Paul Davidson (23 October 1930 - 20 June 2024)

Overview

Paul Davidson took Keynes' General Theory of Employment Interest and Money seriously. The interpretation in mainstream textboooks misses important points. Keynes' book was about theory, not primarily about (short-run?) fiscal or monetary policy. Keynes does not explain persistent unemployment from imperfections or sticky or rigid money wages or prices. A general theory is one that has less axioms than the special case treated by, say, Marshall. Davidson identified, specifically, three axioms relaxed or rejected by Keynes:

• Neutrality of money. For Keynes, money is non-neutral in all runs.
• Gross substitution. Money has no substitutes; it cannot be produced from labor.
• Ergodicity. Important time series in economics can be non-ergodic. Numerical probabilities cannot necessarily be assigned to all possible outcomes. Some might not even be known.

Davidson, following Weintraub, took overall economic activity from a Keynes-like model of aggregate supply and demand. This is neither a 45 degree diagram found in, say, Samuelson's textbook, nor what is in current mainstream textbooks. Aggregate supply and demand are curves in the space of monetary proceeds and employment. Their intersection is the point of effective demand. In Davidson's development, investment is autonomous and not a function of current income.

Davidson's perspective led to conflict with other Post Keynesians. Labor markets do not clear, given either competitive or non-competitive markets. One does not need Kalecki's degree of monopoly. At times, he appreciated the internal critique of marginalism offered by Sraffa those developing his ideas. But he thought that they did not appreciate Keynes' emphasis on uncertainty. On the other hand, some, such as Eatwell, might argue that Davidson's emphasis on money was an imperfection. I think both perspectives assert that Keynes' rejection of Say's law is not confined to the short run.

Maybe developments in the theory of endogenous money are also in tension with some of Davidson's work. Keynes assumed in the General Theory, but not in the Treatise on Money, that the monetary authority could vary the supply of money.

Davidson also wrote about various policy suggestions and international financial institutions. For example, he did not think the Tobin tax would achieve its goals.

Davidson insisted that the Post in "Post Keynesianism" should be capitalized and that no hypen should seperate the words.

Some Aspects of Professional Life

Davidson received an undergraduate degree from Brooklyn College. He performed research in biochemstry at the University of Pennsylvania during 1950-1952. He performed military service during the Korean War.

He switched to economics. Sidney Weintraub supervised his doctorate dissertation at the University of Pennsylvania. He moved to Rutgers in 1958. I think his stint as an executive at an oil company in the early 1960s influenced his views on Keynes' user cost.

He helped found the Journal of Post Keynesian Economics in 1978 and co-edited it with Sidney Weintraub.

After a purge of heterodox economics at Rutgers, Davidson moved, in 1986, to the University of Tennesee at Knoxville. I know of a number of heterodox economists who came out of Rutgers when Davidson was there. The career of Anne Mayhew, an institutionalist, overlapped with Davidson at the University of Tennesee.

In more recent years, Davidson was a visiting scholar at the New School for Social Research, Bernard Schwartz Center for Economic Policy Analysis.

Obituaries elsewhere: Chicago Tribune, Greg Davidson on his father at Daily Kos.

Very Selective Bibliography

• Paul Davison. 1968. Money, portfolio balance, capital accumulation, and economic growth. Econometrica 36(2): 291-321.
• Paul Davison. 1972. Money and the Real world. Macmillan
• Paul Davison. 1989. The economics of ignorance or the ignorance of economics? Critical Review 3(3-4): 467-487.
• Paul Davison. 1991. Is probability theory relevant for uncertainty? A Post Keynesian perspective. Perspectives on Economics 5: 29-43.
• Paul Davison. 1994. Post Keynesian Macroeconomic Theory: A Foundation for Successful Economic Policy for the Twenty-First Century. Edward Elgar
• Paul Davison. 2007. John Maynard Keynes. Palgrave Macmillan
• J. E. King. 2002. A History of Post Keynesian Economics since 1936. Edward Elgar.

David Champernowne

No book-length biography of D. G. Champernowne exists, as far as I can see. Even his Wikipedia page is quite terse. Yet he advised and participated in important twentieth-century intellectual developments.

From Hodges biography of Alan Turing, I learned that 'Champ' was a friend of his. Champernowne did early work in programming chess-playing algorithms, along with Turing and Claude Shannon. Game-playing is one of those disappointing applications of Artifical Intelligence. What seems to work best, like ChatGPT, uses lots of processing power, while ignoring what experts in the subject matter say. Anyways, Champernowne was in on the invention of the computer.

Champernowne (1953-1954) published an appreciation and explanation of the English translation of von Neumann's article on economic 'equilibrium'. This was in the same journal issue. Von Neumann's model is classical in inspiration. No agents are maximizing utility. The composition of capital goods is found as a solution of the model. Champernowne acknowledges conversations with Kaldor and Sraffa. in writing this article.

I had not previously known about Chamernowne's (1952, 1953, 1973, 1988) work on the Pareto distribution, in the context of income distribution. I find the Pareto distribution useful in the context of extreme events.

His commentary on Joan Robinson's article kicking off the Cambridge Capital Controversy (CCC) was published in the same journal issue as Robinson's article. He explicitly notes the possibility of capital-reversing and, if I understand correctly, provides a numerical example. And he develops chain-index measure of capital to enter in an aggregate production function when no such 'perverse' case exists.

Bibliography

• D. G. Champernowne. 1945-1946. A note on J. v. Neumann's article on 'A model of economic equilibrium'. The Review of Economic Studies 13(1): 10-18.
• D. G. Champernowne. 1952. The graduation of income distribution. Econometrica 20(4): 591-615.
• D. G. Champernowne. 1953. A model of income distribution. Economic Journal 63(250): 318-351.
• D. G. Champernowne. 1953-1954. The production function and the theory of capital: a comment. The Review of Economic Studies 21(2): 112-135.
• D. G. Champernowne. 1973. The Distribution of Income between Persons.
• D. G. Champernowne and Frank A. Cowell. 1998. Economic Inequality and Income Distribution.
• Andrew Hodges. 2015. Alan Turing: The Enigma, updated edition. Princeton University Press.

