Return to Cambridge
In 1949 Meade was offered a new, second Chair in economics in Cambridge. He would have become a Fellow of King’s had he accepted. But, although he went up to Cambridge to talk to both Kahn and Robertson about the offer, he declined, as he was ‘very happy’ at LSE (Meade to Robertson, 6 November 1949, Robertson Papers C18/86, Trinity College, Cambridge). (The Chair went to Austin Robinson.) Eight years later he was offered Robertson’s Chair, which was harder to turn down. Robertson (and Meade) hoped he could be offered a Fellowship at Trinity, but Robertson found out this was not possible. Meade accepted the Chair and a Professorial Fellowship at Christ’s College, of which the then vice-chancellor of Cambridge University, Brian Downs, was master (Robertson to Meade, 22 and 25 May; Downs to Meade, 18 and 25 May; Alan Prest to Meade, 28 May 1957, Meade Papers 19/7).[1]
Meade’s relations with his old friends of the Cambridge Circus were still cordial in 1949 and in 1957 but in the intervening years the Cambridge Faculty of Economics had become increasingly polarised, split between the ‘Keynesians’ and the rest of the Faculty. As Luigi Pasinetti has bluntly put it:
The behaviour (or misbehaviour) of each single member of the Keynesian group [which now included Nicholas Kaldor] gave the impression, in the 1950s and 1960s, that they believed themselves to be the masters of the place and of the theory ... [T]heir behaviour appeared rather arrogant. To those who disagreed with them, it even appeared doctrinaire (Pasinetti 2007: 38—39).[2]
As another of the younger Cambridge economists put it, Joan Robinson ‘had a bad habit of bullying anyone who did not accept her opinions’ (Bliss 2010: 633-634). Open hostility between Joan Robinson and Dennis Robertson went back a long way, to the late 1930s; Austin Robinson, then and later, especially as chairman of the Faculty Board from 1950 to 1962, usually managed to keep the peace.
Some of those who wrote to congratulate Meade on his appointment were worried. His former boss in Geneva ‘fear[ed] you will have a very difficult time in Cambridge which will require all your well known tact & patience ... It is delightful to think that Cambridge has been saved from the tyranny of one school of thought’. But Meade’s Cambridge friends had written to welcome him, Richard Kahn telling him that ‘It is going to be so pleasant to have you here as one of us ... I look forward, as does everybody else, to helping you to feel that once again Cambridge has something to offer you as you have to Cambridge’. Joan Robinson wrote more cryptically: ‘A lot of water has flowed since the days of the Circus and the weekend at Newport, but I hope the bridge is still standing’ (Meade Papers 19/7).
In his first year at Cambridge Meade lectured on international trade as he had done at LSE. The following year he began giving a lecture course on economic analysis for the preliminary (second year) examination, as Robertson had done from 1945-1946 until 1956-1957. But while Meade lectured on Tuesdays and Thursdays, Joan Robinson lectured on Mondays and Wednesdays to the same group of students on ‘Principles of Economics’. While Robertson had been lecturing on ‘Principles of Economics’, she lectured on ‘Money’, until 1954-1955 when her course was renamed ‘Theory of Employment’. The year before Meade’s arrival she started giving ‘Principles of Economics’ and continued to do so after he arrived, though the division was made clearer when the courses were renamed ‘Economic Analysis (Value and Distribution)’ and ‘Economic Analysis (Employment)’ in 1960-1961 and ‘Principles of Political Economy’ and ‘Employment, Prices and Growth’ thereafter. By then Meade had resumed work on his projected multivolume treatise on the principles of economics, beginning with The Stationary Economy which appeared in 1965, to be followed shortly by The Growing Economy in 1968.
When Meade arrived in Cambridge the theory of economic growth was becoming a fashionable topic, especially in Cambridge. ‘It was impossible’, Meade wrote, ‘to study economics in present-day Cambridge without being affected by the ferment of ideas on this subject’ (Meade 1961: vi).[3] After preparing his Inaugural Lecture (on the control of inflation) Meade wrote a note on Kaldor’s 1957 article which he sent to Kaldor and to Kahn on 14 January 1958, at the same time beginning to construct his own model. He was soon conducting a prolonged, initially amicable, argument with Joan Robinson over it. Joan, characteristically, became increasingly exasperated when Meade refused to give in to her objections, her core objection being to Meade’s constructing a ‘neoclassical’ model of equilibrium growth with labour and capital continuously fully employed. At the same time, Robinson was commenting on Kaldor’s model and on David Champernowne’s article in the June 1958 Economic Journal, as was Meade, and they were commenting on each others’ comments; from July 1958 Meade was also reading and commenting at length on the typescript of Robinson’s Exercises in Economic Analysis (Joan Robinson 1960).[4]
Meade wrote a note on Champernowne’s article which he submitted to the Economic Journal on 22 January 1959. Harrod accepted it on 26 January, ‘subject to your not wishing to withdraw it’ as a result of showing it to Champernowne. On 1 October, Meade wrote to Harrod again: ‘I am afraid my economic-growth thing has become much too long for an article. If it is published at all, it will have to be a short book’ (Royal Economic Society RES6/1/153, LSE Archives).
