Dennis Robertson (Great Thinkers in Economics)

Dennis Robertson

Gordon Fletcher

Great Thinkers in Economics Series Series Editor: Professor A. P. Thirlwall is Professor of Applied Economics, University of Kent, UK. Great Thinkers in Economics is designed to illuminate the economics of some of the great historical and contemporary economists by exploring the interactions between their lives and work, and the events surrounding them. The books will be brief and written in a style that makes them not only of interest to professional economists, but also intelligible for students of economics and the interested lay person. Titles include: William J. Barber GUNNAR MYRDAL Paul Davidson JOHN MAYNARD KEYNES Peter D. Groenewegen ALFRED MARSHALL Gordon Fletcher DENNIS ROBERTSON Gavin Kennedy ADAM SMITH Michael Szenberg and Lall Ramrattan FRANCO MODIGLIANI Forthcoming titles include: Gerhard Michael Ambrosi ARTHUR C. PIGOU Esben Sloth Anderson JOSEPH A. SCHUMPETER G. C. Harcourt and Prue Kerr JOAN ROBINSON AND HER CIRCLE John King NICOLAS KALDOR Michael A. Lebowitz KARL MARX Julio Lopez and Michaël Samuel Assous KALECKI’S THEORY OF CAPITALIST ECONOMIES Roger Middleton ROBERT SOLOW

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Dennis Robertson Gordon Fletcher

© Gordon Fletcher 2008 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, 90 Tottenham Court Road, London W1T 4LP. Any person who does any unauthorized act in relation to this publication may be liable to criminal prosecution and civil claims for damages. The author has asserted his right to be identified as the author of this work in accordance with the Copyright, Designs and Patents Act 1988. First published 2008 by PALGRAVE MACMILLAN Houndmills, Basingstoke, Hampshire RG21 6XS and 175 Fifth Avenue, New York, N.Y. 10010 Companies and representatives throughout the world PALGRAVE MACMILLAN is the global academic imprint of the Palgrave Macmillan division of St. Martin's Press, LLC and of Palgrave Macmillan Ltd. Macmillan® is a registered trademark in the United States, United Kingdom and other countries. Palgrave is a registered trademark in the European Union and other countries. ISBN-13: 978–1–4039–9934–4 hardback ISBN-10: 1–4039–9934–1 hardback This book is printed on paper suitable for recycling and made from fully managed and sustained forest sources. Logging, pulping and manufacturing processes are expected to conform to the environmental regulations of the country of origin. A catalogue record for this book is available from the British Library. Library of Congress Cataloging-in-Publication Data Fletcher, Gordon A., 1942– Dennis Robertson / Gordon Fletcher. p. cm. — (Great thinkers in economics) Includes bibliographical references and index. ISBN 1–4039–9934–1 (alk. paper) 1. Robertson, Dennis Holme, Sir, 1890–1963. 2. Economists—Great Britain—Biography. 3. Economics—Great Britain—History—20th century. I. Title. HB103.R62F57 2008 330.092—dc22 2008016588 10 9 8 7 6 5 4 3 2 1 17 16 15 14 13 12 11 10 09 08 Printed and bound in Great Britain by CPI Antony Rowe, Chippenham and Eastbourne

Contents

Preface

vii

List of Abbreviations

ix

1 Dennis Robertson: The Economics and the Man

1

2 The Early Years: Lessons for Life

12

3 Cambridge Undergraduate: The Light and the Dark

25

4 Varieties of Escape: 1, Economist and Soldier

37

5 The Economics of Social Improvement

49

6 A Theory of the Trade Cycle

63

7 The Anatomy of the Study

70

8 Welfare in Relation to Cycles and Growth

78

9 The 1920s: Making a Reputation

86

10 The Characteristics of a Style

95

11 Money in a Theory of the Cycle

109

12 An Odd Little Book

124

13 Banking Policy in the Cycle

131

14 An Ideal Banking Policy

145

15 Varieties of Escape: 2, Traveller and Professional Actor

150

16 The 1930s: Robertsonian Theory and Policy in the Decade of Keynes

159

17 Robertson and Keynes: Parallels and Differences

171

18 Keynesian Revolution and Robertsonian Dissent

179

19 A Resolution of the Controversy

189

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20 The LSE and the Treasury

201

21 Professor at Cambridge: 1, Faculty Politics, Public Service and Lecturing

213

22 Professor at Cambridge: 2, Public Addresses, Querulous Dissent and Scenes from College Life

223

23 A Question of Legacy

235

Bibliography

247

Index

259

Preface

This book examines the life and work of Dennis Robertson, 1890–1963, distinguished economist and Fellow of Trinity College, Cambridge. It does not purport to be a definitive biography but it does explain why Robertson qualifies to be considered a Great Thinker in Economics. It also uncovers the sources of his inspiration and ideas and the all-important causal relationship between the man and his work. It is rare to find such a close correspondence between an economist’s personal characteristics and his contribution to economic thought. This makes fascinating reading. I wish to thank Professor Tony Thirlwall, General Editor of the Great Thinkers in Economics Series, for his helpful comments on the manuscript and for his encouragement throughout. My thanks go also to the editorial staff and, in particular, Alec Dubber, of Messrs Palgrave Macmillan for help and advice in the preparation of the manuscript and for seeing the volume through the press. For permission to quote from manuscript collections, published works and correspondence I wish to record my gratitude to the following: Edward Elgar Publishing for generously allowing me to draw freely on my Understanding Dennis Robertson: The Man and his Work (Cheltenham: Edward Elgar, 2000); Palgrave Macmillan Publishers (Fletcher, Gordon 2007, Dennis Robertson: Essays on his Life and Work; Dennison, S. R. and Presley, J. R. (eds) 1992, Robertson on Economic Policy; Harcourt, G. C. (ed.) 1985, Keynes and His Contemporaries; Hill, Roger (ed.) 1989, Keynes, Money and Monetarism; Page, Norman 1983, A. E. Housman: A Critical Biography; Pigou, A. C. 1912, Wealth and Welfare; Pigou, A. C. (ed.) 1925, Memorials of Alfred Marshall; Presley, J. R. (ed.) 1978, Robertsonian Economics: An Examination of the Work of Sir D H Robertson on Industrial Fluctuation; Presley, J. R. (ed.) 1992, Essays on Robertsonian Economics; Robinson, Sir Austin and Moggridge, D. E. (eds) 1971–1989, The Collected Writings of John Maynard Keynes; Robbins, L. 1971, Autobiography of an Economist); The London School of Economics and Political Science (Robertson, Dennis 1948, A Study of Industrial Fluctuation); Routledge (Robertson, Dennis 1922 and later edns., Money; Robertson, Dennis 1926, Banking Policy and the Price Level: permission granted by Taylor and vii

viii

Preface

Francis); The Estate of Kenneth Clark, c/o the Hanbury Agency, 27, Walcott Square, London SE11 4UB (Clark, Kenneth [Lord] 1974, Another Part of the Wood: A Self Portrait. Copyright © 1974 Kenneth Clark. All rights reserved); The Master and Fellows of Magdalene College, Cambridge (A. C. Benson’s Diary); Mrs Judith M. R. Brown and the Master and Fellows of Trinity College, Cambridge (the Robertson Papers); The Master and Fellows of Trinity College, Cambridge (Trinity College Annual Record); Mr Christopher Johnson (the correspondence of Lionel (Lord) Robbins); The Provost and Scholars of King’s College, Cambridge (Basileon; Wilkinson, L. P. 1980, A Century of King’s); Mrs Imogen Thomas and the Haileybury Society (Thomas, Imogen 1987, Haileybury 1806–1987); The British Academy, for permission to reproduce the photograph used as the basis of the cover design. Every effort has been made to trace all the copyright holders but if any have been inadvertently overlooked the publishers will be pleased to make the necessary arrangements at the first opportunity. For personal reminiscences of, and information on, Dennis Robertson I am grateful to the following: Sir John Bradfield CBE, Dr Milo Keynes, Professor Robin Marris. For his invaluable technical assistance my thanks are once again due to Simon Blackman, Computer Support Officer at ULMS. I also wish to thank Geetha Naren and her colleagues at Integra, Pondicherry, India, who capably project-managed the editorial process. My final acknowledgement is to my family for their encouragement and support. For the final version, the views expressed and the errors that remain, I alone am responsible. Gordon Fletcher

List of Abbreviations

RPTC BDMC KPKC HPCC CCRO

Robertson Papers: Trinity College, Cambridge Benson, Diaries: Magdalene College, Cambridge Keynes Papers: King’s College, Cambridge Hawtrey Papers: Churchill College, Cambridge Cambridge County Record Office

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1 Dennis Robertson: The Economics and the Man

As with people in general, interesting economists are more interesting than uninteresting ones and in tracing the relationship between Dennis Robertson the Great Thinker in economics and Dennis Robertson the man, we shall be uncovering one of the most fascinating stories in the history of economics. Sir Dennis Holme Robertson (1890–1963) was one of Britain’s foremost economists, who was also celebrated abroad and especially in the United States of America. He made a crucial contribution to the development of thought during his lifetime and bequeathed an inimitable legacy to posterity – the extent and significance of which is still the subject of discovery and debate. Robertson was also, for many, one of the best-loved economists, who charmed generations of Cambridge undergraduates with his teaching and delighted readers worldwide with his witty and whimsical style of writing. For intellectual precocity, literary facility and the inherent interest of his non-professional activities, Robertson is the only modern economist who can be said to rival J. M. Keynes. Robertson’s contemporary, J. R. Hicks, truly described him as a ‘most unusual kind of economist, with a dimension to him that went far outside economics, expressed in a style that was peculiarly his own’ (Hicks, 1966: p. 9). As our story unfolds we shall, in effect, explore the ways in which Robertson was an economist of a ‘most unusual’ kind, account for the ‘dimension that went far outside economics’ and explain why he affected ‘a style that was peculiarly his own’. At the same time, Robertson has been described as a neglected economist, whose contributions are largely unknown beyond a relatively small group of loyal supporters in the profession. The reason for this neglect 1

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Dennis Robertson

was held to be the predominance of Keynesian economists in the seats of power. Stanley Dennison, a former colleague and protégé, tetchily rounded on mainstream British economists for their unjustified ignorance of his hero’s eminence: In most British universities few students read a word of Robertson or are informed by their teachers of his contributions, which in turn reflects their own limitations. Instead they [the students] are mostly fed on the latest dogmas of debased neo-Keynesianism and mathematical growth models. (Dennison in Presley [ed.], 1992b: p. viii) In the years since Robertson’s death, this group has done much to bring his ideas to the notice of a wider audience. From a more neutral standpoint, we shall treat him not as a ‘neglected’ economist – a somewhat nebulous concept – but as one who is largely undiscovered. This is not only because he did not prevail in the greatest challenge of his life, the struggle against the Keynesian Revolution, but also (paradoxically) because of his facility with style. While he beguiled many, he made his works inaccessible to many more and caused yet others to regard him as one who was not wholly serious. We shall, therefore, go in search of Dennis Robertson, not in the sense that he is lost and needs to be found, as in the case of a lost Inca city in the Andes, but in the sense that the conventional view of this important economist is superficial and inadequate and that the real Dennis Robertson is there waiting to be discovered, like the structure of DNA or the meaning of the Minoan language, Linear B. As with any economist, there are both professional and personal elements to this but in Robertson’s case what our search will reveal is the close, explanatory relationship between the economics and the man: between the contributions that qualify Robertson as a Great Thinker in economics and the circumstances of his life. We shall find that an understanding of Robertson’s temperament and of his outlook on life provides the key to an explanation of the way in which his thought developed (and failed to develop), of the way in which he reacted to the Keynesian Revolution and of the stylistic features of his writings, which are unmistakable. Though economics is often regarded as the ‘dismal science’, a bloodless discipline lacking warmth and feeling, we shall, by tracing the relationship between Robertson’s life and work, obtain a vivid glimpse of its hidden human face. As a preliminary, however, we must establish the grounds upon which Robertson qualifies for a place in the pantheon of Great Thinkers.

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To qualify as a Great Thinker in economics it is necessary to be more than a talented contributor to debate. There must be the essential element of pioneering that gives rise to a new line of thought or a way out from previous confinements. There is no requirement to be ‘right’ for all times and all situations, but our candidate must contribute significantly to the forward momentum of economic understanding and the development of economic theory. The touchstone could be the notion of the ‘big idea’ – or Great Thought – but then again the contribution could be more diffuse, a multi-facetted involvement. Robertson chiefly qualifies on the former criterion though elements of the latter may also be discerned. We shall argue his case on the following grounds. Robertson’s publications were prominent in value theory (utility and the theory of the firm, including industrial organisation) and the theory of international trade. His claim to be a great thinker, however, derives from his work on the relationship between the trade, or business, cycle and economic growth in a money-using economy. This was not simply an academic exercise but an attempt to explain matters of direct relevance to people’s lives and welfare. During the period in which his principal contributions were made, the predominant theory of the whole economy was the theory of the trade cycle. In Robertson’s conception, cyclical fluctuations were a necessary by-product of the growth process. As the economy grew, the succession of the phases of the cycle, through boom and recession, not only affected the employment prospects and incomes of ordinary people but also imposed welfare costs on the community. This was because, during the expansion, the demand for investment had the effect of diverting resources away from consumption and, in the contraction, when consumer goods were plentiful, they had to be kept back to finance investment in the next expansion. Hence the desirability of formulating theory and policy by means of which fluctuations could be reduced to the minimum necessary for economic growth to proceed. There are two aspects to Robertson’s contribution in this respect. The first is that by making the cycle an integral part of economic growth, he set his theory within a larger framework, of the choice between consumption in the present as against present sacrifice in favour of more consumption to be enjoyed by descendants. By posing the question in this way, he emphasised the importance of the short period, the period relevant to the span of human life, some years before Keynes, with whom it is commonly associated. By drawing attention to the real cost of economic growth, he also raised issues which would decades

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later become the subject matter of ‘evo-economics’, the application of Darwinian evolutionary theory to economics. The second is that at the heart of his work on the cycle Robertson provided a theory for the management of the short period, by means of which the saving necessary for growth might be provided at lowest cost in terms of lost consumption. By the same token, this would mean that the fluctuations which were a necessary part of that process would be reduced to the minimum required. This theory explained the relationship between money, investment and saving in a pioneering way and thus provided a crucial advance in thinking on the most hotly debated topic of the interwar period. Here, his contribution was based on two insights. The first was concerned with the consequences of an individual’s attempt to save in a society made up of two or more individuals; the second was with respect to the effects on saving behaviour of modern banking operations. Though set within the traditional context of Say’s Law and the quantity theory of money, Robertson’s innovations set Keynes off on the path that led ultimately to the Keynesian Revolution. It was Robertson’s faith in the value of his own vision that enabled him to stand firm in the face of Keynes’s objections and thus to bring his new ideas into the public domain. His contribution to the development of economic thought is thus of lasting value even though it is open to serious objections on theoretical grounds and, because of Robertson’s style of presentation, is inaccessible to a non-specialist audience except in derivative forms. It nevertheless provided the foundations for a new school of thought, Robertsonian economics, as an alternative to and critique of Keynesian economics – it is one, moreover, that has enjoyed a revival of attention in recent years. Finally, in addition to his purely theoretical contributions, his reorientation of interest towards the short period and the creation of a new school of thought, Robertson is distinguished because of his part as a leading protagonist in the Robertson–Keynes controversy of the 1930s. This was concerned with approaches to the theory of the whole economy and constituted one of the great economic debates of history. Robertsonian economics has endured, has a permanent place in the history of thought and, though it is in general insufficiently known, some theories, concepts and terms have entered the lexicon of modern economics. It is marked by a great intellectual acuity and an un-blinkered appreciation of the realities of human life and human nature. By the same token, however, it can be criticised as being detached, aloof, querulous and critical and as proffering no positive agenda of hope and transformation. It should, however, be noted that he was a pioneer in providing

Dennis Robertson: The Economics and the Man

5

justification for the use of schemes of public works. The purely theoretical aspects of Robertson’s main contributions, on money, cycles and growth, show evidence not only of originality and precision of thought but also of a curiously inhibited approach to research that appears to limit the extent of change that can safely be countenanced. In comparison with an uninhibited revolutionary like Keynes, Robertson’s work can be seen to dwell in a half-way house of compromise. But this very limitation can also be seen as saving Robertson from some of Keynes’s wilder and more idealistic flights. The characteristic features of Robertsonian economics, its strengths and weaknesses, its successes and failures, may be explained by reference to the characteristics of its author. That is, by explaining Robertson’s life we shall come to understand his economics, as the one mirrors the other. This is the justification for a biographical approach. Problems arise because interpretations of a life may vary. There is a conventional account of the pattern of Robertson’s life. It is the one that can be gleaned from obituary notices and from articles written by sympathisers eager to rescue Robertson from oblivion during the Keynesian hegemony. This account has the merit of being plausible and, for Robertsonians, of casting Keynes as the chief cause of Robertson’s downfall. It was received opinion for many years and comprises a gloss on the facts. It goes as follows. Robertson’s life fell into two distinct parts, divided by the Keynesian Revolution. It was this event that marked the watershed between years of happiness and growth and years of unhappiness and decline. In the first part, he learned his love of the classics from his clergyman father and eagerly – and extremely successfully – pursued their study at school and university. From public school at Eton he followed naturally in the ‘great tradition’ and went up to Trinity College, Cambridge. A strong social conscience and sense of duty led him to abandon his beloved ancient Greek, for economics. In 1914, this same sense of duty led him to set aside his commitment to pacifism in order to join the army on the first day of hostilities. Later, his joyous collaboration with Keynes is duly celebrated. In the words of Sir John Hicks, this produced separate publications, but a series that belongs together. Robertson, Money (1922); Keynes, Tract on Monetary Reform (1924 [sic]); Keynes, Economic Consequences of Mr Churchill (1925); Robertson, Banking Policy and the Price Level (1926); Robertson, the new [edition of] Money (1928) with his important lecture, ‘Theories of Banking Policy’ (also 1928); Keynes, Treatise on Money (1930). (Hicks [ed.] 1966: pp. 13–14)

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Dennis Robertson

These were the years of happiness and growth. There followed, in marked contrast, the years of unhappiness and decline following the Keynesian Revolution. In this version, Robertson became the persecuted victim following his failure to endorse Keynes’s departure from orthodoxy in the 1930s and such was the pressure that he was driven from Cambridge. The persecution continued following his return after the war and this brought sadness and loneliness in his latter years. After his death, his work was neglected because of the dominance of Keynesian teaching. Here, then, we have a satisfyingly neat sequence of cause and effect: ‘Precocious youth of the most socially acceptable kind ripens into fulfilled and happy maturity only to be blighted by a disagreement over economic theory’ (Fletcher, 2000: pp. 16–17). One extra element not brought out here is the effect of war on Robertson’s outlook. In a vivid obituary notice written by Sir Frank Lee, a wartime colleague at the Treasury, the experience of two world wars joins the Keynes effect to comprise the factors that brought desolation to a supposedly ideal existence (Lee, 1963: p. 312). The problem with the war thesis is one of chronology: the wars actually occurred either too early or too late to have the effect suggested. Robertson was made a Fellow of Trinity in October 1914, when he was already in the army, and it was five years later that he began his academic career proper. Also, there is evidence that Robertson had a ‘good war’ and that the experience had a beneficial effect on his spirits. In any case, the war was followed by the period of (initially enthusiastic) collaboration with Keynes in the 1920s. It is much more likely that the Second World War, which for most people in Britain lasted just too long, would have had a depressing effect but Robertson was, for significant periods, away in the United States of America, where life continued much as usual, and he was back in Cambridge well before the end of hostilities. With respect to the Keynes effect, we must remember that this had first a positive influence, in that it contributed to Robertson’s time of hope, well before it launched the Keynesian Revolution and its attendant squabbles. This last event certainly did loom large in the Robertson story but why precisely was this? Could a dispute over economic theory really have reversed the trend of Robertson’s life or was there more to it than this simple explanation of cause and effect? The search for an explanation begins with Keynes’s comment on what he perceived to be the Robertson problem. Keynes was noted for his keen intuitive sense and he believed that Robertson, who was intellectually very forward looking, was held back from following his theoretical

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insights to their logical conclusion, by his reverence for what had gone before – what Keynes called his ‘piety’. In 1937 he wrote, regarding their respective theoretical positions: My differences, such as they are, from Mr. Robertson chiefly arise out of my conviction that both he and I differ more fundamentally from our predecessors than his piety will allow. (Keynes, Collected Writings XIV, 1973: p. 109) In other words, they were both challenging established ideas but Robertson was unable to admit it. There is also the complementary view, widely held, that Robertson was an evolutionist in his approach to the development of doctrine, wishing always to build on the foundations laid by predecessors, as compared to Keynes the iconoclast and revolutionist, willing, as in the General Theory, to overturn orthodoxy – the views of his teachers. The problem stemmed from his temperamental make-up, in which a precocious and questing intellect was coupled with an emotional insecurity that engendered a regressive caution, a need to retain a firm hold on what had gone before. In addition, he was forced constantly to reconcile the demands imposed by a deep-seated sense of duty with the desire to follow the promptings of an essentially artistic nature. Together, these two influences explain the contradictions: why he was led forward in his theory but always looked back; why he collaborated with Keynes but became his most intransigent critic; why he spent his life as an economist but yearned to pursue his artistic bent; why he was a fellow of Trinity but looked ever towards King’s; why he studded his scholarly books and articles with quotations from the Alice books of Lewis Carroll and became known as a literary economist. It also provides the justification for us to enter the realms of biography, a discipline that is properly a branch of history and, moreover, history with the dimension of a human lifespan. On the basis of the evidence available, the biographer will develop an overall explanatory theme or motif. The theme that best captures the pattern of Robertson’s life, in both its personal and professional spheres, is that of the desire for escape tempered by self-imposed restraints (into new ways of thinking versus a need to look back; into an artistic life versus duty). Note also that biography is related to economics, in being concerned with what Alfred Marshall, in defining economics, referred to as ‘mankind in the ordinary business of life’. That is, the business of getting and spending, investing and saving, under conditions of uncertainty.