Toni Negri, Bob Solow, Tony Thirwall

I feel each of these three needs more than I am able to say. I find intriguing radicals attacking communist parties from the left, as Negri and others (Autonomia) did in Italy in the 1960s and 1970s. I draw on those who have all sorts of arguments with Solow. I find him witty. Thirwall I associate with Nicholas Kaldor and development economics.

• Antonio Negri (1933 - 2023). Repost of 2015 interview from Democracy Now. Libcom page of works related to Negri.
• Robert Solow (1924 - 2023): MIT obituary. Russell Sage Foundation obituary. 1987 Nobel announcement.
• Tony Thirwall (1941 - 2023). Repost of an obituary from John McCombie.

Victoria Chick (1936 - 2023), James Crotty (1940 - 2023), Makoto Itoh (1936 - 2023)

I cannot write as much about these economists as they deserve.

• INET obituary for Victoria Chick. Her book, Macroeconomics after Keynes has a pun as its title. She is writing about macroeconomics that temporally follows Keynes and macroeconomics that builds on Keynes. The two do not need to be the same. Her book is good on the different time scales in the General Theory. Taking the short run to be when fixed capital ('plant') is given is different than defining the short run by given expectations about returns from investment.
• James Crotty's page at the Political Economy Research Institute (PERI). An obituary. I have not got very far yet into his boock, Keynes Against Capitalism: His Economic Case for Liberal Socialism.
• John Bellamy Foster's review, in the Monthly Review, of Makoto Itoh's book, The Basic Theory of Capitalism: The Forms and Substance of the Capitalist Economy. Phil Armstrong's review, in the Monthly Review, of Makoto Itoh's book, Value and Crisis: Essays on Marxian Economics in Japan. I have previously mentioned the Uno school.

I know even less about Antonia Campus, a Sraffian economist who also recently passed. I have already written about Luigi Pasinetti, but I will here note INET's obituary.

Luigi L. Pasinetti (1930 - 2023)

I have been inspired by Pasinetti's clear expositions. A lot of my work is an attempt to build on his theory of structural economic dynamics. Some highlights of Pasinetti's career as an economist:

• A derivation, in Pasinetti (1962), of the Cambridge equation, r = g/s_c. Along a steady-state growth path, the rate of profit must be equal to the quotient of the rate of growth and the savings rate out of profits. This is an extension of Keynes' theory that investment creates the needed savings to the long run, and it applies whether or not workers save.
• First numerical example of the reswitching of techniques in a model of an economy as a whole, with multiple industries producing inputs for one another. Pasinetti (1966) is an update of a paper presented previously in Rome and a refutation of Levhari's supposed non-switching theorem. Pasinetti (1969), in which he points out Solow relies on an 'unobtrusive postulate' that a lower rate of profits is always associated with the adoption of a more capital-intensive technique, is another classic contribution to the Cambridge Capital Controversy.
• Pasinetti (1973) develops tools for understanding vertical and hyper-vertical integration in input-output models.
• Pasinetti (1977), although not considering joint production, is a typically clear exposition of post-Sraffian price theory. I also often turn to Pasinetti (1980).
• Pasinetti (1981) and Pasinetti (1993) set out the theory of structural economic dynamics. In the second, for clarity, he considers production in which labor is the only input.

In industrial economies, production and consumption take place in a man-built world, with technology embodied in the plant and equipment available at the start of a production period. Pasinetti argues that one should analyze such an economy on two levels, a 'natural' level and an institutional level. The term 'natural' suggests a connection to Adam Smith's analysis. He attempts to provide a theory organized around nine principles.

The 'natural' level considers prices of production. Pasinetti allows the coefficients of production to decline with human learning. The composition of demand evolves as described by Engel curves. He notes that, at this level, a macroeconomic principle arises that must be met if effective demand is to be such that prices of production are to be realized. So, like Richard Goodwin, he draws a connection between Leontief's input-output analysis and Keynes' theory. Much of Keynes' theory, such as liquidity preference, I think is about what Pasinetti calls the institutional level. Pasinetti's work has inspired many, for example, Ian Wright.

References

• Baranzini, Mauro L. and G. C. Harcourt (eds.) 1993. The Dynamics of the Wealth of Nations: Growth, Distribution and Structural Change: Essays in Honour of Luigi L. Pasinetti. Macmillan.
• Baranzini, Mauro L. and Amalia Mirante. 2018. Luigi L. Pasinetti: An Intellectual BiographyPalgrave Macmillan.
• Bellino, Enrico and Sebastiano Nerozzi (eds.) 2021. Pasinetti and the Classical Keynesians: Nine Methodological Issues. Cambridge University Press.
• Pasinetti, L. L. 1960. A mathematical formulation of the Ricardian system. Review of Economic Studies 27 (2): 78 - 98.
• Pasinetti, L. L. 1962. Rate of profit and income distribution in relation to the rate of economic growth. Review of Economic Studies 29 (4): 267 - 279.
• Pasinetti, L. L. 1966. Changes in the rate of profit and switches of technique. Quarterly Journal of Economics 80 (4): 503 - 517.
• Pasinetti, L. L. 1969. Switches of technique and the 'rate of return' in capital theory. Economic Journal, 79(315): 508 - 531.
• Pasinetti, L. L. 1973. The notion of vertical integration in economic analysis. Metroeconomica. 25 (1): 1 - 29.
• Pasinetti, L. L. 1974. Growth and Income Distribution: Essays in Economic Theory. Cambridge: Cambridge University Press.
• Pasinetti, L. L. 1977. Lectures on the Theory of Production. Columbia University Press.
• Pasinetti, L. L. (ed.) 1980. Essays on the Theory of Joint Production. Columbia University Press.
• Pasinetti, L. L. 1981. Structural Change and Economic Growth: A Theoretical Essay on the Dynamics of the Wealth of Nations. Cambridge: Cambridge University Press.
• Pasinetti, L. L. 1993. Structural Economic Dynamics: A Theory of the Economic Consequences of Human Learning. Cambridge: Cambridge University Press.
• Pasinetti, L. L. 2007. Keynes and the Cambridge Keynesians: A 'Revolution in Economics' to be Accomplished. Cambridge: Cambridge University Press.

John Barkley Rosser, Jr. (1948-2023)

Barkley Rosser's professional contributions include the study of complex dynamics in economic models, development and transition economics, observations on the sociology of economists, and editorship. I knew him through Internet discussions and his editing of one of my articles. Peter Dorman has an obituary.

