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ABSTRACT
This paper is the first of a two-part investigation of a topic that has received little attention: the relationships between Keynes and Smith in economic theory and policy. Due to its wide scope and the need for careful discussion of primary sources, two papers are presented. Part I focuses on Keynes and examines all his remarks concerning Smith to address two central questions. Did Keynes classify Smith as a ‘classical economist’ and hence as an exponent of the views he rejected? And how was Smith, and the ‘invisible hand’, treated in Keynes’s writings from 1910 to 1946? The second paper focuses on Smith, and the parallels between the economic arguments of these master-economists.
Acknowledgements
I thank two anonymous referees for their informative and helpful reports.
Disclosure Statement
No potential conflict of interest was reported by the author(s).
Notes
1 The Elgar Companions to Smith in 2009 and Keynes in 2019, for example, contain no discussion of the topic.
2 One earlier paper suggesting Keynes and Smith are more aligned than opposed is Roll (Citation1976, pp. 19–22).
3 On this, the contributions in Thirlwall (Citation1978) are not directly helpful in providing answers.
4 He included his pre-GT self in this group (Keynes Citation1973b, p. 24).
5 In his 1910–14 lectures, Keynes was well aware of differences between non-marginalist and marginalist thinking. The problem of relating theory to reality was ‘attacked on two different lines. Menger, Jevons, Walras, Marshall about 1870 on one hand’ and the ‘Historical school of Germany Roscher, Schmoller, Hildebrand, Wagner on the other’ (Keynes Papers, King’s College Cambridge).
6 Keynes, in his 1910–14 lectures, noted in a passing criticism that Marshall’s treatment of value theory was ‘due to his too great allegiance to Ricardo’ (Keynes Papers, King’s College Cambridge). Keynes also noted Jevons’s ‘departure from the classical school’, thereby acknowledging differences between marginalist and pre-marginalist classicism (Keynes Citation1972b, p. 130).
7 See also Keynes (Citation1979a, pp. 80–81). The issue of whether Say’s Law, expressed as ‘supply creates its own demand’, accurately captures Say’s thought is bypassed here because it was in this form that it was introduced in England by James Mill (Citation1808, pp. 81–86), more widely circulated by J.S Mill, and attacked by Keynes. This makes it the relevant form for present purposes, although it is essential to clarify the meaning Keynes gave to this proposition (see below). On debates over Say’s Law, see, for example, Meacci (Citation2015) and the references therein.
8 On Keynes’s rejection, and Ricardo’s acceptance, of Say’s Law, see, for example, Rogers (Citation1989, pp. 165–167, 176–178, 219, 282–283) and the references therein.
9 In his 1934 lectures, the matter was put rather more clearly: ‘Classics defined by Marx as those culminating in Ricardo & Say; Keynes uses it for those who followed and completed Ricardo, including Marshall. Edgeworth and Pigou’ (Rymes Citation1988, p. O1, added emphasis). This remark excludes Smith entirely.
10 Only those with non-mainstream views on the topic, such as Malthus, Marx, Gesell, Hobson and Douglas, believed otherwise, but had, in Keynes’s view, failed to theorise it adequately.
11 Pasinetti (Citation2007, p. 222, fn. 11) misses this key point. He criticises Keynes for taking ‘Say’s Law as the discriminating element’ and then ‘confusingly’ making ‘no distinction … between the classics and the marginalists’. But given Keynes’s long period target, it was unnecessary to do so, a point consistent with other parts of Pasinetti’s account. See also below.
12 On Ricardo’s acceptance of Say’s Law, see below.
13 No further content is given, but reading Smith certainly needs attentiveness (see Part II).
14 The above does not exhaust all that can be taken from these lectures. The surviving remnants of Keynes’s early lectures are in the Keynes Papers, King’s College Cambridge, and in Keynes (Citation1983b, ch. 5; especially pp. 692, 699–700, 723, 752–753). The above quotations are from the former.
15 Earlier references are omitted, including those in a 1915 review of an edition of Bagehot’s works and life (Keynes Citation1983a, pp. 533–541).
16 See O’Donnell (Citation2019).
17 Note that parallelism per se does not imply truth.
18 Interestingly, this also applies to Ricardo, but he remains a classical economist due to his ‘given output’ stance.
19 In the 20th century, state control of the interest rate combined with fixed exchange rates became a highly dangerous policy (Keynes Citation1936, p. 339).
20 Keynes’s remarks here obviously only apply to British economists.
21 See O’Donnell (Citation1989, Citation1990) for broader commentary on Keynes and laissez-faire.
22 On Keynes-Paley connections, see O’Donnell (Citation2020). Keynes’s rejection of laissez-faire began very early, his earliest published indictment possibly being in 1908 (Keynes Citation1983a, pp. 174–175).
23 This is true of Smith’s published works. The only possible, indirect exception is the following passage reported to have come from his early 1755 lectures (where ‘her’ refers to nature): ‘it requires no more than to leave her alone and give her fair play in the pursuit of her ends … Little else is required to carry a state to the highest degree of affluence … but peace, easy taxes and a tolerable administration of justice’ (Rae Citation1895, pp. 62–63, emphases added). This was written before his European tour, and 21 years before WN appeared. As Part II indicates, a wide gulf exists between these early primitive ideas and the sophisticated system of WN.
24 Despite the language, the first proposition here is not actually a Smithian one, as Part II explains.
25 Note also that no contradiction exists here between Keynes’s views of J.S. Mill in 1926 as accepting significant government interference in the economy, and in 1936 as accepting Say’s Law. Both views are present in Mill (Citation1885, Bk. I, ch. v, Bk. III, ch. xiv, Bk. V, ch. i), the former relating to the short run, the latter to the long.
26 Keynes’s sickness concerned his body, not his mind. His contemporary writings indicate that his mind remained sharp until April 1946 (Keynes Citation1980, pp. 427–487), as does Harry Johnson’s account of that meeting (Johnson and Johnson Citation1978, pp. 132–134).
27 Two accounts, half a century apart, illustrate the orthodox, mistaken resolution. Harrod (Citation1951, p. 622) viewed Keynes as accepting the operation of the classical invisible hand and hence its optimal outcome in the long run, but as proposing ‘short-run aids’ to ‘ease’ the adjustments in the meantime. Cesarano (Citation2003) advanced a similar ‘disequilibrium’ or ‘New Keynesian’ version, apparently without knowledge of Harrod’s account.
28 See also Keynes (Citation1972b, pp. 98, 100–102).
29 Meacci (Citation2015) misses this, as do other accounts. The point is also related to Keynes’s sense of ‘general’ in the GT.
30 On these, see Kurz and Salvadori (Citation2015, pp. 163–164, 273, 499–514).
31 One final remark. Significant differences exist between periods and runs. Length reasons alone have led to using the common (and mistaken) synonymy of these terms.