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Dennis Robertson

An examination of the evidence (memoirs, the texts of his works, private and professional papers and literary sources) does not support the view of there being a simple dichotomy between positive and negative phases of Robertson’s life, with the Keynesian Revolution as the cause of the change from the one to the other. Instead, though outward appearances might give credence to this position, the reality is much more complex, with the actual division lying between his public self and his private self: In one sense at least the Keynesian Revolution did provide the watershed between happiness and unhappiness in Robertson’s life; but only in the partial sense that it marked the division between the happy public Robertson and the unhappy public Robertson. There was, however, a far more significant, longitudinal, divide – a fault line – that ran between the (initially happy and successful) public Robertson and the perennially unhappy and emotionally desolate private Robertson. The Keynesian Revolution was the point at which the two selves converged and Robertson abandoned any hope of escaping into a happier life. Thereafter, what his niece Jean Bromley referred to as his ‘tragic vision’ reigned unchallenged. (Fletcher, 2000: p. 20) The actual circumstances of Robertson’s life that lead to this conclusion are as follows. His early life was not as idyllic as sometimes portrayed. He was born at a time of sudden decline in the family’s fortunes and grew up in an atmosphere of shabby gentility, which left him with a lifelong fear of poverty. Without money, he was dependent on scholarships for his education and although he won outstanding success in this way, the choices made did not bring complete satisfaction. The natural, though by no means invariable, progression for Eton boys going to Cambridge was King’s College, Eton’s sister foundation. Robertson, however, went to Trinity, in order to obtain a larger scholarship and so relieve the burden on the family budget. Academically, Trinity was pre-eminent but was thought rather stiff and dry, as compared to King’s, which was more artistically inclined. He was ever to regret the decision. Also, despite his intellectual ability, a number of factors in his adolescence and early manhood (a sense of loss of ultimate security, the loss of his inherited Christian faith and the discovery of his homosexuality) left him desolate and despairing. His remedy for this was both to seek a means of escape into some more congenial self, in which the various elements of his personality would be better harmonised, and to maintain a (regressive) reference back to a

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mythical golden age, carefree and safe: an idealised, stylised childhood. The latter came to be personified by Lewis Carroll’s Alice adventures, which have both intellectual and philosophical, as well as the obvious children’s storybook, elements. For Robertson, escape meant the pursuit of his artistic, literary desires but the obstacle was a deeply ingrained sense of duty, inherited from his father. The conflict between duty and desire was personified at Cambridge by the contrast between Trinity College, at which he was a major classical scholar following in the steps of his elder brother, who was also a classical scholar, and King’s, the college of free spirits, which forever represented his frustrated ambition, the artistic life, and where he actually spent much of his time. Similarly, we shall argue that the reason conventionally advanced for Robertson’s switch to economics is too simple. Torn between the competing claims, of duty and desire, Robertson sought to resolve the conflict by way of a compromise. He escaped the classics (a family speciality), which represented duty, and took up economics, which was new and interesting but also useful (to be useful remained a lifelong preoccupation). At the same time he attempted to satisfy his essentially romantic, artistic nature by giving full rein to his considerable ability as an amateur actor. This, then, was Robertson’s intended way forward. He continued with the process of writing that was to establish his reputation – a process that was aided by his collaboration with Keynes. He also received acclaim for his prowess as an actor, which was much above the usual amateur level. Outwardly, he seemed to have attained the life of contentment that he sought but, because of problems with the compromise, all was not as it seemed. There was, first, the problem of economics itself. Robertson considered economics not only important and worthwhile but also aesthetically arid and, therefore, unsatisfying for one with his artistic propensities. To remedy this, he followed his natural inclination and adopted an overtly ‘literary’ approach. This delighted many readers but repelled others and in some quarters he acquired a reputation for being not wholly serious, despite his achievements. There were also problems with the supposedly hopeful time of partnership with Keynes, which proved increasingly stressful for one as thin-skinned as Robertson, for Keynes was a voraciously entrepreneurial and rather overwhelming collaborator. This produced symptoms of strain. First, there was the defensively inaccessible style in which Robertson wrote Banking Policy and the Price Level (1926), the book with which he had persevered in the face of Keynes’s highly critical

10 Dennis Robertson

‘collaboration’. Also, in that same year, Robertson followed others who had got too close to Keynes by escaping on an eight-month foreign tour. Then, the following year, he attempted a final escape from Keynes, economics and Cambridge, by auditioning for a career as an amateur actor, though without success. For Robertson, this was a bitter blow. Having failed to escape, he was left to pursue his life as before. Robertson achieved a reputation as a literary economist both because of the elegant, witty and whimsical style in which he wrote and because he incorporated many literary quotations and references into his economic texts. When we examine his writings, we find that the most important of the literary references was to the Alice books of Lewis Carroll, which receive by far the largest number of quotations and allusions. This became recognised as a characteristic feature and is of great significance for an understanding of Robertson’s outlook on life and of the relationship between Robertson the man and Robertsonian economics. They also supply a most important clue to the mystery of why Robertson was so strongly opposed to the Keynesian Revolution, the effect of which was to overturn classical economics and to undermine Robertson’s professional roots and with it, also, his sense of emotional security. This was the reason why he opposed the changes so emphatically. When Keynesian economics triumphed, the effect was to bring to an end the role of economics as a compromise between escape and duty. Robertson was to produce no more work of great originality but instead he became primarily a critic of Keynes and a developer and refiner of the theories he had produced in his postgraduate days and during the growth years of collaboration with Keynes. This major professional blow followed only a few years after his failure to pursue his artistic dream by escaping into the world of professional acting. In combination, Robertson’s failed attempt to escape the self he did not like, by way of economics and the stage, produced the unhappy public Robertson that paralleled the always-unhappy private Robertson. Conscious that escape was now impossible, Robertson lived out his days in the shadow of Keynes. He continued to produce volumes of highly polished essays and lectures and found solace in the many honours he received, in books and music and in the company of his young pupils at Cambridge, who became devoted to him. In retrospect, Robertson was indisputably an economist of considerable importance. What has blighted his memory and coloured the terms in which his achievement has been assessed is, of course, the shadow of Keynes. It was against this background, of diminished perspective and

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general neglect as compared with Keynes, that a number of Robertson’s former colleagues, pupils and enthusiastic students of his work led a revival of interest in an attempt to recover those of his contributions that had been lost. In this way, the work of the man who proved the most obdurate critic of Keynesianism continued to provide an important rallying point for those who believed, with Robertson, that Keynes had marred by distortions and exaggerations of various kinds, a fruitful body of doctrine which had been being moulded over several decades by many hands. (Robertson, 1963: p. 326) As a consequence, the resurgence of interest has, not surprisingly, been part and parcel of an attempt to promote Robertson’s economics at the expense of Keynes’s and so reverse the verdict of history as to which had triumphed. ________________ In this chapter we have justified Robertson’s inclusion in the roll of great thinkers in economics and have seen that a biographical treatment is particularly appropriate in his case because of the close explanatory relationship between the man and his economics. In the chapters that follow, this brief epitome, designed to provide an overview of Robertson’s life and work and the relationship between them, will be elaborated by way of biographical and historical narrative, literary criticism and economic analysis. Some mention will be made of his position within the Cambridge School of economic thought and somewhat more of his relationship, personal and professional, with Keynes and Keynesian economics. Robertson’s economic ideas and theories, as set out in his principal books and papers, will be subjected to close examination and his contributions explained. While the most important of these lay in the fields of fluctuations (the trade or business cycle) and money, even among his relatively minor publications there are many that both strike a memorable note and are of lasting value. It is a worthwhile journey of discovery and a most interesting one.

2 The Early Years: Lessons for Life

The circumstances of Robertson’s early years, from his birth to the conclusion of his schooldays, shaped his approach to life and, ultimately, to economics. It was during these years that he became progressively aware of his true nature and of his life’s predicament. The ‘lessons for life’ he came rather painfully to learn meant a weighing of his strengths and weaknesses and the perception, however dimly, of a personal strategy by means of which he might survive and prosper. Dennis Holme Robertson was born on 23 May 1890 at Lowestoft on the Suffolk coast of England. He was the youngest of the six children – he had three brothers and two sisters – of the Reverend Dr James Robertson (1836–1903) and his wife Constance Elizabeth Wilson (1857–1935). The Robertsons were of Scottish descent though long domiciled in England and there were English connexions on his mother’s side. The family’s rank was that of the established middle class and its members had long been prominent in the English character-shaping professions: He came, by birth as well as by education, from the world of the English public school . . . his ancestors (on both sides) had for generations been clergymen and schoolmasters, at various schools and in several parts of England. (Hicks [ed.], 1966: p. 10) Dennis himself endorsed this view of his family in a strongly autobiographical fragment of a novel he wrote at a young age and left among his papers but giving greater emphasis to links with the church rather than with education (D9/9 RPTC). The English connexion was provided by the Holmeses, a Liverpool family, which supplied Dennis with his second forename. During the 12

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nineteenth century they developed an extensive building and contracting business and were prominent in municipal affairs. Dennis’s great-grandfather, Samuel Holme, was Mayor of Liverpool in 1852. It is interesting to note that the personal characteristics which we have attributed to Dennis, of a questing intellect yoked to a temperamental conservatism, were also found by contemporaries to be visible in his ancestor: It has been a matter of surprise to many that a gentleman possessing so much perception and who has always been a man of progress, should have continued so steadily attached to a political party which has almost become fossilised; and that one who has been foremost in the race of mechanical science should yet attach himself to the megatheriums [pre-historic sloth-like animals] of extinct Toryism . . . His mind is essentially Conservative. (Shimmin, 1866: p. 29) In Dennis’s own time, the Robertsons themselves became established as a ‘Liverpool family’, through the agency of Dennis’s eldest brother, Ainslie. Ainslie was very much his father’s son and had shown the way for those of his siblings who were to follow, with a successful and irreproachably conventional career in academic, business and public life. He graduated with first-class honours in classics from Trinity College, Cambridge, and retained a lifelong interest in classical subjects. He was also, however, a man of affairs and was proficient in all those aspects of life which to Dennis seemed least congenial. In 1903, the year of his father’s death, he entered into a career in the business life of Liverpool, first as an employee with a shipping-line – in which he held a management position during the First World War – and then as a partner with a firm of fruit-brokers (he was elected president of the Liverpool Fruit-Brokers’ Association in 1926). Then he changed direction, to set up a small business to produce and market his own product, The Hurricane Smock Company Ltd. In his public life, he was active on behalf of charitable organisations and as a prominent member of the Liverpool Philharmonic Society. Finally, and perhaps most tellingly, he was a keen and able cricketer. Years later, Dennis would write to his brother to marvel at his reported scores, mystified as to how such things were accomplished and expressing the hope that he, Dennis, would never have to play again (A1/13/20 RPTC). For Dennis, with his essentially artistic nature and perennial desire for escape, Ainslie’s example remained something of a reproach and Dennis both envied and scorned him.

14 Dennis Robertson

The other member of his family, apart from his parents, who was important in Dennis’s life was his sister Gerda. She followed a secretarial career and during the First World War worked for Lloyd George at 10, Downing Street. Gerda shared Dennis’s outlook on life, including the firm belief that they were destined by their upbringing not to marry. She was ever his confidante and support and there were at one time plans for them to share a home together. Her death in 1951 was recognised by all as a great loss for him. As for Dennis himself, he was born during a phase of precipitate decline in the family’s fortunes. His father had recently been forced to resign as Master (headmaster) of Haileybury, the great public school and former East India [Company] College. For the Reverend James it was a bitterly disappointing end to a distinguished career. After school at Cheltenham College he had read classics at Jesus College, Cambridge, where he was bracketed second classic in the university lists for 1858. He was then elected to a fellowship at the same college and held it until 1879 when he was forced to resign, under University rules, upon his marriage to Constance. Subsequently, he was assistant master at Rugby School and at Harrow before being appointed, in 1884, to the Mastership of Haileybury. His appointment, at the age of 48, must have seemed a fulfilment and for several years the Robertsons, husband and wife, prospered. By 1889, however, the contributions they had made to the life of the college were matched by less-welcome developments. The school was now seen to be in a ‘depressed condition’, a circumstance attributed by the school council to the persistent incidence of diphtheria (a contagious, and at that time very serious, disease) among the boys and the damaging publicity resulting from the Hutt trial. The Hutt case, which has been seen by some as the inspiration for Terence Rattigan’s The Winslow Boy, concerned a boy who was expelled for stealing. The evidence against him was but circumstantial and there was an element of entrapment. The doting father protested and, being roundly rebuffed, sued the school. Robertson, as Master, played a central role and was judged to have mishandled the matter, largely on account of his temperament. The problem was that the Reverend James was a particularly muscular Christian. A keen Alpine mountaineer, he hid an essentially kindly nature behind a somewhat daunting breeziness and forthrightness of approach. His successor at Haileybury referred to him as ‘a man of brilliant brainpower and likeable under a somewhat rough exterior’ and, worse, by one of his pupils as ‘gruff in manner and rather sarcastic’ (Thomas, 1987: p. 70). His brusqueness cost him his job. He was

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compelled to resign and the family went into lodgings in Lowestoft. Shocked by the events of the past and fearful of the future, they waited anxiously until a suitable living in the gift of Jesus College could be found. It was during this uneasy period of change in the family’s fortunes that Dennis came into the world. Conceived in the old life of certainty and plenty, born in the uncomfortable period of transition and growing up in the much-reduced circumstances that were to follow, his life-view was shaped by the notion that though the future must be faced with determination and courage, security and comfort can only be found in the past. The circumstances of his birth also became the type of his approach to his work, the going forward–looking back, or evolutionary, method of Robertsonian economics. More practically, the sense of sudden decline in the family’s fortunes taught a strong lesson in the precariousness of prosperity. Dennis learnt it well and he grew up with a desperate fear of poverty. In 1891 the Reverend James was presented as vicar to the living of Whittlesford near Cambridge and he remained there for the 12 years until his death in 1903. For the brilliant scholar and headmaster it was a humiliating anti-climax, his professional career cut short at the age of 54 and his family saved from penury only by the hand of patronage. Nevertheless, with a large family to support on a clergyman’s stipend, these were straitened times and the necessity of keeping up accustomed appearances gave rise to ‘the sad family history of genteel poverty, the minor parsonical snobbery’ (Vaizey, 1977b: pp. 12, 17). In these circumstances, any additional income, from the right kind of source, would have been welcome and it is possible that historical references to a girls’ boarding school being kept during these years could have been some enterprise of Constance’s, intended to supplement the meagre budget. The period of James’s tenure is, unfortunately, poorly documented. There would, of course, have been his duties connected with the cure of souls, based on the parish church, and it is known that he would have been ex officio chairman of governors and treasurer of the local Church of England primary school and have acted as trustee of an oldendowed charity for the relief of need among local residents. For the rest, he would have had ample time for writing doggerel and verse – a practice followed by both Ainslie and by Dennis, of whom it became characteristic – for correspondence with friends and, most important of all, ‘for the preparation of his four sons for [entry to] the public schools’ (Cambridge Chronicle and University Journal, 30 October 1903, CCRO).

16 Dennis Robertson

For Dennis, as for his brothers, this meant being taught (cheaply) at home by his eminently well-qualified father, instead of being sent away to a preparatory school. He was thus at liberty to enjoy the woods and fields of a country parish for the pursuit of his intelligent, middle-class interests of botany and ornithology. The members of his large family, together with the cook and nurse his parents retained (despite the difficult financial circumstances), provided comfort and companionship. As the youngest he was something of a pet and was known as Benjamin (or Ben or Benny) after the Old Testament favourite son of Jacob and Rachel. He seems to have been a happy child though there are occasional hints of his being troubled and his verse compositions from this period, extant from the age of six, show a curious preoccupation with subjects of death and loss. However, if he was subconsciously drawn to such topics at this stage it is important to see that it would only have been within the reassuring framework of Christian belief. With respect to the ‘preparation’ for school he would have received at his father’s hands, it is important to emphasise that this would have been of an all-round nature. The point needs to be made as much hinges on the role of classics in Dennis’s early and later education. A memoir published in the Trinity Review for 1957 (p. 23), in the year he retired, fed a common misconception that it was his early grounding in Latin and Greek that brought him his Eton scholarship (Gll/5 RPTC). Though the classics no doubt loomed large in the election and Dennis entertained his examiners with his encyclopaedic knowledge of the Latin names of British birds, the scholarship was not in classics per se and Dennis carefully amended the cutting when he filed it away. This misconception is part of a more widely held view that sees Robertson as the essential classical scholar who for the public good denies his vocation in favour of the less congenial but more useful study of economics. Both colleagues and family have intimated that the classics constituted the realm in which his heart really lay and as such have hailed the opportune nature of his early education: until Dennis went to Eton in 1902 . . . his father was his only teacher. Not much of a preparation for the world; for the making of a classical scholar, a flying start. (Hicks [ed.], 1966: p. 10) And it is true that he showed a remarkable facility in the classical languages and was duly honoured as a classicist at both Eton and Cambridge. It is, however, a moot point as to whether this was where his heart really lay, for, after achieving first class honours in Part I of the Classical Tripos

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he abandoned the classics for good. That is, having done his duty, he got out as soon as he decently could. The explanation for this is that up until the end of his second year at Cambridge, Dennis’s education was moulded by family circumstances. His father was himself a notable classic, as undergraduate, as fellow of his college and as schoolmaster. Then Dennis’s eldest brother Ainslie had done his duty to the family by winning a major scholarship in classics to Trinity College, Cambridge and subsequently taking first-class honours in the Tripos. In addition, the educational practices of the time decreed that boys would opt either to be classicists or mathematicians and Dennis was never to reveal any evidence of either sympathy with, or aptitude for, mathematics. In the light of all this, it is highly unlikely that he would ever have considered resistance to the promptings of the frustrated dominie. The dutiful Benjamin did as he was bid and jumped through the hoops specified until his obligation was discharged and honour was satisfied. But then he felt free to seek his own destiny. So where did his heart really lie? The answer to this question was bound up with the distinction between his desired self and his duteous self and will become clear as the story unfolds. For now, a clue lies in the comments made in letters from the Master in College at Eton and from a percipient aunt, both of whom affirm that whatever his prowess in Latin and Greek, he was a master of his native English tongue (A2/4/1 and A1/9/1 RPTC). It was an attribute he was to employ to great effect in the service of his economics and so create an inimitable style. But English would not have been regarded as a possible subject of study. At Cambridge, for which university we must presume that Dennis was bound, English was at this time only studied as a component of the Medieval and Modern Languages Tripos and the emphasis was very much on the linguistic and philological aspects of the subject. There was no chair in English literature until 1910 and the independent English Tripos was only established after the First World War. It is hardly surprising, therefore, that with the options and opportunities before him, Dennis would easily fall in with the designs of his father. Another lesson that Dennis was to learn during his early years was that in matters of the intellect he stood in the first rank. As his education progressed, he was to display a dazzling intellectual precocity. There would be ample evidence that this was his strong suit and that wherever else he might be vulnerable this would be the means of his salvation. It is true that his brilliance, unlike that of Keynes, did not comprehend both classics and mathematics but on his chosen ground he had cause to fear no adversary.

18 Dennis Robertson

The lesson began early when, in 1902, he won second place in the ‘election’ (competition) for scholarships at Eton College – despite qualifying by only one week for entry at the age of 12. Winning a scholarship meant that not only would he have his fees paid but would also have the title of King’s Scholar (KS), for Eton had been founded by King Henry VI in 1440 to provide a free education for 70 scholars. It was also to display holy relics, including pieces of the True Cross, and was thus to be a centre for Christian pilgrimage. Thoughtfully, Henry also founded a sister college at Cambridge (King’s College) at which the scholars would receive their university education. This duly became the traditional destination for Eton boys opting for Cambridge rather than Oxford. Why Eton was chosen is not known. It was not his father’s school, Cheltenham, nor, more significantly, that of Ainslie, who was a scholar at Winchester. Perhaps the financial reward was greater, for Dennis was the last in line to be educated. Whatever the reason, it was to prove a great success. Dennis wore the tie with pride throughout his life and was delighted when, in later years, he was appointed a fellow of the college. The reasons why Eton would prove such a congenial choice are readily apparent. Its origins, beautiful buildings, arcane traditions and strong associations with the governing classes would appeal to several aspects of his character, aesthetic and conservative. Also, as a scholar, he would live with the other scholars in College, safely isolated from the far more numerous Oppidans, who paid the fees and dwelt in the town in the care of housemasters or dames. Here in the company of other intelligent and highly motivated boys and under the supervision of an inspirational teacher, he would find ample opportunity to exercise his intellect and indulge his inherited talent for writing verse: he was one of the brilliant band of scholars and poets clustered round Cyril Alington, then Master in College . . . winning . . . among many prizes, one for a Browningesque poem on the San Francisco earthquake. (Butler, 1963: p. 40) There is a further reason why Eton should have proved such a suitable choice compared, say, to Winchester. If finance was indeed the factor that weighed most heavily in the choice of institution, then it served him better for his schooling than it did for his university. It is of the greatest interest that just as Dennis was to find Eton so sympathetic to his outlook, tastes and aspirations, so it was at King’s College, Cambridge, Eton’s sister foundation, that he was to feel most truly at home – despite being a member of Trinity. This is because

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of the supposed contrasting characters of the colleges. If Trinity could be caricatured as frowningly academic and strait-laced, representing duty, King’s by contrast was said to be ‘Oxonian’, representing art and romance. Both Dennis and Ainslie were scholars at Trinity. Dennis ever wished himself at King’s; Ainslie as far as is known felt no such yearning. There is a parallel difference between the two brothers’ schools. The art historian Kenneth (Lord) Clark, who was also a scholar at Winchester, has expressed the contrast between the two schools in their differing attitudes towards the obligation to take part in gruelling cross-country runs when nourished on the most meagre of diets: Our performances were timed by the prefects, and we were beaten if we took too long. The Athenian cunning, traditional at Eton, would have found some way round these hardships; but Wykehamists are as virtuous as Tamino. (Clark, 1974: p. 38) [The particular aptness of the Athenian allusion for Dennis’s position as a King’s exile, will become clear in the next chapter]. Dennis’s success at Eton stemmed principally from his academic achievements. A model pupil, responsive and appreciative, his work earned the highest praise. Of the two great prizes available, the Newcastle (scholarship) for classics and the Tomline for mathematics, Dennis won the Newcastle. In his chosen subjects success came easily but he could not hope for similar distinction in mathematics (a few years earlier Keynes had won the Tomline and had, very unusually, also achieved the Select – runners-up – for the Newcastle). Although keen and hard-working, he was no dull swot and was known as one who wore his learning lightly. He was editor of the Eton College Chronicle and wrote many editorials for what was a weekly newspaper. He also won acclaim for his acting ability and so began an association with the amateur stage that was life-long. In due course, Dennis was elected a member of ‘Pop’, the exclusive Eton Society, and rose to become Captain of the School and thus initiated a relatively brief but highly successful career in public life that was to reach its fullness at Cambridge. The only area in which he found neither enjoyment nor success was games, that bastion of the public school ethos that has rendered miserable the life of many an otherwise talented schoolboy. How different from Ainslie, who excelled! Schooldays, however, also span the traditionally troubled time of growing up, from childhood, though adolescence to early maturity. It is

20 Dennis Robertson

therefore possible that during the six years he spent at Eton, Dennis would have become uneasily aware, in however muted a form, of the problems he was to face at Cambridge. They are the problems of Everyman and arise from the universal human condition. They concern questions about the purpose of life and the meaning of death and are presented most starkly to those able most acutely to perceive them: the intelligent and sensitive who doubt they have the conventional means to provide a satisfactory response. At Eton, growing awareness of his own, homosexual, nature and of his human destiny would have taken place within the supportive framework provided by upbringing, inherited beliefs and the closely regulated round of school life. There is evidence to show, however, that by the time he came to leave, the accustomed supports were crumbling away. The evidence can be gleaned from the poems and prose of the period that he preserved among his papers. These reveal the interests, attitudes and anxieties of his schooldays and predict with uncanny accuracy the characteristics of the man. The material dates from the years 1907–1908, when he was 17 and 18 years old respectively and in his final two years at school. Already self-aware, he is able uninhibitedly to give expression to the two conflicting selves that co-existed in his make-up. Here we find the public Robertson who was unwaveringly conservative in outlook, a classicist and not a mathematician, a poet and not a games player, an amusing satirical writer. Here also, however, we find the first intimations of the private Robertson, who was nostalgic, care-burdened and ultimately tragic. The public self is conveyed in two pieces of ‘doggerel’ he wrote for the Eton College Chronicle. In one piece, he adopts a drawling, languid tone reminiscent of the Western Brothers, the public-school ‘cads’ double-act from the golden age of radio. That this was not a mere affectation is attested by one who attended his lectures at Cambridge, half a century later (Marris to Fletcher, 7 April 1995). In verses that comprehensively embrace the British constitution and the regime at Eton, he portrays himself as a complacent admirer of the established order, grateful for having no enthusiasm for change. There is also a verse claiming his lack of desire for sporting achievement or for the opportunity to seek it by taking part in games. Nevertheless, in the other piece of doggerel he wrote, the public Robertson is more reflective, wistfully recognising that though the lure of athletic fame may be an empty one as compared to his classical studies, it is in any case a choice fruit beyond his reach. When awarded the Military Cross (MC) he was delighted to find that the ribbon was the same as the college

