================= HES POSTING ================= Two further examples 1. Robert Lucas (1976, 20) generously found Chicago and Carnegie-Mellon precursors to his famous critique of econometric policy evaluation in Friedman (1957), Muth (1961) and Knight (1921) (Marschak (1953) and Tinbergen (1956) were also mentioned). But Lucas failed to cite Phillips (1968) or Phillips (1972) - both clear forerunners of his critique. Phillips (1968, Models for the Control of Economic Fluctuations in Kendal, M. ed. Mathematical Model Building in Economics and Industry, London: Charles Griffin) was publicly available - although I know of no evidence that suggests that Lucas was aware of the volume in which it appeared. Phillips (1972, published in Phillips' CW) remained a handwritten essay until I discovered Phillips' private paper (no one had previously thought to ask his widow if such papers existed). But since Phillips' high inflation Phillips curve (which Phillips never suggested existed as a policy alternative) was the 'whipping boy' of Lucas' Critique, the rhetorical impact of Lucas' essay would have been diminished if not destroyed by citing Phillips as a precursor. 2. The General Theory would also have lost its rhetorical impact if Keynes acknowledged that much of the book was Pigouvian. For example, Richard Kahn is believed to be the author of the Keynesian multiplier. The multiplier (in various forms) has a long history, but Pigou (Keynes' whipping boy) developed (at the level of theory and policy) the idea of employment creation having multiple repercussions. There is clear evidence which indicates that both Keynes and Kahn were aware of Pigou's multiplier. Discussing (approvingly) Bowley's calculations of the required magnitude of counter-cyclical public expenditure to stabilise unemployment at five per cent, Pigou (Industrial Fluctuations 1927, 294, 116) wrote that "It will be noticed that Dr. Bowley takes no account of the secondary effects ... the expansion of activity brought about in bad times by 'artificial' creations of demand is likely to be financed in part by the creation of new credit by the banks ... In this way secondary influences are set to work that further enlarge the aggregate real demand for labour. This is a very important matter". There was, however, "no way of determining conclusively" the magnitude of secondary repercussions that depended on relative price changes. If the "volume of floating capital used in purchase of labour" was below normal, this deficiency was made up of a primary part, x million bushels of wheat, and a "secondary part, the outcome of reactions set up through the monetary mechanisms, of (10 - x) millions. But our artificially stimulated demand will also carry with it secondary effects of the same character as those carried by the primary part of the contraction". The size of the multiplier would depend on whether the government financed the expansion through monetary policy or through an increase in taxation. Taxation would reduce, but not eliminate, the multiplier. Pigou then worked out the algebra of the multiplier generated by "public spirited producers" expanding their output; concluding that this "cannot accomplish much towards general stabilisation unless [the] product is one for which the demand is very elastic". Pigou neglected to expand on the relationship between x and the desired counter-cyclical target, simply saying that "unfortunately, we do not know at all how large x is". But he concluded that "the presumption in favour of some creation or transfer [of demand] beyond what comes about 'naturally' is very strong" [emphasis in text] (1927, 294-6, 298-9); "a small injection of money into the income-expenditure circuit might lead to a progressive and far reaching improvement in the employment situation ...The process I have been describing is cumulative and progressive in character ... a spiral upwards movement ... Plainly, this cumulative process is of great importance" [emphasis in text] (1933, 242-3). In May 1929, Keynes and Henderson published (in the Nation) part of their election pamphlet, Can Lloyd George Do It?, which two years later, was reprinted in Essays in Persuasion. The Preface was dated November 1931, and contains some information about Keynes' Cassandra-like frame of mind. In the macroeconomic creation myth, "Cassandra bec[a]me the Delphic Oracle" and other sources of wisdom were demoted (Austin Robinson 1947, 53). But Cassandra could not be seen to be croaking in a chorus. In the version of Can Lloyd George Do It? that appeared in Essays in Persuasion, Keynes deleted the two paragraphs that follow the words, "We are left with a broad, simple, and surely incontestable proposition. Whatever real difficulties there may be in the way of absorbing our unemployed labour in productive work, an inevitable diversion of resources from other forms of employment is not one of them". Those two paragraphs read: "This conclusion is not peculiar to ourselves or to Lloyd George and his advisers. The theoretical question involved is not a new one. The general problem whether capital developments financed by the government are capable of increasing employment has been carefully debated by economists in recent years. The result has been to establish the conclusion of this chapter as sound and orthodox and the Treasury's dogma as fallacious. For example ... our preceding argument has closely followed Professor Pigou's reasoning in his recent volume Industrial Fluctuations (part II, chapter X), where he quotes a statement of the Treasury dogma and expressly declares it to be fallacious ... Indeed we have not been able to discover any recent pronouncements to the contrary, outside the ranks of the Treasury, by an economist of weight or reputation (JMK IX, 120-1; Dimand 1988). Keynes read Pigou's Industrial Fluctuations as soon as it was published, finding it "rather miserable ... he just arranges in a logical order all the things we knew before" ([February 1927] cited by Moggridge 1992, 434). Part II, chapter X, referred to by Keynes in the deleted paragraphs, is entitled 'Attacks on Industrial Fluctuations'. It contains one of the clearest statements of the employment multiplier: "In this way secondary influences are set to work that further enlarge the aggregate real demand for labour. This is a very important matter" (1927, 294). In Can Lloyd George Do It?, Keynes concluded his discussion of the (Pigovian?) employment multiplier with the caution that "It is not possible to measure effects of this character with any sort of precision" (JMK IX [1929], 107); a Pigovian caution that few economists would now dissent from. But these words were also deleted from Essays in Persuasion, and Keynes (1936, 113, 121) attributed sole paternity - of this "definite ratio ... a precise relationship" which in a "typical modern community ... would not be much less than 5" - to Kahn. Lambert (1969, 250, 245) reported that "According to Mrs. Robinson, Keynes threw himself into the working out of his new theory with such fervour that he forgot all his economics". She also recalled that in 1929, "Keynes gave a copy [of Can Lloyd George Do It?] to Kahn asking him in effect to make a detailed analysis". Kahn (1976, 24) was "incensed" by the Treasury view: "To my young mind the important thing was to demonstrate analytically the hollowness of the arguments that were used against the adoption of the obvious remedies". Kahn (1931, 173) did not refer to Pigou's multiplier, although the words "primary" and "secondary" appear in quotation marks and correspond to Pigou's terminology (1929, 294). Kahn believed (1984, 92) that his use of this terminology was designed to avoid previous confusions; believing that he had conceived of the fundamental idea behind his multiplier paper during a mountain-climbing holiday in August 1930 (Moggridge 1973, 75, n7; Kahn 1972, vii). Keynes' popular essay, 'The Multiplier' (the first use of the term) was published in The New Statesmen and Nation on April Fool's Day, 1933. 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