Economic Theory in Retrospect

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ISBN: 9780521571531 | 0521571537
Cover: Hardcover
Copyright: 3/28/1997

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This is a history of economic thought from Adam Smith to John Maynard Keynes - but it is a history with a difference. Firstly, it is a history of economic theory, not of economic doctrines, that is, it is consistently focused on theoretical analysis, undiluted by entertaining historical digressions or biological colouring. Secondly, it includes detailed Reader's Guides to nine of the major texts of economics, namely the works of Smith, Ricardo, Mill, Marx, Marshall, Wickstead, Wicksell, Walras and Keynes, in the effort to encourage students to become acquainted at first hand with the writings of all the great economists. This fifth edition adds new Reader's Guides to Walras's Elements of Pure Economics (1871-74) and Keynes' General Theory to the previous seven Reader's Guides of other great books in economics. There are significant and major additions to six chapters.

Preface to fifth edition

xvii

(3)

Acknowledgements

(1)

Glossary of mathematical Symbols

xxi

(3)

Abbreviations

xxiv

INTRODUCTION HAS ECONOMIC THEORY PROGRESSED?

(9)

NOTES ON FURTHER READING

(2)

1 PRE-ADAMITE ECONOMICS

(23)

MERCANTILISM

(8)

1 The balance-of-trade doctrine

2 The Specie-flow mechanism

3 The defence of mercantilism

4 Precursors of Keynes?

5 Realistic elements in mercantilist theory

THE EIGHTEENTH-CENTURY PREDECESSORS

(6)

6 The mercantilist dilemma and the quantity theory of money

7 The theory of creeping inflation

8 Cantillon's essay

9 Money analysis

10 The real rate of interest

PHYSIOCRACY

(7)

11 The meaning of physiocracy

12 The Tableau Economique

13 The single tax

14 Say's Law

15 Scholastic influences: an afterthought

NOTES ON FURTHER READING

(2)

2 ADAM SMITH

(32)

1 Adam Smith and the Industrial Revolution

READER'S GUIDE TO THE WEALTH OF NATIONS

(28)

2 Division of labour

3 The measure and cause of value

4 Cost-of-production theory

5 Supply-determined prices

6 Wages

7 Profits

8 Relative wages

9 Rent

10 A social unit of accounting

11 The trend of prices

12 Capital and income

13 Banking

14 Productive and unproductive labour

15 An optimum investment pattern

16 Synoptic history

17 The invisible hand

18 Taxation and the public debt

19 Adam Smith as an economist

NOTES ON FURTHER READING

(2)

3 POPULATION, DIMINISHING RETURNS AND RENT

(20)

THE THEORY OF POPULATION

(10)

1 The population explosion

2 Malthus's analytical schema

3 The empirical content of the theory

4 Automatic checks

5 The optimum theory of population and subsistence wages

6 Malthusianism today

DIMINISHING RETURNS AND THE THEORY OF RENT

(9)

7 The law of diminishing returns

8 Differential rent

9 The alternative cost of land

10 Land as a facotor of production

11 Site value taxation

NOTES ON FURTHER READING

(1)

4 RICARDO'S SYSTEM

(58)

1 The theory of wheat profits or the corn model

2 The labour theory of value

3 Capital costs and labour values

4 The Ricardo Effect

5 The invariable measure of value

6 The fundamental theorem of distribution

7 The effect of capital accumulation

8 The trend of relative shares

9 Technical change

READER'S GUIDE TO THE PRINCIPLES OF POLITICAL ECONOMY

106

(34)

10 Value

11 Relative wages

12 The invariable measure of value

13 Demand and supply

14 Social accounting

15 Did Ricardo hold a labour theory?

16 Rent

17 Agricultural improvements

18 Wages

19 Profits

20 Foreign trade

21 Law of comparative cost

22 The natural distribution of specie

23 The purchasing power parity theory

24 Say's Law

25 Pessimism?

26 Monetary theory

27 The Bullionist Controversy

28 The machinery question

29 Taxation

30 The lasting influence of Ricardo

31 Sraffa: Ricardo in modern dress

32 Ricardo in still more modern dress

NOTES ON FURTHER READING

140

(3)

5 SAY'S LAW AND CLASSICAL MONETARY THEORY

143

(29)

SAY'S LAW OF MARKETS

143

(17)

1 Say's Identity

2 Dichotomisation of the pricing process

3 Say's Identity and the quantity theory of money

4 Say's Equality

5 Say's Equality in classical writings

6 Keynes and Say's Law

7 The direct mechanism

8 The indirect mechanism

9 Savings, investment and hoarding

10 The real interest rate

11 Forced saving

12 Conclusion

MALTHUS'S THEORY OF GLUTS

160

(11)

