Joan Robinson on the nature of economics and the uniqueness of humanity

Joan Robinson (1973)

Joan Robinson was Professor of Economics at Cambridge. She was a leading figure in what became the post-Keynesian school, having been one of the group of academics surrounding Keynes as he developed the ideas which led to his General Theory in the 1930s.

She was highly productive and covered a broad range of subjects during her life, from the economics of imperfect competition to the theory of economic growth, as well as popular books on economic philosophy and the nature of society. She was well-known for being fierce in debate and for her tireless efforts at critiquing neoclassical theory.

The following is a brief extract from an interview with Diego Pizano conducted in 1977 and included in his Conversations with Great Economists (p.90):

“Keynes was certainly aware that an economic approach to history was only one, yet dispensable, element in the study of society. Economics is a discipline constructed on the basis of elements of many sciences – geography, biology and psychology – and it interacts with a whole range of subjects from the history of culture to politics, law and religion. Keynes had a very good background in most of these disciplines but it is probably true that he was not sufficiently aware of the connections that certainly exist between the economic and the biological process.

…I would like to say that it is crucial to understand the biological basis of human behavior to shed light on the problem of the origin of society. Man was once defined as a tool-making animal, but now it has been discovered that chimpanzees construct tools designed for particular uses. Neither tools, nor manners characterize man: language does. The invention of a procedure that enabled man to convey information about things not present and to speculate about things not known was the great step. Language made social life much richer and complex and this obviously implies that the economic life of man is much more complicated than that of any other species.”

Good reasons to become a Keynesian — LARS P. SYLL

Below is a revealing quote by Richard Posner from today’s post on the blog of Lars P. Syll. It sums up some of the economics mainstream’s attitudes towards Keynes’ original work, how neglected it is by those arguing against its importance, and its continuing relevance.

I first read Keynes’ General Theory when in my final year of school, before I went on to university. While finding it difficult, it was also inspiring to me and full of insight. In particular, the notion that unacceptable levels of unemployment are a periodic characteristic of capitalist economies and require government action to remedy, truly hit home. It cemented my Keynesian position for some years.

I have since rowed back from being a confident and dedicated Keynesian, although I remain influenced by leftist and other radical economists. Where appropriate, I find that the interdisciplinarity of political economy can also be helpful, not least in the study of development as a process of economic and social change.

Many of those now known as post-Keynesians, who profess to carry the true mantle of Keynes’ original thinking, also wrote on economic development. This is true in the case of key figures Michal Kalecki, Nicholas Kaldor and Joan Robinson, all of whom strongly influenced the so-called Cambridge School and its radical or heterodox offshoots.

Posner’s full quote can be found at the link below.

Until [2008], when the banking industry came crashing down and depression loomed for the first time in my lifetime, I had never thought to read The General Theory of Employment, Interest, and Money, despite my interest in economics … I had heard that it was a very difficult book and that the book had been […]

via Good reasons to become a Keynesian — LARS P. SYLL

Some (political economy) thoughts on the response to Covid-19 – capitalism, socialism and the role of the state

The big state is back with a vengeance, if it ever went away. The apparent suddenness and rapid escalation of the spread of the coronavirus has called forth an almost equally rapid increase in the scope of state intervention in many nations. Countries that had spurned a move to state capitalism have suddenly found themselves having to embrace it.

Authoritarian state capitalist, though ostensibly communist, China, took a while to respond to the outbreak, but once it did, it acted forcibly and, for now at least, it seems to have stemmed the tide. But democratic Japan, South Korea and Taiwan seem also to have responded relatively effectively to the outbreak, at least compared with many other countries.

The UK government has so far pledged a massive fiscal programme of stimulus, including wage subsidies, bridging loans for firms, and at the time of writing is about to announce support for the self-employed as well. Private sector rail company franchises have been suspended in the wake of collapsing ticket sales. The health service has been promised whatever it needs financially to deal with the virus. Private firms are being asked to switch production to medical supplies as fast as possible. The post-crash decade of austerity was already somewhat at an end, but now it has been dramatically, inevitably put into reverse gear. Continue reading

What happens when economics doesn’t reflect the real world?

