"Everybody except Joan Robinson agrees about capital theory." -- Robert Solow (as paraphrased by Robinson)An essential text in my researches on mercantilism, usury and bills of exchange is Raymond de Roover's Gresham on Foreign Exchange, which just happens to be stored in part of SFU's library that is under construction and thus inaccessible. The immediate unavailability of that book, however, led to a fortuitous discovery.
I browsed in the call number section of the library's general collection where de Roover's book would have been and Robert Leeson's Ideology and the International Economy caught my eye. I flipped through the book and noticed on page 19 the delicious quote from Joan Robinson that, "the free-trade doctrine is just a more subtle form of mercantilism."
The quote is from a 1966 lecture, "The New Mercantilism" that is included in a collection of essays, Contributions to Modern Economics, which also contains "Capital Theory Up-to-Date," a 1970 review of C. E. Ferguson's The Neoclassical Theory of Production and Distribution, in which Robinson reprises her parody of neo-Walrasian, neo-neoclassical capital "leets." Leets is steel spelled backward and makes its debut in "Equilibrium Growth Models," Robinson's 1961 review of James Meade's Neo-Classical Theory of Economic Growth.
This allegedly ectoplasmic representation of capital is, in a nutshell, the crux of the "Cambridge capital controversy," which Robinson launched with her 1952 challenge, "I leave it to those who draw production functions to say what marginal productivity and the elasticity of substitution mean when labour and capital are the factors of production." Looking back, in 1978, on her 1952 essays and the "long struggle to escape... habitual modes of thought and expression," Robinson stressed that "it was precisely from the concept of equilibrium that Keynes was struggling to escape..." Contrarily, though:
"...textbook teaching in the department of so-called macro theory was an attempt to push Keynes into short-term equilibrium. ... The grand neoclassical synthesis (now known as bastard Keynesianism) was a more ambitious attempt to reduce the General Theory to a system of equilibrium."In responding to Robinson's leets critique, Robert Solow began by acknowledging "much truth" to the objection that "the usual production functions, allowing for more or less substitutability between capital and labor, attribute to 'capital' a degree of malleability which contradicts common observation." He then distinguished between the "econometrically-minded person" who would view the overly malleable capital as a "specification error" and others -- presumably including Robinson -- who judge it to be "a doctrinal error; and its consequence is a kind of Fall from Grace." Seven years later, Robinson had this to say about "doctrinal disputes":
Many economists, nowadays, who are interested in practical questions are impatient of doctrinal disputes. What does it matter, they are inclined to say, let him have his leets, what harm does it do? But the harm that the neo-neoclassicals have done is, precisely, to block off economic theory from any discussion of practical questions.If one is concerned about actual unemployment in an actual economy, Robinson later explained, one "has to discuss it in terms of processes taking place in actual history. The concept of equilibrium is incompatible with history. It is a metaphor based on movements in space applied to processes taking place in time." In other words, it is not just some kind of ethereal affectation to object to the concept of equilibrium -- it is an argument with irrevocable real-world consequences.
The failure of what Robinson dismissed as "bastard Keynesianism" also had real-world doctrinal consequences. "In the era of stagflation, this notion [that equilibrium growth can be achieved through fiscal and monetary 'fine tuning'] has been discredited and the quantity theory of money is blossoming afresh amongst its ruins." This 'blossoming,' incidentally, was not something Robinson welcomed.
Well, my interlibrary loan of de Roover's Gresham on Foreign Exchange has arrived, so I'm off up the hill to pick it up. To be continued...