13 Malthus's case

14 The doctrine of underconsumption

15 Exponential growth

16 What Malthus actually said

17 Ricardo and Malthus

NOTES ON FURTHER READING

171

(1)

6 JOHN STUART MILL

172

(43)

READER'S GUIDE TO THE PRINCIPLES OF POLITICAL ECONOMY

173

(40)

1 Laws of production and distribution

2 The doctrine of productive labour

3 Theory of capital

4 The wages fund doctrine

5 Advance economics and synchronisation economics

6 The machinery question

7 The rate of growth of the factors of production

8 Socialism

9 Custom and the laws of distribution

10 The distributive shares

11 The abstinence theory of interest

12 The theory of value

13 The quantity theory of money

14 Inflation

15 The loanable funds theory

16 Say's Law

17 The currency-banking controversy

18 The real bills doctrine

19 Mill's position on monetary management

20 Theory of international values

21 International wage and price levels

22 Hume's Law

23 Transfer payments

24 The vent-for-surplus doctrine

25 The basis of a theory of international trade

26 Statics and dynamics

27 The falling rate of profit

28 The stationary state

29 Taxation

30 The incidence of taxes

31 The public debt

32 The scope of government

33 Education in classical economics

34 The classical economists and the Factory Acts

35 John Stuart Mill as an economist

NOTES ON FURTHER READING

213

(2)

7 MARXIAN ECONOMICS

215

(62)

1 Terminology

2 Values and surplus value

3 The great contradiction

4 The transformation problem

5 Solutions of the transformation problem

6 Historical transformation

7 What price value?

8 The Marxist case for the labour theory

9 Profit as unearned income

10 Marx and Bohm-Bawerk

11 Surplus value and economic surplus

12 The laws of motion of capitalism

13 The law of the falling rate of profit

14 A glance at the data

15 Capitalsaving innovations

16 The reproduction schema

17 Business cycles

18 The investment function

19 The myth of a laboursaving bias

20 Impoverishment of the working class

21 Economic imperialism

22 The role of institutional assumptions

READER'S GUIDE TO CAPITAL

254

(21)

23 Value

24 Socially necessary labour

25 Commodity fetishism

26 Theory of money

27 Surplus value

28 The Factory Acts

29 Marx's use of historical material

30 Division of labour and machinery

31 Surplus value and labour productivity

32 The accumulation of capital

33 Absolute and relative impoverishment

34 Primitive accumulation

35 The costs of distribution

36 The turnover of capital

37 The reproduction schema

38 The great contradiction again

39 The transformation problem

40 The law of the falling rate of profit

41 Capitalsaving innovations

42 Foreign trade

43 Business cycles

44 Money and interest

45 Theory of rent

46 Marx as an economist

NOTES ON FURTHER READING

275

(2)

8 THE MARGINAL REVOLUTION

277

(34)

THE EMERGENCE OF MARGINAL UTILITY: AN ABSOLUTIST OR RELATIVIST INTERPRETATION?

277

(15)

1 The new departure

2 The maximisation principle

3 Value and distribution

4 The genesis of marginal utility theory

5 A multiple discovery?

6 When is a revolution a Revolution?

7 The slow uphill struggle

JEVONS

292

(9)

8 The theory of exchange

9 Bilateral and competitive exchange

10 The catena

11 Disutility of labour

12 Negatively or positively sloped labour supply curves

13 Capital theory

OTHER FORERUNNERS

301

(8)

14 Cournot on profit maximization

15 Duopoly theory

16 Dupuit and the French engineering tradition

17 Thunen's marginal productivity theory

18 Gossen's second law

NOTES ON FURTHER READING

309

(2)

9 MARSHALLIAN ECONOMICS: UTILITY AND DEMAND

311

(43)

UTILITY THEORY

311

(29)

1 The measurability of utility

2 Operational measurement of utility

3 The Bernoulli hypothesis

4 Gambling and insurance

5 The Bernoulli hypothesis and progressive taxation

6 Derivation of demand curves

7 The constancy of the marginal utility of money

8 Restatement

9 The indifference-curve approach

10 The revealed preference approach

11 Marshallian demand curves

12 The status of the subjective theory of value

WELFARE ECONOMICS

340

(12)

13 Consumer's surplus

14 Restatement

15 The four consumer's surpluses

16 Tax-bounty analysis

NOTES ON FURTHER READING

352

(2)

10 MARSHALLIAN ECONOMICS: COST AND SUPPLY

354

(52)