A nice interview with Anwar Shaikh of the New School for Social Research, whose magnum opus, Capitalism: Competition, Conflict, Crises was published in 2016. In this video he outlines the basics of his framework as developed in the book. He describes his approach as being part of political economy, with the social and the economic inextricably connected.

Shaikh cites as his main intellectual influences Adam Smith, David Ricardo, Karl Marx and John Maynard Keynes. He argues that it is profitability that is the prime motivation for economic activity under capitalism. This idea underpins his theoretical approaches to growth, unemployment, inflation, money, prices, international trade, finance and so on.

He emphasises the importance of balancing theory with empirical evidence. He also makes a strong case for his theory of ‘real competition’, which he describes as akin to a war, as opposed to perfect or imperfect competition.

Geoff Harcourt on Keynesian theory

In this enlightening video, Professor Geoff Harcourt, who was a distinguished pupil and colleague of Joan Robinson at Cambridge University, discusses a range of issues in Keynesian and post-Keynesian economics.

He covers the need for pluralism in economics; his definition of post-Keynesianism; the work of some of its key protagonists; uncertainty and its impact on business and the economy; the capital theory debates; and finally his vision for analysing a modern capitalist economy, and his most enduring intellectual influences.

On Joan Robinson

Joan Robinson was a brilliant economist at the University of Cambridge and a member of the ‘circus’ of thinkers led by John Maynard Keynes in the 1930s. In the lecture below, John Eatwell, a pupil and co-author of Robinson, and who advised the British Labour Party on economic policy in the 1980s and 90s, gives a very clear and stimulating introduction to her life and work.

Eatwell covers topics in economics addressed by Robinson that remain highly relevant today, such as disguised unemployment and the trade protectionism that tends to result from a deflationary global economic environment.

As the talk makes clear, Robinson published path-breaking work on imperfect competition as distinct from theories of perfect competition and monopoly; she later contributed to the development of Keynes’ magnum opus The General Theory, which put forward an explanation for the persistence of mass unemployment under capitalism and gave birth to the modern discipline of macroeconomics. After the war she attempted to extend Keynes’ theory to deal with problems of economic growth in a number of books and papers, particularly her own magnum opus The Accumulation of Capital.

A strong intellectual personality and something of a zealot, one of Robinson’s most notable quotes regarding economics was: “I never learned mathematics, so I’ve had to think”.

As a liberal socialist, latterly she increasingly favoured central planning to achieve full employment and social justice, as well to promote economic development in the poorest countries. On this, as well as in her enthusiasm for Maoist China, she was perhaps naive and misled and these aspects of her thinking discredited her somewhat in her later years.

Robinson also supervised Amartya Sen who went on to win the Nobel Memorial Prize for his work on welfare economics.

Thanks to the blog The Case For Concerted Action for sharing this video.

Mark Blyth – the top five books on how the world’s political economy works

Here is a compelling interview with political economist Mark Blyth, author of Austerity: the History of a Dangerous Idea, discussing his top five books on how the world’s political economy works. He includes works by Keynes, Polanyi, Hirschman and Moore.

I admit that of the five I have only read Keynes’ General Theory. I have also dipped into some of Albert Hirschman’s writings, though not these two. Even if you don’t plan to read them, the interview with Blyth is worth a look, as he summarises what he sees as the key insights from each of the five books.

Below is an excerpt from the beginning of the interview:

“Well…[the world’s political economy]…doesn’t work according to the textbooks. If you look at economic textbooks, the whole world is meant to work according to the logic of differential calculus; there are these reciprocal relationships – one side goes up and one side goes down. But deep within it there’s a paradox. On the one side you have Adam Smith, where everyone is pursuing their own self-interest leading to an outcome which is better than any of them could have intended. On the other, you have John Maynard Keynes. Today Keynes is thought of as someone who just talks about deficit spending and so on, but that’s just complete rubbish. Keynes’s central message is that individual rational action can be collectively disastrous. So, if you have a series of economic models in a text book where everything balances out, it’s much more attuned to the world working the way that Smith would like to tell us.”