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wall colours – for prowess in the wall game – which he had longed in vain to possess (all in D9/1/15–18 RPTC). There is similar realism in Robertson’s appraisal of his strengths and weaknesses in a poem expressing his thoughts on the examination for the Tomline mathematics prize. Again, while he recognises the power and importance of mathematics as a study, he acknowledges that it is a branch of learning of which he can never be master and perforce must follow the path ordained by his talents and make his way in life by excelling in classics. Already, therefore, he was conscious of a deficiency which in his later career would provide a stick with which his critics might beat him (D9/4/1 RPTC). With respect to his private self, Robertson gave vent to his inner concerns with three poems he wrote in 1907 and a fragment of a novel dating from the following year. Given what they reveal about his outlook on life at this time, it will be helpful to consider the context in which they were conceived. He had, of course, been brought up in a strongly Christian household. His father was in Holy Orders and gave clear theological and moral guidance. His mother, who revered her husband, in the years following his death assumed responsibility for the task. She urged on Dennis the Reverend James’s precept regarding the privilege of loving and serving God and seemed to hint – though we cannot be sure – that this might include a call to the ordained ministry. In any event, in April 1905 Dennis was duly confirmed in the presence of his ecstatic mother in College Chapel. In this atmosphere of family approbation and with his useful command of ancient languages, all might indeed have seemed set fair for a career in the Church. However, there are a few clues to suggest that perhaps Dennis was not as conventionally pious as his parents might have hoped. There is, for example, a letter to his mother of 1898 containing a very amusing account of a visit by the local parson, which describes that personage in less than reverential terms. There is also a letter written to his father during his first ‘half’ (that is, term) at Eton, with an analysis of the windows in Chapel (later removed, to no great regret, by the blast from a German bomb), for which Dennis was upbraided for his tone of levity. Whatever the truth of the matter, it is clear that Dennis had every encouragement and every opportunity to strengthen his faith and develop his discipleship. This is not, however, how things turned out. It is not uncommon for the sons of the clergy to seek employment in other walks of life but this could be as much a revolt against parental authority as a rejection of the

22 Dennis Robertson

ways of the Church. In Dennis’s case, however, this does not adequately explain his state of mind as his schooldays drew to an end. It cannot account for his clear conviction so early on that religious belief was an empty pretence and that he was left to find his own course on a trackless sea. He also believed that his upbringing had condemned him – and Gerda who shared this conviction – to a life without the support of a normal family life. It was all a great burden to be borne and in the outpourings of 1907–1908 we find an unequivocal guide to Dennis’s view of the problem of his life and its solution: It is a view that Robertson held at the age of seventeen and continued to hold throughout his life. The formula it contains is precisely the same as that provided by the Alice evidence . . . That is, that life is nasty and brutish (a ‘bitter way’) and, above all, short; the blissful afterlife is no more than a myth; it is our duty (the duteous life) to carry on regardless and to serve our fellow men according to our calling; our salvation lies in the present, through love in human relationships; comfort can be found in a nostalgic yearning for a past, pain-free golden age. Love is superior to nostalgia but not everyone is able to find love, in which case the golden age assumes greater importance. (Fletcher, 2000: pp. 41–42) Of the three poems from which this summation partly derives, the first finds inspiration in the novels of George Eliot, who, in Robertson’s eyes, teaches that to cope with an ultimately God-less and meaningless existence, we should look for wisdom in the hidden lives of ordinary people. These, by inference, have not the leisure for overmuch philosophising but live and love and find meaning in the necessitous, workaday round. A romanticised interpretation of the supposedly trouble-free existence of ‘simple people’ would have obvious appeal for a middle-class youth, sensitive and highly educated, who felt his life weighed down with care. In the second, which is evidently inspired by a performance of a Greek play (a tragedy – the Antigone of Sophocles), salvation comes through love, which conquers pain and grief and bestows a kind of immortality. The third poem, written in homage to Kenneth Grahame, is of particular interest because it gives notice that Robertson is already indulging the less-positive, regressive element in his make-up, by seeking escape into a mythical golden age of lost content. He nostalgically evokes the world of The Wind in the Willows (by Grahame), which here provides the reassurance he later derived from the Alice books of Lewis Carroll. The link between the two is given by allusion to the river, which is the natural

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home of Ratty and Mole and provides the setting for C. L. Dodgson’s storytelling to the Liddell girls (D9/1/19/20/29). The other source for this insight into Robertson’s outlook on life at this time is the fragment of a novel he wrote (probably) at the age of 18 (D9/9). Entitled The Curse of Electra, it derives from Greek myth – Electra is the subject of tragedies by Sophocles and Euripides. In this version, the narrator is a child of the Robertsons’ station in life and the two other characters have unmistakable parallels with members of the family circle. There is an elder brother, No¨el, who must represent Ainslie and a beloved nurse, Emily, who must be the Robertsons’ nursemaid, Gertrude Spooner, to whom Dennis was very close. Emily’s role is to provide reassurance in the face of anxieties by way of her hitherto infallible ability to induce the sleep that removes his cares. In the story, the child is aware that the family has fallen under a curse such that he is forbidden to marry or leave any issue. Here, already clearly perceived, is one aspect of Robertson’s own destiny. The child also relates that from his earliest remembering, he has seemed to carry an enormous burden – the weight of the world – on his young shoulders and that his mind has been greatly troubled. Matters are brought to a head by a game of hide-and-seek in which he is hunted by No¨el. Here, the second aspect of Robertson’s fate is evoked when Emily’s ministrations fail to assuage the feelings of terror the game arouses. Youthful optimism dies and the reassuring belief that everything must always come right in the end is destroyed. That this is an accurate reflection of Robertson’s state of mind by this stage of his life is confirmed by the comments of a percipient observer soon after he reached Cambridge, as we shall see. The fictional fragment itself can be interpreted as follows. He had recently – the outcome was known by December 1907 – won a major scholarship to Trinity College, Cambridge. He was thus meeting family expectations by following Ainslie’s example and obtaining an excellent university education at minimum cost. By now, however, he knew that he was not cast in the same mould as Ainslie and though constrained to emulate him, must of necessity find his own formula for reconciling the competing claims made by the path of duty and his own desires. The experiments he was to conduct in his search for this talisman would shape the course of his life and work. Also, by the age of 18, a growing awareness of the way in which he was different generated a gnawing sense of anxiety, just as he was losing the accustomed sources of reassurance: the security of childhood, an inculcated system of belief and the congenial regimentation of school. Because of his nature and of his upbringing he was also denied the means

24 Dennis Robertson

by which Everyman adjusts to existence devoid of these supports, namely the society of a family and the immortality bestowed by children. Now, therefore, he must find some new position of certainty upon which to build: in life, the world and philosophy of the Alice stories; in work, the contributions of revered Cambridge predecessors and the classical assumptions from which they began. In this way, what he saw as ‘The Curse of Electra’ would cast a long shadow. Whatever the turmoil of the private self, Robertson’s public self continued to bask in the sunlight of success. On 4 June 1908, Eton’s day of celebration held to commemorate the birthday of George III, a great benefactor, Robertson was a central figure. As Captain of the School, he had his photograph on the front cover of the programme and is prominent in the (non-sporting) events. In the ‘Programme of Speeches’ he is scheduled to appear as Euripides in a scene from Aristophanes’ The Frogs, to declaim Tennyson’s ‘The Last Tournament’ and to play the part of the White Queen in a scene from Lewis Carroll’s Alice Through the Looking Glass [sic]. It was a day of triumph to round off his schooldays. A reporter from the Eton College Chronicle applauded his performance as Euripides and noted, rather appositely, that Robertson was gifted in feeling the pity of things. More significant was his performance as the White Queen. Three years later, when Robertson was at the peak of his public career at Cambridge, a student journalist hailed it as not only his first but perhaps his most striking stage success. A colleague, in an obituary memoir 55 years later, was to describe it as ‘memorable’ (Butler, 1963: p. 40). It was fitting, therefore, that on this culminating day of glory, he should first become publicly associated with the Alice stories, references to which would later become his trademark and which would lend much of the charm of his professional writings.

3 Cambridge Undergraduate: The Light and the Dark

In the autumn of 1908, Dennis Robertson went up to Trinity College, Cambridge, with a major scholarship in Classics, knowing that he had fulfilled the hopes and expectations of his family. It was an auspicious beginning and heralded an outstanding university career. The apparently effortless distinctions he had attained at Eton, in examination performance, in public office and on the amateur stage were repeated in the wider air of one of England’s foremost universities. Everything he touched, it seemed, turned to gold and, however briefly, he became a celebrity, universally loved and admired. It was an enviable record but along with his public successes went private miseries. The nature of his life’s predicament, which he had begun to discern at Eton, was now fully revealed, shorn of the protective supports of school life. Faced with his inner crisis, Robertson forged a strategy for survival. This strategy brought him a distinguished and richly varied life and career but it could never, because of the nature of the compromises involved, provide a completely satisfactory solution to his problem. Fate also took a hand and adventitious factors ensured that whatever honours he obtained, they could never completely dispel his sense of personal failure. That Robertson pleased the examiners at Cambridge is attested by the ample recognition he received. He was, of course, initially known only as a gifted classic. In addition to his entrance scholarship to Trinity and a number of college prizes, he was awarded, in 1910, the Porson (University) Scholarship, named in honour of a former Etonian, Trinitarian and Regius Professor of Greek, and in the same year was placed in the first division (of three) of the first class in Part I of the Classical Tripos. Having thus proved himself as standing second to none as a classicist in the family’s hall of fame, he switched to economics and two years later, in 1912, he achieved a first class in Part II of the Economics Tripos. Along 25

26 Dennis Robertson

the way, in 1911, he was awarded another university scholarship, the Craven. As an outstanding student he remained at Trinity after graduation, to write a dissertation (on the phenomenon of the trade cycle) for possible admission as a fellow of the College. The first version, submitted in 1913, after only one year’s work, was referred but was awarded the Cobden Club Prize. After revision, the dissertation was successful in the following year. He was admitted as a fellow in economics in the autumn of 1914. Nothing speaks more eloquently of Robertson’s intellectual prowess than the range and extent of the non-academic activities he managed to pursue at the same time as excelling academically. He continued to write poetry, which he published in Cambridge magazines, and entered for the annual competition for the Chancellor’s Gold Medal for English Verse (for best ode or poem in heroic verse), which he won three times. He became a notable debater and held office in the Cambridge Union and the Liberal Society. He made his name as a highly talented actor with performances in both classical and lighter roles for the Marlowe Society and the Amateur Dramatic Club (ADC). Though he avoided organised games, he pursued interests that placed him beyond the usual bounds of the aesthete’s world, riding in an amateur horse-race and enjoying the rough and tumble of military life as a member of the Cambridge University Cavalry Squadron. It is curious that commentators should have passed to posterity an impression of Robertson as someone who was shy and retiring, as this seems so much at odds with his record in public life. H. G. Johnson has depicted him as a man virtually incapacitated by shyness (Johnson and Johnson, 1978: pp. 136, 138–139) and while this might be dismissed as a (culpable) misreading of the evidence by someone who regarded Robertson as not wholly serious, even Stanley Dennison, Robertson’s confidant, has found it surprising that ‘someone who was normally so reserved’ should have been a ‘keen and accomplished actor’ (Dennison, 1992b: p. 18). There are several possible explanations for the apparent discrepancy, but given that many of the comments relate to the latter part of his life, might this not in reality be the outcome of the realignment of Robertson’s public self with his private self? Nevertheless, the influence of the private self was detectable earlier and a characteristic diffidence of manner was already evident by the 1920s (see Robbins, 1971: p. 221; Vaizey, 1977b: p. 17). Robertson was, moreover, ever thin-skinned and sensitive to criticism. Even so, there were few overt signs of his being shy and retiring during his student years. He seems to have been quite at home in the adversarial

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atmosphere of organised debate and, according to an observer he had, like Keynes, a ‘genuinely beautiful’ speaking voice (Dennison, 1992b: p. 18). It is important to bear this in mind as there were those who would later seek to depict Robertson as the helpless victim of attacks to which he was temperamentally incapable of responding, so much had outward appearances changed. His membership of the Cambridge Union Society (debating society and gentlemen’s club) extended over both his undergraduate and graduate years, though he was chiefly active during 1910 and 1911. Thereafter he made but rare appearances. He established a reputation as a skilful and persuasive speaker who relied more on charm than on brute force. In the Lent, Easter and Michaelmas terms of 1911, he successively held the offices of Secretary, Deputy President and President. He also made his mark as a visiting speaker at the Oxford Union Society. Robertson’s stance in the debates in which he participated provide insights into his attitudes at the time. In 1910, at the Oxford Union, he spoke for the motion, ‘That this house sets a higher political value on the Nationalist than on the Imperialist spirit’. A similar lack of sympathy with the notion of imperialism is detectable in comments made in later years. Also in 1910, at Cambridge, he spoke perhaps not surprisingly in view of his subsequent rejection of Keynesianism, against the motion, ‘That a regard for practical efficiency is a more important factor in national well-being than a regard for moral principle’. In 1911 he spoke again at the Oxford Union, on a topic that, in the light of the then current great-power rivalry, obsessed the nation: a decline in the birth-rate. His (arguments in) support for the motion, ‘That this house is of the opinion that the British nation is degenerating’, is consistent with his views on the preconditions for social melioration, namely that it is not possible to improve the welfare of the race without first improving the race itself. At the end of the same year, as Retiring President of the Union, he moved: ‘That this House desires to express its undiminished confidence in His Majesty’s Government’. In choosing to support this motion, Robertson revealed that despite holding the office of President of the Liberal Club, he was at heart deeply conservative. In words that echoed the sentiments expressed in his poetry at Eton, he argued that for the modern Liberal Party, ‘the catchword of laissez-faire had passed and that crimes wrought in the name of Liberty were not today wrought by them’. Robertson saw Liberalism ‘as the conservator not the innovator, champion not of change but of continuity, guardian of certain things

28 Dennis Robertson

of immense value to the country: principles of aristocracy, national supremacy and good order’ (Debate 5 December 1911, in A3/1/1 RPTC). Having left office, he made only rare appearances but when he did speak the House expressed its regret that he was not seen more frequently, styling him a ‘rara avis’ and saying that he came out of his tent too seldom. On the two occasions in 1913 on which he rose (to oppose the motions: ‘That this house would rather sacrifice all other literature than the works of Shakespeare’ and ‘That this House would favour the adoption of Compulsory Military Training for Great Britain’) he showed that he had lost none of his power to captivate and that the Robertson style was not the least weapon in his armoury. The student reporter caught a feature that would become his professional hallmark when he wrote, The Retiring President was in his most characteristic and charming mood. He surrendered even more than usual to his opponents, but his sweet reasonableness left a more persuasive impression than many more wholehearted and one-sided speeches could have done. The House will miss him. (Debate 5 December 1911. A3/1/1 RPTC) Half a century later, Robertson’s intellectual sparring partner, the doyen of American economics, Paul Samuelson, captured the same feature in his somewhat less-sympathetic comments on Robertson’s writing style: [He] had the rare vice of being a charming writer [speaker]. He could sneak up on the unwary reader [listener] and gain his acquiescence with a siren song. The man could almost make you believe in such absurd things as cardinal utility. (Samuelson, 1963: p. 518) During the years in which his star rose in the Union firmament, Robertson was equally feted as an outstanding amateur actor. His career, in the Marlowe Society and the ADC , encompassed, respectively, both heavyweight ‘classical’ roles and light drama. His debut performance, in the University’s triennial Greek play, was a resounding success and was widely reported. This set the tone. It was of the essence of the Cambridge Greek plays that the actors should speak classical Greek ‘simply and unaffectedly as if it were the speaker’s own language’ (Cambridge Review, 8 June 1910, F1/1 RPTC). This production, in November 1909 at the New Theatre, Cambridge, was of Aristophanes’ The Wasps, with music specially composed by Ralph Vaughan Williams (the overture has survived as a popular component of the classical repertoire). Robertson, in the part of Philocleon was, with others, congratulated on his speaking of Greek

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and there was general agreement that his was ‘the best piece of acting’ (Daily Graphic, 30 November 1909 F1/2, 3 RPTC). He was equally at home treading the boards for a series of smoking concerts. Only a few days after the Wasps, the ADC staged its production of Fellow or Felon, or the Master and the Miscreant: A Tragic Melodrama in Two Acts, with Robertson in the part of the Master of Queen’s Hall. It showed an enviable versatility and in the following year there was more of the same when he played the lead, as Lord Trumpington, Prime Minister and First Lord of the Treasury, in The Shame of the Shelfords. By 1911 he had also been voted on to the committee. In the same year he was made president and was congratulated for his innovatory style (Cambridge Review in F2/2 RPTC). Enjoyable and memorable as were these smoking-concert appearances, his acting reputation during this period depended more on the classical roles. His Philocleon had been a triumph but not until 1914 did he play a comparable part, that of Subtle in Ben Jonson’s The Alchemist. Here again he pleased the critics and received a clear nod of approval from Sir Arthur Quiller Couch (‘Q’), writer, poet, editor and Professor of English literature at Cambridge. The pattern of Robertson’s extra-curricular activities at Cambridge shows an interesting correlation with his academic studies. A more expansive phase followed his switch to economics in 1910, during which he was increasingly in the public eye, followed in turn by a marked falling away. How is this to be explained? It is as though, having cast off the reins of duty as represented by the classics he revelled in his new-found freedom. Then, as his ever-present personal problems reasserted themselves, he drew back again. Equally, it could be that having demonstrated his capabilities by conquering the available peaks of student life, he felt no further need to prove himself and moved on. Public office was not his natural metier and he did not intend to make a career of it. Instead, his life and work would be shaped by the strategy he adopted for coming to terms with his life’s dilemma, based on a different, personally more congenial, formula. Robertson’s most successful undergraduate year, the very pinnacle of his eminence, was 1911. He was already, of course, an entrance scholar of the grandest and most academically distinguished college of the university and had been awarded a 1:1 in the Classical Tripos. He had established himself as a gifted amateur actor. Now, in one year, he was, successively, Secretary, Vice-President and President of the Union, President of the Liberal Club, President of the ADC, was acclaimed as a debater, both at Cambridge and at Oxford, was awarded the Craven (University)

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Scholarship and won the Chancellor’s Gold Medal for English Verse for the third year running! In recognition of his celebrity, the student newspaper, the Granta, featured him in an article on ‘Those in Authority’. He was dubbed ‘Presidential Man’ and praised as A splendid specimen of the type . . . [the] sort of man whom everybody loves and admires in such a way as to make him president of as many societies as is convenient . . . Rather an alarming person he sounds, and, indeed we have met many persons not intimate with Mr Robertson who have professed themselves abjectly terrified . . . [no need for such feelings]. For the tremendously important fact about him is that he is one of the heroes of the ‘Golden Age’ turned outwardly Olympian, while still preserving all the charm of those most delightful children. (Granta, 21 October 1911, A3/2/1 RPTC) With such an endorsement there can be no doubt that Robertson had ‘arrived’ but beneath the surface glamour of the public self – of the ‘Presidential Man . . . by nature fitted to preside, whether it be over the Union, the A.D.C., or the fortunes of his country’ – the private self was in despair. The problems that had begun to show themselves at Eton had brought on a life-crisis which he was struggling to resolve. The crisis, in brief, involved his having to come to terms with the idea of living a transient, mortal life without the comfort of religion and without that anodyne of Everyman: conventional requited love. Robertson sought escape from his unsatisfactory self by way of an ideal persona in which he could ‘find’ the self in which he could feel comfortable. To do this meant taking leave of his past-given self and seeking the true self as he saw it. Here he faced a dilemma. Ironbound duty, a major component of the past-given self, held him in thrall and produced in his strategy a search for compromise, in company with a yearning for complete escape from the cage of duty. (Fletcher, 2000: p. 52) Evidence of Robertson’s state of mind at this time is available from a number of sources. His own public statements make clear his dissatisfaction with his life at Cambridge and the conflict he faced between duty and desire. More privately, he confided his fears regarding his sexuality

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and his feelings of hopelessness to a much older man who committed his impressions to his diary. Throughout, his poetry published and unpublished reveals his views on life, death and love. Given the success and celebrity he had achieved at Cambridge it comes as some surprise to find him expressing discontent with his lot. Although a scholar of Trinity he spent a ‘large proportion’ of his time in King’s. Here he was known as a ‘King’s metic’, one of a number of young men who were members of other colleges but felt their true home to be in King’s. Note here the appropriateness of Lord Clark’s ‘Athenian’ reference to Eton (above pp. 29–30), at which school Robertson was in his true home and not at Winchester, which he would have found completely unsympathetic to his nature. Metics were resident aliens of ancient Athens, who were prominent in intellectual and business life but had no political rights and could not hold land. Therefore, he was not alone in his discontent but whatever the motivations of the others, Robertson’s resentment stemmed from the circumstances of life that had forced him to choose wrong. In the year of his greatest success, he wrote for a King’s College magazine, the Basileon, an article entitled ‘As it strikes an Outsider’, in which he gave vent to his feelings of bitterness: To those who can content themselves with the mild excitement of the observation of delightful people in the most beautiful acres of England, I need only say that, as I walked rather drearily down King’s parade that night, I cursed the fortune which had compelled me to live in a suburb instead of in the great and shining Metropolis of the Universe. (Basileon No. 13, June 1911: p. 10) The feelings persisted. In 1913, at the end of his first year of postgraduate research, he wrote his sixth and final article for Basileon entitled ‘Why One Does not Go to King’s, by An Outsider’. Here he rounds off a list of entirely trivial reasons for not having gone to King’s with the one big reason: ‘Because one missed one’s opportunities’ (Basileon No. 15, 13 June 1913: p. 10). The circumstances that had propelled Robertson into the position of being a Trinity scholar and a King’s metic have already been noted. It was a particularly ironic outcome as King’s was Eton’s sister foundation and King’s was the natural home for Eton boys opting for Cambridge (though in practice the brighter boys were steered towards Trinity). The problem was aggravated by the different characters of the colleges, for in Robertson’s case they represented the two warring elements in his make-up: that between duty and desire.