Rosser's major book on complexity economics went through two editions. I am not sure I ever made it totally through his book. I think of him as building on, in the Post-Keynesian tradition, some work by Nicholas Kaldor and Richard Goodwin, for example. Plenty of work on mainstream models can also display complex dynamics. I find particularly intriguing Rosser's work connecting the reswitching of techniques to a cusp catastrophe. The one aspect of his comparison and contrast of complex dynamics with dialectics I recall is that it is a principle of dialects is that a sufficient quantitative change can be qualitative. This make sense to me in terms of bifurcations of dynamical systems and the exploration of perturbations in parameter spaces.

Rosser also looked at the sociology of economics. With David Colander and Richard Holt, he distinguished between the dichotomy between mainstream and non-mainstream economics and the dichotomy between orthodox and (traditional) heterodox economics. Traditional heterodox economics is a grouping of schools of thought such as Austrian, (old) institutional, Post-Keynesian and Marxist economics. This way of thinking ends up with the possibility of mainstream heterodox economics, which might include behavioral economics, complexity economics, agent-based economics, and complexity economics. These three also argued that cutting edge mainstream economics is more pluralist and open than traditional economists say. I hadn't thought this before, but maybe Rosser was open to this because he personnally straddled Post-Keynesian and mainstream economics.

Rosser was a professor at James Madison University. He was a long-time and successful editor of the Journal of Economic Behavior and Organization (JEBO). He stepped down as editor-in-chief in 2010 and later founded a new journal, the Review Of Behavioral Economics (ROBE).

I want to mention a couple of times his personal life intersected with history. His father, John Barkley Rosser, Sr. was a great logician, one of the first to appreciate and extend Kurt Gödel's incompleteness theorem. He showed that Gödel could dispense with omega inconsistency and stick with just inconsistency in the statement in the theorem. Apparently his father was an able academic administrator. In 1970, he was director of the Army Mathematical Research Center (AMRC), in Sterling Hall at the University of Wisconsin. I believe that Rosser, the son, was opposed to the Vietnam world. On 24 August 1970, some radicals blew up Sterling Hall, killing one. This resulted in some tension between father and son at the time, as he has blogged about. Yeah, if some of your son's crowd blow up your office, you might have an issue.

Rosser married Marina Rostislavovna Vcherashnaya. His marriage involved overcoming the refusal of the Soviet Union to live up to the Helsinki accords. I believe that this was an important case.

References

• David Colander, Richard P. F. Holt, and J. Barkley Rosser. 2004a. The changing face of mainstream economics. Review of Political Economy. 16(4):
• David Colander, Richard P. F. Holt, and J. Barkley Rosser. 2004b. The Changing Face of Economics: Conversations with Cutting Edge Economists. University of Michigan Press.
• John Guckenheimer and Philip Holmes. 1983. Nonlinear Oscillations, Dynamical Systems, and Bifurcations of Vector Fields. Spring-Verlag.
• Yura A. Kuznetsov. 1998. Elements of Applied Bifurcation Theory, second edition. Springer.
• J. Barkley Rosser. 1983. Reswitching as a cusp catastrophe. Journal of Economic Theory. 31(1): 182-193.
• J. Barkley Rosser. 2000. Aspects of dialectics and non-linear dynamics. Cambridge Journal of Economics. 24(3): 311-324.
• J. Barkley Rosser. 2013. From Catastrophe to Chaos: A General Theory of Economic Discontinuities 2nd editions. Springer.
• Peter Schmitt and Doug Erickson. 2020. The blast that changed everything. On Wisconsin

Herb Gintis (1940 - 2023)

An Academic Lecture from Gintis

I know of Herb Gintis more of as an Internet personality than through his work, mostly with Samuel Bowles. I also know of him as an important historical figure in one of those periodic purges of the Harvard economics departments.

As I understand it, he went to Harvard for a graduate degree towards the end of the 1960s, intending to study mathematics. He was against the Vietnam war and fell in with a radical crowd. Given this interest in worldly matters, he became an economist. Since he was a radical, he began exploring Marx. Somewhere around this time, he met Samuel Bowles. They could not find anybody in the economics department to teach them Marx and, I guess, learned Marx through self study. The Union for Radical Political Economics was founded in 1968

Harvard had to decide whether to tenure radical economists in the early 1970s. In addition to Bowles and Gintis, Arthur MacEwan and Thomas Weisskopf enter the story here. The faculty tenured Stephen Marglin before they realized that he had changed to be more of a radical. Students protested, and Kenneth Arrow, John Kenneth Galbraith, and Wassily Leontief supported hiring radical economists. But it was not to be.

Meanwhile, students were protesting at the University of Massachusetts, Amherst, about the decision to let Michael Best go. The UMass economics department was broken, then, I guess independently of any controversy over radical economics. Bowles, when considering an employment offer, insisted that they other a few others so he would have somebody to talk to about his research. Evenually, UMass decided to tenure Bowles, Gintis, Stephen Resnick, and Richard Wolff. Richard Edwards was the other of the original five, albeit he was not offered tenure. These decisions established the reputation UMass Amherst enjoys to this day. The radical and conventional economists did have an initial period of learning how to get along with one another.

Bowles and Gintis studied schooling in America and developed the theory of contested exchange. This theory looks at principal agent problems, information asymmetries, transaction costs, and so on. Somewhere along the way, the radicals developed a split between Bowles & Gintis and Resnick & Wolff. The latter two were more interested in continential and postmodern philosophy, while Bowles and Gintis turned away from Marx in the 1980s. They became more interested in evolutionary game theory and behavioral economics, for example. They sought a general theory to unify the human sciences.

From about the 1990s on, Gintis was quite active on the Internet. He participated in PKT and PEN-L email discussion lists and the sci.econ Usenet newsgroup. I found out that his prefered exercise regimen was big on weight lifting. He has an extensive set of Amazon reviews. His interventions in these discussion groups could be irritating. He was well-known as a former radical, but he now was a defender of mainstream economics. He thought that undergraduate teaching was outdated and extremely poor, but that advanced researchers were open to new ideas and not driven by pro-capitalist ideology.

• Peter Dorman's obituary.

