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KEYNES' ANTAGONIST: CORRESPONDENCE BETWEEN ALVIN HANSEN AND DENNIS HOLME ROBERTSON
Актуальные публикации по вопросам экономики.
Источник: American Economist, Spring98, Vol. 42 Issue 1, p82, 8p
Higgins, Anthony L. & Wright Jr., J. W.
KEYNES' ANTAGONIST: CORRESPONDENCE BETWEEN ALVIN HANSEN AND DENNIS HOLME ROBERTSON
Abstract
Sir Dennis Holme Robertson's work provides a major contribution to the study of industrial fluctuation in the economy. An early collaborator with John M. Keynes, Robertson later became a major antagonist of the General Theory. In addition, new evidence from recently found documents indicates that Robertson not only criticized Keynes' work, but also that of his supporters, especially Alvin Hansen. This study provides an analysis, within the history of macro economic thought, of the importance of Robertson and Hansen's correspondence.
1. Introduction
In 1936 John A Keynes published The General Theory, which was designed to deal with difficult questions of economic theory and policy (5). This book represented a break from the traditional theories taught at Cambridge University and the movement it sparked became known as the Keynesian economic revolution. The 1930s and 1940s criticism of Keynesian economics from within Cambridge has been analyzed in previous economic literature by Presley and Mizen (7) and in essays Presley wrote or edited for Essays on Robertsonian Economics (8). These writings reveal that an early opponent of the Keynesianism was Sir Dennis Holme Robertson, even though they had once been collaborators and friends, but that philosophical and political divisions drove them apart shortly after Keynes became famous.
Critical letters from the 1950s and 1960s show that Robertson remained the chief antagonist of Keynesian economics long after Keynes' death in 1946. This view is enhanced by Robertson's later letters with Alvin Hansen, a professor at Harvard University who was widely considered the chief American defender of Keynesian economics in the two decades following Keynes' death. Excerpts from letters between Hansen and Robertson are presented here in order to enhance our understanding of both Keynes' and Robertson's respective positions on economic theory and to place Hansen's dialogue on their works in a proper perspective. These letters and correspondences are primarily based on Robertson's reaction to Hansen's A Guide to Keynes (3). The concepts discussed in this essay are as follows: biographia of Robertson, his principal theoretical contributions, biographia. of Alvin Hansen, and an analysis of the Robertson-Hansen correspondence.
2. Biographia--Dennis Holme Robertson
Dennis Robertson's work provided major contributions to the study of cyclical movements in the economy. Even today only a small portion of his work is outmoded in the sense that it has not lost its significance and because a great deal of modem economic thought can be directly traced to Robertson's early work. This is particularly true of recent revivalist criticism that is being published on the current inapplicability of Keynesian theory in a modem industrial economy, which was Robertson's opinion throughout his career.
However, much of his work in the 1920s was written in close collaboration with Keynes, and Robertson felt The General Theory "was an inadequate ending to their collaborative efforts, [because] for Keynesian economists it symbolized the beginning of a totally new approach to macroeconomics and unfortunately this led to a relative neglect of [teaching economic theories] that had gone before" (8, p. 5). Many professors of economics at this time considered work that pre-dated The General Theory to be completely irrelevant in a post-war industrial society. This perspective was particularly insulting to Robertson because most of his major work was pre-General Theory, and also because he was a strong defender of many classical economic theorists like Alfred Marshall, A. C. Pigou, and Franklin Lavington.
Robertson was born in 1890 and spent much of his early childhood in Whittlesford in Cambridgeshire, where he studied European classical texts under the supervision of his father, who was a country parson. When Robertson was twelve he went to the Eton school and from there he applied to Trinity College, Cambridge and won a variety of academic awards and scholarships. In 1910 he turned to the Economics Tripos at Cambridge and in 1912 he gained a first on his comprehensive exams as an undergraduate.
From the beginning of his studies of economics, Robertson thought of Alfred Marshall as "being the explorer, the advance guard in economics, paving the way for the troops to follow" (6, p. 175). Robertson was not actually taught by Marshall, but he was immersed in Marshallian economics by A. C. Pigou and J. M. Keynes, who was his director of studies at Trinity College. This was the beginning of a productive partnership between Robertson and Keynes which flourished until the mid-1930s . and which only ended as a result of Robertson's attacks on the Keynesian revolution.
In 1914, Robertson gained a Trinity Fellowship on the basis of his thesis, which was later published as A Study of Industrial Fluctuation, 1(12) and he remained an academic at Cambridge University throughout his professional career. The only interruptions were army service in Egypt and Palestine during WWI, a year as a professor of banking at the London School of Economics in 1938, and several years of service during World War II as an economic adviser to the Royal Treasury, where his main assignment was to follow the balancing of payments and overseas finance. He succeeded to the Chairmanship of the Department of Economics in Cambridge upon A. C. Pigou's retirement from teaching in 1944. Keynes had nominated Robertson for this post, where he remained until his own retirement in 1957 (7, p. 1).
From 1944 to 1946, Robertson was a leading member of the Royal Commission on Equal Pay, and in 1957-58 he became the only economist on the Cohen Council on Prices, Productivity, and Incomes. He wrote over 100 articles, 30 of which were published in the Economic Journal, and 15 books covering most areas of study within economics.
Students know Robertson best from his economic handbook, entitled Money (10). He devoted much of his later energies to writing lectures at Cambridge which were delivered between 1957 and 1959, and which were subsequently published as Lectures on Economic Principles (11). As critiques of Keynesian economics, these lectures persisted in promoting "the real cash balance approach in macroeconomic analysis typical of the pre-1936 Cambridge" (7, p. 4). One example of these lectures was delivered at the Conference of Economics Teachers in 1949, when Robertson expressed resentment about the way the Keynesian revolution had changed the teaching of macroeconomic analysis, saying that
In some places the flag has been carried too far and will have to be withdrawn onto more familiar ground. Years ago, in the early 1910s and again in the 1920s, I did do a bit of scrambling towards the frontier roped to the man of genius (Keynes) who has perished there. Sometimes, I venture to think, I was even a little bit in front of him; but in the end he went on beyond me, and it is my belief--an unpopular one, I know, but I cannot help it--that he got a bit off track and set the flag in places where it is not destined to rest (7, p. 4).
These comments are indicative of rebukes Robertson often made of Keynesian theories in both public and private forums. However, in many cases it seems he was more critical of the overwhelming support Keynes received and the paralyzing effect he felt this support had on the field, than he was upset by the theories themselves. Or, he at times agrees with the theories, but attributes their origins elsewhere. These views are evidenced in his published papers as well as in his private correspondence on the subject.
