Roger Backhouse and Bradley Bateman (eds.), The Cambridge Companion to Keynes, Cambridge: Cambridge University Press, 2006, pp. 327.
Toshiaki Hirai (Sophia University, Tokyo)
Keynes has had no equal among economists in terms of the depth of his influences in various fields. The so-called “Keynesian Revolution” is his most important contribution, and yet it shows no more than part of his great achievements. Keynes was an intellectual leader of the Liberal Party. In addition, he himself made an important contribution in the field of philosophy and was a central member of the Bloomsbury Group, to mention only a few achievements.
This book deals with Keynes in, broadly speaking, the following aspects: (a) an economist, (b) a philosopher-ethicist, (c) a human being.
I. An Economist
The papers concerned are sub-divided into theory and economic policy.
1. Theory
Backhouse (ch. 2) deals with the Keynesian Revolution, focusing on the debates, evaluation, and re-evaluation of the past seventy years. He maintains that because the General Theory has two inconsistent theoretical elements (IS-LM and “uncertainty”), the Keynesian Revolution can be approached in two quite different ways: Keynesian orthodox and Post-Keynesian thought. He pays attention to both aspects and yet evaluates the former more highly than the latter. His treatment is fair, for Keynes’s economics was propagated and ruled the roost in the 1940s to the 70s in terms of either of the IS-LM or its extended version together with econometrics and national income accounting. This does not mean, however, that the other component, “uncertainty”, is not important. The General Theory sees the market economy as possessing (i) stability, certainty and simplicity and (ii) instability, uncertainty and complexity.
Laidler (ch. 3) examines Keynes’s account of classical economics, seeing it as a caricature. He argues that classical economics provides the General Theory with invaluable information (cf. p. 42) and that the present-day “New Classical Economics” happens to be the same as what Keynes repudiated as the “Classics”.
Keynes looked at the antecedents of the General Theory (the Mercantilists, Malthus and Hobson), criticizing Ricardo and J.S. Mill.
Laidler criticizes Keynes because he overlooked how classical economists were cautious about Say’s Law and emphasized the role of money. Is this criticism persuasive? First, the “Wicksell Connection” did not pay attention to it. Secondly, the monetary debates in the 19th century did not become the core of classical economics.
Laidler describes the General Theory as having two elements, stating that Keynes’s theory was propagated in the form of the IS-LM theory, and dropped another element: monetary exchange. “[These simplifications] helped to ensure that macroeconomics began to lose sight of this essential feature of his contribution ….” (p. 52) Laidler earlier (1999) evaluated the IS-LM element, arguing that it put together what macroeconomics had developed before the General Theory. In contrast, Laidler here seems to put emphasis on the other element.
Leijonhufvud (ch. 4) favourably insists on the continuity between Marshall and Keynes, criticizing Walrasian theory. His stance is as follows: “Keynes was a Marshallian in the deep sense, … when he broke with Marshall …, their very differences presumed a shared system of thought. Keynes’s claim to greatness as a theorist is based on his departures from Marshall.” (p.77)
Leijonhufvud earlier (1999) classified economists into “Classical” (Marx, Marshall and Keynes) and “Modern” (Arrow, Debreu and Lucas).
This distinction is clear in pp. 59-63. Marshall is regarded as a successor of the Classical tradition, and therefore Marshallian equilibrium theory is regarded as dynamic.
It is true that Marshall consciously worked as a successor to the Classics. His way of argument differed from the Classics, however, since the Classics were concerned with a growth theory and downgraded the concept of equilibrium, while Marshall proposed “a theory of stable equilibrium of normal supply and demand”. Marshallian theory differs from Walrasian theory in important respects, and yet both belong to the Catallactics.
Concerning Keynes, the situation is complicated. After his essay “Alfred Marshall” (1925), there is no record of Keynes’s applauding Marshall. In the General Theory, Marshall appears only as an object of criticism. These criticisms were not trivial, for Keynes worked out his monetary theory of production by overcoming the defects in Marshall’s theory. Although Leijonhufvud refers to two types of effective demand failures, he seems to consider them to be secondary (cf. p. 66).
2. Economic Policy
Hoover (ch. 5) examines Keynes’s theory methodologically. He compares the Marshallian with the Walrasian methodology. Hoover’s stance is as follows: “Keynes’s attitude is similar to Marshall’s, but Keynes is more a physician than archaeologist.” (p.82)
I agree with his view. Keynes always developed a model from a policymaker’s point of view, for it was vital to him to understand where the malaise lay and how to cure it.