References

• Samuel Bowles and Herbert Gintis. 1993. The revenge of homo economicus: contested exchange and the revival of political economy. Journal of Economic Perspectives 7(1): 83-102.
• Samuel Bowles and Herbert Gintis. 2000. Walrasian economics in retrospect, Quarterly Journal of Economics 115(4): 1411-1439.
• Herbert Gintis. 2000, 2009. Game Theory Evolving: A Problem-Centered Introduction to Modeling Strategic Interaction, Second edition. Princeton University Press.
• Tiago Jorge Fernandes Mata. 2005. Dissent in Economics: Making Radical Political Economics and Post Keynesian Economics, 1960-1980.. London School of Economics and Political Science. PhD dissertation.
• Tiago Mata. 2009. Migrations and boundary work: Harvard, radical economists, and the committee on political discrimination. Science in Context 22(1): 115-143.

Axel Leijonhufvud, 9 June 1933 - 5 May 2022

I think it should be well-known that the Keynesian economics in Paul Samuelson's textbook, for example, does not capture a lot of the theory in Keynes General Theory. Axel Leijonhufvud, along with Robert Clower, raised this point in the 1960s from a standpoint outside of the emerging Post Keynesianism of Sidney Weintraub, Paul Davidson and Keynes' immediate colleagues at Cambridge.

I do not recall Leijonhufvud's book well. As I recall, much discussion occurred over the previous few decades around which selection of a few markets would be good to organize macroeconomics around and whether it mattered. Candidate markets were for goods, bonds, stocks, money, and labor. Leijonhufvud thought that Keynes organized his theory around a different selection than that selected by Keynesian economists. In the General Theory, Keynes insists that the line between bonds and money is not sharp. I think Leijonhufvud emphasized also that Keynes was a Marshallian, not a Walrasian. Clower suggested that the budget constraint for consumers should, in disequilibrium, be based on actual prices, not prices that would prevail after the completion of some sort of tâtonnement process. Leijonhufvud, I guess, emphasized interest rates and the discoordination possible with savings and investment. A decision to defer spending is not a decision to order consumption goods at a definite future date.

In later work, Leijonhufvud explored Wicksell's macroeconomics. (By the way, Gunnar Myrdal developed a macroeconomics much like Keynes from an immanent critique of Wicksell.) Leijonhufvud developed the difficult-to-formalize notion of the corridor. There is a range of prices, wages, and interest rates in which markets act normally and tend to fall back into equilibrium. If markets fall outside that range, expectations will be so upset that one cannot expect the economy to fall back onto a full-employment equilibrium path without some guidance.

I suppose I ought to mention Leijonhufvud's interest in Hayek too.

Selected Works by Leijonhufvud

• Keynes and the Keynesians: A suggested interpretation. American Economic Review 57(2) 1967: 401-410.
• On Keynesian Economics and the Economics of Keynes: A Study in Monetary Theory , Oxford University Press, 1968.
• Life among the econ, Western Economic Journal 1973.
• Information and Coordination: Essays on Macroeconomic Theory , Oxford University Press, 1981.

Geoffrey Harcourt (1931-2021)

This overview of Geoff Harcourt's work is insufficient. He was interested in economics as a means to a better world. Consequently, he offered political advice, sometimes in the form of 'package deals', in the context of Australian politics, which I know nothing about. Also, I do not know Australian rules football, rugby, or cricket. Apparently, he was very good at mentorship and at introducing young scholars to the professional community. Capital theory is a very contentious topic, but Harcourt was on good terms with all sides.

Geoffrey C. Harcourt was born on 27 June 1931. He married Joan Bartrop in July 1955. Their children are Wendy, Robert, Timothy,and Rebecca. I had not known that the economist Claudid Sardoni married Wendy and was his son-in-law. He died on 6 January.

Harcourt attended the University of Melbourne as an undergraduate and came to Cambridge in July 1955. Nicholas Kaldor was his PhD. supervisor for a short while, but he later had Ronald Henderson as supervisor. His dissertation compared depreciation allowances at historical costs with capital consumption at replacement cost. What are the implications of these accounting conventions for the choice of technique and for taxes on profits? In Joan Robinson's golden age, historical cost, replacement cost, and the present value of the revenues expected from the use of capital equipment are all equal. Harcourt (1965) is one paper that emerged from this work.

Harcourt returned to Australia, to a lecturing post in Adelaide, in 1958. The rest of his professional life was shared between Cambridge and Adelaide. He lectured on Kaldor's growth theory and on Robinson's The Accumulation of Capital. I gather that Harcourt quite enjoyed working with some of his Australian colleagues such as W. E. G. Salter and Eric Russell.

From August 1963 to the end of 1966, he was in Cambridge, with a fellowship at Trinity. Although he reviewed Sraffa's book and co-wrote a paper on Sraffa's subsystems, he says he was mostly an observer of the controversies.

Now comes the work that Harcourt is most noted for. Mark Perlman visited Adelaide to convince Harcourt to write a survey article for the relatively new Journal of Economic Literature. I believe another author had backed out of surveying capital theory, and that author would not have focused on the Cambridge controversies. Harcourt wrote the first draft of his 1972 book while visiting Keio University in Japan. Cambridge University Press is in the process of re-issuing this classic, long out of print.

He found Noam Chomsky's 'The responsibility of intellectuals' inspiring and participated in direct action in Australia against the Vietnam war. He helped developed the Adelaide plan in the early 1970s, and was on the National Committee of Inquiry for the Australian Labor Party (ALP) in 1978-1979. Harcourt described his approach to political programs as 'horses for courses'. I think he may have also used this phrase to describe his approach to economic theory. His political programs included an incomes policy and something like the Tobin tax to curb speculation.

He took a year study leave at Clare Hall in 1972-1973, before returning to Adelaide University. Sometime in the 1970s Harcourt edited a conference volume on microfoundations, which, I gather, had quite a different flavor than the work of, say, Robert Lucas. Harcourt and Kenyon (1976) is one of a number of Post Keynesian works of the time relating markup pricing to firms' investment plans.

Harcourt left Adelaide for Cambridge in September 1982 and became a fellow at Jesus College. He retired in September 1998. I suppose I should mention somewhere his interest in intellectual history and his short biographies of economists in the Cambridge school, such as Richard Goodwin and Lorie Tarshis. The book by Harcourt and Kerr (2009) on Joan Robinson is an example. Most of his biographies are articles, though.

