ECON4907: Classics in History of Economic Thought

PROGRAMME AND READINGS

 

Lectures 1–2 (week 1: 24-28 February) – Matthew Smith

The Formation of Classical Economics to 1776

a) political economy as a distinct intellectual discipline & modern project

b) origins in the seventeenth century

c) Cantillon, Quesnay, Turgot

d) the purpose of political economy

Reading:

There is no required reading for this topic. But if you are interested then recommend:

T. Aspromourgos (1996) ‘On the origins of classical economics: distribution and value from William Petty to Adam Smith’, London: Routledge [ebook].

The short Raphael biography listed under week 2 should be read over these first two weeks (which will amount to only about 50 pages per week). Since this is quite light reading, students are advised to begin reading, in these first two weeks, also the approximately 120 pages of required WN reading for week 3. Skimming pp. 37–71 (WN, book I, chs. IV–VI) would be a sensible additional undertaking in these first two weeks of the course.

 

Lectures 3–4 (week 2: 2-6 March) – Matthew Smith

Adam Smith: Life & Thought

a) the life of Adam Smith (1723–1790)

b) the structure of Smith’s political economy

c) Smith’s economics & his wider thought

d) the structure of the Wealth of Nations

Reading:

D.D. Raphael (1985) Adam Smith (Past Masters Series) (Oxford: Oxford University

Press); repr. in D.D. Raphael et al. (1997) Three Great Economists: Smith, Malthus,

Keynes (Oxford: Oxford University Press): 1–102. required reading

I.S. Ross (1995) The Life of Adam Smith, Oxford: Clarendon.

A.S. Skinner (1987) ‘Smith, Adam (1723–1790)’, in J. Eatwell, M. Milgate & P. Newman (eds.)

The New Palgrave: a dictionary of economics, London: Macmillan: vol. 4: 357–75.

A.S. Skinner (1996) A System of Social Science: papers relating to Adam Smith, 2nd ed.,Oxford: Clarendon.

D. Winch (2004) ‘Smith, Adam (bap. 1723, d. 1790)’, in H.C.G. Matthew and B. Harrison

(eds.) Oxford Dictionary of National Biography, Oxford: Oxford University Press [available also in an online edition, via Fisher Library].

No classes in Week 3 (9-13 March) – Matthew Smith Absent

 

Seminar 1 (week 4: 16-20 March) – Matthew Smith

WN: Prices & Income Distribution

KEY THEMES: natural price versus market prices and their respective determinants; the role of supply and demand; the gravitation of market prices towards natural price; the theory of natural wage rates; the theory of profit rates (if there is one)

Reading:

PRIMARY READING – WN: book I, chs. IV–X, 37–159. [This is all of book I, except for the first 3

chapters on ‘division of labour’ (included under seminar 2) and the final long ch. XI on rent (a subject that we put aside). It is recommended that all students in any case read pp. 1–12 (the ‘CONTENTS’ and

‘INTRODUCTION AND PLAN OF THE WORK’) for this week rather than next week. The key chapters with regard to Smith’s theory of prices, wages and profits are chs. VII (on natural and market prices) and VIII–IX (on wages and profits), pp. 72–115. Skim the rest, but paying more particular attention to ch. X (pp.116–59), on wage and profit relativities.]

T. Aspromourgos (2009) The Science of Wealth: Adam Smith and the Framing of Political Economy, London: Routledge [ebook] —ch. 3 (‘Competition, Prices and Distribution’): 65–134. Section 3.5 (pp. 101–131) – concerning the ‘prehistory’ of Smith’s price theory – may be ignored.

P. Garegnani (1983) ‘The Classical Theory of Wages and the Role of Demand Schedules in the Determination of Relative Prices’, American Economic Review, 73 (Papers and Proceedings): 309–13.