1 The short run

2 Quasi-rents

3 The long run

4 External economies

5 What are external economies?

6 Producers' surplus

7 The asymmetrical welfare effect

8 The representative firm

9 Monopolistic competition

READER'S GUIDE TO THE PRINCIPLES OF ECONOMICS

379

(26)

10 Introduction

11 Scope, substance and method

12 Wants and activities

13 Marginal utility

14 Consumer's demand

15 Consumer's surplus

16 The law of diminishing returns

17 The growth of population

18 The growth of capital

19 The division of labour or industrial organisation

20 Equilibrium of demand and supply

21 Stability conditions

22 Short run and long run

23 Joint and composite demand and supply

24 Marginal net product

25 Rent and quasi-rent

26 Increasing returns

27 The particular expenses curve

28 Tax-bounty analysis

29 Theory of monopoly

30 The marginal productivity theory of distribution

31 The supply of productive agents

32 The peculiarities of labour

33 The theory of interest

34 The theory of profit

35 The theory of rent

36 The course of economic progress

37 The greatness of Marshall's contribution

NOTES ON FURTHER READING

405

(1)

11 MARGINAL PRODUCTIVITY AND FACTOR PRICES

406

(74)

THE DEMAND FOR FACTORS OF PRODUCTION

406

(15)

1 Marginal productivity theory

2 The normative implications

3 Exploitation

4 Is continuous substitution possible?

5 The theory of imputation

6 Linear programming

7 The Hosbon objection

8 The high-wage economy theory

9 The present status of marginal productivity theory

LINEARLY HOMOGENEOUS PRODUCTION FUNCTIONS

421

(14)

10 Product exhaustion

11 The formal properties of linearly homogeneous production funtions

12 The economic meaning of linearly homogeneous production functions

THE OPTIMUM SIZE OF THE FIRM

435

(4)

13 Wicksell's proof of product exhaustion

14 The indivisibility thesis

15 Genuine variable returns to scale

16 Diseconomies of management

17 The growth of firms

THE THEORY OF PROFIT

439

(8)

18 The meaning of pure profit

19 The entrepreneur as a factor of production

20 The history of the concept of enterpreneurship

21 Profit as a return to uncertainty bearing

22 Profit as a return to innovations

23 Profit as a return to arbitrage

AGGREGATE PRODUCTION FUNCTIONS

447

(7)

24 The concept of micro-production functions

25 The problem of aggregation

26 Measurement of capital

TECHNICAL CHANGE AND PROCESS INNOVATIONS

454

(14)

27 Taxonomy

28 The automation bias in technical change

29 The inducement mechanism

30 The neglect of technical change

31 Marginal productivity once again

READER'S GUIDE TO THE COMMON SENSE OF POLITICAL ECONOMY

468

(9)

32 Consumer behaviour

33 The content of the maximand

34 Price formation

35 Supply as reverse demand

36 The doctrine of alter native costs

37 Alternative costs and factor prices

38 Distribution

39 The laws of return

40 The law of rent

41 Applied economics

NOTES ON FURTHER READING

477

(3)

12 THE AUSTRIAN THEORY OF CAPITAL AND INTEREST

480

(69)

BOHM-BAWERK'S THEORY OF INTEREST

480

(9)

1 The productivity of greater roundaboutness

2 The three reasons for interest

3 The first reason

4 The second reason

5 The third reason

6 The interaction of the three reasons

7 The determination of interest

THE AVERAGE PERIOD OF PRODUCTION

489

(15)

8 Bohm-Bawerk's model

9 The definition of the average period

10 The calculation of the average period

11 Is the average period infinitely long?

12 The demise of the average period of production

13 Synchronisation of production and consumption

14 The average period and the capital-output ratio

THE SWITCHING THEOREM

504

(5)

15 Double switching

16 The many-products--one-technique simplification

17 Is switching likely?

18 A post-mortem

FISHER'S THEORY OF INTEREST

509

(12)

19 Willingness and opportunity

20 Rate of return over cost

21 Diagrammatic exposition

22 Some uses of the diagram

23 The theory of investment decisions

24 The real and the money rate of interest

25 The real rate in a dynamic economy

26 Real versus monetary theories

THE RICARDO EFFECT

521

(7)

27 The concertina effect

28 The demonstration of the effect

29 The meaning of capital rationing

30 Conclusion

31 Money and real wages

READER'S GUIDE TO THE LECTURES ON POLITICAL ECONOMY, VOLUME 1

528

(19)