3. Robertson's Principal Theoretical Contributions
The development of a theory of industrial fluctuation was one of Robertson's main contributions to economics. When discussing the subject of fluctuations of money, credit, and employment, he once wrote: "this has always been. to me the most interesting part of economics--the only part to which I can hope to be remembered as having made any personal contribution" (6, p. 536). In this statement Robertson is being modest, especially about his contributions in the field of international trade, to the theory of the firm, and in relation to the study of industrial productivity. Robertson was the first British economist to emphasize the view that real factors inherent in capitalist societies caused industrial fluctuations and he proposed a non-monetary, over-investment explanation for macroeconomic cycles, Robertson stressed analysis of variations which occur not only in levels of prices and the availability of credit, but in fluctuations in output and employment. His work emphasized the idea that economic cycles exhibit different characteristics that are dependent of the cultural, social, and political circumstances of their time. Therefore, economic cycles can not be identical and there may be various causes for any set of industrial fluctuations. He also believed that invention and innovation played great roles in determining the course of investment and, by extension, that the introduction of technologies determined the mechanics and patterns of general trading cycles (4, p. 536).
One of Robertson's key points was that economists must relate "today's consumption to yesterday's income," but he did not necessarily assume a simple or constant relationship between these two factors. He also did not deny that income was a determinant of consumption, but he emphasized as well others factors such as changes in the distribution of family income and variations in the liquid reserves held by consumers. Robertson also defined savings as the difference between income earned in the recent past and consumption expenditures made in the present period, which links movements in money income to the relationship between investment and savings. He claimed that this relationship was similar in nature to the "consumption function" because consumption is then related to disposable income, and because dynamic sets of causal factors influence the savings-ratio out of disposable income. For example, he felt the size of cash balances, the rate of interest, and savings. He claimed that this relationship was similar in nature to the "consumption function" because consumption is then related to disposable income, and because dynamic sets of causal factors influence the savings-ratio out of disposable income. For example, he felt the size of cash balances, the rate of interest, and relative prices belong among these factors (8, p. 132).
In response to the criticized singularity of the Keynesian position, "Robertsonian theory is dynamic in that it depicts a process of economic development. Furthermore, it does not assume that this process satisfies the conditions of moving equilibrium" (8, p. 104). Robertson differed with Keynes' belief that the determinants of aggregate output and employment for a single time-interval during which the system reaches a continuous equilibrium. At the same time, he could not accept the notion that The General Theory represented a revolution in economics, because he felt much of what was being declared as new and written by Keynes was actually presented in earlier work by members of the classical school of economists.
During the Keynesian revolution's height these perspectives were ones one which Robertson and the majority of British economist disagreed. Keynes, for example, stressed the effects of changes in real income more than other factors. However, as Robertson states repeatedly in his letters, the primary problem he had with The General Theory was that in it Keynes ignored the economic analysis which he and Keynes had worked out together in 1926 (7, p. 2). Robertson felt this was at least a personal slight and remained angry for years. Today, the importance of Robertson's "complicating factors" is more obvious, and much recent work on fluctuations in consumption and trade can be regarded as "a vindication of Professor Robertson's views" (8, p. 104).
4. Biographia--A. H. Hansen
Alvin H. Hansen was born in Viborg, South Dakota in 1887, received his Bachelors of Arts degree from Yankee College in 1910, and his Masters of Arts and Doctorate of Philosophy degrees in Economics from the University of Wisconsin in 1915 and 1918. Because the University of Wisconsin was not well-known for its economics department at the time, Hansen was fortunate to have picked business cycles for his thesis topic. He felt he could apply Wisconsin's "Institutionalist" bent into a primary area of analysis of business cycles and thereby make a significant contribution to the field of industrial economics. After finishing his degree, Hansen became a professor of economics at Harvard University in 1937, where he remained affiliated with the Economics Department until 1962. His advisory posts included the Directorship of Research for President Roosevelt's 1933-1934 Committee on Policy in International Economic Relations, membership on the Advisory Council on Social Security between 1941 and 1943, and an appointment as a special advisor to Federal Reserve Board between 1940 and 1945 (12, p. 24).
From the early 1930s, Alvin Hansen gained an international reputation among economists via publications that advocated deflationary policies that simultaneously supported government stimulation of demand. He felt that by making slight modifications to Keynes' theories, they could be better applied and taught in the United States than in Europe. Working from this perspective, he became dedicated to applying Keynes' ideas in an American context and in his writing he endeavored to present these theories in a more accessible form for students' consumption, Hansen also made several other stronger contributions to Keynes' work, such as strengthening the role economic multipliers played in his theories, and he strongly supported the idea that ineffective demand could be offset by macroeconomic policy.
Moreover, Hansen was known as a humanitarian who believed that "economics was the fascinating study of how to improve the lot of humanity" (4, p. 365). For these reasons Hansen came to be known as the "American Keynes," because his work was intent on eradicating unemployment in the U.S. by applying The General Theory to the American economic scene. He felt the fact that the States were a relatively closed, continental economy, with an undervalued dollar and a government that understood the potential for autonomous macroeconomic policies, made the U.S. and not the U.K. the appropriate place to apply Keynesian models. Tobin writes that as the principal intellectual leader of the "Keynesian Conquest," Hansen deserves major credit for the "fiscal revolution in America" via his influence on policies embodied in legislation like the Employment Act of 1946. Through his research and testimonies, he changed the climate of opinion in the economics profession, in government, and in the press (13, p. 32). This was all done despite his resisting Keynes' theories, not converting until 1938.
5. Robertson-Hanson Correspondence
An important note is that the Department of Economics at Cambridge University was divided into two main factions during the time that Keynes and Robertson worked together, and possibly three. One camp, led by Robertson, defended the position that the classical school should remain the primary focus of teaching and scholarship in the Department. The second faction was led by Keynes and Keynesian economists, who felt the Department should leave classical thought behind and that their theories should become a front-runner in new economic thought. The third and least powerful camp at the time was made up of econometricians, (winners in the debate by many of today's standards) who believed that both Robertson and Keynes had oversimplified their studies of macroeconoinics and who felt that higher mathematics needed to be increasingly used in economic analysis. These different factions did not mix often, except to offer criticism of the other groups' methodology, or the results of their research and the Department became known for its heated debates and political divisions. For example, according to Brian Tew, a member of the Department at the time who we interviewed, when positions became available much competition arose between the camps to fill it with someone from within their own camp. This atmosphere persisted throughout Robertson's chairmanship at Cambridge.
Robertson did not ease his criticisms of Keynesian economics in the post WWII period and he became "increasingly more steadfast in his defense of the neo-classical school and more convinced that Keynes had been wrong in The General Theory" (7, p. 6). This is a position he explicitly stated in his correspondence with Hansen after A Guide to Keynes was published in 1953. After reading the book, Robertson initially provided Hansen with comments and criticisms about the text that ranged from theoretical debates to editorial criticisms. However, an on-going, often contentious, relationship developed between them and from 1953 until 1955 the two economists wrote to each other often. At the heart of their dialogue were the two pre-war critical themes Robertson had developed and defended. The first was his defense of "classical" economists, and the second, his complaint that Keynes had failed to recognize and utilize Robertsonian macroeconomic analysis.