Meade completed his book, A Neo-Classical Theory of Economic Growth, in December 1959. It presents a model of equilibrium growth in an economy with two goods and three factors of production assuming perfect competition and constant returns to scale and a banking system which always sets the rate of interest so as to preserve a constant money price of the consumption good and hence full employment of all resources. In the early chapters he also assumed perfect substitutability between capital goods and consumption goods, thus making it a one-good model but the second, mathematical part is worked out in terms of two goods, thus making a considerable advance on the one-sector ‘neoclassical’ models of, for instance, Robert Solow and Trevor Swan.
Joan Robinson wrote a long and critical review in the American Economic Review. She did not go so far as to accuse Meade of ‘bastard Keynesianism’ but in a survey of ‘Pre-Keynesian theory after Keynes’ in 1965 she took his book, along with the work of Paul Samuelson and Robert Solow in the other Cambridge, as exemplars of the genre (Joan Robinson 1965: 15-29, 56-69). Two years earlier, Solow, in Cambridge to give the Marshall Lectures, had, he told Amartya Sen (26 October 1964, Solow Papers, Duke University), ‘got a little annoyed...by the indiscriminate use of “Keynesian” as an adjective meaning “mine” and “neo-classical” to mean “yours.” To the extent that “neoclassical” describes the belief that a capitalistic economy tends automatically to full employment, I am no neo-classical and neither is James Meade’.
Meade had responded forthrightly to criticisms in the Preface to the second edition of his growth theory book:
This book is certainly not classical in the sense of being pre-Keynesian.
It is...based on the assumption of an ideally successful Keynesian policy which at every point of time manages to keep the value of investment at the desired level.
This book is classical in the sense that it is built on the assumption of perfect competition and of payments to factors equal to their marginal products ... [This is not realistic but is the simplest assumption to use].
There remains one further way in which this book is distinctly ‘classical’ in spirit. The analysis is based on the existence of the three classical factors of production—land, labour, and capital. In fact in the real world factors of production do fall into the three broad categories of natural resources, human effort, and man-made instruments. The interrelationships between these three categories is of great importance in economic growth; and in this second edition I have paid even more attention to them than was done in the original version of this book (Meade 1962: ix-xi).[5]
In an interview for a Cambridge student magazine in 1972 he remarked ruefully:
I wish I had never used this term ‘neo-classical’ . I ought to have called it ‘The Keynesian Classical Theory of Economic Growth’, because I am basically a very good Keynesian—though perhaps not a very good ‘neo-Keynesian’. You see the great Keynesian notion. was that you won’t automatically get full employment. But supposing that you do successfully undertake policies.giving you full employment, then all the old classical problems [allocation and distribution] come into their own again [and deserve consideration] (Meade 1972: 4-5).
In the 1960s Meade continued to write on economic growth, with his colleagues Champernowne and Frank Hahn (Meade 1988b: 389-428), thus establishing himself in the other camp from the Cambridge Keynesians’ biased point of view. As Pasinetti noted (2007: 39), Meade ‘was pushed more and more into neoclassical analysis’ while his friends Richard Stone and Austin Robinson were also ‘left isolated’, in the DAE (though Stone had lost the Directorship in 1955) and at the Economic Journal, respectively. Meade also became more active in areas such as distribution and population, which will not be discussed here. His own favourite book was his Efficiency, Equality and the Ownership of Property (Meade 1993b, 1964) which brought together his views on (real world) economic growth, the microeconomic role of the price mechanism, the size and composition of the population, and the distributional implications of property ownership. In 1968, he resigned from the Chair of Political Economy, fed up with the Cambridge Keynesians’ method of conducting Faculty business (in which he was ex officio involved) as well as economic argument. His College gave him a Senior Research Fellowship which he held until his formal retirement in 1974 during which time he completed two more volumes of his treatise.
At the time he completed his second volume he thought the third might be entitled The Fluctuating Economy, but, having learned from younger colleagues about the theory of optimal control, it became a volume on The Controlled Economy (Meade 1971; see also Meade 1970). He thanked the members of a small seminar in Cambridge including David Livesey, Tony Atkinson, Geoff Heal, and David Newbery. By the time he wrote the fourth volume, he had come to doubt that he would write further volumes. But having envisaged since at least the second volume that the final volume must be on The Mixed Economy, he had lectured on that topic (Meade Papers 12/18) and he had written a short book, The Intelligent Radical’s Guide to Economic Policy (Meade 1975), which ‘treated in the tone of a political pamphlet much of the ground which would be covered more tediously in The Mixed Economy’ (Meade 1976: 10).