S. Hollander (1973) The Economics of Adam Smith, Toronto: University of Toronto Press—chs. 4–5: 114–87.

R. O’Donnell (1990) Adam Smith’s Theory of Value and Distribution: a reappraisal, New York: St. Martin’s—chs. 4, 6: 53–61, 82–117.

 

Seminar 2 (week 5: 23-27 March) – Matthew Smith

WN: Capital Accumulation & Growth

KEY THEMES: division of labour as the source of labour productivity growth; capital and the distinction between productive and unproductive labour; the role of saving in relation to growth; the distinction between saving and investment (if there is one); growth—a demand-led or supply-led process?

Reading:

PRIMARY READING – WN: book I, chs. I–III & book II, chs. I–IV—pp. 1–36, 276–359. [This includes all of book II, except for the last chapter on value added, labour productivity and capital intensities in different production sectors. The fourth chapter of book II is not so vital and can be skimmed.]

T. Aspromourgos (2009) The Science of Wealth: Adam Smith and the Framing of Political Economy, London: Routledge [ebook]—ch. 4 (‘Production and Capital Accumulation’): 135–202. Secs. 4.1.2, 4.2.3–4.2.4 and 4.3.5–4.3.8 (pp. 140–46, 155–60, 178–91) – concerning the ‘prehistory’ of Smith’s economics and some aspects of his economics less significant for the theory of growth – may be ignored. The lecturer can provide a pdf of page-proofs of the chapter.

W. Eltis (1984) The Classical Theory of Economic Growth, London: Macmillan—ch. 3: 68–105.

S. Hollander (1973) The Economics of Adam Smith, Toronto: University of Toronto Press—chs. 6–7: 188–241.

A.A. Young (1928) ‘Increasing Returns and Economic Progress’, Economic Journal, 38 (Dec.): 527–42.

 

Seminar 3 (week 6: 30 March-3 April) – Matthew Smith

WN: Economic Policy & the State

KEY THEMES: general opulence as the normative purpose of political economy (and of economic purpose of political society); the system of natural liberty; the role of policy and the legitimate economic functions of government; the relation between theory (and principles) and policy (practice); does Smith provide a justification for the distribution of material resources in a liberal capitalist society?

Reading:

PRIMARY READING – WN: book IV, ch. I; book V, parts of chs. I, II (there are only 3 chs in book V)—pp. 428–51, 689–723 (the legitimate functions of government in general), 781–8 (concerning education and division of labour), 814–16 (conclusion of ch. I), 817 (intro. to ch.II), 825–8 (general statement on taxation), 847–52 (taxes on rents & profits), 864–7 (taxes on wages), 869–76 (consumption taxes). [The third and final chapter of book V concerns public debt.]

Because Smith’s policy analysis and policy commentary in WN is both diffuse and covers a large quantity of the text, it is particularly important for this topic, to read the comprehensive overview in the first reading below.

T. Aspromourgos (2009) The Science of Wealth: Adam Smith and the Framing of Political Economy, London: Routledge [ebook]—ch. 5 (‘Opulence and Policy’): 203–54. Secs. 5.1.2 and 5.2.4–5.2.6 (pp. 212–14, 228–38) – concerning the ‘prehistory’ of Smith’s economics – may be ignored. The lecturer can provide a pdf of page-proofs of the chapter.

J.R. Lindgren (1973) The Social Philosophy of Adam Smith, The Hague: Martinus Nijhoff: 110–32 (ch. 6—‘Commercial Policy’).

W.J. Samuels and S.G. Medema (2005) ‘Freeing Smith from the “Free Market”: on the misperception of Adam Smith on the economic role of government’, History of Political Economy, 37 (2): 219–26.

A.S. Skinner (1996) A System of Social Science: papers relating to Adam Smith, 2nd ed., Oxford: Clarendon: 183–208 (ch. 8—‘The Role of the State’).