In his defense of the "Classics" or "Classicals," as he called them, Robertson's arguments focused on two sections of Hansen's A Guide to Keynes. The first of these sections discussed Keynes' treatment of flexible wages and the automatic adjustment process. Robertson claimed that the second postulate which Hansen attributed to Keynes was in fact a postulate that could be found in theories put forward by the Classicals. Moreover, he felt that too often Hansen's attempts to break down broader theories into simple, more-easily-understood propositions made Keynes' theories more singular and modular than ever before. For example, he complains about Hansen wasn't justified in his presentation that under all circumstances workers will remain or become unemployed rather than accept a reduction in real wages (9). And, Robertson argues Keynes and Hansen didn't understand a second Classical postulate: "The utility of the wage when a given volume of labor is employed is equal to the marginal disutility of that amount of employment" (5, p. 5). In Robertson's view, this meant that the real earnings of an employed person is that wage which is just sufficient to induce the volume of labor desired in the production process.
However, in A Guide To Keynes, Hansen explains that Keynes' second postulate is only obscured by the fact that he presents it in terms of the marginal disutility of labor, in relation to the utility of the wages associated with a given amount of employment. According to Hansen, in reality, the postulate Keynes attack's is only two propositions: "(1) that workers will refuse the offer of employment if the real wage is cut below the current real wage; and (2) that a cut in money wage rates is an effective means to reduce real wage rates. " Keynes denied these theories feeling that existing real wages remained equal to the marginal disutility of employment (3, p. 22).
In one of his letters, Robertson questioned how Hansen can be in favor of such a proposition against the Classicals. He claimed that if the Classics had held this view, they would not have argued, as Hansen had said previously, that the economic system tends always to full employment by means of wage adjustments. Robertson went on to say that "the classicals may have been stupid, but they were not utterly inconsistent!" (9). Furthermore, Robertson made it clear that the Classics believed "if the workers won't accept wage reductions in certain circumstances, there will be unemployment; if they will, there won't; and in the long run, realizing this, they will tend to accept wage reductions" (9). In a letter to Robertson, Hansen made it known that he did not entirely disagree, claiming instead that the economy would rise to full employment only under the conditions of flexible wages. However, in a direct reply to Robertson's above statement, Hansen remarked, "Surely there is no inconsistency here, and neither I nor Keynes have charged that there was" (1).
According to Hansen, Keynes believed that workers were indeed unwilling to take real wage cuts through money wage cuts, but he doubted that money wage cuts were an effective way of bringing about real wage cuts. In A Guide to Keynes, he writes that the manipulation of wage rates is not an effective way to increase employment, and that the manipulation of demand is a more effective technique. This could allow employment to be raised, and as a result real wage rates would fall to a level consistent with the increased volume. "Thus employment is not raised by cutting real wages. Rather it is the other way around. . . . " (3, p. 23). This passage was thought of by Robertson as "sheer sophistry," because Keynes' proposal was to reduce unemployment by lowering real wages through inflation of money-cycle demands (9). However, Hansen believed that Keynes argued that workers were prepared to take real wage cuts due to the expansion of aggregate demand and increased employment at current money wage rates; that increased employment at current money wage rates would result in a reduction in real wages. Hansen went on to remark, "I am afraid I could not agree that this argument is `sheer sophistry.' It seems to me to be, on the contrary, a very significant and important analysis" (1).
Hansen also noted that Keynes adopted a short-run analysis in which organization, equipment, and technique are assumed to be given factors. He also felt Keynes saw employment and output activities that could be expected to fluctuate closely together, and likewise that wage rates and prices would move closely or in unison. Therefore, in Hansen's interpretation of Keynes it made little difference whether he corrected the nominal monetary magnitudes by price index or by a wage-rate index (3, p. 42). Robertson protested this belief vehemently and argued that by assuming that prices and wages may be taken to move together, Hansen is "assuming what, for the validity of the Keynesian system, needs to be proved- and in my judgment cannot be improved--namely that a cut/rise in wages can be relied on to lead to an exactly proportional fall/rise in prices" (9). Unconvinced by his vehemence, Hansen responded by saying that Keynes did not argue that a cut in money wages would always lead to an exactly proportional decline (1).
The notion of Keynesian emphasis on the role of expectations is the second of the two sections of Hansen's interpretation of The General Theory that Robertson concentrated on when defending the theories of the Classics. Hansen claimed that Keynes took "cognizance of the entire series of annual `prospective yields' over the whole anticipated life of the capital good" (3, p. 123). In other words, he believed that Keynes was the first explicitly to consider future expected yields of capital goods as well as current yields (7, p. 7). But Robertson did not think that claim could be substantiated because he felt Keynes had actually taken a quote from Marshall's Principles (p. 593) and put it in his The General Theory, without providing its originator with due credit. Robertson stops before making any more drastic charges against Keynes, but he does attribute the writing of "The value of the capital already invested in . . . making a railway or a machine is the future net incomes; and if its prospective income-yielding power should diminish, its value would fall accordingly," to earlier statements made by Marshall about other products (9).
Hansen responded to these comments by adamantly defending what he had originally written. He felt Keynes gave a definition of the marginal efficiency of capital very superior to anything else in this field: "the marginal efficiency of capital may be said to govern the terms on which loanable funds are demanded for the purpose of new investment; whilst the rate of interest governs the terms on which funds are being currently supplied" (5, p. 165). Hansen even ventures that Marshall is confused by citing the omitted portion of the above quote- "value of the equipment would be the capitalized value of that smaller income after allowing for depreciation" (1). Hansen illustrates this position by supposing that real annual returns after allowing for depreciation are zero. Then, according to Marshall, there would be nothing to capitalize, and the machine would have no value. He goes on to say that this is not the case, that the value of the machine is the capitalization of the future returns prior to depreciation. Hansen claims that it is not true to say the value of the machine is equal to the capitalized value of the estimate of the future net incomes after allowing for depreciation. It is quite apparent that Hansen was not persuaded by Robertson's attacks, and that he felt attempts to push this argument on Keynesian economists would remain useless (7, p. 7).
Another point that Hansen mentions is Keynes' criticisms of Hayek's "neutral" rate, which was designed to meet the requirements of a progressive society to keep money income stable and to drive the prices of an increasing volume of goods down, because lower prices reflected increased productivity. He also mentioned Keynes' use of the "natural" rate, "the real yield of capital in production; it falls when capital increases by continuous saving, for as it becomes more and more difficult to find profitable employment for the new capital, competition with existing capital lowers the rate of interest whilst wages and rents rise in consequence" (14, p. 205), which had to do with maintaining price stability. After reading this section of A Guide to Keynes, Robertson remarked that "the concept of `neutral' money is in itself no more absurd than that of the `natural' rate of interest, and is indeed another way of saying the same thing." He went on to say that by trying to discredit the entire concept of neutrality, and also of the useful concept of "forced savings," "Keynes was going out of his way to give hostages to those who regard him as an incorrigible inflationist." Robertson regarded this section of The General Theory as the worst in the book (9). Hansen's reply was defensive in that he felt the "neutral" money concept was a dangerous deflationary doctrine, particularly at the time when Keynes wrote The General Theory (1).