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King’s stood for the muses en masse. It was reported in other colleges to have celebrated a Bump Supper [feast in honour of rowing-success] by marching around the College singing the chorus from a Greek play. Even if the story was only ben trovato, no one . . . would have told it of any other college . . . King’s looked up to Trinity as the great college it was. Much larger than the rest . . . it also had overwhelming academic superiority (Wilkinson, 1980: p. 36: includes the report of a speech by G. M. Trevelyan, Master of Trinity) Along with unchallengeable academic eminence went a reputation for being somewhat dry, severe and stiff. By contrast, King’s was seen to be more outgoing and liberal. George Rylands, an English don at King’s from the 1920s and an intimate friend of Robertson, saw the membership as ‘free spirits: artistic and literary and romantic’ (interview, 17 February 1994). As producer, actor and scholar, Rylands was the epitome of his own characterisation of the college, a leading light in the Marlowe Society and the ADC. Through Rylands and Keynes, King’s had links with the literary and artistic world of London and the Bloomsbury Group. Looking back a generation, there was Rupert Brooke: poet, ‘Neo-Pagan’ and free spirit par excellence. King’s was also thought of as being more akin to an Oxford college than were others at Cambridge (Wilkinson, 1980: p. ix) and Robertson, though he was said to deny the fact, was described as being ‘Oxonian at heart’ (Granta, 21 October 1911, A3/2/1 RPTC). The reason for Robertson’s attachment to King’s is clear enough, for it represented the life to which he wished to accede and, therefore, the self he wished to be. It is equally clear why, despite his yearnings, he really belonged at Trinity. His strength lay in his intellect and, as he would one day find out to his sorrow, his artistic talent, though formidable, was not sufficient to sustain a career. Further, the demands of both duty and desire must be appeased and the only possible outcome was an unsatisfactory compromise. King’s, therefore, became his ‘land of lost content’. Like his contemporary at Cambridge, the Kennedy Professor of Latin and Fellow of Trinity, A. E. Housman, who had dreamt of the idealised fantasy-land of A Shropshire Lad whilst exiled in London, so Robertson dwelt in Trinity but looked ever towards King’s (see Housman, 1896: XL). The conflict between duty and desire that shaped the course of his public life arose from the problems that beset the private self. Evidence as to their nature can be gleaned from the poems he wrote during this period. Even making due allowance for youthful romanticism, the story they tell is clear enough. Within, all is desolation and despair. Loss of

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faith takes away the solace of religion. In life, trust is to be placed in the calculations of science rather than the whims of a fickle God. Lives and fortunes are shaped by the arbitrary hand of fate, rather than by notions of fairness and justice. Death is not the gateway to paradise but to extinction, the end of life. The hope of immortality, of a kind, comes only through the durability of the works we leave behind. Nor is refuge to be sought in requited love, from which he feels excluded by his aberrant sexuality. Instead he pines in vain for love that is in nature homoerotic. Finally, because he is denied the joys of Everyman he must perforce settle for the next best way, a life of compromise, because the best is out of reach (see D9/1–3 RPTC). To an observer, Robertson’s dissatisfaction with life could look like selfish perfectionism, the distasteful self-pity of a person born with many enviable advantages. Such a view could certainly be justified but in defence it might be said that Robertson was temperamentally a perfectionist and that he judged his own life accordingly. Though academic success came easily to one who gathered prizes ‘as it were bread’ (Vol. 120 fol. 39 BDMC), he seemed to discount that to which he could effortlessly aspire and to yearn for that from which he felt excluded. In a Godless universe it is love that assumes a predominant importance and finding love becomes a major preoccupation. To feel, therefore, that love is denied one, is to feel cut off from the mainstream of human life and from the comforts and solaces that it represents. To Lionel (Lord) Robbins who knew him from the 1920s, Robertson was ‘obviously craving affection’ (1971: p. 221) and his failure to find it on conventional terms would later lead him into scrapes (he was one who had his knuckles rapped for succumbing to the allure of boyish beauty: see Newsome, 1980: p. 367), into mental instability and a search for some healing therapy. We can also gauge Robertson’s outlook and state of mind from the concerns he expressed privately to A. C. Benson, Master of Magdalene College, Cambridge. Benson was one of the world’s great diarists, who bequeathed to posterity a record of his thoughts and observations over a period of almost a quarter of a century in 185 manuscript volumes, the whole amounting to over four million words. He was also a confirmed admirer and confidant of attractive young men and his sympathetic ear provided pabulum for his ever-ready pen. Robertson was clearly unaware of all this and freely unburdened himself in speech, in writing and in dumb-show. The entries that relate to their meetings cover the period between 1909, when Robertson was in his second undergraduate year, and 1924, when he was well established as a don, with a large gap between 1913 and 1923, inclusive. Benson was noted for the accuracy

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of his recall and the impression he leaves of Robertson is unambiguous and consistent with other forms of evidence. He notes the extraordinary contrast in Robertson’s make-up between outward success and inner turmoil. He clearly perceives that Robertson is deeply troubled but is at a loss to explain the cause. The pattern was established from the start. In December 1909 Benson went to tea with Robertson and found him ‘such a clever creature, son of R of Haileybury, acts in Wasps, gets every sort of prize and scholarship – yet is boyish and unaffected’. More surprisingly, he also found An odd melancholy discontented strain in him – and a certain pleasure in introspective talk, most unlike what I should have expected from his mild and ingenuous (almost rabbit-like) face and gentle demeanour – he seemed dissatisfied and to be looking forward to nothing. (v. 108, p. 63 BDMC) Confirmation of the existence of this curious contrast came a week later when they walked beside the Cam. Curious to find this brilliant and successful creature . . . bemoaning his futility and his introspective habit – his dissatisfaction with everything. I wonder what strange weakness lies behind it all. (v. 108, f. 75 BDMC) As though in an attempt to explain, Robertson later left him some poems to read and from these Benson began to discern that the problem might be temperamental: They filled me with sorrow. I can’t make out what the tragedy has been but there has been a tragedy. This dissatisfaction and unhappiness become plain to me. It makes me wretched to think of a creature suffering so, especially this extraordinarily able, brilliant and naturally ingenuous boy. I hope I may be able to do something but I fear it may be temperamental. Why must these ghastly elements creep so insidiously into lives and burrow there like worms? (v. 109, f. 64 BDMC) The next stage in this process of self-revelation was a ‘most intimate letter, revealing the devastating emotions of his heart and soul’ but when, early in February, the two next walked beside the river any hope that Benson entertained that matters would be further elucidated were to be

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disappointed. Robertson remained ‘absolutely silent’ or just murmured politely in response to Benson’s futile attempts to maintain a conversation (v. 110, p. 1 BDMC). Robertson’s refusal to talk or at least to sustain a conversation was to become a source of increasing exasperation to Benson (during both his undergraduate and graduate years: v. 116 f. 8, v. 117 f. 28, v. 120 f. 39, v. 121 pp. 4–5, v. 128 p. 34, v. 137 p. 48, v. 141 p. 11 BDMC). This behaviour is all the more remarkable given his role in public life, as he variously presided over the most prominent student societies, captivated his listeners at the Union and achieved fame as an actor. It must be seen as his way of revealing to Benson the desolation of his inner self (the self he otherwise kept from view), the heartbroken face behind the mask of success. The final stage in Robertson’s great unburdening came as early as March 1910. He had been preparing the ground first with his poems and then with the ‘most intimate letter’ but now he stunned Benson with A rather wild and hysterical note about himself and his tendencies – a surprise, I admit; but the curious daring frankness of the note amazed me even more. (v. 110 f. 51 BDMC) This can only refer to Robertson’s revelation that he was homosexual. The excited tone of the note is surely indicative of the emotional catharsis produced by the confession. To others such discoveries could yield pleasure, in an all-male world in which homoerotic feelings and even display were not uncommon. Benson himself had asserted to a colleague that ‘it is an ill time with one when one’s pulse does not beat a little faster when someone draws near’ and agreed with another that ‘to be a Don and not to care romantically for the young men was a very chilly affair’ (BDMC, April 1910, quoted in Newsome 1980: p. 250). Part of the shock for Benson must therefore be that Robertson clearly felt no pleasure in the fact but, rather, a sense of loss, dismay and guilt. His ‘Victorian’ upbringing (Rylands, interview, February 1994?), his ingrained sense of duty and the inherited burden of Christian morality, all combined to condemn one who possessed ‘tendencies’ that were socially censured and legally proscribed. The process of coming to terms with his sexuality can only have heightened his perception that he had chosen the wrong college at Cambridge. While for Robertson, Trinity represented convention and the frowning disapproval of deviant practices, King’s possessed a reputation for overt and flamboyant homosexual behaviour (see Benson’s

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reaction to the open displays of affection he found there, as reported in Wilkinson, 1980: p. 51; see also passim). King’s, therefore, stood for tolerance and freedom and here a metic might hope to find the acceptance he was elsewhere denied. Such were the promptings of the private self. They led Robertson to seek a solution to his life’s dilemma by way of escape into some more congenial persona in which the various aspects of his make-up would achieve a natural harmony. His ultimate desire was to achieve complete escape and to give full rein to his essentially artistic nature through a career on the stage but the inescapable grip of duty held him back. With his childhood experience of (genteel) poverty he was also sufficiently worldly to perceive the importance of a regular income. The outcome must therefore be a compromise with the call of art being answered on a part-time basis. In 1910 much of this would be in the future but on achieving his 1:1 in the Classical Tripos, Robertson took the first step along the road that would lead to his destiny. He switched degrees and read economics.

4 Varieties of Escape: 1, Economist and Soldier

In 1910 economics was a relatively new subject at Cambridge – the first examinations for Part II of the Economics Tripos were held as recently as 1906. It is therefore unsurprising that not a few of Robertson’s future colleagues should have started out in more conventional fields of study: Alfred Marshall and Maynard Keynes in mathematics, Gerald Shove and Austin Robinson in classics and Arthur Pigou in history. Nor are likely reasons behind this migration hard to find, for the new subject of economics could be seen as a particularly attractive venture for the young. Not only did it possess the lustre of novelty but it could also be related to real world events and problems. For idealistic members of the Cambridge School founded by Alfred Marshall who were bent on social improvement, it promised to provide the instrument whereby social melioration could be achieved. Robertson’s move to economics was, therefore, not at all unusual in the Cambridge of this period and in part at least his motivation can be explained in the same familiar terms: Why did he move? One can only conjecture, but it is not hard to conjecture. An intellectual, but with a conscience that rode him more strictly than those of most intellectuals, he sought the field for his talents where he could be of most service. In the Cambridge of 1910, economics was the obvious answer. Social conscience is reason enough for the attraction to . . . Marshall’s school. (Hicks [ed.], 1966: pp. 10–11) In forming this view, Hicks had the testimony of Robertson’s family, who saw Dennis as being constantly preoccupied with the desire to be useful (G11/6 RPTC). A more contemporary source, A. C. Benson, recorded in his diary in August 1911 that a close friend of Robertson, J. R. M. Butler, 37

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had told him that ‘Robertson (D) was almost too tolerant, and had an immense idea of the value of work and the duty of service’ (v. 123, p. 59 BDMC; see also Butler, 1963: p. 40). Service, duty, to be useful: these descriptions certainly invoke one of the major contenders for dominance in Robertson’s make-up that imposed a powerful constraint on his behaviour. It was, moreover, an attitude that swam easily with the current of the times, for there was increasing interest among the younger generation in economic and ‘social’ affairs with a desire to understand what was involved and possibly discover solutions to the many problems facing society. (Dennison, 1992b, p. 17). However, we know that this cannot be the whole story. For ever and anon with Robertson, duty must contend with desire, the desire for escape, for in choosing to take up economics he was by the same token choosing to abandon his study of the classics. When we consider that, by 1910, Robertson had been studying the classics for most of his conscious life, first at home with his father, then at Eton, then at Trinity, he would have had enough and be ready for a change (Rylands, interview, 17 February 1994). Though he excelled in classical studies his heart was elsewhere and the occasion of his success in the Tripos and the attendant prizes and scholarships would have heralded the point at which that change should be made. Note, however, that unlike Austin Robinson who, inspired by Keynes’s lectures in the autumn of 1919, was to rebel against the terms of his classical scholarship in order to study economics (in Moggridge [ed.], 1974: pp. 99–100), Robertson dutifully followed the course to its natural end. It was in his nature to do his duty and by 1910 he had done his duty: to his classicist father; to Eton, where he had triumphed and won the Newcastle Scholarship; to his family by following the example of Ainslie, winning a major scholarship and, moreover, obtaining a better class of degree (a 1:1 as against a 1:2); to Trinity for amply fulfilling the promise exhibited at the time the scholarship was awarded. Now he was free to follow his own inclinations. Well not entirely free, for in seeking a new persona in which the public self would more nearly meet the needs of the private self, the steadying hand of duty would ensure that desire did not run away with itself. And so it proved, for as so often in his life, Robertson compromised. While he would move away from the classics, his new self would be moulded by considerations of usefulness, duty and service. Art must be served on a part-time basis.

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The point at which Robertson made the decision to study economics is not clear but during the summer of 1910 he Read, and digested, [Adam Smith’s] The Wealth of Nations [1776] and [Alfred] Marshall’s Principles [of Economics, 1890–1910], making a 30page summary of the latter, including the Appendices . . . . (Dennison, 1992b: p. 17) This was an important initiation for it would convince Robertson that he would find the subject accessible and to his taste. The Wealth of Nations was written in good, if ponderous, English and the Principles presented its propositions in polished prose that stood aloof from the technical analysis to be found in the appendices. The experience had lasting effect for ‘Throughout his life, he constantly refreshed his memory of these two works . . . and throughout his later work the influence of these two majestic works was of major importance’ (Dennison, 1992b: p. 17). A further possible incentive for the decision could be that Keynes, who had recently returned to Cambridge from the civil service, had just been appointed director of studies in Economics at Trinity. To be supervised by Keynes would, of course, strengthen Robertson’s links with King’s, of which college Keynes was a fellow. With the rather makeshift arrangements pertaining in the early days of the Tripos, the teaching staff included two unofficial lectureships financed out of the professor’s own pocket. At this time the Professor of Political Economy was A. C. Pigou, who had succeeded Marshall in 1907. The lectureships were held by Keynes and by W. T. (Walter) Layton (later Lord Layton, distinguished public servant). When term began, Robertson attended lectures given by Keynes and others and wrote essays for both Keynes and Layton (Dennison, 1992b: p. 17). As elsewhere in areas of intellectual endeavour, Robertson prospered and so impressed his supervisor and the Tripos examiners that he achieved another first in 1912. Here was ample proof, if any were needed, that he could excel in this new discipline and that the compromise solution was, therefore, workable. But compromises by their nature can never be wholly satisfactory. He had neither left behind the inhibitions of the duteous, past-given self nor made the leap of faith that would have satisfied the promptings of the desired self. Instead his life and work would continue to be ordered according to the pattern he had now established, of seeking to move forward but always looking back and dwelling as a consequence in a half-way house of compromise.

40 Dennis Robertson

Dissatisfied, he continued to yearn for the ‘land of lost content’ that King’s exemplified even as he achieved distinction as a professional economist. His life-problems were not solved and were indeed incapable of solution, though Robertson continued to nurture his hopes. In the end they turned out to be hopes betrayed. His bid for final escape would fail and economics-as-ideal-compromise led not to salvation but to crisis and the desolation of the public self. His talents as an actor, though well above the average, were not such as would sustain a career on the stage. Nor could he have foreseen the changes in the subject-matter of economics or the advent of the Keynesian Revolution. In truth he had done the best he could in the circumstances, though this would not finally be made plain until the 1930s. But in 1912 all was glad, confident morning as Robertson took the path open only to the pick of the new graduates: he remained at Trinity to write a dissertation as the basis for admission as a college fellow. Fellowships were greatly prized, for senior members of a college had many privileges. They were paid as teachers of a college’s undergraduates and were provided with accommodation in college and dining rights in the college hall. Such appointments could be held independently of any appointment to the teaching staff of the university. Election was made on a competitive basis by reference to a candidate’s fellowship dissertation. Fellowships of Trinity were seen as particularly desirable because of the academic eminence of the college and the status thereby conferred on the holders of the office. A. E. Housman, author of A Shropshire Lad and newly appointed Kennedy professor of Latin, expressed his appreciation on being elected a fellow in 1911 in fulsome terms: [Lord] Macauley used to rank a Fellow of Trinity somewhere in the neighbourhood of the Pope and the Holy Roman Emperor: I forget the exact order of the three, but I know that the King of Rome was lower down, and His Most Christian Majesty of France quite out of sight. (letter to H. M. Innes, 21 January 1911; quoted in Page, 1983: pp. 94, 219 n.) Robertson’s ambition and commitment in this regard are clearly indicated by his choice of topic for research and the speed with which he brought the project to completion. The topic was the trade cycle, the phenomenon of alternating phases of higher and lower levels of economic activity that had long been familiar to observers and which was thought to take the form of a regular wave or cycle. It was a topic of central importance that occupied the field

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of economic enquiry later known as macroeconomics. The turning of the cycle heralded periods of prosperity or depression, of good wages or unemployment, and was thus directly relevant to the welfare of ordinary people. By the same token it was seen as important by those academics who sought to improve the lot of humanity. Theories of the cycle abounded and Robertson took on the formidable task of reviewing these on a systematic basis in the light of the empirical evidence. His survey included both ideas fashionable at home and an important continental literature, much of it unfamiliar in Britain. The evidence against which he judged the theories was no less than the actual experience of individual industries over a 40-year period. In so comprehensive an investigation the sources had to be readily available and Robertson had extensive resort to the ‘Annual Histories’ published by the Economist. From this process he derived a synthetic theory of the trade cycle that lent many new insights and provided the foundation for all his subsequent work in the field. Most remarkable of all is that he submitted his dissertation as early as the summer of 1913! Keynes was Robertson’s supervisor – though Pigou and Walter Layton were also involved – but any guidance he gave in the research is likely to have been rather perfunctory: It is not known how much Keynes was involved in this work, but it would seem that his contribution was minimal: at that time students engaged in research were left almost entirely to their own devices, a tradition that continued well into the 1950s. . . . (Dennison in Dennison and Presley [eds], 1992b: p. 18) Dennison buttresses this view by quoting from a letter Keynes wrote to Robertson at the end of September 1913 which makes it clear that Keynes had been making himself familiar with the contents of the dissertation (28 September 1913, C2/1 RPTC). The letter reveals that Keynes had found the work heavy going, that he was greatly impressed by the effort expended in compilation and that he believed that he had a theory that would synthesise an enormous number of the facts it contained (he presented the theory in a paper read to the Political Economy Club in December of the same year). The letter was written clandestinely as the dissertation was at that time in the hands of the examiners, one of whom was Keynes (the other was J. S. Nicholson, Professor of Political Economy and Mercantile Law at Edinburgh). The examiners declared themselves unconvinced and the submission failed. However, the work was, in the same year also, entered

42 Dennis Robertson

in the competition for the Cobden Club Prize. Here it was successful and Robertson received the prize (the last year in which it was awarded) of £20 and a silver medal. The examiners this time included Arthur Pigou, who wrote to Robertson in terms that echoed Keynes’s letter and indicates why the fellowship submission had failed. Neither Robertson’s indefatigable industry in gathering material nor the originality of his conclusions could be faulted but the method he had employed (the form in which his argument was conducted) left much to be desired. In making recommendations for improvement, Pigou recalled the advice of his own teacher, Alfred Marshall, regarding the stages to be followed in the process of forming an economic argument. This involved mulling on the material collected as evidence until the theory – the researcher’s own production – emerged from the mass. The raw materials then become illustrations of the theory. Always the emphasis should be on positive contribution with criticisms of the work of others employed only as a buttress (see Pigou to Robertson, 1913: in C1/2 RPTC). This was obviously rather chastening, but constructive, criticism and to follow its precepts could only result in improvement. Robertson duly redrafted his dissertation and it was successfully resubmitted in August 1914 (this time with Edwin Cannan and H. S. Foxwell as referees). He thus became a fellow of Trinity and was to remain so, with a five-year break, until his death. His election was reported in The Times of 13 October 1914. He was admitted a fellow in uniform, with sword, for by this time Robertson was in the army. While the peaceful, scholarly issue of his dissertation was being resolved, Europe had erupted into war. The assassination of the Archduke Franz Ferdinand at Sarajevo in Serbia and the subsequent invasion by Austria began a conflagration that spread the conflict to a rapidly widening circle of belligerents: Russia, then Germany, France, Belgium and finally Great Britain, which declared war on Germany on 4 August 1914. War did not come as a complete surprise, for tension between the great powers and war-like preparations had been evident for some years, but Britain’s involvement was in doubt until the last minute. Robertson was a participant in events that preceded and followed the outbreak of war and they form an important and illustrative episode in his life and career. In the period preceding the war Robertson was involved in two quite separate and apparently contradictory activities that to the casual observer comprised almost comically inconsistent behaviour. Both Dennison and Hicks noted that he was simultaneously a member of the Cambridge University (anti-war) War and Peace Society and the Officer

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Training Corps (OTC). His participation in the former went much further than fashionable tokenism. He lobbied members of parliament, raised money, demonstrated in Trafalgar Square and represented the Society at a conference at Le Touquet. Hicks sought to explain Robertson’s subsequent decision to enlist on grounds of the violation of international law: ‘It was the invasion of Belgium that cleared the issue’ (Hicks [ed.], 1966: p. 12). It is certainly true that he explored the issue of Belgian neutrality but nevertheless worked desperately until the last minute to ensure that Britain stood aside from the conflict. Robertson is sometimes referred to as a pacifist but this is not the case. He was, more accurately, a ‘neutralist’ in the particular circumstances of the time. Colleagues have also expressed surprise and amusement at the spectacle of one of Robertson’s temperament volunteering for active service. Dennison thought that ‘Enlistment was perhaps unusual for somebody so unmartial and gentle’ (Dennison, 1992b: p. 20), while J. R. M. Butler attempted a more comprehensive rationalisation: No one could have hated militarism more wholeheartedly or looked less soldierly, but he prepared himself for the impending war by joining the cavalry squadron of the OTC . . . (Butler, 1963: p. 20) The problem with this explanation is that persons who hate militarism do their bit by acting as medical orderlies (Pigou joined the Friends Ambulance Unit) and do not anticipate the outbreak of war by posing as dashing young cavalrymen. Photographs taken in 1915 and 1918 depict Robertson as every inch a soldier and his conduct in the field brought him praise and even a respectable decoration. Rather than the bumbling milksop that colleagues seemed to need him to be, Robertson proved himself an effective and dutiful officer. For whatever reason, however, he was the only one among his contemporaries to retain junior rank (this again, perhaps, was partly a consequence of the style that led to his being thought by some as being not wholly serious). Robertson’s decision to join the colours was influenced much more by considerations of duty rather than of jingoism but if we fail to take proper account of that other constituent part of his make-up – the desire for escape – we shall obtain a distorted picture. His pre-war military training doubtless had the effect of preparing him for the ‘impending war’ but we should note that he had been a member of the OTC since at least 1911 and showed little sign of being a reluctant participant in events. The Granta had described him as ‘an enthusiastic cavalry-man’ (Granta, 21 October 1911, A3/2/1 RPTC), Butler allowed that he ‘enjoyed

44 Dennis Robertson

the humours of camp’ (Butler, 1963: p. 41) and the poems he wrote on the episode are elegiac and nostalgic in tone. Nor did the Cavalry Squadron provide his only avenue for horse-borne adventure as, again belying his gentle and aesthetic reputation, he had ridden in a steeplechase, in November 1910, organised by the Decemviri (a debating society whose exclusive membership was confined to ten invited undergraduates from Trinity and King’s). In print, he was later to explain the public’s enthusiasm for the war in terms of its being a big adventure, of providing a means of escape from the ‘uncongenial slavery of the counting-house and the factory’ (War and Peace, March 1915: in D5/4/1 RPTC). Nevertheless, it was not all romantic affectation, for the demands of duty were met in tandem with the desire for escape. The various manoeuvres and practice battles in which he participated (see for example Benson v. 134, November 1912: pp. 27, 26) had a warlike purpose and there is no doubt that, as events unfolded, Robertson envisaged himself as preparing with the cavalry for what was expected to be a war of movement. In the event, therefore, it comes as some surprise to find him gazetted second lieutenant in the 11th Battalion of the London Regiment (Finsbury Rifles), a circumstance which he attributed to indecision on his own part, unhelpful family advice and intransigence on the part of the War Office. It was all rather a comedown. The Finsbury Rifles were a battalion of the Territorial Army, a formation of recent creation popularly dismissed as Saturday-night soldiers, though they were to provide indispensable reinforcement to Britain’s very small Regular Army. The drill-hall of the Finsbury Rifles was in Pentonville Road, near Pentonville Prison, and the locals referred to them derisively as ‘The Pentonville Pissers’ (Carver, 1978: p. 5). As a junior infantry officer, Robertson found himself initially horseless and it was, presumably, his experience of caring for his cavalry mount that subsequently qualified him to be made battalion transport officer. One commentator has depicted Robertson’s experience of war in decidedly sombre tones (Lee, 1963: p. 312) but there is no evidence for this. Instead, the sense of escape, of adventure and the overriding purposefulness of it all combined to raise his spirits and, at least for the duration, allowed him to leave his problems behind. That he did not suffer the fate of so many, of death, maiming or mental affliction, can be attributed to his role as transport officer, which, together with luck in his postings, meant that he was saved from the bloodiest war-fronts. First, he was kept behind in England when the regiment was sent overseas to take part in the disastrous Gallipoli campaign. Then, in 1916, he

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went with the transport to rejoin the remnants of the regiment, now in Egypt, but only after a brief but telling brush with the civil service. Robertson had no taste for committee work, whether at Trinity or in the public domain, and only a strong sense of duty drove him to serve on such bodies. In 1916, however, a summons to Whitehall brought him a week of such misery that strings were pulled with the Army Council to get him transferred back to the military. The problem was, of course, that though civil service committees would satisfy his sense of duty they could not provide the accompanying element of escape that he needed. Unsettled and with some feelings of guilt, he fled back to his freewheeling life with the transport. In the Middle East, he served first in the defence of the Suez Canal and then, after the Turks were forced to withdraw into Palestine, in all three Battles of Gaza. It was during the first of these that he was awarded the Military Cross (1917), for his gallantry in maintaining supplies to the front line. The award, however, brought little satisfaction, both because he felt that his was a reward for unremitting effort rather than some daredevil act in the face of the enemy, and because of a rumour that gained currency that the award had been of an even higher decoration. Despite his embarrassment, however, no one should doubt the importance of his contribution. In a country in which water was scarce, access to supplies could influence the course and outcome of battles. Also, the nature of animal transport itself presented great problems. This is illustrated by an incident that became particularly relevant in the latter part of 1917, after Robertson had been promoted captain and was transport officer for a machine-gun company. Machine-guns were being moved up in readiness for an impending battle (the First Battle of Gaza, March 1917) by the usual means of mule-transport. Now, mules had a well-recognised antipathy to camels, which were used for transporting supplies. During the crucial, final night march the customary rule of keeping the mules upwind of the camels was inadvertently broken. The mules scattered into the night, taking the precious machine-guns with them, and all then depended on the skill of the transport officer to ensure that, nevertheless, the guns were delivered in time for the battle (Carver, 1978: p. 24). Again he was lucky with his postings. He was not part of the draft sent to reinforce the abortive Nivelle Offensive on the Aisne, in France, nor did he participate in the ill-starred Townsend adventure up the River Tigris (the so-called Mesopotamian Picnic). He was thus spared the horrors of Kut el Amara and the futile attempts at its relief.