Meade gave the last of his ‘Principles of Political Economy’ lectures in 1966-1967, though until 1974 he was still giving some lectures to undergraduates in Cambridge—including ‘Economic Analysis and Policy’ for Prelims for one year after Joan Robinson retired and a course on welfare economics the following year.[6] His ‘Principles’ lectures followed closely the material he was using for his Principles of Political Economy. In the first volume, he had ‘claim[ed] only to present a series of “models”—i.e. of economic systems, each built on greatly simplified assumptions about human motives, technology, and social institutions—and to undertake in each case a series of “exercises”— i.e. to examine the links of causal relationship in each case’. For ‘while no final decision about policy should ever be taken without adequate empirical enquiry, experience has convinced me that a training in economic principles of [this] kind...inculcates a way of looking at things which helps greatly in reaching a sensible final decision’ (Meade 1965: 7-8).
The economist father of one student recalled that his daughter sometimes consulted him about difficulties she had encountered in lectures and showed him her notes:
Those from the Meade lectures were remarkable in that (a) it was always clear what you said and (b) one could see precisely where she had failed to take a point and run into trouble. This is the supreme test of clarity in the exposition of theory, and I have always regarded you as a great master (Worswick to Meade,
18 October 1977, Meade Papers 19/8).
When Meade was free of the demands of lecturing, he could turn to economic issues and policy problems out of intellectual curiosity and his continuing desire to make a better world. In 1974 he took on the chairmanship of an important inquiry on the structure and reform of direct taxation; his young economist colleagues included Atkinson and Mervyn King from Cambridge and John Flemming and John Kay from Oxford. Their ‘Meade Report’ came down in favour of the expenditure tax originally promoted by Kaldor (Meade 1978).[7] In 1978 Meade returned to his Keynesian macroeconomic roots to lead a major research project on ‘stagflation’ with a group of young economists in the DAE. In his Nobel Lecture in 1977, he had revisited the concept of internal balance he had used in The Balance of Payments (Meade 1988a: 349-362). He said that if he were rewriting the book he would have three policy targets (the balance of payments, full employment, and price stability) instead of two (internal and external balance). He proposed a ‘New Keynesian’ assignment of policy instruments to these targets: monetary and fiscal policy to maintaining total money expenditure (nominal GDP), reform of wage-fixing arrangements to full employment and exchange rate policies to the balance of payments. In an inflationary world, the old Keynesian assignment of demand management to the employment objective served to increase inflationary pressure which could not be suppressed by any feasible ‘incomes policy’. The monetarist alternative of controlling the rate of inflation by fixing the rate of growth of the money supply was unacceptable as it would generate intolerably high unemployment. His young collaborators, who included David Vines and Martin Weale, worked on the design of the appropriate demand management policies while he concentrated on the reform of wage-fixing arrangements (Meade 1982; see also Meade 1986a, b, 1989; Meade et al. 1983, 1989).
Although New Keynesianism might be thought to be more ‘monetarist’ than the Keynesian Non-Monetarist position of many of Meade’s Cambridge colleagues (Meade 1988a: 382), it ‘has much of the merit of the original Keynesian prescription to use financial policy to maintain real GDP—the general level of output and employment’ (Meade 1995: 20-21; italics in original). In his last book, Full Employment Regained.?, published shortly before he died in 1995, Meade tackled the question whether ‘Full Employment’ could be regained without serious inflation and increasing inequality, arguing ‘as an old Keynesian’ that appropriate macroeconomic policy is always necessary to achieve full employment.
- [1] Trinity made Meade an Honorary Fellow 30 years later.
- [2] Kaldor, who had moved to Cambridge with LSE in 1939 and moved back to London with LSE in 1945,but keeping his family home in Cambridge, had been offered a University Lectureship and a Fellowship atKing’s in 1949, which he accepted.
- [3] Cambridge contributions in the 1950s included David Champernowne (1958), Kahn (1959), Kaldor(1957), and Joan Robinson (1956).
- [4] The extensive correspondence, with memoranda, survives in the Meade Papers (10/4 and 10/6). Withrespect to Robinson’s comments on Meade’s model the earliest dated letter is one of 19 February 1958from Meade to Robinson, the latest, from Robinson, 17 October 1959, when she was reading the typescript of the book. It is worth noting that in January 1958, Meade wrote the nomination for her electionas a Fellow of the British Academy.
- [5] In the second edition, Meade added a whole new chapter using his model to consider growth in anoverpopulated economy.
- [6] In that year, the arrangement of complementary or competing lectures for Prelims resumed, this timegiven by Hahn and Pasinetti.
- [7] It was not the first ‘Meade Report’ which was Meade (1961).