As stated earlier, Robertson's major complaint about the The General Theory was its failure to utilize Robertsonian macroeconomic analysis. It may also be that Robertson's goal was to convince Hansen to reject some of Keynes statements about his work and vindicate his work in Hansen's Guide. For example, on important issues such as the relationship between saving and investment, income and effective demand, Keynes had written that: "Mr. Robertson's method might be regarded as an alternative attempt to mine to make the same distinction, so vital for causal analysis, that I have tried to make by the contrast between effective demand and income" (5, p. 78). Furthermore, the attack on "forced saving" and on Hayek's work which followed this in The General Theory was perceived by Robertson as an attack also on "induced lacking," the concept that Keynes and Robertson developed together in their collaborative work prior to 1926. In response to this perceived criticism, Robertson wrote many comments to Hansen that were critical of Keynes' use of comparative statistics rather than advocating as he had always done, a "step by step" approach to economic analysis (7, p. 8).
In another set of arguments, Robertson argued that investment must be financed through forced as well as voluntary savings. He also believed that Keynes over simplified the economic relationships which he discussed in The General Theory. When discussing these points with Hansen, Robertson wrote: "My own complaint has always been that Keynes cannot make up his mind whether his verbal labels apply only to equilibrium positions or also to disequilibrium ones. In these pages (of The General Theory) he seems to be concerned only with the former, so that while his D (demand) is explicitly defined (Keynes 1936, p. 25) as expected sales proceeds, it does not much matter if we interpret it as you do, as actual sales proceeds, alias money income. But later on (p. 78) we suddenly find a distinction between effective demand (=expected income) and actual income not merely drawn but declared to be `vital for causal analysis'; and we are left gasping with bewilderment as to what is the relation between this `vital' distinction and the central analysis of pp. 24-30, where it is never mentioned" (sic, 9).
After that, Robertson brought out Keynes' failure to identify all of the variables determining saving and consumer spending. He did this by saying that there was an excess of saving over investment, which is merely the same thing as to say income is falling. Robertson went on to declare: "my statement carries an implication that the fall in income is due to an excess of thrift or a deficiency of enterprise--an implication which is completely lacking from the bare statement that income is falling" (9). Robertson did not commit himself to the view that current savings was a single valued function of "yesterday's" income. He believed current savings may be influenced by expectations of future income, presented "a la Duesenbery by previously attained income, as well as by the rate of interest, liquid assets etc. " (9).
Robertson seems personally offended by some of Hansen's remarks about one of his 1933 articles. This was apparent when Robertson wrote: ". . . though Keynes misquoted and disparaged my 1933 article, I do not think he went so far as to say that it `offered no analysis,'--it was left for you to say that!" (9). Robertson claimed the article offered "penetrating analysis" of a number of different situations although, he admitted it was a bit over-simplified. Hansen replied to Robertson by saying, "I surely agree that it does offer valuable analysis . . . I was discussing the significance of the equations used in this article. It was these that I asserted were merely truistic statements" (1). In a further attempt to soothe Robertson's wound, Hansen wrote:
". . . I slipped in the phrase that Robertson's article offered no analysis. I had not noticed this until I received your letter and regret that I put it inadvertently in this manner. I quite agree with this phrase, which is certainly wrong as it stands" (1).
Robertson and Hansen continued to discuss Hansen's A Guide to Keynes, almost until the (late of Robertson's death. In this correspondence Robertson continued to complain that sections of Hansen's book were worded poorly and that this made the text confusing to the reader. Hansen responded to this good-humouredly by recommending Robertson reread that section of the book with the following in mind: "according to classical doctrine the unemployed could find work at lower real wages" (2), although he admitted that he would re-phrase this section better with Robertson's criticism in mind. Hansen also said that if the section is read carefully, in its original form it would become more clear, implying that Robertson was unable or unwilling to spend an adequate amount of time reading this section.
In the end, it seems that Hansen had developed an affection for Robertson through their correspondence, or at least a respect for his persistence. However, Robertson's letters failed to bring substantial modifications to Hansen's interpretation of The General Theory. Furthermore, their letters establish that Robertson persisted in being Keynes' antagonist on major policies until his death in 1963. But maybe he died too early because as a consequence of Robertson's work Presley, Mizen and others now conclude that, "it is easy to recognize that some later developments in economics--real business cycle theory, the portfolio approach to the demand for money, aspects of economic dynamics, have a Robertson dimension which might not always be coincidental," (7, p. 10) and that Robertson was perhaps the important English writer who "looked beyond the veil of money to explain the historic rhythms of capitalism" (12, p. 28). It is likely that these types of vindication of his work was what he wanted from Hansen all along.
(*) Washington College, 300 Washington Avenue, Chestertown, Maryland 21620. The authors would like to thank Professor John Presley for his help with this paper and for providing access to the letters that are analyzed herein. In addition we want to thank Brian Tew for his interview about Keynes and Robertson, and we want to thank Alice Goodfellow, Davy H. McCall, Edguardo Buscaglia, and Michael Szenberg for their editorial suggestions.
References
(1.) Hansen, A. correspondence to D. H. Robertson. 12 November 1953.
(2.) Hansen, A. correspondence to D. H. Robertson. 23 November 1955.
(3.) Hansen, Alvin H. A Guide to Keynes. McGrawHill Book Co. New York. 1953.
(4.) International Encyclopedia of the Social Sciences. The Macmillan Co & The Free Press, by Crowell Collier and Macmillan, Inc: 1968.
(5.) Keynes, John Maynard. The General Theory of Employment Interest and Money. Harcourt, Brace and Company, New York: 1936.
(6.) Pioneers of Modern Economics in Britain. ETD: O'Brien, D. P., & Presley, John R. The Macmillan Press Ltd, London, 1981. (article: "D. H. Robertson 1890-1963." John R. Presley).
(7.) Presley, John R. & Mizen, Paul. "Persistent Negative Reactions in Cambridge to Keynes' General Theory-Some New Evidence." The History of Political Economy. Vol. 27, No. 3, (Fall 1995).
(8.) Presley, John (Ed.). Essays On Robertson Economics. The Macmillan Press Ltd, London: 1992. (article: "J. M. Keynes and D. H. Robertson: Three Phases of Collaboration." John R. Presley).
(9.) Robertson, Dennis Holme, Sir. Correspondence to A. Hansen. 23 Sept. 1953.
(10.) Robertson, Dennis Holme, Sir. Money. University of Chicago Press. 1959.
(11.) Robertson, Dennis Holme, Sir. Lectures on Economic Principles. London, Staples Press. 1957.
(12.) Robertson, Dennis Holme, Sir. A Study of Industrial Fluctuations: An Inquiry into the Character and Causes of the so-called Cyclical Movements of Trade. London, Aldwych: London School of Economics and Political Science, 1948.
(13.) Samuelson, Paul. "Alvin Hansen As A Creative Economic Theorist." Quarterly Journal of Economics. Vol. 90, 1976.
(14.) Tobin, James. "Hansen & Public Policy." Quarterly Journal of Economics. Vol. 90, 1976.
