before his death and seen through the Cambridge University Press by Tony Thirlwall and Ferdinando Targetti; the lectures are, in effect, an account of his legacy to our profession. Goodwin’s magnum opus, The Dynamics of a Capitalist Economy: A Multi-Sectoral Approach (1987), co-authored with Lionello Punzo, brought together in a grand synthesis, the two major preoccupations of his academic life – aggregative cycle models and productioninterdependent models – on which he had been working since the late 1930s. It is a pleasing symmetry then that Pasinetti’s volume has also been published in the second half of his eighth decade and that it, too, draws together themes on which the author has been working for a life time.

Amiya Kumar Dasgupta (1903–92) was one of India’s outstanding economic theorists of the twentieth century, ‘undoubtedly the most distinguished economic theorist of his time in India’ is the late I. G. Patel’s assessment (Vol. III, 1). A.K., as he was usually known, was an extraordinary teacher; he wrote a great amount, amazingly so when we read of the huge amounts of time he gave to his students, to prolonged discussions with friends and colleagues (overlapping sets), as well as corresponding with economists and others all over the world. His collected writings have now been gathered together in the three volumes under review, expertly and lovingly edited by Dasgupta’s daughter, Alaknanda Patel, also an economist. She led a devoted team for the task, including her late husband, I. G. Patel, and her brother, Partha Dasgupta, both outstanding economists who knew the work of the older Dasgupta very well indeed.

I take the Cambridge approach to economics to mean the approaches of the great days of the Faculty of Economics and Politics in Cambridge (it is now, significantly, the Faculty of Economics – period). Those days were principally associated with the development of Economics as a separate Tripos1 from 1903 on and ending with the retirement, then deaths of the first generation of Keynes’s ‘pupils’ and/or close colleagues – Piero Sraffa, Joan Robinson, Austin Robinson, Richard Kahn, James Meade, Nicky Kaldor, David Champernowne and Brian Reddaway – in the 1980s and 1990s.

May I thank the original inhabitants of the land on which we now meet, for their courtesy in having us as their guests?† Just over 14 years ago, I gave the second Donald Horne Address on ‘Markets, Madness and a Middle Way’ (I have a horrible feeling it was also the last Horne Address). Tonight I want to revisit some of the themes and issues I raised then. February 1992 was a strategic time in which to reflect upon and assess the emerging or emerged effects of the Monetarist experiment in many advanced capitalist economies, together with the rise to dominance of neo-liberal policies backed up by the arguments of economic rationalists. It was also an appropriate time to try to persuade the then Prime Minister, Paul Keating, to have second thoughts about some old-fashioned theories and policies which the ALP government had jettisoned almost entirely but nevertheless were still maintaining relatively open minds about, as the law of unintended consequences began to emerge explicitly and openly.

Maynard Keynes’s best known remark is: ‘In the long run we are all dead’ (Keynes (1923)???; C.W., vol. IV, 1971, 65, emphasis in original). This led an IMF wit some years ago to crack: ‘Well, he’s dead and we’re in the long run.’ Though Keynes’s remark is well known, its context is not. It occurs in his 1923 Tract on Monetary Reform in which he is cheeking his old teacher, Alfred Marshall. For he continued: ‘Economists set themselves too easy, too useless a task if in tempestuous seasons they can only tell us that when the storm is long past the ocean is flat again’ (65). He was arguing for a change in emphasis, from concentrating on the economics of the long period, of the long-period determination of normal competitive equilibrium prices and quantities by the forces of supply and demand, Book V of Marshall’s Principles, then the bible of most English-speaking economists, to more attention to analysis of, and policy for short-run happenings. But, just before he died, in his last article in the Economic Journal, in speeches to the House of Lords and at his Political Economy Club at Cambridge (by then presided over by Dennis Robertson), he bemoaned the fact that the pendulum had swung too far the other way, to an undue concentration on the short period and the neglect of fundamental and lasting truths to be found in the insights of our founder Adam Smith and Keynes’s own mentor, Marshall.

Tom and I knew one another for 35 years.† Our close friendship dates from the late 1960s, after Tom had made a major shift in his approach to economics. This followed his year at MIT in 1965–66 where, listening to Bob Solow’s lectures, the significance of Joan Robinson’s critique of neoclassical theory and method fell into place (see Harcourt, 1991, 42, and Abe Tarasofsky’s moving account of this episode quoted in the Preface of Harcourt et al. (eds), 1994, xii). Tom immediately took up the implications of the critique and started to spell them out in his own work. This was a courageous decision. It removed him from being regarded as one of the most promising young theorists in mainstream economics in Canada to an unpopular maverick position for which there was little understanding and even less tolerance among his peers.