46 Dennis Robertson

He finished the war with the occupying forces in Constantinople (Istanbul) at the heart of the defeated Ottoman Empire. Altogether, he had been fortunate and while waiting in Egypt for demobilisation in 1918 confided that he’d had ‘a pretty good time in this war’ (27 January 1918, A1/13/16 RPTC). Robertson was lucky not just in the kind of war he fought but also in its timing. It fell between the end of one phase of his career and the beginning of another and provided a sort of extended natural break between them. Following the rejection of the first version of his dissertation, he had time for revision before hostilities commenced and was able to resubmit in the very month war was declared. His postings then kept him in England until early 1916. This meant that he was available to be admitted to his fellowship and so could be sure of an academic post when he returned from the war. It also gave him the time to lay the foundations of a future academic career with two significant publications. The first was a paper based on his research findings, ‘Some Material for the Study of Trade Fluctuations’, which he read before a meeting of the Royal Statistical Society and which was published in the Society’s Journal in January (March according to Dennison) 1914 (Robertson, 1914: pp. 159–173). The other was a version of his dissertation. In revising the text for publication, he had before him the paper containing Keynes’s ‘superb theory about fluctuations’, which was supposedly inspired by his own work. As, however, the paper was critical of Robertson’s over-investment theory of the cycle and gave more emphasis to saving-deficiency as a cause of crises, it was of limited value. Nevertheless, there was a reciprocal obligation, for it suggested a role for the banks and of the concept of forced saving which Robertson was later to develop in his path-breaking analysis of the relationship between investment, saving and credit (Robertson, 1926). The process of revision was helped by changes in the structure of the Territorial Army in 1915, which left Robertson undisturbed in England when his comrades sailed for Gallipoli. This provided the opportunity for contact with Keynes, who was reading the manuscript on behalf of Messrs Macmillan. At the end of May 1915 Keynes wrote to say that he had recommended publication ‘without hesitation . . . as a brilliant and most important contribution to the subject’. At the same time, he recommended changes in presentation which plainly derive from his own approach to economics, which treated economics writing as an art-form and a means of persuasion. In the event, Robertson was certainly to discover a highly individual and widely popular writing style but he could never bring himself to adopt with any conviction Keynes’s

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technique of verbal arm-twisting, which was wholly contrary to his donnish inclinations. He did, however, attempt, as far as he thought appropriate, to restructure the argument in line with Pigou’s criticisms of his method. In the published version he wrote as follows: A word remains to be said as to the method of discussion adopted in the following pages. The ideal method of economic exposition is perhaps to elaborate an independent constructive theory, treating the results and suggestions of others as material for incidental rejection or as buttresses to afford incidental support and introducing facts rather as illustrations than as the formal groundwork of generalisations. While I have tried in the main to follow this method, it has not seemed to me entirely applicable [because of the present state of the study of fluctuation]. (Robertson, 1915: p. 9) Pigou was quick to acknowledge his efforts. He thought the new version, in particular Part I which dealt with the individual trades, immensely improved, though Part 2 was still in need of attention in order to make more easily distinguishable the wood among the trees (Pigou to Robertson, January 1916: CI/3 RPTC). Two points are relevant here. The first is that Pigou recognised that Robertson was attempting something ‘very ambitious . . . and heroic’. His was an empirical study and a monumental and pioneering enterprise. He was, that is, seeking to provide, on the basis of actual experience, an explanation of the trade cycle in Britain. The second is that he plainly felt, as he intimated, that while he was free to mark out his own territory in Part I, in Part II he would have to make an accommodation with the current state of the study of the cycle: the plethora of extant, partial theoretical explanations and the general lack of appeal to the facts hitherto among trade-cycle theorists. The result was bound to be less than unequivocal and pellucid. In the event, perhaps because Macmillan would only take the work subject to amendments of style or substance recommended by Keynes that Robertson was unable or unwilling to make, the book was published by Messrs P. S. King, with whom (and their successors) he was to remain. It appeared at the end of 1915 as A Study of Industrial Fluctuation (the Study, Robertson, 1915). It was destined to become a classic and provided the stem from which all his later work in the field would grow. Meanwhile, the war continued and Robertson began his travels: first to Egypt, with an opportunity to visit Cairo, the Pyramids and famous

48 Dennis Robertson

temples; then Palestine, and the sites of the Promised Land and Holy Land; then Constantinople, the ancient seat of the Eastern Christian Church and latterly an important Islamic city. These experiences gave his war service the spice of romance and adventure, the element of escape that he required to leaven the heavy dough of duty. The sights and sounds, heightened by periods of hardship and danger, all combined to leave an indelible impression and provide a rich source of nostalgic reminiscences. So strong was the pull that he took the opportunity to retrace his steps within a decade. As the war drew towards its close, however, fears about the future peace began to disturb his thoughts. What would the post-war generation make of his anti-war activities? He was assured by his sister Gerda that it would be too busy to bother. What was to be his occupation in life? It is clear that his main consideration was with an adequate, regular income. This in turn ruled out any fanciful notions of complete escape into the world of the arts. He had heard nothing from the college authorities at Trinity and did not feel certain of an assured income there. He considered the idea of a position with the Workers Educational Association in London. This would have the additional advantage of proximity with theatreland and the possibility of acting on a more prominent stage. In the end, however, he did go back to Trinity and stayed there, except for the years 1939–1944, until he died. He began lecturing in the Michaelmas term of 1919: his academic career had finally begun.

5 The Economics of Social Improvement

Robertson worked extremely hard on the research that underpinned his fellowship dissertation. Years later, he was careful to balance some slightly self-deprecating remarks as to its validity with an assurance that he had endured ‘long hours of wallowing in the Economist Annual Histories and similar material’ and had expended ‘a considerable amount of honest sweat over these facts and figures’ (Robertson, 1948a: pp. xvi, viii). In turn, after revision, the work yielded a substantial monograph. Even shorn of much of the ‘consecutive industrial narrative’ that had bolstered the 1913, Cobden Club, version, the book, A Study of Industrial Fluctuation (1915), still ran to 254 pages of main text, together with 27 pages of statistical tables and charts. In an astonishingly short period of time he had produced a major study of the trade cycle, based on extensive empirical evidence, which provided the foundation for all his later work in the field. The book was also to achieve recognition as a classic economic text when, in 1948, it was reissued by the London School of Economics as Number 8 in their Series of Reprints of Scarce Works on Political Economy. Its importance in Robertson’s own scheme of scholarly development was acknowledged 32 years later when he referred to it publicly as ‘my only real book’ (in a speech to the faculty board in 1946, in B2/3 RPTC). The subject matter of the Study is indicated by its title, which Robertson clearly chose with great care (though it has defeated many subsequent commentators, who have produced a range of variants) as A Study of Industrial Fluctuation: An Enquiry into the Character and Causes of the so-called Cyclical Movements of Trade. In other words, he would examine the proposition that the economy was subject to fluctuations in activity of such regularity that they could be deemed to constitute a recognisable cycle of alternating phases. Before we go on to examine the way in which 49

50 Dennis Robertson

he achieved this aim and the conclusions he reached, it will be helpful to enquire into the inspiration and motivation that led him into a field that seemed so alien to his essentially aesthetic temperament. We have already seen why the choice of economics as a new subject for study in 1910 was so well suited to the resolution of his life’s dilemma. We have also hinted at the reasons for the appeal of economics for the idealistic young at Cambridge and why Robertson might have been drawn to the study of the trade cycle specifically. We must now enquire further into the justification for such a prodigal expenditure of Robertson’s effort on this particular branch of economic study. The answer will provide insights into the work’s real significance both for his outlook on life and for his contribution to the development of economic knowledge. The area of Robertson’s work that the economics profession has deemed of greatest importance, together with the reasons that justify the choice, is indicated by J. R. Presley in his Robertsonian Economics, which focuses on the theory of industrial fluctuation, since this is where the majority of Robertson’s writings were concentrated, where he made the greatest impact upon the study of economics and where much of the debate between Robertson and Keynes took place. (Presley, 1978: p. 5) Robertson’s own view entirely accords with this, for he never had any doubt as to where he should concentrate his effort. This much was made clear in a speech he gave, as chairman, to a meeting of the faculty board in 1946: Now about the economics of fluctuation. This is where I have to be a little bit personal. To me this has always been the most interesting branch or aspect of economic study. It’s the only one to which I have made any contribution; my only real book published (alas) 32 years ago was about the fluctuation of output (B2/3/2 RPTC). It is noteworthy that Presley’s treatment of what he deems to be Robertsonian economics covers a number of related topics, including movements in aggregate output and employment, the relationship between saving and investment, the finance of investment, money and the rate of interest. These are all relevant for the study of fluctuation in a modern economy and they came, in turn, to assume positions of increasing significance in Robertson’s work. They are also topics at the centre of

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the collaboration between Robertson and Keynes and to the subsequent Robertson–Keynes controversy. This latter came so much to overshadow the rest of his activities that he is often remembered more as a monetary economist. For Robertson, however, there would be no conflict. The development of his theory of fluctuation increasingly involved discussion of monetary matters and this aspect was then blown out of all proportion by the need to counter the arguments that accompanied Keynes’s construction of his ‘theory of a monetary production economy’. It was all, fluctuations and money, part and parcel of the whole and in his Lectures on Economic Principles, a work recognised as expressing the definitive Robertson position, he wrote I have now . . . to say something about money, about fluctuations in activity, about ‘lapses from full employment’ – the subject matter of Marshall’s projected volume, never fully brought to birth, on ‘Money, Credit and Employment’. If I may strike a personal note, this has always been to me the most interesting part of economics – the only part to which I can hope to be remembered as having made any personal contribution. (Robertson, 1963a: p. 325) And here we have it, a statement of the factors that led him to the study of his principal interest and concern in economics, namely the significance of spells of unemployment, the influence of economic fluctuations, the Marshallian inheritance. The link is provided by Alfred Marshall’s conviction that the study of economics had a practical end in view – the betterment of the social condition – and that economists, and especially Cambridge economists, had a sacred duty to use the expertise they acquired to alleviate the poverty and deprivation in society that was everywhere apparent. He had been drawn to his life’s work on being told that the economic resources available in Britain were not sufficient to allow the mass of the population the leisure for study and the development of the mind. Marshall became the father of Cambridge economics and the founder of the Economics Tripos. In 1885 he set out what in modern parlance would be called his mission statement when he delivered his inaugural lecture on appointment as Professor of Political Economy: It will be my most cherished ambition, my highest endeavour, to do what with my poor ability and my limited strength I may, to increase the numbers of those, whom Cambridge, the great mother of strong men, sends out into the world with cool heads but warm hearts,

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willing to give some at least of their best powers to grappling with the social suffering around them; resolved not to rest content till they have done what in them lies to discover how far it is possible to open up to all the material means of a refined and noble life. (in Pigou [ed.] 1925: p. 174) It was a clarion, indeed a messianic, call to a life of duty, service and action. Guidance as to the means by which the aim was to be realised was necessarily cast in general terms and in essence involved the application of science to facts in order to ‘build up the organon of economic theory’, as a means to alleviate the ‘economic side of social problems’ (Pigou [ed.] 1925: p. 171). The scope and method of the subject became more clearly defined with the process of specification necessary when setting up the new Tripos in 1903, and by the time Robertson came on the scene everyone assumed that they knew where they were going and were concerned only with mastering the organon provided by Marshall himself: what sort of a study economics is, and what it is all about. This is a topic which, when I started to read economics at Cambridge in 1910, it was not, I think, fashionable among us to think much about – less fashionable, I dare say, than it may have been a few years previously, when the separate course in economics had not yet been extracted like Eve from the ribs of the Moral Sciences Tripos . . . We thought we knew pretty well what sort of things we wanted to know about, and were glad enough to take the counsel of Marshall himself near the beginning of the Principles, ‘the less we concern ourselves with scholastic enquiries as to whether a certain consideration comes within the scope of economics the better’, and to gallop on through the rest of those introductory chapters till we reached the relatively solid ground – or so it then seemed – of the theory of demand. (Robertson, 1952: pp. 13–14) This might be sufficient for a bright, well-meaning young man setting out on a study of economics but when it came to the means of bringing about actual amelioration of social conditions, policies were needed and for policies to be effective they must be based on solid foundations. What was required was a positive theoretical link between the subject matter of economics and the problems that observably gave rise to social distress. This was to be provided by the timely appearance of Pigou’s book, Wealth

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and Welfare (Pigou, 1912), which was published, as if ordained, while Robertson was yet in the early stages of his research: something happened which enabled and compelled us to formulate our ideas a little more sharply – namely the birth in 1912 of the great work by Pigou which in its christening-clothes bore the name of Wealth and Welfare. Thenceforward we went armed with a picture of what we were supposed to be doing. . . . (Robertson, 1952: p. 14) This book, which was later developed into the better-known The Economics of Welfare (1920 and later editions), was important as the culmination of an approach to welfare economics particularly, though not exclusively, associated with Cambridge. We begin by outlining the context within which the Pigou approach is set. Economics is the science (that is, systematised study) of mankind’s material wants and the means of their satisfaction. As such, it can be divided into two broad aspects: positive economics, which is claimed to be without value-judgement and empirically based – the economics of what ‘is’; normative economics, which is prescriptive and value-laden – the economics of what ‘should be’. Normative economics is the realm of welfare analysis and is concerned with policy recommendations. In Cambridge, Henry Sidgwick, Alfred Marshall and A. C. Pigou contributed to the (traditionally English) utilitarian approach to welfare analysis, which became associated in its most developed form with the work of Pigou. It can be contrasted with the non-utilitarian, continental, approach associated with Vilfredo Pareto. Paretian theory succeeded Pigovian welfare economics as the dominant school due to the latter’s reliance on the assumptions of cardinal utility (that utility is measurable in absolute terms) and that interpersonal comparisons are possible. We should notice that such considerations would not have troubled Robertson, who famously and tenaciously defended cardinal utility (see Robertson, Utility and all That, 1952: pp. 13–41). Pigou’s Wealth and Welfare provides a valuable link between Marshall’s call to action of 1885 and Robertson’s empirical study of the trade cycle of 1915. It was, we might say, a pioneering attempt to develop a science of doing good and provided objective counterparts to warm feelings about social improvement. Pigou furnished Robertson with the theoretical justification for the choice of subject matter for his dissertation and there are several explicit references to the book in the Study (Robertson, 1915: pp. 5 n2, 51 n1, 70 n1, 124 n2, 137 n1, 252 n1 and n2, 253 n1). The relevant points are as follows.

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‘Welfare’ means the same thing as ‘good’ and like good admits of no further definition, though the study of ethics allows us to determine what things belong to welfare and in what way. On this basis, we can lay down two propositions concerning welfare: ‘first, that welfare includes states of consciousness only, and not material things or conditions; secondly, that welfare can be brought under the category of greater or less’. One part of welfare is economic welfare, which is the welfare that arises ‘in connection with the earning and spending of the national dividend, or, in other words, of those parts of the community’s net income that enter easily into relation with the measuring rod of money’. Further, economic welfare includes only part of the psychic return to be derived from consumption of the national dividend, namely ‘the psychic return of satisfaction’ (all quotations: Pigou, 1912: pp. 3–4). There are, as might be expected, problems relating changes in economic welfare to changes in welfare in general (including the measurement of satisfaction – utility – in relation to money on the one hand and good on the other) but there is a presumption – ‘what Professor [F. Y.] Edgeworth calls an “unverified probability,’’ that conclusions about the effect of an economic cause upon economic welfare will hold good also of the effect on total welfare’ (Pigou, 1912: p. 11). The next step is to understand that, in most cases, causes that affect economic welfare do so only indirectly, through changes in the national dividend (p. 14). Two sets of issues arise. The first is with respect to the measurement of the dividend and here Pigou follows Marshall. He includes only items that can be measured in terms of money and makes the all-important distinction between consumable goods/services and capital goods/services: that is, the distinction between items capable of yielding satisfaction directly and items employed as instruments to produce goods/services which will yield their satisfaction in the future. The aggregate of these items is designated the gross national dividend and from this total is deducted that part which would ‘suffice to maintain the country’s capital intact’ to obtain a measure of net national dividend or current ‘psychic income’ (pp. 15, 17). The second issue is with respect to the determination of the size and distribution of the dividend and its relation to economic welfare. Here, Pigou puts forward three propositions that, in effect, provide a basis for the formulation of policy measures. The propositions are that any cause that cet. par. (a) results in an increase in the aggregate size of the dividend or (b) reduces the inequality of distribution of the dividend between different persons or (c) reduces the ‘variability, or inequality in time, of the dividend, and especially of that part of it which accrues to the poorer

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classes’, will increase the economic welfare of the community as a whole (pp. 20, 24, 32). Note that the first of Pigou’s propositions is concerned with the promotion of economic growth and the third with the phenomenon of economic fluctuations (the cycle) and that these two topics were to be intimately related in Robertsonian theory and formed the subject matter of the fellowship dissertation and the Study. Notice also that in connexion with the third, questions arise as to definition and proof and Pigou dealt with them at length in Part IV of his book (see Chapters 1 and 2 of Part IV, pp. 401–419). This treatment was to prove influential with Robertson, who years later was to remind his readers that he had chosen the national income (‘dividend’) ‘rather than prices, profits or even employment, as the thing whose fluctuation is to be the primary object of study’, long before the Keynesian Revolution laid claim to ‘output as a whole’ as a peculiarly Keynesian phenomenon. There was, he argued, nothing really original in making such a choice as at that time ‘Part IV of Pigou’s Wealth and Welfare was in my hands’ (Robertson, 1948a: p. ix). The crucial link between welfare and fluctuations can be explained as follows. Pigou employed the concept of marginal utility (in place of Marshall’s own notion of consumers’ surplus) as the basis for measuring the level of welfare in society. This is because it is by reference to degrees of utility, or satisfaction, that (the pattern of) consumption is regulated and a measure of the welfare to be derived from consumption is obtained. Furthermore, the level of consumption is limited by income and, in turn, the variability of income is governed by the variability of employment: variability of consumption, in general, involves, not merely loss of satisfaction at the moment, but also future consequences injurious to welfare . . . Variations in the consumption of the poorer classes generally come about through causes, which, in different degrees, compel also variability of employment, in the sense of alternations of working spells and idle spells [unemployment being seen as a cause of poverty and deleterious to the health and moral fibre of the workers] . . . In the majority of industries [it is] changes in entrepreneurs’ demand [that give rise to] variability of employment. (Pigou, 1912: pp. 403–404) Employment and earnings are related to variations in the national income (dividend) and these, inter alia, to variations in ‘the bounty of nature’ (harvests) and to business confidence (see especially Part IV, Chapter VIII). There is thus a direct link between fluctuations in the level of (economic) welfare, fluctuations in consumption, fluctuations in the

56

Dennis Robertson

level of income and fluctuations in the level of economic activity. It was this link that Pigou used to justify policies of income redistribution, both between persons and over time, on the grounds that greater equality of consumption will maximise utility and so increase (economic) welfare (p. 401). All this would imply that a Cambridge man who wished to answer Marshall’s call to duty by providing insights into the working of the trade cycle and the means of its moderation, could, though he were never to leave his study in Cambridge, do more potentially to alleviate social distress than a multitude of those who went forth as Marshall envisaged and exerted their influence in individual firms and local situations. Therefore, the task that Robertson had set himself, though substantial enough, held promise of benefits infinitely greater. Accordingly, in the Study, his principal concern was with the losses of welfare that arise from the incidence of the cycle and its relationship with economic growth and with the considerations associated with measures to minimise such losses. Robertson’s approach to his investigation of the trade cycle had been empirical and inductive, in that he sought to derive theory on the basis of accumulated facts and figures. Interestingly, he was never again to attempt such an ambitious empirical work but the inductive approach, of working from the particular to the general and from the study of the parts to the study of the whole, was to remain characteristic. For his fellowship dissertation he had originally intended merely to criticise existing theories of the cycle by reference to readily available statistics but had, following Pigou’s promptings, put forward his own theory, using the data and actual industrial experience as evidence and illustration. However, having escaped one set of strictures, he was, many years later, to meet the altogether opposite charge when J. R. Hicks, in expressing ‘whole-hearted agreement and admiration’ for Robertson’s diagnosis of the causes of the trade cycle, nevertheless felt it necessary to express wonderment at Robertson’s apparent method: [Robertson’s theory of the cycle] . . . was first foreshadowed in the pages of his Study of Industrial Fluctuations [sic] . . . ; at that time it was grounded more in inductive research than in high-flown theory. That it should have been possible, at that time, to distil such a conclusion out of the welter of facts seems to me proof of almost miraculous insight. (Hicks, 1942: p. 57) What is Hicks seeking to imply, that Robertson had produced his conclusions like a rabbit from a hat? A note of irony is often detectable