(15.) Wicksell, Knut. Lectures on Political Economy. Routledge & Kegan Paul LTD, London: 1935.
Higgins, Anthony L. & Wright Jr., J. W.
KEYNES' ANTAGONIST: CORRESPONDENCE BETWEEN ALVIN HANSEN AND DENNIS HOLME ROBERTSON
Abstract
Sir Dennis Holme Robertson's work provides a major contribution to the study of industrial fluctuation in the economy. An early collaborator with John M. Keynes, Robertson later became a major antagonist of the General Theory. In addition, new evidence from recently found documents indicates that Robertson not only criticized Keynes' work, but also that of his supporters, especially Alvin Hansen. This study provides an analysis, within the history of macro economic thought, of the importance of Robertson and Hansen's correspondence.
1. Introduction
In 1936 John A Keynes published The General Theory, which was designed to deal with difficult questions of economic theory and policy (5). This book represented a break from the traditional theories taught at Cambridge University and the movement it sparked became known as the Keynesian economic revolution. The 1930s and 1940s criticism of Keynesian economics from within Cambridge has been analyzed in previous economic literature by Presley and Mizen (7) and in essays Presley wrote or edited for Essays on Robertsonian Economics (8). These writings reveal that an early opponent of the Keynesianism was Sir Dennis Holme Robertson, even though they had once been collaborators and friends, but that philosophical and political divisions drove them apart shortly after Keynes became famous.
Critical letters from the 1950s and 1960s show that Robertson remained the chief antagonist of Keynesian economics long after Keynes' death in 1946. This view is enhanced by Robertson's later letters with Alvin Hansen, a professor at Harvard University who was widely considered the chief American defender of Keynesian economics in the two decades following Keynes' death. Excerpts from letters between Hansen and Robertson are presented here in order to enhance our understanding of both Keynes' and Robertson's respective positions on economic theory and to place Hansen's dialogue on their works in a proper perspective. These letters and correspondences are primarily based on Robertson's reaction to Hansen's A Guide to Keynes (3). The concepts discussed in this essay are as follows: biographia of Robertson, his principal theoretical contributions, biographia. of Alvin Hansen, and an analysis of the Robertson-Hansen correspondence.
2. Biographia--Dennis Holme Robertson
Dennis Robertson's work provided major contributions to the study of cyclical movements in the economy. Even today only a small portion of his work is outmoded in the sense that it has not lost its significance and because a great deal of modem economic thought can be directly traced to Robertson's early work. This is particularly true of recent revivalist criticism that is being published on the current inapplicability of Keynesian theory in a modem industrial economy, which was Robertson's opinion throughout his career.
However, much of his work in the 1920s was written in close collaboration with Keynes, and Robertson felt The General Theory "was an inadequate ending to their collaborative efforts, [because] for Keynesian economists it symbolized the beginning of a totally new approach to macroeconomics and unfortunately this led to a relative neglect of [teaching economic theories] that had gone before" (8, p. 5). Many professors of economics at this time considered work that pre-dated The General Theory to be completely irrelevant in a post-war industrial society. This perspective was particularly insulting to Robertson because most of his major work was pre-General Theory, and also because he was a strong defender of many classical economic theorists like Alfred Marshall, A. C. Pigou, and Franklin Lavington.
Robertson was born in 1890 and spent much of his early childhood in Whittlesford in Cambridgeshire, where he studied European classical texts under the supervision of his father, who was a country parson. When Robertson was twelve he went to the Eton school and from there he applied to Trinity College, Cambridge and won a variety of academic awards and scholarships. In 1910 he turned to the Economics Tripos at Cambridge and in 1912 he gained a first on his comprehensive exams as an undergraduate.
From the beginning of his studies of economics, Robertson thought of Alfred Marshall as "being the explorer, the advance guard in economics, paving the way for the troops to follow" (6, p. 175). Robertson was not actually taught by Marshall, but he was immersed in Marshallian economics by A. C. Pigou and J. M. Keynes, who was his director of studies at Trinity College. This was the beginning of a productive partnership between Robertson and Keynes which flourished until the mid-1930s . and which only ended as a result of Robertson's attacks on the Keynesian revolution.
In 1914, Robertson gained a Trinity Fellowship on the basis of his thesis, which was later published as A Study of Industrial Fluctuation, 1(12) and he remained an academic at Cambridge University throughout his professional career. The only interruptions were army service in Egypt and Palestine during WWI, a year as a professor of banking at the London School of Economics in 1938, and several years of service during World War II as an economic adviser to the Royal Treasury, where his main assignment was to follow the balancing of payments and overseas finance. He succeeded to the Chairmanship of the Department of Economics in Cambridge upon A. C. Pigou's retirement from teaching in 1944. Keynes had nominated Robertson for this post, where he remained until his own retirement in 1957 (7, p. 1).
From 1944 to 1946, Robertson was a leading member of the Royal Commission on Equal Pay, and in 1957-58 he became the only economist on the Cohen Council on Prices, Productivity, and Incomes. He wrote over 100 articles, 30 of which were published in the Economic Journal, and 15 books covering most areas of study within economics.
Students know Robertson best from his economic handbook, entitled Money (10). He devoted much of his later energies to writing lectures at Cambridge which were delivered between 1957 and 1959, and which were subsequently published as Lectures on Economic Principles (11). As critiques of Keynesian economics, these lectures persisted in promoting "the real cash balance approach in macroeconomic analysis typical of the pre-1936 Cambridge" (7, p. 4). One example of these lectures was delivered at the Conference of Economics Teachers in 1949, when Robertson expressed resentment about the way the Keynesian revolution had changed the teaching of macroeconomic analysis, saying that
In some places the flag has been carried too far and will have to be withdrawn onto more familiar ground. Years ago, in the early 1910s and again in the 1920s, I did do a bit of scrambling towards the frontier roped to the man of genius (Keynes) who has perished there. Sometimes, I venture to think, I was even a little bit in front of him; but in the end he went on beyond me, and it is my belief--an unpopular one, I know, but I cannot help it--that he got a bit off track and set the flag in places where it is not destined to rest (7, p. 4).
These comments are indicative of rebukes Robertson often made of Keynesian theories in both public and private forums. However, in many cases it seems he was more critical of the overwhelming support Keynes received and the paralyzing effect he felt this support had on the field, than he was upset by the theories themselves. Or, he at times agrees with the theories, but attributes their origins elsewhere. These views are evidenced in his published papers as well as in his private correspondence on the subject.
3. Robertson's Principal Theoretical Contributions
The development of a theory of industrial fluctuation was one of Robertson's main contributions to economics. When discussing the subject of fluctuations of money, credit, and employment, he once wrote: "this has always been. to me the most interesting part of economics--the only part to which I can hope to be remembered as having made any personal contribution" (6, p. 536). In this statement Robertson is being modest, especially about his contributions in the field of international trade, to the theory of the firm, and in relation to the study of industrial productivity. Robertson was the first British economist to emphasize the view that real factors inherent in capitalist societies caused industrial fluctuations and he proposed a non-monetary, over-investment explanation for macroeconomic cycles, Robertson stressed analysis of variations which occur not only in levels of prices and the availability of credit, but in fluctuations in output and employment. His work emphasized the idea that economic cycles exhibit different characteristics that are dependent of the cultural, social, and political circumstances of their time. Therefore, economic cycles can not be identical and there may be various causes for any set of industrial fluctuations. He also believed that invention and innovation played great roles in determining the course of investment and, by extension, that the introduction of technologies determined the mechanics and patterns of general trading cycles (4, p. 536).