J. Viner (1927) ‘Adam Smith and Laissez Faire’, Journal of Political Economy, 35 (2): 198–232; also in J.M. Clark et al. (1928) Adam Smith, 1776–1926: lectures to commemorate the sesquicentennial of the publication of ‘The Wealth of Nations’, Chicago: University of Chicago Press: 116–55.

 

Lectures 5–6 (week 7: 6 -10 April) – Matthew Smith

Classical Economics after Smith and Modern Economics

a) Smith & the classical tradition

b) Smith to Ricardo to Mill and Marx

c) the decline of classical economics in the nineteenth century

d) Sraffa and the revival of classical economics in mid-twentieth century

Reading:

H.D. Kurz (2003) ‘The Surplus Interpretation of the Classical Economists’, in W.J.

Samuels, J.E. Biddle and J.B. Davis (eds.) A Companion to the History of Economic Thought, Oxford: Blackwell: 167–83. required reading

H.D. Kurz & N. Salvadori (2003) ‘“Classical” vs. “Neoclassical” Theories of Value and Distribution and the Long-Period Method’, in F. Petri and F. Hahn (eds.) General Equilibrium: problems and prospects, London: Routledge: 216–45. required reading

T. Aspromourgos (2009) The Science of Wealth: Adam Smith and the Framing of Political Economy, London: Routledge [ebook]—‘Epilogue’: 255–71. The lecturer can provide a pdf of page-proofs of the chapter. required reading

V. Walsh (2000) ‘Smith After Sen’, Review of Political Economy, 12 (1): 5–25.

 

 

THE WEEK 13-17 April IS

THE AVCC ‘COMMON WEEK’—NO CLASSES.

 

 

Lectures 7–8 (week 8: 20-24 April) – Graham White

The Rise of Marginalism and Dissenting Undercurrents to 1936

a) the rise of the marginalist tradition

b) the structure of the marginalist theory

c) Alfred Marshall & the Cambridge School

d) dissenting undercurrents and under-consumption theories  

Reading:

M. Milgate, (1982) Capital and Employment (London: Academic Press), Ch. V: 59-76. required reading

A. Campus, (1987) ‘Marginalist economics’ in J. Eatwell, M. Milgate & P. Newman (eds) The New Palgrave: a dictionary of economics (London: Macmillan), Vol.3: 320-22. required reading

P. Garegnani, (1983), ‘Notes on Consumption, Investment and Effective Demand’ in Eatwell J. and Milgate M. Keynes’s Economics and the Theory of Value and Distribution (London: Duckworth): 21 – 47.

 

Lectures 9–10 (week 9: 27 April – 1 May) – Graham White

John Maynard Keynes: Life & Thought

a) life & activities to 1930

b) Keynes’s intellectual development with particular reference to the making of

the General Theory (1930–1936)

c) Keynes after the General Theory

d) the structure of the General Theory

Reading:

M. Milgate (1987) ‘Keynes’s General Theory’; J. Eatwell (1987) ‘Keynesianism’; & L. Tarshis (1987) ‘Keynesian Revolution’ – all in J. Eatwell, M. Milgate & P. Newman (eds) The New Palgrave: a dictionary of economics (London: Macmillan), vol.3: 42–50.

A. Cairncross (2004) ‘Keynes, John Maynard, Baron Keynes (1883–1946)’, in H.C.G. Matthew and B. Harrison (eds.) Oxford Dictionary of National Biography, Oxford: Oxford University Press [available also online, Fisher Library (23 pp.)].

R. Skidelsky (1996) Keynes (Past Masters Series) (Oxford: Oxford University Press); repr. in D.D. Raphael et al. (1997) Three Great Economists: Smith, Malthus, Keynes (Oxford: Oxford University Press): 219–367. [This is a summary version of his three-volume biography of Keynes (1983–2000). There is also a further condensed version of the three-volume work (but nevertheless, more than 1,000 pages): R. Skidelsky (2003) John Maynard Keynes, 1883–1946: economist, philosopher, statesman (London: Macmillan)].

