Professional Documents
Culture Documents
Anticipations of The General Theory - M Boianovsky
Anticipations of The General Theory - M Boianovsky
Anticipations of The General Theory - M Boianovsky
8. For every dollar saved and not invested infixed capital there is an addition to circulating
capital of an unsold commodity worth a dollar. The demand for investment is therefore a
demand for commodities that shall not be consumed, but that shall be retained for use, or held
for a market at cost of reproduction inclusive of normal profit (1907, 223; quoted in Davis
1953, 121). Unsold commodities that cannot be held at cost of reproduction are not part of the
demand for investment, but are added to the total investment of the period as a forced, or
unwilling demand (see also Hawley 1907,223-24; 1927,423).
9. Purchasing power must have some material representation somewhere, and the only way
a saving can be effected is by the retention of some material thing. But, paradoxical as it may be,
the material thing saved is never in the possession of the saver as an economic capitalist. . . .
What the economic abstainer abstains from is merely the exercise of a part of the abstract power
to purchase which has come into his possession (1907, 255-56).
10. Again, the similarity to Keynes is remarkable: Every such attempt to save more by
reducing consumption will so affect incomes that the attempt necessarily defeats itself ([ 19361
1973,84). As a matter of fact, Hawley had already implied this point in his I882 book: There is
here a case where individual are opposed to social interests. . . . The capital that the community
383
Discussion
Hawleys concept of period of readjustment made no impact on the
contemporaneous business cycle literature. Eugen von Bergmann ( 1895),
author of a comprehensive history of theories of business cycle of the
nineteenth century, quoted a passage from Hawley (1882, 17) about the
elimination of dead stock through output reduction but made no reference to page 54, where Hawley made the crucial assumption that spending will decline less than output. Bergmann discussed Capital and Population as part of his chapter on the simple over-production theories
(58-60), which misses the point that, according to Hawley, consumption
exceeds production during the depression. Hawley ( 1927) distinguished
sharply his own formulation from the under-consumption approach of
Foster and Catchings and John Hobson, since none of them note the
influence of variation in the field of investment. . . . Consequently, they
are unable to formulate any general law of the business cycle and make
little or no statement of the period of readjustment (422-23). It was
clear for Hawley that his formulation filled a gap in the literature. Why
it is that at certain periods there appear to be so many more unsaleable
misfits than at others, and how such maladjustment is rectified, are questions that economists have hardly attempted to answer, but which are
inevitably led to inquire into when we have once adopted enterprise as
the standpoint from which to view the field of Economics (1907, 245).
The macroeconomic character of Hawleys approach has its roots in the
application of supply and demand concepts to capital as an aggregate
of goods in 1879-82 and in the notion that the rate of profit depends on
aggregate consumption demand, advanced in 1907. The former idea was
expressed in the following passage: Capital . . . is a means, not an end
. . . a commodity useless except within definite limit. It is but the totality
17. Their statement that lack of money prevents consumers from buying commodities as
they are created, is too strong. They can always eke out by infringing on their capital. This
is just what happens during the period of readjustment, during which consumers purchase not
only all products as created, but all the accumulated stock of old commodities (Hawley 1927,
422).
them; and I venture the prediction that, when they are formulated,
accumulations will be found to arise from the proceeds of labor that
would otherwise have been unemployed, or in other words, that the
amount of a nations capital depends almost wholly upon the opportunity for profitable investment. Who understands the relations between
interest and profits? Who has satisfactorily explained the variations in
the amount of employment? (1902,264)
Apparently, Hawley believed his new ideas would be understood if only
his proposed definition of economics was accepted, as indicated by
his American Economic Review article (1913). This overemphasis on
methodology and definition helps to explain his inability to communicate
to his contemporaries the notion of the equilibrating mechanism as an
essential part of his Theory of the Productive Process.