One of Robertson's key points was that economists must relate "today's consumption to yesterday's income," but he did not necessarily assume a simple or constant relationship between these two factors. He also did not deny that income was a determinant of consumption, but he emphasized as well others factors such as changes in the distribution of family income and variations in the liquid reserves held by consumers. Robertson also defined savings as the difference between income earned in the recent past and consumption expenditures made in the present period, which links movements in money income to the relationship between investment and savings. He claimed that this relationship was similar in nature to the "consumption function" because consumption is then related to disposable income, and because dynamic sets of causal factors influence the savings-ratio out of disposable income. For example, he felt the size of cash balances, the rate of interest, and savings. He claimed that this relationship was similar in nature to the "consumption function" because consumption is then related to disposable income, and because dynamic sets of causal factors influence the savings-ratio out of disposable income. For example, he felt the size of cash balances, the rate of interest, and relative prices belong among these factors (8, p. 132).
In response to the criticized singularity of the Keynesian position, "Robertsonian theory is dynamic in that it depicts a process of economic development. Furthermore, it does not assume that this process satisfies the conditions of moving equilibrium" (8, p. 104). Robertson differed with Keynes' belief that the determinants of aggregate output and employment for a single time-interval during which the system reaches a continuous equilibrium. At the same time, he could not accept the notion that The General Theory represented a revolution in economics, because he felt much of what was being declared as new and written by Keynes was actually presented in earlier work by members of the classical school of economists.
During the Keynesian revolution's height these perspectives were ones one which Robertson and the majority of British economist disagreed. Keynes, for example, stressed the effects of changes in real income more than other factors. However, as Robertson states repeatedly in his letters, the primary problem he had with The General Theory was that in it Keynes ignored the economic analysis which he and Keynes had worked out together in 1926 (7, p. 2). Robertson felt this was at least a personal slight and remained angry for years. Today, the importance of Robertson's "complicating factors" is more obvious, and much recent work on fluctuations in consumption and trade can be regarded as "a vindication of Professor Robertson's views" (8, p. 104).
4. Biographia--A. H. Hansen
Alvin H. Hansen was born in Viborg, South Dakota in 1887, received his Bachelors of Arts degree from Yankee College in 1910, and his Masters of Arts and Doctorate of Philosophy degrees in Economics from the University of Wisconsin in 1915 and 1918. Because the University of Wisconsin was not well-known for its economics department at the time, Hansen was fortunate to have picked business cycles for his thesis topic. He felt he could apply Wisconsin's "Institutionalist" bent into a primary area of analysis of business cycles and thereby make a significant contribution to the field of industrial economics. After finishing his degree, Hansen became a professor of economics at Harvard University in 1937, where he remained affiliated with the Economics Department until 1962. His advisory posts included the Directorship of Research for President Roosevelt's 1933-1934 Committee on Policy in International Economic Relations, membership on the Advisory Council on Social Security between 1941 and 1943, and an appointment as a special advisor to Federal Reserve Board between 1940 and 1945 (12, p. 24).
From the early 1930s, Alvin Hansen gained an international reputation among economists via publications that advocated deflationary policies that simultaneously supported government stimulation of demand. He felt that by making slight modifications to Keynes' theories, they could be better applied and taught in the United States than in Europe. Working from this perspective, he became dedicated to applying Keynes' ideas in an American context and in his writing he endeavored to present these theories in a more accessible form for students' consumption, Hansen also made several other stronger contributions to Keynes' work, such as strengthening the role economic multipliers played in his theories, and he strongly supported the idea that ineffective demand could be offset by macroeconomic policy.
Moreover, Hansen was known as a humanitarian who believed that "economics was the fascinating study of how to improve the lot of humanity" (4, p. 365). For these reasons Hansen came to be known as the "American Keynes," because his work was intent on eradicating unemployment in the U.S. by applying The General Theory to the American economic scene. He felt the fact that the States were a relatively closed, continental economy, with an undervalued dollar and a government that understood the potential for autonomous macroeconomic policies, made the U.S. and not the U.K. the appropriate place to apply Keynesian models. Tobin writes that as the principal intellectual leader of the "Keynesian Conquest," Hansen deserves major credit for the "fiscal revolution in America" via his influence on policies embodied in legislation like the Employment Act of 1946. Through his research and testimonies, he changed the climate of opinion in the economics profession, in government, and in the press (13, p. 32). This was all done despite his resisting Keynes' theories, not converting until 1938.
5. Robertson-Hanson Correspondence
An important note is that the Department of Economics at Cambridge University was divided into two main factions during the time that Keynes and Robertson worked together, and possibly three. One camp, led by Robertson, defended the position that the classical school should remain the primary focus of teaching and scholarship in the Department. The second faction was led by Keynes and Keynesian economists, who felt the Department should leave classical thought behind and that their theories should become a front-runner in new economic thought. The third and least powerful camp at the time was made up of econometricians, (winners in the debate by many of today's standards) who believed that both Robertson and Keynes had oversimplified their studies of macroeconoinics and who felt that higher mathematics needed to be increasingly used in economic analysis. These different factions did not mix often, except to offer criticism of the other groups' methodology, or the results of their research and the Department became known for its heated debates and political divisions. For example, according to Brian Tew, a member of the Department at the time who we interviewed, when positions became available much competition arose between the camps to fill it with someone from within their own camp. This atmosphere persisted throughout Robertson's chairmanship at Cambridge.
Robertson did not ease his criticisms of Keynesian economics in the post WWII period and he became "increasingly more steadfast in his defense of the neo-classical school and more convinced that Keynes had been wrong in The General Theory" (7, p. 6). This is a position he explicitly stated in his correspondence with Hansen after A Guide to Keynes was published in 1953. After reading the book, Robertson initially provided Hansen with comments and criticisms about the text that ranged from theoretical debates to editorial criticisms. However, an on-going, often contentious, relationship developed between them and from 1953 until 1955 the two economists wrote to each other often. At the heart of their dialogue were the two pre-war critical themes Robertson had developed and defended. The first was his defense of "classical" economists, and the second, his complaint that Keynes had failed to recognize and utilize Robertsonian macroeconomic analysis.