Bateman (ch. 15) deals with the difference between Keynes and Keynesianism on economic policy. He argued that Keynes “rarely explicitly supported [deficit spending] policy” (p.275), but rather “espoused a consistent argument that monetary policy should be kept loose.” (p.278)
I agree with this point. Throughout the 1920s, Keynes advocated a policy of a low rate of interest . In 1931 during the Great Depression, he favored lowering the long-term rate of interest, to be followed by a policy of public investment (JMK.13, p. 364). He was also flexible on his prescription, as is seen in How to Pay for the War (1940).
Peden (ch. 6) focuses on “what Keynes said about monetary policy, public investment and fiscal policy in relation to unemployment and inflation.” (p.100) We can see here the relation between Keynes, his disciples and Treasury officials.
II. A Philosopher-Ethicist
The papers concerned are subdivided into philosophy-ethics and political philosophy.
1. Philosophy-Ethics
Since the 1980s, studies on Keynes as a philosopher have appeared. The main problem here is the nature of the Probability (1921. The original work can be traced back to 1907.) and whether it influenced the General Theory (1936). The controversy between the continuity camp and the discontinuity camp has been over how Keynes in the intervening period should be evaluated, given the fact that only a few fragments remain.
The papers here belong to the discontinuity camp. While paying attention to the world events which might have changed Keynes’s thinking (cf. p. 175), Raffaelli (ch. 9) states that Ramsey’s influences on Keynes are well documented while those of Wittgenstein are difficult to prove.
Gillies (ch. 11) describes Keynes’s philosophy after Ramsey’s criticism as “intersubjective” (p. 211), pointing to long-term expectation and “uncertainty.”
Baldwin (ch. 13) examines Keynes as an ethicist. He argued that Keynes first developed an ethical theory as an improvement on Moore’s theory but later abandoned it. Yet Baldwin concluded that “although his later beliefs include a new emphasis on the importance of retaining confidence in social and economic institutions, Keynes remained true to his youthful … [conviction] that “sometimes old duties must go to be replaced by new.” (p.255)
3. Political Philosopher
Brittan (ch. 10) characterised Keynes’s political stance as follows: (a) suspicion of fixed rules, (b) dislike of the money motive, (c) interest in non-conclusive inferences (cf. p. 189). He also maintains that Keynes accepted many of the interventionist conclusions of the old “New Liberals,” while he was an individualist at the personal level (cf. p. 190). It was a surprise to me that Brittan presents Schumpeter as Keynes’s rival since Schumpeter regarded capitalism as inevitably collapsing and provided a blueprint of socialism.
Klaes (ch. 14) seems to state that Keynes was a modernist in the sense of the Bloomsbury Group, although he believes that this should not distract us from “exploring how parts of Keynes’s work may … be expanded” (p. 268) in terms of Post-Modernism.
III. A Human Being
Goodwin (ch. 12) explains how the Bloomsbury principles influenced Keynes in “(a) his professional as well as his personal life and … as (b) a more ethical economist” (p.236).
I agree with point (a), but I doubt (b). I believe that in order to understand Keynes as a whole, a study of the Bloomsbury Group is indispensable. So far, few economists have shown interest in it, and this has been a serious obstacle to understanding the British Society intellectually.
In Marcuzzo (ch.7) I find “Keynes and the Cambridge Economists” interesting, which, based on the huge correspondence, describes a theoretical relation among Keynes and his contemporaries in relation to the Keynesian Revolution.
In Moggridge (ch. 8), what attracted me was “Keynes’s Management of His Intellectual Property”: “Whether it were raising pigs at … Tilton, managing the Cambridge Arts Theatre, or dealing with his publishers, Keynes revelled in the details.” (p.142) This reveals one of his features. The same man who criticized capitalistic society and put forward proposals for an international system was the last person to neglect mundane details.
IV. Some Remarks
The features of this book as a whole are as follows.
1. A propensity to regard the relation between Marshall and Keynes as continuous in terms of theory and methodology.
2. Much attention to Keynes’s philosophical/ethical aspects.
On the other hand, Keynes’s theoretical development and social philosophy are not taken up. The book is too small to cover Keynes’s multifarious aspects. The rest is to be dealt with in other books.
References
Laidler, D. (1999), Fabricating the Keynesian Revolution, Cambridge University Press.
Leijonhufvud, A. (1999), “Mr Keynes and the Moderns” in Pasinett, L. and Shefold, B. eds, The Impact of Keynes on Economics in the 20th Century, Edward Elgar
Hirai, T. (2007), Keynes’s Theoretical Development – from the Tract to the General Theory, Routledge.
