Cambridge and the Monetary Theory of Production The Collapse of Mars
Less than fifty years after the publication of Marshall's Principles Cambridge once again set economics on a new path with the publication of Keynes's General Theory. This book examines the developments in Cambridge monetary and trade cycle theory that we
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Cainbridge and the Monetary Theory of Production The Collapse of Marshallian Macroeconomics Robert J. Bigg
©Robert J. Bigg 1990 Softcover reprint of the hardcover 1st edition 1990 978-0-333-51657-7
All rights reserved. No reproduction, copy or transmission of this publication may be made without written permission. No paragraph of this publication may be reproduced, copied or transmitted save with written permission or in accordance with the provisions of the Copyright, Designs and Patents Act 1988, or under the terms of any licence permitting limited copying issued by the Copyright Licensing Agency, 33-4 Alfred Place, London WClE 7DP. Any person who does any unauthorised act in relation to this publication may be liable to criminal prosecution and civil claims for damages. First published 1990 Published by THE MACMILLAN PRESS LTD Houndmills, Basingstoke, Hampshire RG21 2XS and London Companies and representatives throughout the world British Library Cataloguing in Publication Data Bigg, Robert J, 1957Cambridge and the monetary theory of production: the collapse of Marshallian macroeconomics. 1. Economics. Theories of. Cambridge School I. Title 330.15'5 ISBN 978-1-349-38937-7 ISBN 978-0-230-37121-7 (eBook) DOI 10.1057/9780230371217
For Penny and Alastair
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Contents
1 Introduction
1
1.1 The Methodological Framework 1.2 The Need for an Analytical History 1.3 The Degeneration of the Marshallian Research Programme 1.4 The Period under Review 1.5 An Outline of the Book 2 Some Methodological Issues
2.1 2.2 2.3 2.4 2.5 2.6 2.7
2 2 3 4
5
6
Introduction Economics and Methodology Ex Ante and Ex Post Rationality Falsification Lakatos and Research Programmes Research Programme Performance Some Practical Considerations
6 6 7 8 9 9 10
3 The Cambridge School Appendix: Biographical Notes
12 14
4 Marshall's Theory of Money and the Trade Cycle
17
4.1 4.2 4.3 4.4 4.5
Introduction Marshall on the Internal Value of Money The Rate of Interest Marshallian Trade and Credit Cycles Some Final Points
5 The Marshallian Research Programme 5.1 The Hard Core 5.2 The Positive Heuristic
17 18 25 28 32
34 34 38
vii
Contents
Vlll
5.3 Micro- and Macroeconomics 5.4 The Degeneration of the Marshallian Programme: Some Preliminary Comments 6 Risk and Uncertainty, 1900-26
6.1 Introduction 6.2 A Distinction between Risk and Uncertainty 6.3 Adaptive Views of Economic Behaviour and Failures of the Invisible Hand 6.4 An Early Version of Mean-Variance Analysis 6.5 Conclusion 7 Formalisation of the Cambridge Quantity Theory
7.1 7.2 7.3 7.4 7.5 7.6
Pigou's 1917 Quarterly Journal Article Some Aspects of Keynes's Early Work on Money The Quantity Theory Equation in Keynes's Tract Hawtrey and the Quantity Theory Cambridge and the Equation of Exchange Conclusion
8 Developments in Cambridge Monetary Theory to 1925
8.1 8.2 8.3 8.4 8.5
Lavington Robertson on the Supply of Bank Money Keynes and the Tract on Monetary Reform Keynes after the Tract Some Conclusions