In his defense of the "Classics" or "Classicals," as he called them, Robertson's arguments focused on two sections of Hansen's A Guide to Keynes. The first of these sections discussed Keynes' treatment of flexible wages and the automatic adjustment process. Robertson claimed that the second postulate which Hansen attributed to Keynes was in fact a postulate that could be found in theories put forward by the Classicals. Moreover, he felt that too often Hansen's attempts to break down broader theories into simple, more-easily-understood propositions made Keynes' theories more singular and modular than ever before. For example, he complains about Hansen wasn't justified in his presentation that under all circumstances workers will remain or become unemployed rather than accept a reduction in real wages (9). And, Robertson argues Keynes and Hansen didn't understand a second Classical postulate: "The utility of the wage when a given volume of labor is employed is equal to the marginal disutility of that amount of employment" (5, p. 5). In Robertson's view, this meant that the real earnings of an employed person is that wage which is just sufficient to induce the volume of labor desired in the production process.
However, in A Guide To Keynes, Hansen explains that Keynes' second postulate is only obscured by the fact that he presents it in terms of the marginal disutility of labor, in relation to the utility of the wages associated with a given amount of employment. According to Hansen, in reality, the postulate Keynes attack's is only two propositions: "(1) that workers will refuse the offer of employment if the real wage is cut below the current real wage; and (2) that a cut in money wage rates is an effective means to reduce real wage rates. " Keynes denied these theories feeling that existing real wages remained equal to the marginal disutility of employment (3, p. 22).
In one of his letters, Robertson questioned how Hansen can be in favor of such a proposition against the Classicals. He claimed that if the Classics had held this view, they would not have argued, as Hansen had said previously, that the economic system tends always to full employment by means of wage adjustments. Robertson went on to say that "the classicals may have been stupid, but they were not utterly inconsistent!" (9). Furthermore, Robertson made it clear that the Classics believed "if the workers won't accept wage reductions in certain circumstances, there will be unemployment; if they will, there won't; and in the long run, realizing this, they will tend to accept wage reductions" (9). In a letter to Robertson, Hansen made it known that he did not entirely disagree, claiming instead that the economy would rise to full employment only under the conditions of flexible wages. However, in a direct reply to Robertson's above statement, Hansen remarked, "Surely there is no inconsistency here, and neither I nor Keynes have charged that there was" (1).
According to Hansen, Keynes believed that workers were indeed unwilling to take real wage cuts through money wage cuts, but he doubted that money wage cuts were an effective way of bringing about real wage cuts. In A Guide to Keynes, he writes that the manipulation of wage rates is not an effective way to increase employment, and that the manipulation of demand is a more effective technique. This could allow employment to be raised, and as a result real wage rates would fall to a level consistent with the increased volume. "Thus employment is not raised by cutting real wages. Rather it is the other way around. . . . " (3, p. 23). This passage was thought of by Robertson as "sheer sophistry," because Keynes' proposal was to reduce unemployment by lowering real wages through inflation of money-cycle demands (9). However, Hansen believed that Keynes argued that workers were prepared to take real wage cuts due to the expansion of aggregate demand and increased employment at current money wage rates; that increased employment at current money wage rates would result in a reduction in real wages. Hansen went on to remark, "I am afraid I could not agree that this argument is `sheer sophistry.' It seems to me to be, on the contrary, a very significant and important analysis" (1).
Hansen also noted that Keynes adopted a short-run analysis in which organization, equipment, and technique are assumed to be given factors. He also felt Keynes saw employment and output activities that could be expected to fluctuate closely together, and likewise that wage rates and prices would move closely or in unison. Therefore, in Hansen's interpretation of Keynes it made little difference whether he corrected the nominal monetary magnitudes by price index or by a wage-rate index (3, p. 42). Robertson protested this belief vehemently and argued that by assuming that prices and wages may be taken to move together, Hansen is "assuming what, for the validity of the Keynesian system, needs to be proved- and in my judgment cannot be improved--namely that a cut/rise in wages can be relied on to lead to an exactly proportional fall/rise in prices" (9). Unconvinced by his vehemence, Hansen responded by saying that Keynes did not argue that a cut in money wages would always lead to an exactly proportional decline (1).
The notion of Keynesian emphasis on the role of expectations is the second of the two sections of Hansen's interpretation of The General Theory that Robertson concentrated on when defending the theories of the Classics. Hansen claimed that Keynes took "cognizance of the entire series of annual `prospective yields' over the whole anticipated life of the capital good" (3, p. 123). In other words, he believed that Keynes was the first explicitly to consider future expected yields of capital goods as well as current yields (7, p. 7). But Robertson did not think that claim could be substantiated because he felt Keynes had actually taken a quote from Marshall's Principles (p. 593) and put it in his The General Theory, without providing its originator with due credit. Robertson stops before making any more drastic charges against Keynes, but he does attribute the writing of "The value of the capital already invested in . . . making a railway or a machine is the future net incomes; and if its prospective income-yielding power should diminish, its value would fall accordingly," to earlier statements made by Marshall about other products (9).
Hansen responded to these comments by adamantly defending what he had originally written. He felt Keynes gave a definition of the marginal efficiency of capital very superior to anything else in this field: "the marginal efficiency of capital may be said to govern the terms on which loanable funds are demanded for the purpose of new investment; whilst the rate of interest governs the terms on which funds are being currently supplied" (5, p. 165). Hansen even ventures that Marshall is confused by citing the omitted portion of the above quote- "value of the equipment would be the capitalized value of that smaller income after allowing for depreciation" (1). Hansen illustrates this position by supposing that real annual returns after allowing for depreciation are zero. Then, according to Marshall, there would be nothing to capitalize, and the machine would have no value. He goes on to say that this is not the case, that the value of the machine is the capitalization of the future returns prior to depreciation. Hansen claims that it is not true to say the value of the machine is equal to the capitalized value of the estimate of the future net incomes after allowing for depreciation. It is quite apparent that Hansen was not persuaded by Robertson's attacks, and that he felt attempts to push this argument on Keynesian economists would remain useless (7, p. 7).
Another point that Hansen mentions is Keynes' criticisms of Hayek's "neutral" rate, which was designed to meet the requirements of a progressive society to keep money income stable and to drive the prices of an increasing volume of goods down, because lower prices reflected increased productivity. He also mentioned Keynes' use of the "natural" rate, "the real yield of capital in production; it falls when capital increases by continuous saving, for as it becomes more and more difficult to find profitable employment for the new capital, competition with existing capital lowers the rate of interest whilst wages and rents rise in consequence" (14, p. 205), which had to do with maintaining price stability. After reading this section of A Guide to Keynes, Robertson remarked that "the concept of `neutral' money is in itself no more absurd than that of the `natural' rate of interest, and is indeed another way of saying the same thing." He went on to say that by trying to discredit the entire concept of neutrality, and also of the useful concept of "forced savings," "Keynes was going out of his way to give hostages to those who regard him as an incorrigible inflationist." Robertson regarded this section of The General Theory as the worst in the book (9). Hansen's reply was defensive in that he felt the "neutral" money concept was a dangerous deflationary doctrine, particularly at the time when Keynes wrote The General Theory (1).
