Jon’s Blog

When using the term “Keynesian”, most people strictly associate the principles and theories formulated by John Maynard Keynes. However, Keynesian economic thought is much broader due to the expansion of Keynes’ theories by many of his contemporaries. One notable group, the “Cambridge Keynesians” was begun by a group of young economists studying under Keynes at Cambridge named the “Circus”. This group, made up of Richard Kahn, Joan Robinson, Austin Robinson, James Meade and Piero Sraffa, read and discussed Keynes’ General Theory , formulating their own opinions and passing them along to Keynes for revision. Not only did the group help revise Keynes’ work but many produced significant theories themselves. Richard Kahn provided the “income-expenditure multiplier” which helped to explain the determination of output and unemployment. Joan Robinson, along with fellow Cambridge economist Nicholas Kaldor, formulated the “Cambridge Growth Theory”.

Another member of the Circus that had a significant impact of economic theory was Piero Sraffa. Sraffa’s early works on returns to scale and perfect competition pointed out many flaws in Marshallian economics, which is one reason for the creation of imperfect competition. Sraffa was a very shy man often having trouble lecturing his students, and this shyness led him to one of his greatest contributions. To avoid the lecturing, Keynes appointed Sraffa to librarian of King’s College where he was able to spend ample time revising the works of David Ricardo. The twenty year project outlined Classical and Neoclassical economic thought and sturred many extentsions to those ideas.

The effect of Keynes theory was felt far outside of this inner circle. Economists at institutions such as Oxford and the London School of Economics also helped the expansion. Led by Roy F. Harrod, they looked even deeper into the effect of the theory of long-run growth and cyclical functions. Harrod concentrated on growth, and his work was later expanded by Evsey Domar to construct the Harrod-Domar model of “steady-state growth”. The model adds demand determined equilibrium to Keynes theories, with steady-state growth occuring when aggregate demand grows at the same rate as output. The Harrod-Domar model is an essential theory in modern economics as it is used to explain growth in developing nations.

In summary, Keynesian economics extends far beyond the General Theory. Many of John Maynard Keynes peers and pupils expanded this work to produce what we know today as modern economics. This economic “think tank” circulated ideas around England and proved to be one of the most influential eras in the field. This article, as well as the links to other related topics, is a great source for general economic knowledge. The Economic Thought website seems to provide a vast encyclopedia of economics that could prove very useful throuhgout the semester.

Summary- Arthur Pigou

Arthur Pigou enjoyed a very decorated academic career, studying alongside great minds such as Winston Churchill. As a student he received awards in many fields including the Chancellor’s medal for English and the Cobden Prize for his study of agricultural prices over time. Once he began teaching in 1901, however, he stuck mostly to the field of economics. While his knowledge of the subject was vast, his main interests were in the history of the labor movement, tariff reform, and Marshallian economics (which he called advanced economic theory). His works in these fields included The Principles and Methods of Industrial Peace and The Riddle of the Tariff. In his advanced economic theory lectures, Pigou offered a very structured presentation of Alfred Marshall’s ideas which he did not change or alter to his preference throughout the years in respect to his mentor.

When Marshall resigned as the Professor of Political Economy at Cambridge in 1908, Pigou was not very high up on the list of potential predecessors. However, with the help of Marshall’s personal recommendation Pigou was offered the job, which he held for thirty-five years thereafter. It was around this time that Pigou was finishing up his most notable work. Originally titled Wealth and Welfare, it was later named The Economics of Welfare (1920) after he re-wrote it following the war. The book as so big two sections, Industrial Fluctuations (1927) and A Study in Public Finance (1928), were taken off and published as separate titles.

Pigou also developed a semi-feud with economist John Maynard Keynes, sparked by differing views of unemployment. The feud was not bitter, however, as the two were both colleagues and friends for over twenty-five years, sharing a great mutual respect. In 1913, Pigou produced The Theory of Unemployment which setup the classical marginal productivity theory and attributed unemployment to trade union intransigence and minimum wage laws. At the same time, Keynes was developing his work, General Theory, and needed a theory to dispute while establishing his new ideas of what really caused unemployment. The Theory of Unemployment served that purpose. In two later works, Employment and Equilibrium and A Retrospective View, Pigou admitted his judgment of Keyes may have been harsh, and conceded that short run equilibrium with a high level of unemployment was a possibility.

In the grand scheme of things, Arthur Pigou did not create or discover anything revolutionary. He did not change a school of thought or provide a great fundamental theory. However, he did provide solid work in field of economics for over fifty years. He presented ideas in a more systematic way than ever before, and shifted people to this more orderly thinking. The article was a decent read, but added a little too much fluff about his personal life that could have been omitted. It does, however, provide a nice overview of Pigou for anyone who needs a quick, condensed summary of the economist or his works.

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