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in Hicks’s comments on Robertson and this may be the case here, or it could simply be that, unaware of the book’s provenance, he is genuinely surprised by the outcome of Robertson’s all-to-successful application of the Marshall–Pigou method. If so, the answer to Hicks is that, facts and figures apart, Robertson did not arrive at his conclusions within a universe previously unpopulated by theories of the cycle. There was a surfeit of such theories and Robertson had been, for the first time, attempting to apply systematic economic analysis to the task of sifting among them. With respect to the existing theories, The causes of crises and depressions alleged before the various committees of Congress in the eighties amounted to some 180 in number, and included the issue of free railway passes and the withholding of the franchise from women. This list remained undefeated until M. Bergmann in 1895 was able to publish an exhaustive discussion in the German tongue of 230 separate opinions, arranged in eight categories. Indeed the problem of industrial fluctuation has exercised the minds of business men, economic writers and practical reformers of all schools throughout the past century: and within the last five years alone six weighty works, varying in length from 280 to 742 pages, have been published upon it in England, America and France. (Robertson, 1915: p. 1) While all the serious contributions could be said to possess some merit, no previous writer had attempted to provide a dispassionate assessment. As a result, there is as yet no single comprehensive explanation which may be said to hold the field. It is the author’s conviction that the most important work which remains to be done lies in the direction of developing and synthesising the various and often conflicting opinions which have already been expressed. (Robertson, 1915: p. 2) Accordingly, Robertson’s contribution to knowledge was to subject alternative theories to testing as the basis for the provision of an empirically validated synthetic explanation of the cycle. The alternative theories were almost infinite in their variety and attempts by various commentators over time had failed to produce a satisfactory system for classifying them. In more recent years J. R. Presley, the first serious student of the origins of Robertsonian economics, classified the extant theories by reference to the predominant element in

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each writer’s explanation of the causes of the cycle. This produced seven groupings which included English, continental and transatlantic economists (Presley, 1978: pp. 13–17). Robertson’s choice was limited by what he later referred to as his blissful ignorance of ‘a great mass of continental literature’ (Robertson, 1956: p. 89). This was to lead him into what is sometimes disparagingly known as the Anglo-Saxon habit of useless originality, though it should rather be seen as making him a pioneer of ideas which were either unfamiliar or unpopular in Britain at the time. Robertson’s choice was further circumscribed by what we might call his presuppositions and in particular from being ‘taught [by Pigou] to be constantly trying to dig down below the money surface of things . . . to get down to “real’’ terms’ (Robertson, 1948: pp. xi–xiii). In doing so he was to go against the work of prominent British economists, who favoured monetary and psychological explanations. Though he was to follow the ‘method of Dr Marshall’ his theory nevertheless departed significantly from inherited Cambridge ideas. The idea of digging down below surface appearances to some underlying reality obviously struck a chord with Robertson and came in the Study to have two different but related meanings. The first was concerned with seeking an explanation of fluctuations that was rooted in the underlying structure of the production process, after the froth of monetary and psychological influences had been blown off. The theory also implied that some degree of fluctuation was a necessary part of the process of economic growth and this, because it involved saving rather than spending out of income, invoked the second meaning of digging down to an underlying reality: to discover the mainsprings of human behaviour, the primal forces that govern human action. Robertson’s theory of the cycle can be classified as a non-monetary, over-investment theory . . . on the grounds that the crisis is seen to be caused by over-investment, and the factors generating this are non-monetary in nature, and associated with inherent characteristics of the capitalist system of production. (Presley, 1978: p. 26) Over-investment theories were novel in Britain but less so on the continent. Robertson rejected the ideas of M. Tougan-Baranowski, in which the demand for capital goods is excessive in relation to the supply of credit required for their purchase, but found more congenial the notion, found in the work of both M. Labordère and A. Spiethoff, of there being a shortage of ‘real saving’, in the form of consumption goods, in

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relation to the level of investment. Robertson was later to give belated acknowledgement to the work of Labordère (Robertson, 1948a: p. xiii and the Appendix to the volume) and to adopt a shortage of saving theory as a secondary or subordinate cause of the crisis. For his preferred meaning of over-investment, however, in the sense that it is better supported by the evidence, and which became the basis of his own theory of fluctuations, Robertson was indebted to A. Aftalion. For Aftalion, overinvestment meant that the supply of capital goods at the end of the boom was excessive in relation to the demand for them, with the consequence that their marginal utility would decline and in turn provide a ‘rational inducement to the producers of consumption goods to restrict their supply’ and so give rise to that very lack of certainty of employment which so, according to Pigou, influenced the welfare of the labouring classes. Though the world outside Cambridge had to wait until the publication of the Study in 1915 for the full report on Robertson’s research into the trade cycle, important indications of the conclusions he had reached were made public in the previous year. These were, respectively, two reviews he had written of books by continental writers and the publication of a paper read at a meeting of the Royal Statistical Society. To be published in 1914, the reviews must have been written and the paper read in 1913, the year of the first version of the fellowship dissertation, produced after only one year of postgraduate research. They provide further proof of Robertson’s breathtaking precocity and they exhibit both mastery of his material and a confidence beyond his years when approaching the work of established economists. With respect to the book reviews (Robertson, 1914), it is abundantly clear that, fresh from his researches and the promptings of his teachers, Robertson approached them as a convinced advocate of the need for ‘digging down’ and that he was highly sensitive to any signs, in those writers who professed themselves in sympathy, of backsliding into merely monetary terms. Robertson found that this weakness seriously undermined the theory put forward in the first book he reviewed, a translation from the Russian, into French, of M. Tougan-Baranowsky’s 1894 history of English crises, Les Crises Industrielles en Angleterre (1913). The following points, of particular relevance for Robertson’s own theory of the cycle, are of interest. First, there is recognition that crises are intimately associated with the capitalistic or ‘roundabout’ system of production although Robertson draws attention to an apparent contradiction contained in the suggestion that their diminished severity over time is associated with an increase in the proportion of production to consumption goods.

60 Dennis Robertson

Second, the author draws attention to an apparent increase in workingclass prosperity as indicated by a weakening of the traditional correlation between unemployment and money wages, pauperism and so on, a circumstance he attributes to the increased power of trades unions. While Robertson would no doubt have recognised the seeming benefit in Pigovian welfare terms, he appositely pointed to the possibility that the stability of money wages had been won at the expense of unnecessarily large fluctuations in employment and that the periods of unemployment were, as the author acknowledged, associated with greatly increased rates of criminality. Tougan-Baranowsky correctly identified over-investment in capital goods as the dominant cause of ‘modern fluctuations’ and made much of his perception that capital goods and consumer goods are related in terms of investment and saving, respectively. Nevertheless, he did not follow the logic of his argument to its conclusion and so failed to grasp that overinvestment occurred in relation to available real savings in the form of consumer goods rather than of monetary purchasing power locked up in bank accounts and government bonds. The author had clearly not dug down far enough. Robertson was much more enthusiastic about the second book he reviewed, A. Aftalion’s Les Crises Périodiques de Surproduction (1913), which he thought ‘on the whole, very much the most suggestive and original work that has yet appeared on this most important problem’ and ‘the most suggestive contribution, except perhaps that of Jevons, ever made to a constructive theory of fluctuations’ (Robertson, 1914a: pp. 84, 88). As before, the following points are of most interest. First, Aftalion’s arguments, like Robertson’s own, were statistically based. Second, he dismissed the popular theories of fluctuation of the day, such as repercussion, under-consumption and the availability of credit. The only caveat in Robertson’s general approval was that Aftalion remained rather vague as to the nature of savings and that he may have seen them only in monetary terms. Third, Aftalion foresaw the possibility of oversupply in the production of capital and consumption goods arising from prolonged intense demand, itself due to a lag in the production of capital goods behind aggregate output and prices and aggravated by the length of the period of production (a concept which was to assume central importance in Robertson’s own theory of the cycle). Unfortunately, Aftalion’s imperfect understanding of the nature of demand in society and his failure to

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include the influence of agriculture or of invention necessarily limited his achievement in Robertson’s eyes. Fourth, he was redeemed, however, by his suggestion that economic expansion led to oversupply in the sense of a fall in marginal utilities. The resulting disequilibrium between marginal revenue and marginal cost of production could give rise, due to the relative stability of money wages, to a cutback in production by entrepreneurs and a consequent fall in working-class employment and consumption (welfare). For Robertson, the meaning of overproduction thus became clear as ‘the failure to secure the equality through time of the marginal utility of consumable goods’ (Robertson, 1914a: p. 88). The avowed purpose of the paper read before the Royal Statistical Society was a modest one, as is indicated by the title Robertson chose: ‘Some Material for a Study of Trade Fluctuations’. The ‘material’ consisted of two ideas put forward as being useful in the explanation of the ‘so-called cyclical fluctuations of trade’ as tested (rather informally) against readily available statistical evidence. Neither of the ideas was original to Robertson and he accorded credit directly to A. Aftalion and to G. U. Yule, a Cambridge statistician from whom he had received helpful suggestions (Robertson, 1914b: p. 178). Each was, moreover, discussed in isolation, without the context of an overarching theoretical scheme. The first, which in the Study was to be listed as a temptation to overinvestment, was Aftalion’s notion of the period of gestation, by which ‘the boom in any trade is prolonged and the depression aggravated by the length of time required to construct and to bring into working order the instruments of production’ (Robertson, 1914b: p. 159). Aftalion had supplied statistical evidence from French sources and Robertson’s contribution was to provide verification, within the context of other factors bearing on the cases examined, of the usefulness of the concept. This he did with evidence ‘of a rather more precise character’, taken from the experience of British industries: railways, pig-iron and coal, freights and shipbuilding, cotton-spinning, coffee. The second idea, which in the Study was to be listed as an aggravation of depression, was Karl Marx’s suggestion that ‘the decennial character of crises was due to the fact that the fixed capital of the world needs replacement every ten years’ (Robertson, 1914b: p. 164). Even though this idea probably originated as a guess made to explain observed facts, Robertson felt it had not ‘received adequate attention at the hands of subsequent writers’ (p. 165). Again, this notion, of the importance of the longevity of instruments, was tested against the experience of industries

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in Britain: railways, cotton-spinning, shipbuilding, house-building and coffee, pig-iron and coal, oil. The conclusions from the discussion that followed the paper were that the ideas Robertson had presented were the more important contribution and that the statistics used to provide verification were defective – and were indeed challenged in detail by discussants. The paper was seen to provide illustrations of Marshall’s important distinction between the long and short periods, with ‘the correspondence between value and investment in effort and sacrifice’ holding only in the long period, while the short period was subject to the Marshallian phenomenon of quasirent (the return over and above opportunity cost when capital is fixed in supply). In sum the Study would come to be seen as an original and pioneering work which, though by modern standards crude and amateurish in its technique, applied to trade-cycle theory a method of investigation which would become the norm in economics. Overall, it is the sheer scale of the undertaking and the speed with which it was accomplished that impresses, given that within one year Robertson had achieved his original goal and within two years his own synthetic theory from the data. The explanation of the cycle he produced would, in a later incarnation, sustain his claim to be considered a Great Thinker in economics. This theory of the cycle he produced is the subject of the next chapter.

6 A Theory of the Trade Cycle

The reader approaching A Study of Industrial Fluctuation for the first time will quickly become aware that, even in its post–Cobden Club form, the process of revision had not gone as far as would be desirable. Robertson acknowledged that ‘the pressure of other duties’ (war-service) had prevented him from ridding the text of a certain amount of technical apparatus and of detailed statistical material, more suitable for a dissertation intended for the eyes of scholars and to give evidence of research than in a work designed to impress certain clear conclusions on a more general public (Robertson, 1915: p. xviii) In other words, the theory the work contains is not set forth with textbook clarity and, accordingly, must be lifted clear of the accompanying corroborative evidence. Much will be familiar from our previous discussion but as a preliminary it will be helpful to set the stage with a number of general observations and conclusions that spring from Robertson’s detailed analysis of industrial experience over the period from ‘about 1870 till the eve of the great war’ (p. xviii). First, we should notice that, in addition to the specific references to Pigou’s Wealth and Welfare given in the text, the spirit of the work permeates the whole of the Study. In conception and in execution, its purpose is to show policy-makers how to increase the sum of human welfare through time. Second, that Robertson had concluded that the apparent industrial anarchy of laissez-faire capitalism produced a remarkable degree of economic cohesion and resulting prosperity, ‘without the guidance of any single directing power’ (p. 7). 63

64 Dennis Robertson

Nevertheless, he argued that the system was prone to welfare-reducing fluctuations which stemmed from two complementary sources: (1) the nature of modern capitalistic (capital-using) production; (2) an apparently unremitting urge to promote economic growth. Because of the influence of custom, convention and the blind acceptance of the consequences of human compulsions, the economic system had worked year-in, year-out to produce both good outcomes and bad. The war, however, had, in the face of the possibility of national destruction, forced upon the governing classes a questioning of accepted ideas and practices which (curiously!) had only occurred ‘When the safety of the nation and no longer merely the welfare of millions of its citizens is at stake’ (p. xix). In other words, Robertson thought that it is at least possible that in industrial as in other matters we are in the presence of one of those definite mutations of the social life which it is in the collective power of man to fix and foster in accordance with his highest hopes. (p. xx) As a consequence, public opinion is likely to be in some ways more receptive now than ever before to a searching analysis of industrial problems and less suspicious of drastic change. Necessity has destroyed many shibboleths and torn down many veils. (p. xix) A most valuable precedent had been set by the case of the financial system, traditional beliefs concerning which had been challenged in an unprecedented manner: The sacred machine of high finance has been shown to be at once infinitely vulnerable, and far more amenable than its hierophants supposed to conscious manipulation and control. (p. xix) As in finance, so in the economy as a whole, for In a hundred ways the shock of war is awakening men to a sense of the economic realities in a manner which . . . may form the prelude to a less thoughtless and anarchic industrial age. (p. xx)

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Potentially seismic changes in attitude and behaviour were portended and, in the Study, Robertson detected them and made them clear and provided the means by which the opportunities they presented could be exploited to increase the sum of human welfare. In a most extraordinary way, the incidence of war had uniquely produced the circumstances in which the ideas and policy recommendations Robertson had provided in the days of peace were given the best hope of their being adopted. Less fortunately, it had also denied Robertson the opportunity of putting the Study into the more accessible form in which it might have had a greater impact upon the national consciousness – as Keynes was to do, with his 1919 polemic, The Economic Consequences of the Peace. It must be said, however, that Keynes was ever the campaigner, ready to use his writings and his personal contacts to obtain his desired policy ends; Robertson never was. Next, by digging down, Robertson had perceived that below the surface clutter of technical detail, the question of the cycle was essentially one of saving and investment – what they consisted of and how they were related. Later, during the inter-war period, saving and investment, together with money, lay at the centre of economists’ debates on the working of the national economy. Robertson’s pioneering work on the relationship between these three variables (Robertson, 1926) was to have a profound influence on future thinking on the subject. The basis in real-world industrial experience for this work was provided in the Study. Very significantly, Robertson’s insights into the working of industrial processes gave a new emphasis to the analysis of the short period which was different from the previous Cambridge conception of the short period, as merely the domain of the mechanism by which the economy adjusts to long-period equilibrium (on the Cambridge School, see Bigg, 1990). For Robertson, the short period as the domain of cyclical fluctuations became important in its own right as the period relevant to the span of human life and, therefore, the period during which the level of economic welfare was actually relevant. It was linked to the long period by the relationship between cycles and growth. The Study thus became a study of the determinants of economic welfare in a growing economy and had as its principal concern the means by which the costs imposed by the cycle were to be reconciled with the desire for economic growth: that is, the means by which the cycle was to be reconciled with the trend. In more specific terms, the problem Robertson was seeking to solve raised two questions. These were, that if it was accepted that the process of economic growth imposed welfare costs in the present then (1) for any given rate of growth, how was it possible to minimise the necessary costs

66 Dennis Robertson

incurred; (2) even if necessary costs had been minimised, was it desirable to sacrifice so much in the present for the promise of future prosperity? The answer to the first of these questions occupied the vast bulk of the Study and comprised the Robertson theory of the trade cycle. The second was approached on far more tentative lines as being a question of ethics, with suggestions as to any possible solution being made in philosophical and literary, rather than economic, terms. The relevance of all this for Robertson’s stature as an economic thinker is twofold. First, in giving a new emphasis to the short period, Robertson the pioneer was anticipating the work of Keynes, with whose name the idea is usually associated. Second, in raising the issue of the costs imposed on the present generation by the demands of economic growth and of the human compulsions from which they spring, Robertson was going beyond Pigou and this makes the Study far more than an application of an aspect of the Pigovian analysis. In addition, the apparatus of thought by which economists could provide a more complete explanation of the phenomenon was not to enter the professional literature for another 70 years. Perhaps rather surprisingly, the Study contains an example of what we might term a pet theory, to which Robertson was attached and which he continued to defend in the face of criticism and some ridicule. Equally, it contains an example of what might be seen as a pet aversion, which may have arisen from some predisposition. Finally, and arising from the above, there is a very rare but significant instance in Robertson’s work of his being prepared to change his mind in subsequent expositions of his theory. Accordingly, the former pet aversion assumed the role of leading element and the pet theory changed its relationship with other elements. Robertson’s pet theory concerned the continued importance of agriculture and he was later to admit that ‘about one third in bulk of the whole book is devoted to the study of the influence of crops on industrial activity’ (Robertson, 1948a: ‘New Introduction’, p. x). In this regard he drew inspiration from the work of the Jevonses, father and son, whom he greatly esteemed, and though he did not accept that agriculture could provide a complete explanation of industrial fluctuation, he did think it a significant factor. He suggested improvements to the Jevonses’ sunspot theory of the cycle and later called for a more expert investigation of the influence of solar disturbance on the course of economic activity (Robertson, 1948a: p. xi). However, there was a widespread feeling that Robertson’s emphasis on the importance of agriculture was misplaced even at the time it was put forward, for by 1913 the sector was much diminished in size as

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compared to earlier periods. One sympathetic commentator was to argue that Robertson ‘showed courage’ in emphasising the role of agriculture at a time when ‘to exhibit any leaning towards celestial or crop theories was indeed to invite the suggestion that one ought to go to see a doctor’ (Ashton, 1951: p. 300). Subsequently for the economics profession, evidence of a systematic relationship proved elusive and, in retrospect, a less sympathetic commentator was to use an obituary article to deliver the following verdict: Time permits us to filter out Robertson’s overemphasis on factors such as agriculture, which experience shows has no simple relationship to business cycles. (Samuelson, 1963: p. 522) In the face of the general scepticism, Robertson remained undaunted and was sustained by occasional crumbs of support, such as that offered by other writers (see, for example, Robertson, 1948a: p. x). To his pet theory he was faithful to the end and in his Lectures on Economic Principles (Robertson, 1963a: p. 410) he affirmed his belief in the fluctuations in Nature’s bounty playing a role which is none the less recognisable because it may not be possible to reduce it to a regular cyclical pattern closely linked with the peculiar maladies which afflict our glorious Sun. Though agriculture retained its position in Robertson’s affections, in later work its role was diminished and it changed its relationship with other variables. In Banking Policy and the Price Level (1926), agriculture was seen to influence both the timing of the phases of the cycle and its magnitude but not as being able to ‘furnish a complete explanation of the periodicity of industrial output’ (1926: pp. 14ff.). Significantly, its role in his theory of fluctuation changed in line with a change in the fortunes of his erstwhile pet aversion. This was the principle of acceleration, or repercussion as he referred to it in 1915. In a development that ran contrary to the general rule that Robertson built on previous ideas and stayed loyal to those he adopted, he moved from outright rejection of the notion of repercussion to a position of almost complete acceptance. It is generally not noticed that Robertson used the generic term ‘repercussion’ to refer both to the principle of acceleration and to what Keynes would later refer to as the multiplier (see Study, p. 125 and Lectures, p. 410). It is also important to bear in mind for what is to follow that whereas Robertson came to embrace the idea of the accelerator, which

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he evidently did not regard as a threat to his position, he was dismissive of the idea of the multiplier, which he evidently did see as a threat (see, for example, Robertson, 1948a: ‘New Introduction’, pp. 12–13). In 1915, however, he could hardly have been more dismissive, asserting that The whole theory of repercussion, as expounded so glibly for instance by M. Lescure, appears to be engaged in making something out of nothing, and to rest on a quicksand. (1915: p. 125) Similarly, on a later page he speaks of discarding the ‘shibboleth of “repercussion’’ ’ (1915: p. 164). Robertson, in common with many other economists of the time, saw repercussion as an apparently endless process, subject to no inherent constraint: Does not the whole notion of the communication of prosperity from one industry to another in an endless chain imply an elementary confusion of thought? (1915: p. 125) The problem was that Robertson continued to think in these terms, even after Keynes had introduced the concepts of the propensity to consume and to save, which provided the scientific basis of the multiplier and a more precise account of the paradox of thrift. This would provide the grounds for a (possibly wilful?) misunderstanding of Keynes’s New Economics and a source of controversy between the two. Though he continued to anathematise the notion of the multiplier, he looked more favourably on the accelerator in his later work, to the extent that, by 1937, he was able to say that ‘I find myself in agreement with Mr Harrod that the principle of acceleration deserves pride of place . . . in any analysis of the trade cycle’ (Robertson, 1940: p. 179 [Review of The Trade Cycle in Can. Journal of Economics, 1937, reprinted in Essays pp. 176– 181]). The attachment continued and when the time came to confide his definitive thoughts on the subject, he had convinced himself that ‘I have always felt that it is to the acceleration principle . . . that one should give pride of place in one’s thoughts about the cycle’ (Robertson, 1963a: p. 425). As these changes were going forward, there was a parallel change in the fortunes of another mainstay of the original version of the theory. In the Lectures, there is no reference to the concept of the ‘effort elasticity of demand’, which played a crucial role in the articulation of the mechanism of the Study. By this means, total effort increases when the

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relative price of agricultural products falls. In place of this concept, Robertson applied at the macro level conclusions (especially regarding the relationship between farm incomes and investment) reached on the basis of observations made at the micro level in his early work (Presley, 1978: p. 58). Now, if we were to take account of both sets of developments, that is, with regard to both agriculture and repercussion, we might reasonably conclude that as Robertson came to accept the principle of repercussion, at least in its acceleration form, the need for the argument from relative marginal utilities, which was central to the Study, became less necessary and could be dispensed with, along with effort elasticity of demand.