Keith Frearson was born to store-keeper parents, William Allan Frearson and Olive Elizabeth, née Roberts, in the small wheat-farming town of Tammin in Western Australia. He was the sixth of eight children – he attributed his second name to the fact that his mother had lost count. He was a RAAF navigator in Lancasters in Bomber Command during World War II. He beat the odds many times in an exceptional number of flights over Germany (including the raid on Dresden) for which he was awarded the Distinguished Flying Cross (DFC). These horrific experiences undoubtedly affected him and his behaviour for the rest of his life though he rarely spoke of them except in typical Frearson jests.

Brian Reddaway was born on 8 January 1913 in Cambridge into a Cambridge ‘gown’ family. His father, William Fiddian Reddaway, was an historian (of Eastern Europe), a fellow of King’s College and the first Censor of Fitzwilliam House. His mother was Kate Waterland Sills. Except for two years in Australia at the University of Melbourne (1936–38), Cambridge was always to be his base. He died in Cambridge on 23 July 2002 after a short illness. Reddaway went to King’s College School (1920–24), Lydgate House (Boarding) School, Hunstanton (1924–26) and Oundle School (1926–31). He came up to Cambridge (King’s) as a Scholar in Natural Sciences in October 1931 and decided to read for Part I of the Mathematics Tripos before going on to read Chemistry in Part II of the Natural Sciences Tripos.

Sukhamoy Chakravarty, who died in Delhi on 22 August 1990, was internationally respected as an academic economist of the highest distinction. Like Maynard Keynes, he was one of those rare scholars who are able successfully to bridge the gap between the world of learning and practical affairs. For over 20 years he worked at the centre of Indian economic planning, either as a member of India’s Planning Commission or as one of its chief advisers. At his death he was chairman of the Council of Economic Advisers to the Indian Prime Minister, having served three successive prime ministers, and was also a professor at the Delhi School of Economics (where he did a full stint as a devoted lecturer and researcher).

David Champernowne died in Devon on 19 August 2000 at the age of88.† Though he was not directly associated with the Cambridge Journal of Economics, his major contributions both belong to and serve to extend the approach to economics which the journal is dedicated to preserve and advance. We wish therefore to record our appreciation of his life and work. Champernowne was born in Oxford on 9 July 1912. His family roots, though, were in Devon. He was to hold posts at the LSE, Cambridge and Oxford; indeed, he held chairs in both ‘ancient universities’. His undergraduate college was King’s. He read mathematics (he was supervised with Alan Turing who became a close friend and with whom he was to design and construct a chess computer, the ‘Turochamp’, which was capable of beating bright beginners).

Robin Matthews held the two most senior chairs of economics in the UK – the Drummond Chair at Oxford (1965–75, succeeding John Hicks) and the Chair of Political Economy at Cambridge, ‘Marshall’s Chair’, (1980–91, succeeding Brian Reddaway). His many contributions to the discipline, the profession and the community make it abundantly clear why. He described his empirical work as economic history written in the style of an economist. His teaching, research and administrative duties over the years made him more and more aware of the inadequacies of ‘the conventional model of rational individualistic utility maximisation,so that increasingly his] interests moved toward the institutional and psychological underpinnings of economic behaviour’.

Maynard Keynes called Thomas Robert Malthus, ‘the first of the Cambridge economists’. He provided a brilliant description of Malthus’s approach: Malthus was above all, a great pioneer of the application of a frame of formal thinking to the complex confusion of the world of daily events. Malthus approached the central problems of economic theory by the best of all routes. He began … as a philosopher and moral scientist, … brought up in the Cambridge of Paley, applying the à priori method of the political philosopher. He then immersed himself … in the facts of economic history and of the contemporary world, applying the methods of historical induction and filling his mind with a mass of the material of experience … finally he returned … to the pure theory of the economist proper, and sought … to impose the methods of formal thought on the material presented by events, … to penetrate these events with understanding by a mixture of intuitive selection and formal principle and thus to interpret the problem and propose the remedy

The Economics Tripos at Cambridge celebrated its centenary in 2003 with a number of brief lectures and, as is usual at Oxbridge, with food and drink.† My brief (in two senses) was to discuss some academic highlights of those first 100 years. What follows is a shorter version of my lecture. As background, may I point out that over this period, Cambridge economists made seminal, often classic contributions to welfare economics, employment and monetary theory, the theory of the firm and economic history, including history of economic theory ?