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The New Cambridge School

Naturally enough, the impact ofKeynes’s General Theory was particularly strong in Cambridge. The role of Keynes’s direct pupils, like Kahn and

Joan Robinson, was reinforced by others, such as Nicholas Kaldor who arrived from the London School of Economics where, in an early phase, he had followed Hayek’s star. The odd one out there was Piero Sraffa who, though closer to Keynes than many commentators recognise, followed an autonomous research path. All these protagonists and many others, from the British Marxist Maurice Dobb (1900-1976) to the American Richard Goodwin (1913-1996),[1] constituted the new Cambridge school (thus dubbed to distinguish it from the old Cambridge school, of Marshall and his pupils), a particularly lively intellectual centre, particularly in the 1950s and 1960s.

Keynes’s closest collaborator, his pupil and subsequently literary executor, was Richard Kahn (1905-1989). A student and then teacher in Cambridge, in the early 1930s Kahn was the moving spirit of the Circus that, as we saw previously, stimulated Keynes’s transition from the Treatise on Money to the General Theory. He also contributed a crucial element to Keynes’s analytical apparatus with his theory of the multiplier (Kahn 1931), which connected changes in employment to changes in autonomous expenditure (investments, public expenditure, exports): a relationship that presupposed the existence of unemployed workers. This was, for all the economists of those times, a fact of life that contradicted a central tenet of the dominant theory, namely the automatic tendency towards full employment. Kahn had begun a gradual departure from this theory through his research on ‘the economics of the short period’ (the title of his 1929 fellowship dissertation, which was to remain unpublished for more than fifty years, where he had taken up the theme of market imperfections). Kahn also made important contributions on monetary theory, in part through his influence on the famous Radcliffe Report (1959), which developed a Keynesian view of the working of financial markets and the role of monetary policy tools.[2]

Joan Violet Maurice Robinson (1903-1983; her husband was Austin Robinson, 1897-1993, a Keynesian as well and economics professor in Cambridge but more interested in applied policy issues) was the standard-bearer of Keynesianism: a lively and prolific writer, passionate and brilliant orator and vigorous polemist, she left her mark in universities all over the world. Among her contributions, together with various writings of divulgation of Keynesian theory, we may recall The Economics of Imperfect Competition (1933) and the attempt to extend Keynes’s analysis to the long period, with The Accumulation of Capital (1956), where she offered a taxonomy of growth models and an analysis of the interrelation between effective demand and productive capacity, already taken up as a central element in Harrod’s famous model (1939).

Nicholas Kaldor (1908-1986), born in Budapest and subsequently a British citizen, was an expert on the UN Commission for Europe in the immediate post-war period, consultant to many developing countries and to the British Labour government. He contributed to the theoretical corpus of the Cambridge school a theory of income distribution, in which distribution between wages and profits depended on the capitalists’ propensity to save and the growth rate of the economy.17 This theory was then flanked with theories of accumulation based on Keynesian and classical (Ricardian) ideas in successive versions of a growth model (Kaldor 1957, 1961) where he set out to represent the main ‘stylised facts’ of developed capitalistic economies.

17 Kaldor 1956; this theory was taken up and developed by Pasinetti 1962; Kaldor (1966) then connected this theory to the financial choices of the firm and hence to the new stream of researches on managerial capitalism.

  • [1] Dobb, a Marxist, was the author of important writings on theory, economic history andhistory of economic thought, including a volume on the Soviet Union (1928 and subsequent editions); a volume of Studies in the Development of Capitalism (1946) in which,among other things, the issue of the transition from feudalism to capitalism was discussed; and a volume of history of economic thought (Dobb 1973). By Goodwin we mayrecall the works on the multiplier and the cycle; in particular, Goodwin (1967) presenteda model of economic cycle based on the prey-predator evolutionary scheme originallystudied by the mathematician Vito Volterra (1860-1940).
  • [2] His main contributions are collected in Kahn 1972.
 
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