7 The Anatomy of the Study

The organisation and method of the Study are of interest inasmuch as they follow Robertson’s accustomed practice, of working from the particular to the general, from the individual to the aggregate or, in later parlance, from the micro to the macro level. Accordingly, the text is divided into two parts. Part I deals with fluctuations in individual trades and Part II with fluctuations in trade in general. In both Parts, Robertson follows the same procedure. And here we see why a reading of Robertson’s 1914 Royal Statistical Society (RSS) paper provides so useful an introduction to the Study, for it mirrors the method of the parent work. In the Study, as in the paper, he introduces a proposition, discusses it and then relates it to the actual historical experience of a range of trades. Thus, for example, one of the propositions dealt with in the RSS paper was the period of gestation of capital – in the Study, one of the ‘phenomena of supply’ which are associated with modern industry – which tends to result in over-investment taking place. Robertson defines it as ‘the length of time necessary to construct and prepare for use the requisite instruments of production’ (p. 13). As before, the validity of the proposition is examined against experience and practice in a, now somewhat wider, range of trades – coal, pig-iron, shipping, railways, cotton-spinning, coffee, copper, rubber – together with the rigidities of supply that lengthen the ‘period of transference’, such that a localised as well as a universal rise in exchange value may arise that results in over-investment (pp. 13–25). Then, in Part II, Robertson applies his findings to the explanation of that ‘alternation of general expansion and depression’ that is referred to as the trade cycle (p. 121). In other words, in Part II Robertson is asking whether the factors which he has identified as giving rise to fluctuations in a large number of individual trades, each with its own peculiar 70

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characteristics, can be used to explain the cycle in general industry. The notion of ‘repercussion’ was, of course, ruled out as a significant factor in the explanation and more likely candidates would be those compatible with the neoclassical concept of relative prices that predominates at the microeconomic, individual industry, level. The presumption would be that for an exponent of Pigovian ideas this would give a central role to (relative) marginal utilities. Beginning with the individual trades, Robertson examines ‘certain tendencies towards fluctuation which, granted an initial rise in the exchange value of the services rendered by any trade, are found to be inherent in the modern system of large scale competitive capitalistic industry’ (p. 46), namely those that encourage over-investment, leading to a downturn and those that aggravate the ensuing depression. The required initial rise in exchange value could derive either from changes in demand for the finished product or from a fall in costs of production. One such supply-side change, as illustrated by the experience of a number of trades (pp. 47–65), was ‘one form in particular of lowered costs which seems to be of considerable importance both in inducing immediate prosperity and in stimulating the over-investment which sows the seeds of future depression’ (p. 66). This was invention and Robertson’s emphasis upon it is generally seen as his most significant contribution, at least to English thought on the cycle (now, however, associated chiefly with Schumpeter). Moving on to consider demand-side changes, Robertson leaves until Part II questions concerning the (critically important) demand relationships as between the consumptive and instrumental trades (p. 69) and concentrates on demand factors that operate more generally. Of these, there is a group labelled ‘miscellaneous’, which comprises the effects of changes of fashion, ‘alternations of peace and war’ and foreign tariffs (p. 72) but pride of place is reserved for the role of agriculture. Robertson saw the influence of agriculture as being of ‘more persistent and widespread importance than the others’ (p. 75). His interest in it persisted partly because of the strategic role it played in his theory. This role was important not so much with respect to its effect on industry when considered as a collection of individual trades (whether ‘direct’, ‘normal’ or ‘psychological’ effects on the instrumental and consumptive trades, see pp. 75–120) but rather when considered in relation to the fluctuations of general trade, dealt with in Part II. Now, given the initial rise in exchange value, the observed ‘alternation of general expansion and contraction’ will follow as a matter of course. The question then arises as to the nature of the entity in which the

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alternations are observed to occur. Years later, in his ‘New Introduction’ to the reprint of the Study (Robertson, 1948a: p. ix), Robertson claimed that he had deliberately chosen ‘real national income’ rather than the more traditional candidates for attention – prices, profits or even employment – and justifiably cited Pigou’s Wealth and Welfare as the inspiration for his choice. Nevertheless, there is here a hint yet again of Robertsonian pique over originality denied, for he acknowledged that the terminology he now chose (as compared to the nomenclature of 1915) was intended as a riposte to Keynesians, who claimed to have discovered the importance of output as a whole in the 1930s. Consequently, it is more enlightening to turn to Robertson’s original treatment of the subject in the ‘Preliminary Chapter’ of the Study, written before alleged Keynesian presumptions had begun to cast their shadow. The nature of the variable in which fluctuations occur is indicated by Robertson’s use of the term ‘industrial activity’, which he contrasts with ‘agricultural activity’. Industrial activity refers to the production of consumption goods and investment goods and is divided into trades or groups of trades and trade in general. Use of the term ‘trade’ also connotes the idea of exchange and while for an individual trade the proper measure of prosperity or depression is ‘aggregate net receipts’ (p. 3), the measure of general economic activity becomes the aggregate volume of exchanges or, more properly, the aggregate volume of consumption. It is consumption that is to be the measure of economic success. In a growing economy this apparently straightforward concept is complicated by the necessity of including the utility of gross investment during the year as well as that of finished goods (p. 5). Nevertheless, the clear conclusion is that the end of all economic activity is consumption and that economic endeavour is to be directed to the maximisation of the community’s net utility (gross utility less disutility of input: see p. 200) derived from consumption. Next, Robertson explains the relationship between the two types of output in terms of saving and investment. Capital goods (‘instrumental goods’) are used to produce consumption goods and consumption goods constitute the real saving necessary for the construction of capital goods (pp. 171 n. 2 and 236). Rates of production between the two types are regulated by way of relative marginal utilities (exchange values) such that a rise in marginal utility will induce an increase in activity and a fall will induce a reduction. The notion of marginal utilities being relative presents no problems in the case of individual trades but when considering groups of trades or general trade, there must be something relative

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to which they can be rising or falling. That something can only be either expectations or agriculture. With respect, first, to expectations, Robertson judged that estimates of the marginal utility of capital goods were likely to be less accurate and stable than those for consumption goods, because estimates in respect of capital goods had to be based on estimates of future productivity (pp. 156–157). This possible variation is the key to an understanding of modern industrial fluctuation. In particular, it can explain the cause of the revival from depression, which initiates the expansionary phase of the cycle, and from which, in due course, the downturn from the boom will inevitably follow. This is because, for Robertson, ‘each period of “expansion’’ contains as it were the seeds of its own dissolution’ (p. 8). The influences under which the marginal utility of capital goods might be revised (upward) could be (a) the psychological effects of an exceptionally good harvest; (b) the need to replace an unusually large amount of worn-out capital in leading sectors; (c) the application of some invention in leading sectors (p. 157). In turn, the expectation of a boom in investment goods will presage an increased demand for consumption goods. The marginal utility of consumption goods will accordingly be revised upward, manufacturers will be induced to increase output and owners of stocks to release them from store. In considering fluctuations in general trade, Robertson describes himself as ‘breaking at some point arbitrarily into the magic circle of industrial change’ (p. 121) and this point is picked up and used somewhat reproachfully of Robertson’s method by a later commentator (see Goodhart in Presley, 1992: p. 24). However, the explanation as to why Robertson breaks into the cycle at the point of revival is now clear. First, it is the most important point to explain, as from the revival the rest of the process will follow. Second, it allows him to group together the three causes of revision of the marginal utility of capital goods, as the revival is the only appropriate point at which to introduce (b), the need to replace a large amount of capital equipment. From expectations we turn to agriculture, the strategic importance of which is now clear as it is the only other entity in relation to which the exchange value of the output of general industry can be rising or falling. For Robertson, its position in his scheme derived from the results of his empirical investigations and whatever the subsequent criticism, he was always able to point to the evidence in support of his claims as to its effect on the cycle (pp. 129–155).

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Robertson’s rejection of the principle of repercussion (pp. 122–125) left open the question of the incentive to producers and stockholders to change their behaviour. This want he supplied with his notion of effortelasticity of demand, or, more fully, increased productivity, in terms of satisfaction, of effort-input (p. 125). Such a rise in satisfaction can come about in three ways: through increased productivity due to a reduction in real costs in the production of own output (through improved organisation and equipment); or, more likely, by means of a rise in the exchange value of the product due to an abundant harvest; or a rise in the expected value of marginal utility of own product (pp. 126–129). The usefulness of this device is particularly marked in relation to agriculture, as it explains why a change in exchange values will not simply bring about the redistribution of an unchanged level of purchasing power between the sectors. This is because the effort-elasticity of demand is held to be greater than unity (there is a rise in the productivity of effort of corn consumers in terms of satisfaction), which means that a fall in the price of corn will lead to a greater than proportional demand for corn and that part at least of the increased demand will consist of an increased supply of industrial goods. There is thus an increased aggregate level of demand, the extra effort put into the acquisition of corn being not entirely at the expense of effort put into the demand for other products (pp. 130–137). From the revival, economic activity quickens into the boom, from which, in due course, the crisis and downturn of the industrial cycle will follow. Why does this happen? Robertson’s explanation is that the forces that initiated the expansion will, when considered in their negative aspect, also constitute ‘the forces which put an end to the progress of general revival’ (p. 165). Thus, the expansion of the economy will see a steady growth of real costs, associated with the use of less-efficient factors and techniques and more-expensive sources of supply. Also, and ‘More obvious and catastrophic’, is the effect of an agricultural shortage, which is likely to result in a contraction of industrial activity, on the assumption that in such times the effort demand for corn will be inelastic (less than unity). Robertson would see this effect as being of ‘supplementary importance’ but would ‘refuse to assign it as the sole cause of industrial collapse’ (p. 170). Third, a fall in the expected value of the marginal utility of own product, ‘exhibiting itself in a fall of the ratio of exchange of constructional as against consumable goods, and a diminished prosperity of the constructional trades’ (p. 170). This can come about in two ways. First, because of a shortage of saving for investment:

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one result of the increased attractiveness of investment is a considerable absorption into the vortex of exchange of accumulated consumable stocks. After a time therefore, unless and until the consumable goods created by the new instruments appear in sufficient quantities to compensate for this absorption, it will be physically impossible for the investment in construction goods to be maintained on the scale on which it has been begun. The fundamental cause in such circumstances of the collapse of constructional enterprise, is thus seen to be not the high cost of constructional materials, but the scarcity of real capital [consumption goods] available for investment. (pp. 170–171)

However, the ‘fall in the ratio of exchange of constructional as against consumable goods’ is not dependent on an actual fall in stocks of the latter, for in times of rising productivity no such fall may occur. Instead, the second reason for which capital goods could be overproduced as compared to consumption goods is due to miscalculation or, more certainly, ‘to the inevitable characteristics of modern large scale production’ (p. 187). This last rescues the explanation for cyclical fluctuation from dependence on adventitious factors and places the blame firmly on the real features of the capitalistic system. The ‘seeds of . . . dissolution’ are, therefore, inherent. For the ‘inevitable characteristics’ we turn to the ‘temptations to overinvestment’, which are a feature of the experience of modern, capitalusing industries. First, there is the period of gestation of investment (Aftalion). A rise in the exchange value of a product will induce increased investment in the trade producing it. Because of the ‘length of time necessary to construct and prepare for use the requisite instruments of production’ (p. 13) and because individual producers will be ignorant of the preparations being made by rivals during the continuing period of high prices, the resulting increase in investment will be such that the exchange value of the product will eventually fall below the old level. This will be the case even if the demand for the product is elastic because the resulting increased command over other goods will not compensate for the sacrifice involved (in terms of consumption goods) in the wholly disproportionate increase in investment. Robertson concludes that ‘the longer therefore this period of gestation, the longer will the period of high prices continue, the greater will be the over-investment, and the more severe the subsequent depression’ (p. 14).

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Temptation to over-investment also exists where a trade is easily accessible to new entry, measured in terms of the sacrifice necessary to provide the required fixed capital. This would be the case where required capital was small, where financed on the joint-stock principle or by easy access to the money market (pp. 25ff.). Nevertheless, large size is the essence of two other features of capitalistic enterprise which have the effect of aggravating the extent of the ensuing depression: ‘imperfect divisibility and intractability of the instrument (pp. 31–36)’. That is, in cases in which the optimum scale of production and appropriate unit of investment are large, entrepreneurs may be led to expand capacity beyond that justified by the extent of the rise in the exchange value of their product. Then, because of the costs involved in de-commissioning and re-commissioning, these discontinuities will make it difficult for producers to regulate economically their usage of capital. Finally, there is the problem of longevity of the instrument (Marx). That is, the length of life of capital will influence the pattern of economic activity through the need periodically to replace large amounts of capital by way of flurries of investment (pp. 36–45). With over-investment, the marginal utility of capital goods will be revised downward and demand for them will fall. At the same time, the reduced productivity of effort-input, in terms of satisfaction, to consumption goods production (consequent on the reduced attractiveness of investment) will lead to a concomitant reduction in output (1948a: pp. xiv, 241). Robertson notes that this reduction is likely to be more severe than would be desired by the working class, whose effort-elasticity of demand for consumption goods is lower than that of the business classes, for whom alternative activities are available in the depression. However, through their control of access to capital, the business classes will retain the power to regulate employment and therefore the level of working-class welfare (p. 210). So far, ‘digging down’ has provided an explanation of the cycle in terms of the real features of the industrial process but Robertson was careful also to take account of the influence of money. This influence he saw as being subordinate to that of real factors but nevertheless important in that the operation of a modern monetary economy would give rise to exaggeration of the extent of fluctuations. The role of money in the cycle is dealt with below, in Chapter 11. We are now in a position to make some observations about Robertson’s method. The stages in the development of Robertson’s ‘aggregative theory’ have been traced by M. K. Anyadike-Danes (see [Anyadike-] Danes,

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1979, 1985). On the basis of the system he devised, we can say that the theory of fluctuation put forward in the Study was worked out in terms of a ‘cooperative, non-monetary economy’ but that his analysis also indicated that the extent of fluctuations was exaggerated in cases in which the economy was organised non-cooperatively (a disparity of interest between the business and working classes) or where the economy was money-using.

8 Welfare in Relation to Cycles and Growth

The question of how all this affects the welfare of ordinary people is best approached by way of investment and saving, on the grounds that consumption goods constitute the real saving necessary for the construction of capital goods and that what is saved cannot be consumed. We have seen that as the economy moves into boom, the expansion of investment will result in ‘a considerable absorption into the vortex of exchange of accumulated consumable stocks’ (p. 170). Of course, consumable goods will continue to be consumed during the expansion phase but on the real-saving logic of the Robinson Crusoe economy, the construction of capital goods will preclude, to that extent, the production of consumables. There is thus a ‘going without’ in the present in order to provide for better times in the future. The deprivation continues in the depression because though consumption goods are relatively plentiful, there is again an argument in favour of their being accumulated as a means to provide for expansion in the coming revival. When we look to the long run, we see that the investment–saving relationship lies at the heart of the Robertson economic problem, which explains the cycle in terms of the trend and, therefore, industrial fluctuation as a by-product of economic growth. Consequently, just as the preparation for investment growth in the expansion phase of the cycle demands sacrifice which cannot be made good within the cycle, so in the long run the urge to provide for a better tomorrow requires saving which will not bear fruit in the lifetime of the present generation. As we would expect, therefore, the question of the public’s welfare is bound up with the distribution of consumable goods through time and consequently with the vagaries of employment that arise from 78

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the incidence of industrial fluctuation. Thus the essential nature of over-investment, howsoever it comes about, is a failure to secure the best conceivable distribution through time of the community’s consumption of consumable goods. The aggregate satisfaction of the community over time is thereby diminished, and the damage to that extent final and irremediable. (p. 187, also p. 180) This idea of an optimal distribution of consumption through time, with its obvious Pigovian antecedents, is an important one for Robertson and he refers to it several times. Where the optimal distribution is not achieved, the question arises of the proportionality of present sacrifice when measured against the possible future reward. Over the cycle this means that in a revival, consciousness that the present scale of investment will in due course produce an abundance of consumable goods will motivate a wise community to devote currently available consumable goods to the production of further consumables rather than to further investment (p. 80). It is this reasoning that more generally, and with implications for the longer term, explains the dangers, in terms of welfare loss, of being tempted into over-investment: a danger inherent in any expansion (p. 200). Robertson reinforced his message with a passage the relevance of which in economic terms should now be clear. It takes the form of a general principle of conduct, necessarily valid for both the short run and the long run – for the potential losses of welfare incurred over the cycle and through economic growth: When fairly faced, the problem of the prevention of industrial fluctuation becomes nothing less formidable than the problem of maximising the community’s aggregate of net satisfaction through time, – in other words of attaining the best distribution through time of its income of consumable goods which is practicable without undesirable restriction of the total of that income. (pp. 241–242) Economic growth, it seems, is desirable but we must attempt to minimise the losses involved for those who must bear the costs in the present. How is this to be done is not straightforward, for though they are but two aspects of the same process the remedies that will moderate the cycle, and the extent of welfare losses in the short run, are more easily specified than any possible solution to the altogether more nebulous

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problem of the long run. For the short run, Robertson proposed measures that would both reduce the occurrence of events that could set off reactions in the system and possible aggravations of the initial disturbance (p. 242): Thus any change would be beneficial which: (1) provides for interlocal and inter-temporal compensation in agriculture (to offset the significance of good and bad harvests); (2) reduces discontinuity in the process of investment, through devolution and decentralisation of industry; (3) minimises the possibility of miscalculation on the part of producers in both boom and depression (pp. 242–9); (4) removes obstacles that prevent the community from enjoying to the full in time of depression, the large income of consumable goods that overinvestment in the boom has made available (pp. 249–53). (Fletcher, 2000: p. 220) Of these recommendations, (3) and (4) call for further comment. With regard to the first, there are several means by which miscalculation might be reduced. One that is of particular interest for future reference is price stabilisation. Here, the conventional wisdom was that the market is best stabilised by keeping prices stable but Robertson argued that in the boom, prices should rise in order to rein in investment and that later in the cycle judgement is needed as to whether prices should be reduced again or kept high to prevent further outbreaks of investment (pp. 243–246). Discretionary price manipulation would later become the centrepiece of Robertson’s economic stabilisation policy. With regard to the second, if consumable goods are to be made available for consumption during the depression, the accumulation required to sustain investment in the next revival – the investment, note, upon which ‘industrial progress depends’ (p. 253) – is to that extent restricted. Here is a dilemma, the resolution of which depends upon what Robertson calls ‘more ultimate judgements’ (p. 253). In later work, Robertson would approach the question of policy prescription by asking nations to decide how quickly they wished to grow. In the Study, however, he first made plain the stark alternatives facing mankind. For individual men and women, time on earth is very short and they must choose between present enjoyment and the sacrifices incurred by ‘acquiescing’ in an apparently unquestioned presumption in favour of economic growth and the supposed benefits it would confer in some future time. The question of ‘the most desirable distribution of . . . income through time’

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(p. 253) is posed in Robertson’s concluding paragraphs and one of economic literature’s finest passages: Is the assumption valid upon which western civilisation seems to proceed, – that it is desirable so to manipulate one’s income-stream that it shall flow in with an ever-rising tide? From some points of view the whole cycle of industrial change presents the appearance of a perpetual immolation of the present upon the altar of the future. During the boom sacrifices are made out of all proportion to the enjoyment over which they will ultimately give command: during the depression enjoyment is denied lest it debar the possibility of making fresh sacrifices. Out of the welter of industrial dislocation the great permanent riches of the future are generated. How far are we bound to honour the undrawn bills of posterity, and to acquiesce in this never-closing hyperbola of intersecular exchange? Shall we sacrifice ourselves as willing victims to the: Urge and urge and urge. Always the procreant urge of the world? Or shall we listen to the words of one of the wisest of English philosophers, who counsels us to eat our grapes downwards, and who always washed up the knives first in case it should please God to take him before he got to the forks? The question is one of ethics, rather than of economics: but let us at least remember that we belong to an age which is apt to forget the [Greek quotation – ‘final cause’] among the [Greek quotation – ‘material cause’] and to immolate ourselves, if we must, with our eyes open and not as in a trance. (p. 254) That is, having spent the vast bulk of the Study in explaining the cycle in terms of the trend, the final question to be answered concerns the determination of the trend itself. What is the ‘final cause’ – that for the sake of which – the logos that exists behind the manifestations of the ‘material cause’ – the sine qua non – the without which not, of industrial fluctuation? In other words, what is the rationale for a collective presumption in favour of a policy that imposes real costs in terms of consumption denied in the present, in return for, at best, an enhanced material standard of life for those we shall never see? The question being one of ‘ethics, rather than of economics’, Robertson departs from empirical data and economic analysis and enters the realms of philosophy and poetry. In seeking to supply the final piece of the jigsaw, he attempts

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to provide a tentative answer by reference to the work of Heraclitus and Walt Whitman. Heraclitus of Ephesus was a Greek philosopher of the Classical period known for his melancholy views. His most important idea, for present purposes, was that all things are in a state of flux but that behind the apparent chaos there is a reality of stability and order. That is, the flux is governed by permanent laws that determine the working of the universe. In order, therefore, to understand the world and possibly to influence events, it is necessary to comprehend the logos (reason), the universal principle through which all things are interrelated. This notion holds no less in the social than in the physical sphere and in order to achieve social harmony it is necessary to comprehend and be guided by the logos, rather than by surface appearances. There are references to the Heraclitan flux in the quotation, in Classical Greek, that appears on the title page of the Study and, in English, in the Preface. These references show that Robertson associated the notion of flux both with the industrial fluctuations that constitute the trade cycle and with ‘the unplanned and unregulated atomism in economic organisation that under the influence of the individual urge, gives rise to them’ (Fletcher, 2000: p. 223). His point was, however, that despite the anarchy of modern industry and the resulting fluctuations, things on the whole work amazingly smoothly together to produce prosperity and that by better understanding the forces at work it should be possible to achieve a more ideal distribution of income through time. Quite fortuitously, the disruption to established ideas and practices wrought by the war provided the best opportunity to initiate change. Of course, economic fluctuations and their consequences for the distribution of consumption through time have significance only when applied to the lives of real people rather than to economic ciphers. Real people live briefly and then die and must come to terms with the inevitability of death as best they can. For those without the comfort of religion the question takes on a particular urgency. For these, the economics of ‘jam today’, rather than ‘jam tomorrow’ takes on a new significance and comes to dominate their professional concerns. It was in this manner that Robertson would be fulfilling the commission of his Cambridge mentors, to increase the welfare of the mass of the people. In this last regard the idea of the flux has the wider meaning of metaphor for the world of change and decay, in which time slips underneath the feet of those who must face death as extinction in a cold, uncaring, amoral universe, which is devoid of purpose or meaning. Robertson’s insight into the nature of the human predicament, always

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more acute than that of Keynes, stemmed from his own life-view and the means he employed to come to terms with it. What these were can be inferred from the literary references and associations that featured prominently in his life: principally, William Shakespeare, whose Mr Justice Shallow (Henry IV Part 2) was regarded as one of Robertson’s most affecting performances as an amateur actor; and the Alice stories of Lewis Carroll, which provided such a fund of quotations to illuminate his thought and writings. These will be looked at more closely in Chapter 10. But what was the seat of the problem? What provided the compulsion to grow that, in turn, gave rise to the fluctuations that denied consumption and so reduced material welfare? What, in other words, was the logos, the reason, that links industrial fluctuation with the greater mystery of life and death? This question he approached by reference to the work of Walt Whitman, through which it is possible to perceive the justification for challenging the established belief in the need to ‘sacrifice ourselves as willing victims’ of economic growth and to argue that it might be wiser to live for the present. Whitman provided the basis, that is, upon which we might seek to modify the Urge and urge and urge, Always the procreant urge of the world. That the ideas contained here were at the centre of Robertson’s concerns over a period of many years is indicated by the use he made of the quotation. He gave it three times: on the title page of the Study, on the last page of the text and again, 33 years later, at the end of the New Introduction to the Scarce Reprint edition of 1948. Its meaning in economic terms is clear: the ‘urge’ is the push for growth, while the ‘vitality’ that is associated with it in the 1948 edition (p. xvii) refers to the logos, the reason for which fluctuation is endured. What, therefore, is the human drive or motivation that gives rise to economic instability? Clues to the answer may be found in the work of Whitman. Walt Whitman was a major nineteenth-century American poet whose work exudes the freshness and vitality of a new nation together with a barely concealed homoeroticism. The corpus of his poetry is contained in the much-revised volume Leaves of Grass (Whitman, 1855–1892), from which Robertson took the featured quotation. Consciousness of the reality of death and the means of coming to terms with it permeates the whole. First, life must be lived to the uttermost and be fulfilled by love

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which, in an exclusively male context, Whitman refers to as ‘adhesiveness’. Second, immortality of a kind is to be achieved through the body of work one leaves behind. Third, and most important, Whitman conceives of the soul outliving the body and of expanding or ‘dilating’ until it comprehends and becomes one with the whole creation. Whitman’s role in this is to celebrate himself as a sort of ubiquitous, representative man, exploring the web of relationships that link him to every part of creation. What writers have referred to as the ‘Heraclitan obsession of Walt Whitman’ (Allen, 1975: p. 213; Waskow, 1966: pp. 23, 31), the notion of cosmic unity in flux, must be taken together with the notion of ‘an unseen thread that holds the whole congeries of things’ (William James in Allen, 1975: p. 194). These two notions delineate man’s destiny, which is to progress from the unity of All in flux to the unity of One. There is a struggle towards wholeness or oneness, in which we escape the pains and infirmities of the living flux and find permanence and rest in the organic fluidity of the ‘One’. The journey is, moreover, a measured one. It proceeds only by small steps, invoking the maxim of natura non facit saltum (nature does not make leaps) which was used as a motto by both Alfred Marshall and by Robertson himself, who invoked it in his expressed hope of the delivery of industry from the chaos of the Heraclitan flux (Robertson, 1915: p. xx). It was also, most significantly, a basic hypothesis of the naturalist Charles Darwin, who based upon it his belief that evolutionary change occurs gradually and slowly. Whitman came to know Darwin’s work and found in it support for his own view of gradual evolution – though he retained a Lamarckian element of purposefulness in the onward journey, which is an idea absent from Darwin’s theory. However, in the modern theory of evolution, which is based on Darwin’s theory of natural selection in conjunction with Mendelian genetics, this element of purpose can be supplied by Richard Dawkins’s hypothesis of the ‘selfish gene’ (Dawkins, 1976). The suggestion is that human bodies function as gene carriers which enable the genes to achieve their aim of becoming more numerous in the gene pool. The gene theory can be used to explain individual acts of both selfishness and altruism, the apparently pointless behaviour of saving even in the face of death (for one’s descendants) and, most relevantly, the urge for economic procreation, as a means of benefiting descendant gene carriers whom those currently forgoing consumption will never see. However, human initiatives are not in vain, for Dawkins explicitly acknowledges the possibility of modifying gene-determined behaviour through cultural influences: that is, by learned behaviour.