Neglect of the equilibrating mechanism by Hawleys contemporaries
may be also interpreted as another instance of an unsuccessful early
discovery that did not fit into the then current state of science, of
the kind discussed by Stigler ( 1980).18First-rate macroeconomists, such
as Wicksell, were not ready to accept the idea that unsold goods are
absorbed in the depression since consumption is presumed to decline at
the same pace as output. Earlier theory has in my opinion turned the
whole matter as it were upside down in so far as it assumes that stocks
are increased in good times and depleted in bad times. . . . Not even the
assumption of widespread unemployment (or short time) in depressions
suffices as an explanation, for. . . unemployment itself implies greatly
reduced consumption (Wicksell 1978,213-14; see Boianovsky 1995).
R. K. Merton suggests a distinction between three degrees of resemblance in the study of the history of ideas: (i) rediscoveries (substantive identity); (ii) anticipations (when the earlier formulations overlap
the later ones but do not focus upon and draw the same set of implications); and (iii) adumbrations (earlier formulations have merely foreshadowed later ones; 1968, 13). The application of Mertons classification scheme leads to the conclusion that Haw ley prediscovered Keyness
consumption function and anticipated the adjustment mechanism be18. Stiglers list includes only instances of early discoveries from the theory of value and
distribution. Perhaps we should add three cases from macroeconomics and monetary theory:
Henry Thorntons, James Wilsons, and Hawleys early discoveries of the Wicksellian cumulative process, the Hayekian capital shortage explanation of the business cycle, and the Keynesian
theory of effective demand, respectively.
words, Often a new idea or a new empirical finding has been achieved
and published, only to go unnoticed by others, until it is later uncovered or
independently rediscovered and only then incorporated into the science.
After all, this is what we mean by rediscovery: the signals provided by
a discovery are lost in the noise of the great information system that
constitutes science, and so must be issued anew (1963a, 380).
Though he was active as a member and treasurer of the American
Economic Association in its first years (see Dorfman 1949, 209), the
signals provided by Hawley were lost. He did not hold an academic
position and had no influence on the professions approach to economic
fluctuations. Like Johannsen, he was a New York businessman with acute
insight into the workings of the economic system. The lack of crossfertilization between Johannsens multiplying principle and Hawley s
readjustment period helps to explain why The General Theory was not
within full grasp of the New York of 1907-8.
References
Bagehot, W. [ 18731 193 1 . Lombard Street. London: John Murray.
Barnett, P. 1941. Business-Cycle Theory in the United States, 1860-1900. Journal
of Business 14.2 (Part 2): 1-129.
Bergmann, E. v. 1895.Die Wirtschafskrisen: Geschichte der Nationalokonomischen
Krisentheorieen. Stuttgart: W. Kohlhammer.
Bharadwaj, K. 1978. The Subversion of Classical Analysis: Alfred Marshalls Early
Writings on Value. Cambridge Journal of Economics 2.3:253-7 1.
Bigelow, K. W. 1932. Hawley, Frederick Barnard. In vol. 7 of Encyclopaedia of
Social Sciences. Edited by E. R. A. Seligman. London: Macmillan.
Boianovsky, M. 1995. Wicksells Business Cycle. European Journal of the History
of Economic Thought 2.2:375-41 1 .
Branson,-W. H. 1989. Macroeconomic Theory and Policy. 3d ed. New York: Harper
& Row.
Chapple, S. 1991. Did Kalecki Get There First? The Race for the General Theory.
HOPE 23.2:243-61.
Davis, R. M. 1953. Frederick B. Hawleys Income Theory. Journal of Political Economy 61.1:117-26.
Dorfman, J. 1949. The Economic Mind in American Civilization, vol. 3. New York:
Viking.
Duesenbeny, J. S. 1949. Income, Saving and the Theory of Consumer Behavior.
Cambridge: Harvard University Press.
Foster, W. T., and W. Catchings. 1923. Money. Boston and New York: Houghton
Mi ffl in.
389