P. Clarke (2009) Keynes: the rise, fall, and return of the 20th century’s most influential economist, New York: Bloomsbury. [This is the best available short account of Keynes’s life and thought as a whole.]

D.E. Moggridge (1992) Maynard Keynes: an economist’s biography, London: Routledge.

 

 

Seminar 4 (week 10: 4-8 May) – Graham White

GT: the Principle of Effective Demand & the Multiplier

KEY THEMES: the classical postulates & involuntary unemployment (ch. 2); real wages & labour demand (chs. 2–3); the aggregate-supply/aggregate-demand apparatus (ch. 3); determinants of consumption (chs. 8–9); relation between consumption & income (chs. 8–9); relation between saving (consumption) and investment (ch. 10).

Reading:

PRIMARY READING – GT: chs. 1–3, 8–10 (pp. v–viii, 3–34, 89–131).

W. Darity, Jr. & W. Young (1997) ‘On Rewriting Chapter 2 of The General Theory’, in G.C. Harcourt & P.A. Riach (eds.) (1997) A ‘Second Edition’ of The General Theory, 2 vols. (London: Routledge), vol. 1: 20–27 (hereafter ‘GT2’).

L.L. Pasinetti (1997) ‘The Principle of Effective Demand’, in GT2: 93–104.

S. Parrinello (1980) ‘The Price Level Implicit in Keynes’ Effective Demand’, Journal of Post Keynesian Economics 3 (1): 63–78 [with a comment by S. Weintraub (1980) ‘Comment on Aggregate Demand and Price Diagrammatics’, Journal of Post Keynesian Economics 3 (1): 79–87].

J.S.L. McCombie (1985–86) ‘Why Cutting Real Wages Will Not Necessarily Reduce Unemployment – Keynes and the “Postulates of the Classical Economics”’, Journal of Post Keynesian Economics 8 (2): 233–48.

J. Thomas (1997) ‘The Propensity to Consume and the Multiplier’, in GT2: 147–61.

 

Note: The intervening chapters 4 to 7 (i.e. Book II) of GT, which are not covered by this seminar, deal with definitions and assumptions underlying the discussion in subsequent chapters; most importantly, the definitions of income and investment; the use of the money wage as the numeraire for the analysis and preliminary comments about the state of expectations as a variable in the subsequent determination of the level of employment.

 

Seminar 5 (week 11: 11-15 May) – Graham White

GT: Investment & the Theory of Interest

KEY THEMES: the MEC & investment demand (ch. 11); long term expectation, equity markets & investment demand (ch. 12); liquidity preference (chs. 13, 15); the rate of interest, saving, investment and Keynes’s critique of the ‘classical’ theory (ch.14).

Reading:

PRIMARY READING – GT: chs. 11–15 (pp. 135–209).

L.L. Pasinetti (1997) ‘The Marginal Efficiency of Investment’, in GT2: 198–218.

C. Panico (1988) Interest and Profit in the Theories of Value and Distribution (London: Macmillan), ch.4: 102–56 (‘Keynes on the Interest Rate’).

M.S. Lawlor (1997) ‘The Classical Theory of the Rate of Interest’, in GT2: 343–67.

C. Panico op. cit., Chapter 5: 157–80 (‘Keynes on the Relation Between Interest and Profit’).

F. Petri (2004) General Equilibrium, Capital and Macroeconomics: A Key to Recent Controversies in Equilibrium Theory (Cheltenham UK: Elgar), ch. 7: 256–68 (just part of the chapter, ‘Capital Theory and Macroeconomics. I: the theory of aggregate investment’).

Milgate M. (1982) Capital and Employment (London: Academic Press), ch. 7: 111–23.