As stated earlier, Robertson's major complaint about the The General Theory was its failure to utilize Robertsonian macroeconomic analysis. It may also be that Robertson's goal was to convince Hansen to reject some of Keynes statements about his work and vindicate his work in Hansen's Guide. For example, on important issues such as the relationship between saving and investment, income and effective demand, Keynes had written that: "Mr. Robertson's method might be regarded as an alternative attempt to mine to make the same distinction, so vital for causal analysis, that I have tried to make by the contrast between effective demand and income" (5, p. 78). Furthermore, the attack on "forced saving" and on Hayek's work which followed this in The General Theory was perceived by Robertson as an attack also on "induced lacking," the concept that Keynes and Robertson developed together in their collaborative work prior to 1926. In response to this perceived criticism, Robertson wrote many comments to Hansen that were critical of Keynes' use of comparative statistics rather than advocating as he had always done, a "step by step" approach to economic analysis (7, p. 8).
In another set of arguments, Robertson argued that investment must be financed through forced as well as voluntary savings. He also believed that Keynes over simplified the economic relationships which he discussed in The General Theory. When discussing these points with Hansen, Robertson wrote: "My own complaint has always been that Keynes cannot make up his mind whether his verbal labels apply only to equilibrium positions or also to disequilibrium ones. In these pages (of The General Theory) he seems to be concerned only with the former, so that while his D (demand) is explicitly defined (Keynes 1936, p. 25) as expected sales proceeds, it does not much matter if we interpret it as you do, as actual sales proceeds, alias money income. But later on (p. 78) we suddenly find a distinction between effective demand (=expected income) and actual income not merely drawn but declared to be `vital for causal analysis'; and we are left gasping with bewilderment as to what is the relation between this `vital' distinction and the central analysis of pp. 24-30, where it is never mentioned" (sic, 9).
After that, Robertson brought out Keynes' failure to identify all of the variables determining saving and consumer spending. He did this by saying that there was an excess of saving over investment, which is merely the same thing as to say income is falling. Robertson went on to declare: "my statement carries an implication that the fall in income is due to an excess of thrift or a deficiency of enterprise--an implication which is completely lacking from the bare statement that income is falling" (9). Robertson did not commit himself to the view that current savings was a single valued function of "yesterday's" income. He believed current savings may be influenced by expectations of future income, presented "a la Duesenbery by previously attained income, as well as by the rate of interest, liquid assets etc. " (9).
Robertson seems personally offended by some of Hansen's remarks about one of his 1933 articles. This was apparent when Robertson wrote: ". . . though Keynes misquoted and disparaged my 1933 article, I do not think he went so far as to say that it `offered no analysis,'--it was left for you to say that!" (9). Robertson claimed the article offered "penetrating analysis" of a number of different situations although, he admitted it was a bit over-simplified. Hansen replied to Robertson by saying, "I surely agree that it does offer valuable analysis . . . I was discussing the significance of the equations used in this article. It was these that I asserted were merely truistic statements" (1). In a further attempt to soothe Robertson's wound, Hansen wrote:
". . . I slipped in the phrase that Robertson's article offered no analysis. I had not noticed this until I received your letter and regret that I put it inadvertently in this manner. I quite agree with this phrase, which is certainly wrong as it stands" (1).
Robertson and Hansen continued to discuss Hansen's A Guide to Keynes, almost until the (late of Robertson's death. In this correspondence Robertson continued to complain that sections of Hansen's book were worded poorly and that this made the text confusing to the reader. Hansen responded to this good-humouredly by recommending Robertson reread that section of the book with the following in mind: "according to classical doctrine the unemployed could find work at lower real wages" (2), although he admitted that he would re-phrase this section better with Robertson's criticism in mind. Hansen also said that if the section is read carefully, in its original form it would become more clear, implying that Robertson was unable or unwilling to spend an adequate amount of time reading this section.
In the end, it seems that Hansen had developed an affection for Robertson through their correspondence, or at least a respect for his persistence. However, Robertson's letters failed to bring substantial modifications to Hansen's interpretation of The General Theory. Furthermore, their letters establish that Robertson persisted in being Keynes' antagonist on major policies until his death in 1963. But maybe he died too early because as a consequence of Robertson's work Presley, Mizen and others now conclude that, "it is easy to recognize that some later developments in economics--real business cycle theory, the portfolio approach to the demand for money, aspects of economic dynamics, have a Robertson dimension which might not always be coincidental," (7, p. 10) and that Robertson was perhaps the important English writer who "looked beyond the veil of money to explain the historic rhythms of capitalism" (12, p. 28). It is likely that these types of vindication of his work was what he wanted from Hansen all along.
(*) Washington College, 300 Washington Avenue, Chestertown, Maryland 21620. The authors would like to thank Professor John Presley for his help with this paper and for providing access to the letters that are analyzed herein. In addition we want to thank Brian Tew for his interview about Keynes and Robertson, and we want to thank Alice Goodfellow, Davy H. McCall, Edguardo Buscaglia, and Michael Szenberg for their editorial suggestions.
References
(1.) Hansen, A. correspondence to D. H. Robertson. 12 November 1953.
(2.) Hansen, A. correspondence to D. H. Robertson. 23 November 1955.
(3.) Hansen, Alvin H. A Guide to Keynes. McGrawHill Book Co. New York. 1953.
(4.) International Encyclopedia of the Social Sciences. The Macmillan Co & The Free Press, by Crowell Collier and Macmillan, Inc: 1968.
(5.) Keynes, John Maynard. The General Theory of Employment Interest and Money. Harcourt, Brace and Company, New York: 1936.
(6.) Pioneers of Modern Economics in Britain. ETD: O'Brien, D. P., & Presley, John R. The Macmillan Press Ltd, London, 1981. (article: "D. H. Robertson 1890-1963." John R. Presley).
(7.) Presley, John R. & Mizen, Paul. "Persistent Negative Reactions in Cambridge to Keynes' General Theory-Some New Evidence." The History of Political Economy. Vol. 27, No. 3, (Fall 1995).
(8.) Presley, John (Ed.). Essays On Robertson Economics. The Macmillan Press Ltd, London: 1992. (article: "J. M. Keynes and D. H. Robertson: Three Phases of Collaboration." John R. Presley).
(9.) Robertson, Dennis Holme, Sir. Correspondence to A. Hansen. 23 Sept. 1953.
(10.) Robertson, Dennis Holme, Sir. Money. University of Chicago Press. 1959.
(11.) Robertson, Dennis Holme, Sir. Lectures on Economic Principles. London, Staples Press. 1957.
(12.) Robertson, Dennis Holme, Sir. A Study of Industrial Fluctuations: An Inquiry into the Character and Causes of the so-called Cyclical Movements of Trade. London, Aldwych: London School of Economics and Political Science, 1948.
(13.) Samuelson, Paul. "Alvin Hansen As A Creative Economic Theorist." Quarterly Journal of Economics. Vol. 90, 1976.
(14.) Tobin, James. "Hansen & Public Policy." Quarterly Journal of Economics. Vol. 90, 1976.
(15.) Wicksell, Knut. Lectures on Political Economy. Routledge & Kegan Paul LTD, London: 1935.
Опубликовано 25 декабря 2004 года
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