On 13 June 1994, Harcourt was awarded an Office in the General Division of the Order of Australia (AO). He was the president of Jesus College in Cambridge for most of 1988 to 1992. I do not know when he was in Cambridge and when he was in Adelaide for the last 20 years.

The list of references I append is very selective. I do not list the many volumes he edited or any articles in which he set out political programs or his views on politics and its relation to economics. Barkley Rosser has an obituary. Lars Syll links to an interview with Harcourt. John Hawkins and Selwyn Cornish describe Harcourt as 'the beating hear of Australian economics.' You can read testimonials here.

References

• Cohen, Avi J. and G. C. Harcourt. 2003. Whatever happened to the Cambridge capital controversies? Journal of Economic Perspectives 17: 199-214.
• Hamouda, O. F. and G. C. Harcourt. 1988. Post-Keynesianism: From criticism to coherence? Bulletin of Economic Research. 40: 1-33.
• Harcourt, G. C. 1965. The accountant in a golden age. Oxford Economic Papers. 17: 66-80.
• Harcourt, G. C. 1969. Some Cambridge controversies in the theory of capital. Journal of Economic Literature. 7: 369-405.
• Harcourt, G. C. 1972. Some Cambridge Controversies in the Theory of Capital. Cambridge University Press.
• Harcourt, G. C. 1982. The Social Science Imperialists: Selected Essays by G. C. Harcourt (ed. by Prue Kerr). Routledge and Kegan.
• Harcourt, G. C. 1986. Controversies in Political Economy: Selected Essays by G. C. Harcourt (ed. by O. F. Hamouda). New York University Press.
• Harcourt, G. C. 1995. Capitalism, Socialism, and Post-Keynesianism: Selected Essays by G. C. Harcourt. Edward Elgar.
• Harcourt, G. C. 2001. Selected Essays on Economic Policy. Palgrave-Macmillan.
• Harcourt, G. C. 2006. The Structure of Post-Keynesian Economics: The Core Contributions of the Pioneers. Cambridge University Press.
• Harcourt, G. C. and Prue Kerr. 2009. Joan Robinson. Palgrave Macmillan.
• Harcourt, G. C. and Vincent G. Massaro. 1964. Mr. Sraffa's Production of Commodities. Economic Record 40: 442-454.
• Harcourt, G. C. and Peter Kenyon. 1976. Pricing and the investment decision. Kyklos. 29: 449-477.

Martin Weitzman's The Share Economy

I happen to have one book by Marty Weitzman (1942 - 2019) on my bookshelf. So I thought I would write a bit about The Share Economy: Conquering Stagflation.

This is an ill-timed book. It proposes that firms negotiate with workers to pay them a percentage of revenues, instead of, say, an hourly money wage. It argues that such a change will address the widespread macroeconomic problem, throughout the 1970s, of simultaneously high unemployment and high inflation. But, by the time the book came out, stagflation had been "solved", in an extremely reactionary way. The countervailing power of organized labor was being abolished. Labor unions were being crushed, and workers would, by and large, no longer see their wages increase with productivity. Instead of unemployment being addressed, workers would just have to get used to long-lasting higher unemployment.

Maybe some day, we will get back to a setting where Weitzman's book is socially relevant. Even so, it is worth exploring how macroeconomic performance is affected by microeconomic structures.

Although I think of Weitzman as a mainstream economist, his view of the microeconomic setting at the time of his writing was not that far away from Post Keynesianism. He thinks of the "tone" of "modern industrial capitalism" as set by "a relatively small number of large-scale firms", such as those in the Fortune 500. These firms are described by the theory of monopolistic competition. (quotes on p. 11). These firms are characterized by constant costs over a wide range of levels of production below limits set by capacity. They set their prices at a markup over cost. The theory of profit maximization, under these assumptions, yields a markup based on elasticity of consumer demand.

Weitzman explicitly rejects a theory of monopsony for labor markets:

"...If your aim is to focus in on fine close-up details and you wish to do justice to the facts, you must rely on a heavily institutional approach. But I think the unique long-run substitutability of labor among different uses actually makes the competitive theory a rather good description of long-run tendencies in the labor market...

In this book I am primarily interested in the general theory of wage determination... ...at least the labor market behaves 'as if' it is competitive, in the sense that countervailing power between buyers and sellers of labor is sufficiently balanced that neither party has a clear upper hand and both possess approximately equal bargaining strength. The economy-wide real wage is not very different from what would be determined by competitive forces in the labor market." (pp. 29-30.)

I am not sure that Weitzman's account of firms is consistent with firms operating multiple plants and producing multiple products. I think of Alfred Eichner's theory of the megacorp here. I also doubt that theories of full cost, markup, or administered prices should be developed based on markups determined by elasticities. Rather, the markup might be theorized as based on firm's plans for growth.

Weitzman sees that firms will respond to fluctuations of demand by adjusting quantities, not prices. He cites Janos Kornai's contrast of planned, socialist economies with capitalist economies. In the United States, firms must attend to making the consumer's shopping experience as pleasant as possible, while in the Soviet Union, establishments do not care and consumers wait in queue. On the other hand, establishments in the Soviet Union cater to the worker. Weitzman argues his share economy would change the dynamics of the labor market such that firms in the United States would also worry more about the worker's experience.

Wietzman sees the contemporary practice of firms awarding year-end bonuses as a start towards his share economy. He includes Eastman Kodak as an example. Kodak is now bankrupt, and Kodak Park in Rochester, NY, is mostly empty and decaying. In my anecdotal experience, bonuses are often experienced as a present that cannot be planned or depended on. Maybe it would be different with more transparency from your employer, as resulting from a union contract, representatives from the union sitting on the board of directors, an Employee Stock Ownership Plan (ESOP), or some such.

Overall, I find The Share Economy intriguing. It illustrates how good economists will not develop an universal theory, but will address problems of the economist's own time and place.

(A propos of nothing in particular, Branko Milanovic has a post coming close to an endorsement of Neo-Ricardianism.)

• Martin L. Weitzman (1983). The Share Economy: Conquering Stagflation. Harvard University Press.

