Malthus and the Origins of Keynesian Thought

Ross Gittens wrote an article in The Age last week and I wrote a reply which has not been published. Gittens wrote about how original Keynesian ideas were when first put forward in 1936 and I pointed out that these supposedly original ideas were part of an ancient tradition in economic thought that had until then been universally rejected by the mainstream of the profession.

I cannot blame The Age for not publishing the article since newspapers are not a forum for the history of economics but it nevertheless does make quite a bit of difference where ideas come from and their ancestry as well.

The origins of The General Theory are, as it happens, part of my contribution to economics and without putting too fine a point on it would make the claim that I know more about how that book was written than just about anyone else alive. If you doubt this, google the name Harlan McCracken and see what you get. It was McCracken, it turns out, who coined the phrase “supply creates its own demand” that ended up in The General Theory as Keynes’s own definition of Say’s Law. Ask an economist where the phrase comes from and my guarantee is that they will not know. Now you do, but they don’t. Anyway, this was my response to Gittens. And it is issues like the following which make me a strong advocate of the importance of the history of economic thought in the education of an economist:

Demand deficiency and oversaving was the most common fallacy in economic theory until it became the mainstream. Today, rather than it being seen as fallacious, it is the core theoretical mode in all of macroeconomics. But Keynes was hardly the first to try to bring such ideas into the mainstream.

How far back do we want to go to find some precursor for this bit of nonsense. Well, let us go to Robert Malthus’s Principles which was published in April 1820. I always prefer to go back to Malthus’s version since it was because Keynes was reading Malthus in late 1932 that the idea of demand deficiency even entered his head.

Does it matter that Keynes took his ideas from Malthus? Perhaps not, but it certainly does cast them in a different light. And if you then read Malthus, you will know a lot more about what Keynes in The General Theory was getting at than if you don’t.

Update: Two things have come up from this posting, the first one of which is that the name “Ross Gittens” is spelled Ross Gittins. I am grateful for having had this pointed out and apologise to Ross.

The other matter is why do I write Robert Malthus when his full name is Thomas Robert Malthus which is frequently just written as T.R. Malthus. Even as I wrote it down this time, I thought about it although I do invariably think of him as Robert Malthus and Thomas Malthus seems a bit foreign. But is it a convention of some kind that I am following? The only evidence that I can offer that it is comes from The Reclaiming Malthus website which structures his name as “T. Robert (Bob) Malthus”. Does this make it a convention? I don’t think so since most of the other websites refer to Thomas Malthus but since this one is described as Malthus’s homepage, it may carry that extra bit of authority.

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18 Responses to Malthus and the Origins of Keynesian Thought

  1. ken n

    Thanks for that, Steve.
    For those of us who are neither economists nor economic historians, it’s enlightening.

  2. Dandy Warhol

    Exactly right Steven.

    I think of the General Theory as `Notes on Malthus`.

  3. Pingback: Steve Kates gives Gittins another lesson | Ross Gittins, Corrected

  4. Nice one Dr Kates. I posted it to RossGittins.info here, with a link to and quote from Gittins’ article.

  5. Skuter

    I was brought up on a diet of Keynesian economics early on in my economics education, and claims of ‘brand new ideas’ emanating from Keynes and that he was the first person to recognise and acknowledge business cycle fluctuations, were made often. These ideas are so pervasive now as no-one it seems can be bothered to check these outrageous and false claims for themselves. A good idea in my opinion is to encourage students to read some reviews of the general theory by various other economists of that period. Frank Knight’s is one of my favourites. From what I can tell, the reaction of Keynes’ contemporaries was one of confusion and bewilderment.

  6. TerjeP

    Students should be taught classical economics as a foundation and KeynesIan economics as an optional elective.

  7. sdfc

    Actually Steven if your going to bag other economists for their lack of knowledge it is best not to follow it up by demonstrating your own ignorance of Keynes theory.

    The GT is every bit a book of financial market processes. What you state is a recycling a simple demand deficiency argument was in fact a detailed analysis of financial crisis and the role of investment in driving employment.

    That deficit spending has at the very least arrested the slump in US aggregate demand is fairly obvious to anyone who cares to look at the figures. That is unless you believe falling household income is of little or no consequence or that business investment something other than a function of expected returns.

  8. sdfc

    Terje

    Students aren’t taught Keynes at uni. They are taught Hicks and the neoclassical synthesis, neither of which are strictly Keynsian and in the GT sense of the word.

  9. sdfc

    That should be Keynesian in the GT sense of the word.

  10. JC

    When did they stop using Samuelson, SDFC.

  11. sdfc

    JC

    Samuelson is basically the father of the neoclassical synthesis as far as I know JC. Which pretty much tried to jam “Keynesian” theory of macro stabilisation into a neoclassical framework.

    The Keynesian theory I was taught made no mention of the financial markets, uncertainty or the banking sector’s role in money creation.

  12. JC

    We used Samuelson at uni for part of time from what I recall and some other book for micro.

  13. sdfc

    JC

    We didn’t use any Samuelson text when I went. Our texts for various units were Mankiw, Taylor, Pindyck, Van Hoose, and one or two others from memory. We’re building a house at the moment so all my old text books are boxed up in the garage.

  14. JC

    ha Showing my age. Mankiw would barely have been going to university by then.

    Mankiw is keynesian for the most part.

  15. Jim Rose

    A good doctrinal history that puts Keynes is his historical context in a 300 year long debate is in The Richmond fed quarterly Spring 1999 in Mercantilists and Classicals: Insights from Doctrinal History by Thomas Humphrey.

    The abstract is

    “Three centuries of events, episodes, and policy controversies reveal that certain classical theories of monetary policy have outperformed other theories whose superficial, albeit fallacious, logic makes them perennially popular with the general public, politicians, and even some policymakers. The doctrinal historian’s job is to distinguish the robust from the fallacious theories so that central bankers can lock the former into place and thus avoid repeating past policy errors.”

    Section 3 is on THE KEYNESIAN REVOLUTION AND MONETARIST COUNTER-REVOLUTION (1936–1985)

  16. And it is issues like the following which make me a strong advocate of the importance of the history of economic thought in the education of an economist

    Hear, hear!

    Interesting that you call him Robert Malthus. Is that standard in economics?

  17. Peter Patton

    Why are we even talking about Keynes? Keynes is obly taught as part of history of economic thought. Nobody here would have been taught Keynes, they would have been taught the foundations of the IS-LM model and the Phillips, neither of which was Keynes.

  18. sdfc

    JC

    I didn’t go to uni until I was in my 30s which probably explains why I was using Mankiw while you were using Samuelson.

    Mankiw is a member of another branch of Keynesian economics, the New-Keynesians.

    Much of the GT is finance based, most Keynesian derivatives aren’t.

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