An Intellectual Phenomenon Called Joan Robinson

Amit Bhaduri

ne of the most colourful and versatile economists of the 20th century, Joan Robinson, aroused admiration and hostility from the profession in almost equal measure. The volume u nder review by Harcourt and Kerr on Joan Robinson, in the Great Thinkers in Economics series edited by Thirlwall, helps us to understand this apparently puzzling phenomenon in an apparently scientific subject. It would be a misleading over-simplification to say that the admiring and the disparaging comments were simply from two sides of the political divide. Joan Robinsons contribution to academic economics was so obviously important from a theoretical point of view that even those who thoroughly disagreed with her world view could not simply dismiss it. The issues involved often went to the heart of the subject, and the main merit of the book lies in explaining them accurately to an uninitiated audience in an accessible way. Professional economists who worry about the relation between economics as a body of scientific principles, and economics as i deology (or rhetoric) would benefit enormously by understanding the intellectual phenomenon in economics called Joan Robinson. This book would remain valuable for a very long time because it illuminates the complex relation between science and i deology in economics which received considerable attention in Robinsons writings throughout her life. During one of her visits to Poland, I was told she made a very interesting observation. The best test of a scientific theory in economics, she is reported to have said, is when you change your politics, but do not change the economic principles you apply. Its truth should be apparent after the recent crisis. Stimulating demand through fiscal policy has been accepted by dogmatic free marketers, not only in the United States and Europe, but

book review
Joan Robinson by G C Harcourt and Prue Kerr (London: Palgrave Macmillan), 2009; pp x+270, 65.00.

even in India by economists trained in the World Bank type ideology.

A Rebel
Robinson was by instinct an intellectual rebel, a rebel not identified either with the orthodox Left or Right. This is because her rebellious instinct was subservient to acute logical reasoning, not by commitment to any ideology. Professional economists could not simply ignore her logically crafted arguments. Brought up on the Marshallian tradition of partial equilibrium analysis (of mostly perfect competition), Joan Robinson received international fame and attention with the publication of her Economics of Imperfect Competition (1933). It was a masterpiece in micro economic theory of the time. Most economists would have developed vested interests in the particular line of research which brought them such professional success, and would have defended its usefulness till the end of their life. Joan Robinson did exactly the opposite! She began to question its importance as a line of research and, joined soon the emerging Keynesian revolution in Cambridge which reshaped macroeconomics. Harcourt and Kerr document (Chapters 3 and 4) that for a while (mostly during the 1940s) three almost parallel lines of enquiry proceeded in her work, as she tried sorting out the relation between imperfect market structures and Keynesian theory. First, and most obvious was the relation between imperfect competition (the falling demand curve) and deficiency of aggregate demand. Second, since Marx had c on nected his theory of exploitation with the realisation problem arising from insufficient demand, she found it natural to explore

the links between Marx and Keynes. And finally, the analytical overlap between the theories of Marx and Keynes despite their diametrically opposite attitude to capitalism the former theorised to destroy it, and the latter theorised to preserve it led Robinson to face the question of the role of ideology in economic theory, helping her to formulate her own views about the role of the state and the market especially in the context of post-war planning in Britain. It was now an intellectual challenge to reconcile these three aspects in a comprehensive analytical framework. Joan Robinson searched for this framework throughout her life, and her most perceptive work was probably simulated by this search. She searched relentlessly with complete intellectual honesty, often admitting her own mistakes about false starts without caring for academic respectability or recognition, and broke many intel lectual conventions in the process. The attempt at reconciling theoretically the three aspects of her enquiry was made in her Accumulation of Capital (1956) with its central propositions briefly reformulated in a short volume, Essays in the Theory of Economic Growth (1962). She believed, probably rightly that such a framework should be embedded in long period tendencies of capitalist growth by generalising the General Theory in the long period setting. Joan Robinson was the first in the immediate circle of Keynes to recognise that the link between Marx and Keynes could be deciphered through Kaleckis work, while Harrod (1939) had already provided the basic analytics for setting Keynes analysis in the context of the long period. A central point of her theory of growth, combining Kalecki and Harrod, was the two-way relation between the rate of profit and the rate of economic growth. In her scheme, growth affects profit through realisation (Kaleckis version of the multiplier mechanism) and profit affects growth through an investment function influenced by profit expectations (which can be similar to an acceleratorlike relation of Harrod). In this scheme, class distribution of income also affects the multiplier relation by affecting the savings propensity, and