Alfred Eichner's Microfoundations, Or An Open Letter To Marco Rubio

The Growing Importance of Finance in the Post-War U.S. Economy

As I understand it, Marco Rubio takes from Post Keynesians the idea that, during the post-war golden age, investment decisions were dominated by industrial firms. But now, they are dominated by financial corporations. This change has been accompanied by deleterious effects on economic growth, stagnant wages, and an upward shift in the distribution of income and wealth. The increasing importance of finance in the economy in the United States, at least, is illustrated by the above graph. The impact of the global financial crisis is immediately apparent in 2008.

The distinction between having investment directed by finance or by industry might not make any sense to you if you think of every investment as like purchasing a bond. In this sort of way of looking at things, every investment can be evaluated by a Return On Investment, taking suitable account of risk, the payback period, and so on. It does not matter if one is talking about a college degree; research and development in, say, clean energy; a painting by Monet; or a stock option. To the financier, it is all one.

I take some of the most notable work of Alfred Eichner (1937-1988) as a description of the previous era. Eichner learned a lot about how corporations set prices by looking at the results of Senate Committee on the Judiciary, Subcommittee on Antitrust and Monopoly, as chaired by Estes Kefauver. Various corporate executives from the steel industry testified. Rubio, as I understand it, could similarly investigate how American businesses operate now.

Eichner theorized megacorporations. These are corporations that operate multiple plants and produce multiple products and that try to maintain market power. Eichner took aboard the idea, as developed by Gardiner Means and Adolfe Berle (1932), that ownership and control are separate in the modern corporation. In a sense recently explained by Dan Davies, Eichner's approach is microfounded. His theory is consistent with recognizing the principal agent problems that come about when a corporate board is somewhat independent of stock owners, when corporate executives are another group of personnel, and so one. According to Eichner, managers in the megacorp are interested in pursuing a satisfactory rate of growth, not in maximizing economic profits.

Eichner recognizes that corporations set prices as a markup on costs. He builds on the survey findings of R. L. Hall and C. J. Hitch. Eichner's ideas relate to theories of administered or full cost pricing. I guess they are consistent with Robin Marris's managerial theory of the firm.

Markups vary among industries and within an industry over time. How is the markup set? According to Eichner, the markup, at least for industry leaders in price-setting, are put at the level needed to finance investment for planned growth targets. Eichner draws an analogy to a tax, in the Soviet Union, on turnover. This tax was used to finance planned investment.

Eichner had some correspondence with Joan Robinson. He saw his theory of the megacorp as compatible with Post Keynesian theories of growth.

I explicitly do not claim that this theory is descriptive of how investment is determined nowadays in the United States. But I find lots of interesting ideas here.

References

• Alfred S. Eichner. 1973. A Theory of the Determination of the Mark-up Under Oligopoly pp. 1184-1200.
• William Milberg (ed.) 1992. The Megacorp & Macrodynamics: Essays in memory of Alfred Eichner M. E. Sharpe.

Donald J. Harris

Don Harris is a Stanford economist. Apparently, this post is on current events. His daughter, Kamala Harris is the junior senator from California and has announced that she is running for President of the United States. I gather Don and his wife divorced when Kamala was quite young, and that his ex-wife raised her.

I do not know much about Harris' personal history. I did not even know that he was Jamaican. Did he give Michael Manley any advice? (This is a great movie.) It is his more theoretical work that I am aware of. It is decades since I have read his AER article and book, and I do not recall much about them. I find that I happen to have handy the other five items in the reference below, including Harris' foreword to a reprint of the Bukahrin book.

If I do remember anything about the AER article, my impressions is that it is an overview of the Cambridge capital controversy, closer to Sraffa than Joan Robinson's emphasis on historical time. For purposes of this article, I'll talk about, rather, the article in Nell's 1980 collection.

Harris (1980) starts out by describing the aggregate neoclassical theory, including growth theory. He refers to Samuelson calling it a parable or fairy tale. He presents this theory in the context of a response to Harrod. Substitution of capital for labor allows for the existence of a stable steady state growth path. Of course the Cambridge capital controversy showed this parable does not apply once one allows for the production of more than one commodity. I like to put it that, in a comparison of steady states, a higher wage, all else equal, is not necessarily associated with the adoption of a technique requiring less labor to be employed per unit output. Harris suggests the existence of such non-monotonic relationships between inputs and prices has wider repercussions in the neoclassical theory of general equilibrium. Asserting that the price of each input is equal to the value of its marginal product doesn't get you very far.

Harris then moves on to considering an alternate theory, with labor being exploited, as in Marx. He has an independent investment function. He considers three possible regimes. I am reminded of some work of Joan Robinson in the 1960s and her "banana" diagram. Or looking ahead, to a Bhaduri and Marglin paper.

Harris, I guess, is closer to Marx than some Post Keynesians. It make sense that once one has seen that most of academic mainstream economics is nonsense, in many ways, that one would turn to a sociological explanation of why this balderdash persists. The leisure class, in Bukharin's terminology, consists of those, generally very rich, who obtain income from property, without having to do a lick of work. They need it to be commonsense that their exploitation be acceptable. Academics, particularly neoclassical economics, fill this need. Bukharin focuses specifically on Austrian economics.

I should probably reread Bhaduri and Harris (1987). It is the sort of article that needs an illustration or two. Such an illustration is easy to generate with the information technology we now have available.

(Gramsci's Political Thought (Brill, 2012), by Carlos Nelson Coutinho, is another book on my shelf. The foreword is by Joseph A. Buttigieg. His son, Pete, is mayor of South Bend, Indiana and just announced that he is running for President.)

References

• Amit Bhaduri and Donald J. Harris (1987). The Complex Dynamics of the Simple Ricardian System. Quarterly Journal of Economics. (Reprinted in: Unconventional Economic Essays: Selected Papers of Amit Bhaduri (1993). Oxford University Press.)
• Nikolai Bukharin. (1927). Economic Theory of the Leisure Class.
• Donald J. Harris (1973). Capital, distribution, and the aggregate production function, American Economic Review 63 (1): 100-113. (reprinted? in Sraffian Economics, 2 volumes, (ed. by Ian Steedman) Edgar Elgar (1989)).
• Donald J. Harris (1978). Capital Accumulation and Income Distribution. Stanford University Press.
• Donald J. Harris (1980). A postmortem on the neoclassical 'parable'. In Growth, Profits, and Property: Essays in the Revival of Political Economy (ed. by E. J. Nell). Cambridge University Press
• Donald J. Harris (1990). Comment (on Pasinetti). In Essays on Piero Sraffa: Critical Perspectives on the Revival of Classical Theory (ed. by K. Bharadwaj and B. Schefold). Routledge
• Donald J.Harris (2005). Robinson on 'History versus equilibirum'. In Joan Robinson's Economics: A Centennial Celebration (ed. by B. Gibson). Edward Elgar.