32 Utility and value

33 Welfare economics

34 Imperfect competition

35 Production and distribution

36 Capital

37 The capital structure

38 Bohm-Bawerk's theory of interest

39 The optimum storage period

40 The value of capital

41 The Wicksell Effect

42 Definitions of capital

43 The accumulation of capital

44 Cassel's theory of social economy

45 Durable capital goods

46 Wicksell as an economist

NOTES ON FURTHER READING

547

(2)

13 GENERAL EQUILIBRIUM AND WELFARE ECONOMICS

549

(47)

WALRASIAN GENERAL EQUILIBRIUM

549

(9)

1 The concept of general equilibrium

2 The Walrasian system

3 The existence of general equilibrium

4 Stability and determinacy

5 The fall and rise of general equilibrium theory

READER'S GUIDE TO THE ELEMENTS OF PURE ECONOMICS

558

(12)

6 Preface to the fourth edition

7 Definitions of basic terms

8 Bilateral exchange

9 Multilateral exchange

10 Theory of production

11 Theory of capital formation

12 Capital formation or capital accumulation?

13 Monetary theory

14 Marginal productivity theory

15 Monopoly and taxation

16 Evaluation of Walras's contribution

PARETIAN WELFARE ECONOMICS

570

(25)

17 The optimum exchange conditions

18 A Pareto optimum

19 The Scitovsky double criterion

20 Recent welfare economics

21 The marginal conditions

22 The optimal characteristics of perfect competition

23 Nonmarket interdependence

24 Public goods

25 Pigovian welfare economics

26 Second-best solutions

27 Marginal cost pricing

28 The Mislaid Maxim

29 Cost-benefit analysis

30 Back to the conflict between efficiency and equity

31 Competition as an end-state and competition as a process

NOTES ON FURTHER READING

595

(1)

14 SPATIAL ECONOMICS AND THE CLASSICAL THEORY OF LOCATION

596

(17)

1 The isolated state

2 Rent theory

3 The Thunen problem again

4 The theory of rings

5 Industrial plant location theory

6 The three-points problem

7 Sales areas

8 New developments in location theory

9 Weber's theory of industrial location

10 Market area analysis

11 Isard's general equilibrium theory

12 Linear transport functions

13 What survives of classical location theory?

14 The continued neglect of location theory

NOTES ON FURTHER READING

612

(1)

15 THE NEO-CLASSICAL THEORY OF MONEY, INTEREST AND PRICES

613

(28)

1 What is the quantity of money?

2 Fisher and Marshall

3 Wicksell's rehabilitation of the indirect mechanism

4 The cumulative process

5 Monetary equilibrium

6 Saving-investment concepts

7 Price stabilisation

8 Expectations

9 Keynes and Wicksell

10 The demand for money after Keynes

READER'S GUIDE TO WICKSELL'S LECTURES, VOLUME II

628

(13)

11 Velocity

12 The demand curve for money

13 The direct and indirect mechanisms

14 The two rates

15 Business cycles

16 Currency reform

17 Is the money supply exogenous?

18 Is the demand for money stable?

19 Is money neutral?

NOTES ON FURTHER READING

640

(1)

16 MACROECONOMICS

641

(48)

THE KEYNESIAN SYSTEM

641

(10)

1 The Keynesian Revolution

2 Why did it succeed?

3 Leading elements in the success story

4 Keynes's principal novel predictions

5 Other Keynesian predictions

READER'S GUIDE TO THE GENERAL THEORY OF EMPLOYMENT, INTEREST AND MONEY

651

(25)

6 Preface

7 The postulates of classical economics

8 The principle of effective demand

9 Definitions of terms

10 The propensity to consume

11 The inducement to invest

12 The rate of interest

13 The properties of capital, interest and money

14 The General Theory restated

15 Money wages and prices

16 An apologia for Pigou

17 The aggregate supply curve

18 Afterthoughts to the General Theory

19 What did Keynes mean?

20 The IS-LM reading

21 Dynamic readings

22 Rereading Keynes

23 Keynes's contributions to economics

MACROECONOMICS SINCE KEYNES

676

(11)

24 The Phillips curve

25 The natural rate of unemployment

26 How expectations are formed

27 Rational expectations

28 Real business cycle theory versus neo-Keynesianism

NOTES ON FURTHER READING

687

(2)

17 A METHODOLOGICAL POSTSCRIPT

689

(16)

1 Falsifiability in classical economics

2 Falsifiability in neo-classical economics

3 The limitations of the falsifiability criterion in economics

4 The role of value judgements

5 American institutionalism

6 Why bother with the history of economic theory?

NOTES ON FURTHER READING

704

(1)

Index of names

705

(8)

Index of subjects

713

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Economic Theory in Retrospect

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