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.