Samir Amin (1931-2018)

Despite the label at the bottom of this post, this is not really a profile of Amin. I happen to have started reading Modern Imperialism, Monopoly Finance Capital, and Marx's Law of Value (Monthly Review Press, 2018) last month. Here are a couple of quotations:

"Vulgar economics is obsessed with the false concept of 'true prices,' whether for ordinary commodities, for labor, for money, for time, or for natural resources. There are no 'true prices' to be 'revealed' by the genius of the 'market.' Prices are the combined products of rates of exploitation of labor (rates of surplus-value), of competition among fragmented capitals, and the deduction levied in the form of 'oligopoly rents,' and of the political and social conditions that govern the division of surplus-value among profits, interest, ground rents, and extractive rents." -- Amin, p. 99.

"Marx's criticism of the classic bourgeois political economy of Smith and Ricardo concluded by shifting from analysis centered on 'the market' ... to one centered on the depths of production where value and the extraction of on surplus value are determined. Without this shifting of the analysis from the superficial to the essential, from the apparent to the concealed, no radical critique of capitalism is possible...

The law of value formulated by Marx, based on the concept of abstract labor, expresses the rationality of the social utility (the utility for society) of a defined use value. This rationality transcends that which governs the reproduction of a particular mode of production (in this case, the capitalist mode of production). Under capitalism, rationality demands the accumulation of capital, itself based on the extraction of surplus value. The price system frames the operation of this rationality. Economic decisions in this framework ... will be different from those that might be made on the basis of the law of value that would define, in the socialism to come, the mode of social governance over economic decision making.

Bourgeois economic theory attempts to prove that the mode of decision making in the framework of its system of prices and incomes produces a rational allocation of labor and capital resources synonymous with an optimal pattern of output. But it can reach that goal only through cascading tautological arguments. To do so it artificially slices productivity into 'components' attributed to 'factors of production.'

Although this pattern of slices has no scientific value and rests on tautological argument, it is 'useful' because it is the only way to legitimize capital's profits. The operative method of this bourgeois economics to determine 'the wage' by the marginal productivity of 'the last employee hired' stems from the same tautology and breaks up the unity of the collective, the sole creator of value. Moreover, contrary to the unproven affirmations of conventional economics, employers do not make decisions by using such 'marginal calculations.'" -- Amin, pp. 232-234.

I have several other books by Amin on my bookshelf:

• Samir Amin (2006). Samir Amin: A Life Looking Forward: Memoirs of an Independent Marxist. Zed Books.
• Samir Amin (1998). Spectres of Capitalism: A Critique of Current Intellectual Fashions. Monthly Review Press.
• Samir Amin (1997). Capitalism in the Age of Globalization: The Management of Contemporary Society. Zed Books.

As I understand Amin is most well known for inventing the word "Eurocentrism" and for extending the law of value to the law of worldwide value.

Amin builds on the concept of the "surplus", as developed in the work of Paul Baran and Paul Sweezy. One can formalize this notion in a model of a developed country with three departments, for producing capital goods, consumption goods, and luxuries. The last department is not in Marx's models of simple and expanded reproduction. This department is needed to address the problem of realization in an age of monopoly capital.

When it comes to realization problems, there is a long tradition among Marxists of looking at open economies, with advanced industrial capitalist economies trading with less developed peripheral regions or countries. Amin, an Egyptian trained in Paris and working in Dakar, was well positioned to develop these ideas of North-South trade. In the book mentioned above, he often talks about extending Marx's law of value to the law of worldwide value. I gather his ideas are partly the result of a critical engagement with Andre Gunder Frank's work, which I do not know.

To my mind, you can find similar ideas, about monopoly and finance capital and imperialism, going back to the time of the Second International. Amin mentions Rosa Luxembourg, but, as I recall, is critical of her. By the way, he groups Sraffa with bourgeois economists.

I was hoping to find Amin providing an exposition of a mathematical model in Modern Imperialism. He does provide some, but mostly he sticks with numerical examples and historical analysis. He says that this is, partly, to make his work accessible to a larger audience. Also, I am not sure that a mathematical model of the whole is appropriate for monopoly capital. I guess if I want to explore more, I should look at his 1974 book, Accumulation on a World Scale.

Some Obituaries for Kenneth Arrow

Bill Black has one here, emphasizing Arrow's impossibility theorem. The blog, A Fine Theorem, has two of a planned four-part series. The first is on the impossibility theorem. The second is about General Equilibrium. The two planned, I gather, are to be about learning-by-doing and health economics, respectively.

I have written several posts drawing on Arrow's work. This one, on a sophisticated neoclassical response to the Cambridge Capital Controversy, is among my most popular posts.

Herbert Scarf (1930-2015)

Herbert Scarf died this 15th of November. I think of Scarf as the economist who first demonstrated that general equilibria need not be stable. Something more, some special case assumption or another approach entirely, is needed.

From his Wikipedia page, I learned that have been exposed to more of Scarf's work than I knew. Long ago I took a course in Operations Research, in which we were taught queuing theory and how to find policies for optimal inventory management. Apparently, that approach to the study of inventory policies comes from Scarf.

I did not find the New York Times obituary enlightening. I wish they had mentioned that his algorithm was for finding so-called Computable General Equilibrium (CGE). I have never quite got CGE models. The ones I have seen do not have the dated commodities of the Arrow-Debreu model of intertemporal equilibrium. I have never been sure that they really belong with that tradition, or, like Leontief's model, really fit with a revival of classical economics. Perhaps they are an example of temporary equilibria, as put forth by J. R. Hicks in Value and Capital.

Quite some time ago, Rajiv Sethi discussed Duncan Foley's appreciation of Scarf as a teacher.

Update: Barkley Rosser provides some comments on Scarf (hat tip to Blissex). Here is an obituary from the blog, Leisure of the Theory Class.

(Unrelated to the above, Cameron Murray recently comments on economists confusion about what is meant by "capital".)