Wholes and parts: economics in the spirit of Keynes

A nice little post at the link below from Lars P. Syll quoting John Maynard Keynes on what he calls ‘organic unity’. Another way of putting it is that the whole can be more than the sum of its parts. This is the basis for the discipline of macroeconomics as distinct from microeconomics. Modern mainstream macroeconomics insists on ‘microfoundations’ and neglects the concept of organic wholes, which runs against the spirit of Keynes and his wish to establish a distinct macroeconomics.

Organic wholes can be seen as emergent from, but irreducible to their constituent and interacting parts. Thus while one can still pay attention to microfoundations (the parts), the behaviour of a larger whole can be very different from that deduced from simply adding the behaviour of the parts together.

In economics, the parts might be individuals, firms or households, while the larger wholes might be an economy at the national or global level. Of course, one could think of these concepts in ways which reach beyond the discipline of economics, which conflate wholes and parts and provide useful insights: an individual can be thought of as a ‘whole’ rather than a ‘part’, with the parts defined biologically, such as organs, cells etc, with the whole human being and its functioning as emergent from but irreducible to its constituent parts.

Returning to economics, a national economy can be analysed as a part of the global economy, leading to the possibility of certain macroeconomic paradoxes. So an economy can be seen as both a whole and a part, depending on how we look at it.

The unpopularity of the principle of organic unities shows very clearly how great is the danger of the assumption of unproved additive formulas. The fallacy, of which ignorance of organic unity is a particular instance, may perhaps be mathematically represented thus: suppose f(x) is the goodness of x and f(y) is the goodness of y. […]

via Additivity — a dangerous assumption — LARS P. SYLL

Keynes against capitalism

Crotty Keynes Against CapitalismJohn Maynard Keynes did not wish to merely save capitalism ‘from itself’ but to replace it with ‘Liberal Socialism’. That is the controversial claim made in a new book by the distinguished radical economist James Crotty, whose work ‘attempts to integrate the complementary analytical strengths of the Marxian and Keynesian traditions’.

The book, Keynes Against Capitalism, subtitled His Economic Case for Liberal Socialism, draws heavily on textual evidence found in the collected works of Keynes himself, from the 1920s through to the end of his life in 1946. This is both its strength and its weakness.

Without wishing to get into debate over semantics, one could find oneself agreeing with much of the argument ie that Keynes did in fact wish to replace capitalism with a radically different system called Liberal Socialism, but to say, in some ways, so what? The book is a fine scholarly read, but I found myself questioning whether Keynes’ (Crotty’s?) Liberal Socialism, for all its admirable socially transformative aims, would be both feasible and sustainable. Continue reading

Keynes and the conceptual cul-de-sac of General Equilibrium

Economist John Maynard Keynes

“The reasons for which Keynes’s arguments fail to translate into the orthodox paradigm are not because they are vague, confused or poorly formulated. They fail to translate, instead, because they identify and address crucial flaws in the structure and logic of the dominant paradigm. As Keynes himself put it, what he hoped to do is ‘convince [us] that Walras’ theory, and all others along those lines are little better than nonsense’. He was able to see, like Kornai, that the Walrasian ideal is ultimately ‘a special branch of mathematics’, which employs ‘logical reasoning [but] from arbitrary assumptions’, making it more an ‘intellectual experiment’ than a theory in the mould of the sciences.

The real problem which far too many economists have had with understanding Keynes’s arguments exactly as he expressed them is an intransigent desire to believe that, as once said by Debreu in an interview, ‘the superiority of the liberal economy is incontestable and can be mathematically demonstrated’. The problem with this conviction is that the economy that Debreu had in mind has little connection with reality. It is time, if we want in the future to avoid the terrible waste, not just of the past ten years, but of the many other times that liberal economies have so clearly failed to provide for full employment, that we turn our attention to understanding more accurately not the economic society in which we might wish to live but the one in which we actually live. It is in this regard that Keynes, read without the desire to adhere to the conventional wisdom of the Walrasian General Equilibrium paradigm, provides a truly valuable starting point.”

Mark Pernecky and Paul Wojick