 

Note: While controversial over the years, the omitted chapters chapters 16 and 17arguably do not add to the substance of Keynes’s argument, and, some would say, act to cloud the essence of the argument advanced in Chapters 13, 14 and 15. Chapter 16 deals (not for the first time in the GT) with the direction of causation between saving and investment, but partly in terms of what many have seen as a somewhat obscure discussion of capital theory.

Chapter 17, drawing in part on the influence of discussions with Piero Sraffa, is an attempt to cement Keynes’s alternative view of the direction of causation between the rate of interest and the rate of profit. However, the force of both of both Chapters 16 and 17 turns very largely on the validity of the negative side of Keynes’s critique which is the basis of chapter 14 and are arguably either unnecessary or defensive and suggestive of problems with the earlier chapters. Chapter 18 is essentially a summarising of the argument in the preceding 16 chapters, though it is worth noting Keynes’s comments towards the end of this chapter regarding stability in the money wage.

 

Seminar 6 (week 12: 18-22 May)

GT: Economic Policy & the State

KEY THEMES: money-wage flexibility & employment (ch. 19); money-wage adjustment versus monetary policy (ch. 19); effectiveness of monetary policy (passim); ‘cheap money’ (ch. 24); public investment (ch. 24); Keynes & socialism (ch. 24); the GT & Keynes’s social philosophy.

Reading:

PRIMARY READING – GT: chs. 19 [not including the Appendix], 24 (pp. 257–71, 372–84), with 94–95, 119–20, 128–31, 163–64, 196–99, 202–08, 217–21, 315–20. (The latter pages bring together the more significant discussions of policy prior to chapter 24.) ALSO:

J.M. Keynes (1930) ‘Economic Possibilities for Our Grandchildren’, repr. in Essays in Persuasion, (London: Macmillan, 1931), reproduced as vol. 9 of The Collected Writings of John Maynard Keynes, (London: Macmillan, 1972): 321–32.

J.M. Keynes (1944) Letter to F.A. von Hayek (28 June), in D. Moggridge (ed.) (1980) John Maynard Keynes. Activities 1940–1946. Shaping the Post-War World: employment and commodities (The Collected Writings of John Maynard Keynes, vol. 27): 385–88.

T. Aspromourgos (1997) ‘Keynes on Wage Flexibility and the Australian Wages System’, Australian Economic Papers 36 (June): 114–26.

R.M. O’Donnell (1991) ‘Keynes’s Political Philosophy’, in W.J. Barber (ed.) Perspectives on the History of Economic Thought, volume VI (Aldershot: Elgar): 3–28.

T. Aspromourgos (2012) Keynes’s General Theory After 76 Years: Chapter 24 and the Character of “Keynesian Policy”, Economic Record, 88 (Special Issue, June): 149–57

J.A. Kregel (1985) ‘Budget Deficits, Stabilisation Policy and Liquidity Preference: Keynes’s post-war policy proposals’, in F. Vicarelli (ed.) Keynes’s Relevance Today (London: Macmillan): 28–50.

D. Patinkin (1987) ‘real balances’, in J. Eatwell, M. Milgate & P. Newman (eds.) The New Palgrave: a dictionary of economics, vol.4: 98–101. [A version of this is also in the 2008 2nd edition, available online in Fisher.]

 

Lectures 11–12 (week 13: 25-29 May) – Graham White

Keynes & Modern Economics

a) Keynes’s General Theory and the development of macroeconomics to the present:

(i) the neoclassical synthesis;

(ii) the search for microfoundations

(iii) ‘new’ Keynesianism

b) Keynes & the reconstruction of classical economics: effective demand and the classical/Sraffian approach to value and distribution

Reading:

P. Garegnani (1988) ‘Capital and Effective Demand’, in A. Barrère (ed.) The Foundations of Keynesian Economics, (New York: St Martin’s), ch. 10: 197–230.

G. White (2004) ‘Capital, Distribution and Macroeconomics: ‘core’ beliefs and theoretical foundations’, Cambridge Journal of Economics, vol. 28 (no. 4).