Fred Lee

Barkley Rosser, David Ruccio, and Matias Vernengo have obituaries. I find I had not known much about Lee's life.

I have been influenced by Lee's work on markup pricing (also known as full-cost pricing), the history of heterodox economics, and the suppression of heterodox economics by the mainstream through bullying and bureaucratic measures. I think highly of Lee's 2004 paper (written in collaboration with Steve Keen), "The Incoherent Emperor: A Heterodox Critique of Neoclassical Microeconomic Theory". I can only find one blog post of mine referencing this paper. Lee promoted pluralism in economics.

Wynne Godley On Front Business Page Of New York Times

The New York Times, even outside of their editorial pages, seems to think their readership should know about the non-mainstream economists I generally like:

• 11 September 2013 profile of Wynne Godley.
• 18 July 2013 article on Steve Keen and how his work builds on Hyman Minsky.
• 5 July 2013 profile of Warren Mosler.
• 4 March 2009 article on the difficulties heterodox economists face in academia.
• 23 April 2008 profile of George Soros.
• 11 July 2007 article on heterodox economics.

I predict that this profile of Godley will get a more positive response from Post Keynesians and advocates of endogenous money than their profile of Warren Mosler did. One caveat: I think Godley was more about using his stock-flow consistent modeling to identify unsustainable trends, than to quantitatively predict the course of, say, Gross Domestic Product (GDP) over the next n quarters. (He also accepted the conclusions of the Cambridge Capital Controversy.)

Update: I should have noticed that the Jonathan Schlefer is the author of the article on Godley. L. Randall Wray comments.

Ronald Coase, 1910 - 2013

Elsewhere, on Ronald Coase:

• An obituary in the New York Times.
• John Cassidy offers an appreciation.
• Mike Konczal explains that Coase's unintentionally undermines propertarianism (sometimes called "libertarianism").
• Discussion of Coase at Crooked Timber.
• An older piece, from Deidre McCloskey, arguing that the "Coase theorem" is misleadingly named.

Past posts from me:

• The Coase Theorem does not describe market transactions.
• Elodie Bertrand shows shows Coase was mistaken about lighthouses.
• Michael Albert argues that building a law and economics approach on the Coase theorem encourages bullying and nasty behavior.

Related past posts from me:

• Transactions costs make a nonsense out of the textbook theory of the firm under perfect competition.
• America institutionalists had combined law and economics before Coase's work was picked up.

Haikus

These have been written by authors who have not acknowledged their authorship. (I have written many of them myself.)

John Maynard Keynes
Created Bretton Woods system
The theory works

Michal Kalecki
Macro with markup pricing
Empirical success

Nicholas Kaldor
Nonlinear business cycle
Generates chaos

Lorie Tarshis
Elements of Economics
Met McCarthyism

Richard Goodwin
Tenureless at Harvard
Among best of the best

John Kenneth Galbraith
The world listened
Not economists

Joan Robinson
Predicted stagflation
Bastard golden age

John Hicks
Renounced IS/LM
Post Keynesianism

Nicholas Kaldor
Defeated Milton Friedman
Endogenous money

Paul Davidson
Explains historical time
Nonergodicity

Post Keynesians
Kicked out of Rutgers
Alfred Eichner died

Wynne Godley
Invents Sectoral Balances
Predicts Crises

The genius of Keen
His splendid model
Remains unrecognized

Post Keynesianism
Destroyed Reinhardt and Rogoff
No surprises here

Phyllis Deane, An Editor Of The Modern Cambridge Economics Series

Matias Vernengo has noted the passing of Phyllis Deane.

I think of Deane as a historian of economics, based on her 1978 book The Evolution of Economic Ideas. In it, she portrays economics as a succession of struggles between competing paradigms, in Thomas Kuhn's sense of the word. Economics was in a pre-paradigm state before Adam Smith. She contrasts this approach to history with an approach emphasizing refinements of analysis, as in Joseph Schumpeter's posthumous history.

But I want to point out another role she took on. Her book was the first in the Modern Cambridge Economics series. And she was co-editor, with Joan Robinson, of that series. She was later co-editor with Geoffrey Harcourt and Jan Kregel. As of Asimakopulos 1991 book, the series consisted of:

• Phyllis Deane, The Evolution of Economic Ideas
• Joan Robinson, Aspects of Development and Underdevelopment
• A. K. Bagchi, The Political Economy of Underdevelopment
• Éprime Eshag, Fiscal and Monetary Policies and Problems in Developing Countries
• Michael Ellman, Socialist Planning
• Colin Rogers, Money, Interest and Capital
• A. Asimakopulos, Keynes's General Theory and Accumulation

Here is the original introduction to this series of books:

"The modern Cambridge Economic series...is designed in the same spirit and with the similar objectives to the series of Cambridge Economic Handbooks launched by Maynard Keynes soon after the First World War. Keynes' series, as he explained in his introduction, was intended 'to convey to the ordinary reader and to the uninitiated student some conception of the general principles of thought which economists now apply to economic problems'. He went on to describe its authors as, generally speaking, 'orthodox members of the Cambridge School of Economics' drawing most of their ideas and prejudices from 'the two economists who have chiefly influenced Cambridge thought for the past fifty years, Dr. Marshall and Professor Pigou' and as being 'more anxious to avoid obscure forms of expression than difficult ideas'.

This series of short monographs is also aimed at the intelligent undergraduate and interested general reader, but it differs from Keynes' series in three main ways: first in that it focuses on aspects of economics which have attracted the particular interest of economists in the post Second War World era; second in that its authors, though still sharing a Cambridge tradition of ideas, would regard themselves as deriving their main inspiration from Keynes himself and his immediate successors, rather than from the neoclassical generation of the Cambridge school; and third in that it envisages a wider audience than readers in mature capitalist economies, for it is equally aimed at students in developing countries whose problems and whose interactions with the rest of the world have helped to shape the economic issues which have dominated economic thinking in recent decades.

Finally, it should be said that the editors and authors of this Modern Cambridge Economics series represent a wider spectrum of economic doctrine than the Cambridge School of Economics to which Keynes referred in the 1920s. However, the object of the series is not to propagate particular doctrines. It is to stimulate students to escape from conventional theoretical ruts and to think for themselves on live and controversial issues."

-- Joan Robinson and Phyllis Deane