Economic & Political Weekly EPW august 14, 2010 vol xlv no 33

31

BOOK REVIEW

this brings into the argument the impact of exogenous technical progress on income distribution. One point not mentioned by the authors of this volume is the unfortunate intellectual insularity of the Cambridge school. Although Robinson in particular had been trying to integrate the market structure of imperfect competition with aggregate demand in her work, she overlooked Josef Steindls seminal work on this very theme, Maturity and Stagnation of American Capitalism (1951) written in post-war Oxford under the intellectual influence of Kalecki. Undoubtedly, The A ccumulation of Capital would have been enriched by Steindls theoretical and empirical insights on the subject. Robinsons growth theory made novel connections with theories of value and distribution through its treatment of capital. She took the lead from Wicksell, and showed how change in relative price between capital and consumer goods at different rates of profit (an old problem due to Ricardo) plays havoc with the traditional production function. It becomes both a useless and a misleading tool of analysis, destroying in particular the marginal productivity theory of distribution. Since she had already established in her scheme that profit was influenced by growth, the marginal productivity of capital was u nnecessary for her analysis. Moreover, outside a one commodity world it was a logically faulty concept, and gave a misleading explanation of the rate of profit through relative scarcity of capital as a factor of production. In the rejection of the relative scarcity explanation of profit, her economics came dangerously close to upsetting a main ideological pillar of conventional economics. Conventional economists who had found it so convenient to believe in an apologetic justification of profit as the reward (for temporal or intertemporal) scarcity of capital hated that their beliefs were being questioned on logical grounds. Sraffas classic Production of Commoditities by Means of Commodities (1960) set matters to rest by exposing the logical h ollowness of the entire neoclassical paradigm, and its explanation of profit in p arti cular. For conventional academic wisdom it became a logical disaster. Marginal productivity theory of profit was shown to

have no logical foundation. Re-switching of technique was shown to be possible, as the same method of production (technique) could be profitable both at a relatively low and a relatively high real wage rate and yet be unprofitable in the intermediate range. Thus it destroyed irrevocably the inverse relation between the rate of profit and the capital-labour ratio, measuring the relative scarcity of capital in aggregate models.

Capital Controversy
In this demolition job of neoclassical capital theory, Joan Robinson again became a main player, and popularised its implications for economic theory through her writings. The debate on capital theory was logically won with its devastating implications for standard theory, and yet nothing changed in the profession! Business continued as usual, because the vested intellectual interest in standard neoclassical economics as a worldwide industry was too great. It also made clear that economic ideology in the service of capitalism does not need logic on its side! In disgust, Joan Robinson picked up the word mampsimus from the dictionary which means persisting deliberately in mistake (pp 103-05). However, in her search for a more realistic and logically coherent theory of capitalistic growth, Joan Robinson herself began to see that the capital controversy could play only a limited negative role. It was useful for clearing up the ideological cobwebs of neoclassical theory about distribution and profit. And yet, a realistic theory of economic growth has to meet a different and even more difficult challenge. A theory of growth that wishes to illuminate history has to take the question of path dependence far more seriously. The historically inherited stock of capital goods in this sense raised a different set of issues in this context which had been ruled by the assumption of malleability of the stock of capital. Her idea of the pseudo production function in which each point on an imagined production function had its capital stock consistent with its past history entailed a deeper criticism of the equilibrium method in economic theory. She had found an incomplete answer already in her Accumulation by comparing different equilibrium growth paths, but as she rightly insisted,

comparison is a very unsatisfactory way of understanding change. By taking snapshots of different positions and comparing them, you hardly understand how things change or develop from one position to another through time. It is a problem to which we do not know the answer. Irreversibility in time, path dependence arising in particular from past mistakes in forecasting the future or small probability chance events combine in historical (as well as biological) processes. We can describe them in historical narratives, but their complexities remain analytically intractable. With the intellectual honesty typical of her, Joan Robinson refused to fudge the problem, and insisted on the distinction between accumulation in historical and in logical time to highlight the contrast. Joan Robinson became a source of discomfort to other economists, as she admitted candidly that she did not know the answer and was trying to find a way. Because, through this admission she made us aware how most academic economists were simply fudging their answers by avoiding the real analytical issues. Towards the end of her life, she was fond of repeating in lectures and private conversations that economics is an important subject, mainly because it prevents you from being fooled by other economists! This is a lesson we all need to take to heart in this media age confronted frequently with economists who have either turned politicians or pretend to be modern pundits.
Amit Bhaduri (abhaduri40@hotmail.com) is professor emeritus at the Jawaharlal Nehru University, New Delhi.

More Retail Outlets for EPW

The Economic & Political Weekly (epw) is now available at a number of additional retail outlets. You can now buy the latest issues of the epw at Landmark, Odyssey, Crossword, Sankars and other select bookstores across the country. Please look for epw at the Outlook Counter at the above mentioned stores. If you need any help locating a store please call us at 022-40638282 and we would be able to assist you.

32

august 14, 2010 vol xlv no 33 EPW Economic & Political Weekly