Keynes

In 1930, Sraffa organised a group of young economists to discuss Keynes’s Treatise on Money (Keynes 1930 [1971]) (TM): the Cambridge Circus. The group comprised Sraffa, Austin and Joan Robinson, Kahn, and James Meade. Keynes’s TM was a theory of money and the determination of the general price level in Keynes’s eyes, but members of the Circus also saw it as possessing the germ of a new theory of (total) output and employment and as being about the long period. Keynes subsequently developed the argument in The General Theory (GT) (Keynes 1936 [1973]), and although the theory remained partly dependent on a Marshallian basis, Keynes showed, in a radical departure from Marshall, how effective demand, investment spending in particular, was the major determinant of levels of employment and output. Furthermore, investment, by increasing employment and incomes, generated its own saving, the reverse of neoclassical causality. Most importantly, he demonstrated the possibility, indeed probability, of sustained unemployment over the long run, that is, the long-period equilibrium outcome was consistent with ‘normal’ profits and wages and unemployment. He developed his analysis in a short-period context in which capacities of plant and of labour were fixed and his question concerned the influence of change in the level of effective demand on the utilisation of these resources and on incomes. He did comment on the possibility of there being no unique long-run equilibrium as its determinants might themselves change the nature of their response to the short-period outcomes so introducing an idea of an endogenous growth process, a shifting equilibrium, which Robinson later gave form to as an iterative path in her growth models and, more broadly, as a way to introduce history into the analysis. Kaldor (1934) was also developing an idea of path dependence and ‘cumulative causation’.

Keynes had asked Robinson to read his manuscript for the GT as he wrote it (replacing his usual discussant in Kahn, who during this time, 1933-1934, was in the USA). In 1933, she published two articles which reported on Keynes’s current thinking and defended his ideas as he responded to the feedback from the Circus; Robinson (1933b) published in the first issue of the new journal, Review of Economic Studies, jointly edited by the younger generation at the LSE and Cambridge, and Robinson (1933c). By the time the GT was published in 1936, she felt confident that she was in a position to make its radical ideas more widely known and understood, anticipating those aspects of its argument which would be most politically as well as analytically problematic. It was a bold move to leave behind her recently acquired authority in the field of imperfect competition for a new venture into aggregate issues of unemployment and a role of apprentice. In 1937, she published two books: An Introduction to the Theory of Employment (Robinson 1937a), and Essays in the Theory of Employment (Robinson 1937b). The former was addressing a non-specialist (although informed) audience and aimed to provide a simplified introduction to Keynes’s main arguments, thereby familiarising a wider public with the rationale behind a new policy orientation. The Essays represented the first impact of Keynes’s new theory on other related—theoretical and actual—issues. Around this time, Kalecki had arrived in Cambridge and Robinson reset her understanding of the theory of effective demand into a Kaleckian-Marxist context (Targetti and Kinda-Hass 1982).