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Thus, though Robertson can have had no knowledge of the gene theory or of the new field of ‘evo-economics’ which followed, he did obtain an inkling of the issues involved and tried to hint at the forces which underlie observed economic behaviour. These insights can be used to explain the ‘urge and urge and urge’ of people to reproduce their kind and to sacrifice present consumption in order to promote economic growth as the means to provide for the greater welfare of those they will never see and, apparently, cannot possibly know. They can also be used to attempt to effect ‘one of those definite mutations of the social life’ which would give rise to ‘a less thoughtless and anarchic industrial age’ (Robertson, 1915: p. xx) – if people could but see the Final Cause among the manifestations of Material Cause and then to ‘immolate’ themselves, if they must, with their ‘eyes open and not as in a trance’ (Robertson, 1915: p. 254). The dilemma for Robertson, of course, is that the organic fluidity of the One is inimical to the characteristics of nonsense as game and, therefore, to its property of providing a refuge from real life. This explains his warning against the too-ready acceptance of the promptings of the ‘urge and urge and urge’. Life in the present offers both current consumption and the sanctity of ‘nonsense’. In conclusion, the Study revealed that the causes of the trade cycle arose from the time preferences (real choices) of human beings as well as from the technical characteristics of capitalistic production. These were insights that would, in the inter-war period, provide the starting point for Robertson’s work on the theory of the management of the cycle. They supplied the basis for his hope that means might be found to ‘limit the turbulence, without destroying the vitality, of the “urge and urge and urge, Always the procreant urge of the world’’ ’ (Robertson, 1948a: p. xvii).

9 The 1920s: Making a Reputation

Robertson returned to Trinity in the summer of 1919, to take up the reins of the fellowship he had won five years earlier and, with the start of the Michaelmas term, to begin at last ‘teaching in the steps of Marshall’. Whatever his doubts and speculations regarding a future career as the war drew to a close, in retrospect it is clear that he was back where he belonged. The strategy he had devised for coming to terms with his strengths and weaknesses would allow of no other outcome. Indeed, the professional and personal developments of the following decade were generally predictable on the basis of the trends discernible earlier. That is, he would make his name as an economist of the first rank and as an outstanding amateur actor; he would learn how to marry science and art to find his distinctive voice as a ‘literary economist’; his emotions would be often in turmoil as he struggled to find love; he would continue to seek escape, both as temporary relief from current pressures and, more permanently, as a means of resolving the inherent shortcomings of the compromise between duty and desire; finally, and of the utmost significance, he would continue his association with Keynes, as they embarked on a period of collaboration that would bring benefits to both. In academic terms, the 1920s were, for Robertson, a period of continued growth and development, during which he elaborated and extended his theory of industrial fluctuation. In particular, there was a new emphasis on the monetary aspects of the cycle and this was reflected in the recognition he received and the principal publications that resulted. He achieved an international reputation as an economist and though judged to have reached his professional peak in the mid-1930s, when he was second only to Keynes, even in the 1920s he was ranked sixth in a citations league-table of monetary economists (see Moggridge, 86

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1992: p. 598). Similarly, of the two textbooks he wrote in the Cambridge Handbooks series (Money, 1922 and The Control of Industry, 1923), Money was of particular importance. Writing it caused Robertson to think deeply about the nature of money in the modern age and it thus provided a necessary stage in the preparation for his most important and most formidable publication, Banking Policy and the Price Level (BPPL) (1926). This book, which explicitly introduced money into the theory of industrial fluctuation, provided a novel and seminal analysis of money in relation to saving and investment. Condemned as ‘almost unreadable’, BPPL deterred all but the most resolute readers and its ideas were largely disseminated via derivative publications, especially ‘Theories of Banking Policy’ (1928b) and the 1928 and subsequent editions of Money. The theory of money and fluctuations was not, however, his only field of academic enquiry. He also made contributions in other areas of economics, including industrial organisation, the theory of the firm, fiscal policy and international economics, which he published either in book form (The Control of Industry, 1923) or as articles in leading journals (see Goodhart, 1990: pp. 16–17; Dennison’s bibliography, in Dennison and Presley, 1992: 215–224). Also, despite his natural antipathy to committee work, he dutifully engaged with issues of current economic concern through membership of official and other enquiries and institutions. In 1921, for example, he was invited to take part in the Clapham (British Association) enquiry set up to consider the question of policy on the currency and the return to the gold standard. Here Robertson differed from the other three members of the sub-committee in the strength of his reservations about the return to gold and in his preference for the maintenance of a stable price level. In November 1922, he was elected under Keynes’s patronage into membership of the Tuesday Club, a private dining club whose members – academics, bankers, civil servants and journalists – met for uninhibited discussion of economic and financial questions at the Café Royal in London. Then, in the following year, he joined Keynes in running the Cambridge end of the London and Cambridge Economic Service, where he assisted in the production of the Monthly Bulletin. He also kept up his links with the Liberal party, with participation in the annual summer schools and, from 1926, in the preparation of material for the Liberal Industrial Enquiry, which produced its report, Britain’s Industrial Future, in 1928. He also contributed to the discussions and publications of the Royal Institute of International Affairs (Chatham House). Finally, in 1930, he was invited to present a written ‘Memorandum of

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Evidence’ to the (Macmillan) Committee on Finance and Industry and was subsequently examined orally on matters arising from it. Robertson’s success as an economist was rewarded with university posts of increasing seniority, which he held along with his fellowship at Trinity. In 1924 he was promoted from assistant lecturer to a university lectureship (when increased funding became available for the expansion of the teaching staff), which from 1928 he held under the title of Girdler’s Lecturer (named after the Girdler’s Company, which provided financial support). Finally, in 1930 he was made reader and so reached the most senior academic post available at Cambridge below the professorship of political economy. This was originally Marshall’s chair, held at that time by A. C. Pigou, who, in 1944, would be succeeded by Robertson himself. In the 1920s, Robertson forged a reputation in two other ways, one associated with his professional work and one separate from it, but both giving expression to his essentially artistic nature. In the first, he became known as a literary economist, from the inimitable style in which he wrote his books and papers, while in the second he reached new heights of acclaim for his performances on the amateur stage. For a full appreciation of his overall achievement we shall need to look at both and we begin with his acting career. Robertson had earlier demonstrated his prowess as an actor with notable performances in a number of classical and lighter roles and the post-war decade was to witness the fullest flowering of his talent. In particular, he became associated with three Shakespearian roles: Pandarus (Troilus and Cressida), Shallow (Henry IV Part 2) and Menenius (Coriolanus), each of which retained a longer-term significance in his life. He also confirmed his versatility with distinguished performances in a variety of other parts, including Silenus in Euripides’ The Cyclops, Corbaccio in Ben Jonson’s Volpone, Li the Head Eunoch in Lytton Strachey’s The Son of Heaven and the Master of Queen’s Hall College in a college revival of Fellow or Felon or the Master and the Miscreant. The universal critical acclaim that followed Robertson’s performances (see the notices he retained from the period 1922 to 1932, in F3/2, 3, 4, 5, 6, 11 RPTC) was not perhaps, in view of his pre-war reputation, entirely to be unexpected but what was significant was the clear indication the notices gave that his talent was far beyond that of the amateur. The reception that greeted his portrayal of Pandarus was the most explicit: Much the best – indeed a really fine – piece of acting was Pandarus who was almost too good, since he was in a completely different class

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from the other performers and tended to make them look more amateurish than they really were . . . the Marlowe [Society] Pandarus gave a deep subtle and extraordinarily amusing performance. (The Outlook 18 March 1922) This could only have the effect of reinforcing any lingering desire for success on a broader stage. Regardless of any aspiration to professional status, there was a pattern to the kind of roles Robertson played which was clear enough to his colleagues. For Austin Robinson, he ‘excelled in humorous parts’, while J. R. M. Butler, his long-time friend at Trinity, perceptively noticed that He came to specialise in old men’s parts . . . [though] All his ancients, deservedly or not, became rather sympathetic characters (Butler, 1963: p. 40) These features came together in his portrayal of Mr Justice Shallow, a role with which he identified and which may be seen to embody characteristics of Robertson himself. That he made the character sympathetic is confirmed by J. R. M. Butler’s comment that he gave ‘a really moving rendering’ (Butler, 1963: p. 40); also, after one performance of Henry IV Part 2 around 1930, we find Robertson, in character, inviting members of ‘the caste’ [sic] to his rooms in C Great Court Trinity ‘to take a dish of caraway seeds (and so forth) [with Mr Justice Shallow]’ (F3/8 RPTC). The other way in which Robertson established his reputation during these years was as a literary economist. Because this was intimately associated with his professional work it became known to a far wider audience. Within the economics profession, there have been two quite distinct views about Robertson’s reputation as a ‘literary economist’. Detractors have taken it to mean that he lacked capabilities that should be the stock-in-trade of every modern economist. Admirers by contrast have taken it to imply that he possessed capabilities all too often absent in the modern economist; some of the latter, however, have nevertheless expressed unease about aspects of Robertson’s position. For the detractors, the problem lay squarely in his failure to make proper use of mathematics in his theoretical analysis. Proper use because, at whatever cost to himself, Robertson did to a very limited extent provide mathematical support to parts of his verbal exposition. It was, rather, that it was not well done. Hicks referred to his algebra as ‘flat-footed’ (Hicks [ed.], 1966: p. 21) while Samuelson was to regret

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that (in BPPL) ‘his elementary mathematics is not presented gracefully’ (Samuelson, 1963: p. 518). There was also the problem of attitude. Hicks noticed Robertson’s ‘(rather flaunted) lack of mathematics’ (Hicks [ed.], 1966: p. 21) while in similar vein Samuelson deplored the fact that ‘his inability to understand what e = 2.718 . . . meant, he wore throughout his life as a badge of honor’ [sic] (Samuelson, 1963: p. 519). There was justification for the critics’ suspicions as Robertson did not shrink from overt expressions of contempt for techniques and modes of exposition for which he possessed little aptitude and less inclination. That they were couched in a gently mocking style can only have been salt in the wound. Commentators also recognised, however, that there might be a more positive aspect to Robertson’s distrust: that he genuinely feared that to become over-reliant on mathematical analysis would lead to the impoverishment of the subject and even errors in analysis. For Hicks, Robertson was ‘opposed to the reduction of economics to mathematics’ (Hicks, 1981: p. 885). Austin Robinson saw his campaign as being directed to ‘the puncturing of over-ambitious and over-simplified generalisations by the more mathematically minded model makers of his subject with whom he had little patience and sympathy’ (Robinson, 1963). Similarly, Goodhart’s assessment was that ‘Dennis the classicist and humanist, enjoyed poking fun at some of the pretensions and jargon of the subsequent generations of more mathematical economists’ (Goodhart, in Presley [ed.], 1992: p. 10). To support this viewpoint, there is more than a hint among his admirers that Robertson’s own position on the use of mathematics included an element of self-denial: [though it is] obvious that Dennis was more proficient at Maths, and certainly at understanding the mathematical analysis of others, than he liked to let on, he viewed its increasing use with considerable reservation. He felt that the need to reduce complex affairs to a simplified and tractable mathematical system tended to lead economists to concentrate unduly on a limited set of explanatory factors. (Goodhart, in Presley [ed.], 1992: p. 11) His protégé and confidant, Stanley Dennison, was also explicit: He was particularly distrustful of mathematical models, especially when they were used for ‘forecasting’ in precise terms the course of events. He disclaimed any knowledge of mathematics, though he was not quite so ignorant as he made out, and his scepticism did not spring

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from inability to use this tool, but a belief that it was an inappropriate instrument for understanding economic phenomena, based as they were on human actions and human responses to changing situations. (Dennison, in Dennison and Presley [eds], 1992: p. 8) Although in the light of his misgivings this is a valid approach to take, it carried a cost. By his failure to make more use of the accepted currency of economic discourse, Robertson was unable to communicate the full extent of his contributions to economic thought. Indeed, taken in conjunction with the medium through which he chose to express his ideas, the result was that he failed to find the recognition that was his due. This is a matter of no small consequence when assessments of an economist’s stature are in question. Samuelson, never slow in criticising his old adversary, nevertheless allows that his failure to use mathematics was regrettable on the grounds that he can justly claim to have been an originator of the period analysis (i.e. dynamic difference equations and the qualitative analysis of market ‘days’), which became in the 1930s so useful a tool in the hands of Lundberg, Hicks, J. M. Clark, Metzler, and others. He also made claim – with more than an epsilon of justification – to having been an originator of the geometric progressions that Harrod, Domar and others have made so famous in the golden age we live in. (Samuelson, 1963: p. 518) Goodhart, less convincingly, argues that Robertson’s inability to formalise his own model, contributed to his failure to set forth a positive, constructive economic vision of his own and led instead to the generally negative, critical phase in his writing that followed his controversy with Keynes (Goodhart, in Presley, 1992: pp. 11–12; though the more likely explanation here is that the sheer scale of Keynes’s success produced a crushing psychological defeat for Robertson and consequent creative paralysis). Robertson’s failure also gave free rein to those who sought to depict him as merely a gentleman economist and a generally pathetic figure to boot. H. G. Johnson drew attention to the difficulties caused by the inability of ‘a subtle but hopelessly literary mind to tackle serious problems’ (in Johnson and Johnson, 1978: p. 144). There is, therefore, general recognition that Robertson lacked the capability to engage fully in modern economic discourse and yet, when he launched into economics from the summer of 1910, there was no obvious indication that he would find himself at a disadvantage. Neither

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of the two ‘majestic works’ that he read at that time relied on mathematical analysis and both demonstrated just what could be achieved with purely literary exposition (though Marshall used diagrams here and there to help elucidate concepts). Furthermore, Marshall actually warned against the dangers of reliance on mathematics on the grounds that ‘a good mathematical theorem dealing with economic hypotheses was very unlikely to be good economics’ and went so far as to exhort the statistician A. L. Bowley to ‘do all you can to prevent people from using Mathematics in cases in which the English Language is as short as the Mathematical’ (both quotations from a letter of 1906, in Pigou [ed.], 1925: p. 427). Again, Pigou’s Wealth and Welfare (1912) overwhelmingly employed verbal exposition of the argument and with the infrequent flurries of mathematical analysis confined to footnotes. All this was highly misleading, however, and had Robertson reflected more carefully – though there is no reason why he should have done given the role that his switch to economics played in his life – he might have been more on his guard. He might have taken more note of the fact that both his exemplar, Marshall, and his director of studies, Keynes, had been gifted mathematicians before they became economists. Also, that the Bowley to whom Marshall delivered his exhortation was regarded as a mathematical prodigy at school and was placed tenth wrangler in his Cambridge finals. Even Pigou, whose background was in history and philosophy, came to regard mathematics as a prerequisite for economics, on the grounds that it would discourage charlatans. It was as though there was something in the mathematical mindset that would be evident to the reader even when the argument was cast entirely in verbal terms. For example, F. Y. Edgeworth characterised Marshall’s writing ‘by a phrase which he himself acknowledged to be appropriate, “bearing under the garb of literature the armour of mathematics’’ ’ (in Pigou [ed.], 1925: p. 66). This would also imply the ability to slip easily into mathematics as occasion arose and to show sympathy for those whose mathematical mode of expression came increasingly to dominate the economics literature. Robertson was neither able nor inclined to do either. Nevertheless, given his ability to impress Keynes as an undergraduate and the work he chose to do, as a postgraduate, in furtherance of the desire for social betterment, he can only have embarked on his professional career with confidence. He knew he was exceptionally able and his winning a fellowship can only have reinforced his conviction. Even so, he was feeling the lack of a mathematical facility by the 1920s and as time went on he acquired the reputation among his critics as being not wholly serious – as one who did economics ‘lightly’. This reputation

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was acquired, it must be emphasised, as much for the approach he took to economics as for the approach he was denied. This was so because combined with Robertson’s gentle mocking of mathematical model-builders was his own conscious literariness. Nothing could have been more galling for those in the mainstream and Robertson suffered accordingly. This adopted literariness of approach sprang not simply from his lack of mathematics but reflected an aesthetic distaste for the aridity of economic language. He saw economics as a subject of the greatest importance for the benefits it could confer but insisted that his ideas and arguments should be couched in a language that was as far as possible as artistic as the nature of the man himself. As a consequence, Robertson became known for his command of language, his elegant writing-style, his wit and whimsy and an extensive knowledge and appreciation of English and classical literature. Rather than a mind ‘hopelessly literary’, Robertson was seen by many to possess strengths all too rarely met with in the economist. He became ‘a master craftsman in the use of English’ (Goodhart, in Presley [ed.], 1992: p. 9), with a style that ever retained its distinctive ‘cadence, colloquialism and feline grace’ (Lee, 1963) and whose contributions to economics were ‘outstandingly well written, in a style peculiarly his own which won the affection of many of his readers’ (Hicks, 1981: p. 885). The perceived rarity of such gifts is indicated by a tribute he received in the Trinity Review: ‘Amongst economists, he is perhaps most envied for his wit, his economy of words and his feeling for the English language – qualities which many economists have every reason to envy.’ (1957: p. 23). Or perhaps not: the writer is revealing his own preferences. The most glowing and unqualified praise came from Stanley Dennison, as might be expected: As a writer he is famous for the elegance of his style; it has often been said that in his hands economic literature becomes English literature. He had complete mastery of language and his writing is clear, concise and vigorous with constant felicitous touches and memorable phrases, and the whole illuminated by his delightful wit. Many of his essays (particularly those intended for a wider audience than professional economists) are worth reading for these qualities alone, and no doubt they are often so read. (Dennison, 1963: p. 43) In this regard, perhaps, we see the fulfilment in part of Keynes’s admonition that in the Cobden Club version of his dissertation, he had not yet

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found the ‘art-form’ best suited to him. On the evidence of commentators he had certainly learned to harmonise the ‘construction of economics’ with the ‘writing of economics’. He would never, however, write ‘so as to compel people to listen’ to him. He was never a campaigner. Robertson found his voice and made his name as a literary economist with the publication, in quick succession, of two volumes in the Cambridge Handbooks series: Money (1922) and The Control of Industry (1923). They established his reputation as a writer of attractively written economics, which was confirmed and enhanced over time in a succession of essays and published lectures. There are other of Robertson’s works that do not at all conform to this ideal but they tend either to be overlooked or excused. They are, however, part of the whole and must be accounted for – not least because they contain some of his most important contributions to economic thought. On questions of style, his first major work, the Study (1915), will be left out of consideration here (however, see Chapter 6, above). Apart from the glorious final flourish it is neither artistic nor persuasive – nor at all easy to read. Its origins as a fellowship dissertation together with the special conditions imposed by the onset of war must account it an unfinished work and, therefore, not a true test.

10 The Characteristics of a Style

Taken in the round, Robertson’s writing style may be seen to possess five characteristic features. The first we have already noted. That is, it is not overtly scientific but consciously literary and with the rise of the mathematical model builder and econometrician, Robertson’s charming, elegant prose could appear somewhat dated and even quaint. Similarly, throughout his career, Robertson wrote for essentially the same intelligent, educated elite – people with whom he shared the same mental furniture. With the rise of mass higher education this could pose problems. The same familiarity with language and vocabulary and the same ability to read unsupervised could no longer be assumed. Although his two textbooks are divided into convenient sections with appropriate rubrics, they have little in common with the idea of textbooks as efficient learning machines that was pioneered in the United States. At first glance, Robertson’s prose can appear discursive and allusive, with principles illustrated by parables (see Money, 1922: p. 130). In Money, for example, we find the velocity of circulation of money explained by the story of Bob and Joe, who go to the Derby with a barrel of beer (pp. 3–4); bank advances with the help of Mr ‘Super-Selfridge’ (pp. 76–82); multiple credit creation by introducing Mr Eggman, Mr Orangeman, Mr Tobaccoman and Mr Breadman. It is ingeniously done but could appear rather rambling for those who come to expect key terms, boxed features and review questions. Again, while Robertson’s use of figures of speech has an agreeably homely feel to it, the student trained in modern economic method could find it unbecomingly whimsical. Good examples are his description of the Treasury bills held by banks as liquid assets as ‘ripening claims to common money – the chirruping as it were of hosts of unborn Bradburys 95

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[currency notes issued by the Treasury]’ (Money, p. 11); similarly, his likening of variations in the velocity of circulation of money to the contrast between ‘pieces of scandal’, which ‘skip easily from one person to another’, and ‘an old lady buying a railway ticket’, which seemed to have ‘lost the power of locomotion altogether’ (Money, p. 35). Finally, there is the description of a person’s current account at the bank as his ‘chequery, because it is both a breeding-ground and a homing place for cheques, as a rookery is for rooks’ (Money, p. 50). Though there is no ‘armour of mathematics’ beneath the prose, there is at least a tight logical structure and it is all too easy for the unwary reader to be led on by elegance, wit and charm, believing that he has followed the argument, until a periodic recapitulation forces the realisation that steps have been missed along the way. The writing has an elusive quality that recalls Keynes’s warning about Marshall’s Principles (one of Robertson’s two exemplars from the summer of 1910), that A student can read the Principles, be fascinated by its pervading charm, think that he comprehends it, and, yet, a week later, know but little about it. (Keynes, ‘Alfred Marshall 1842–1924’, CW X: p. 212) The second – and perhaps most memorable aspect of the Robertson style – is his liberal use of literary quotations and allusions. These can be found in varying degrees of frequency throughout his work. He used them both to illustrate a point and, as a leaven, to lighten what he saw as the inherent aridity of the subject matter. Though they are taken from a wide variety of sources, an unmistakable partiality in his choice of sources provides valuable clues to his outlook on life and the basis of his approach to economics. The principal sources are ‘Alice’, ‘Bible’, ‘Classical’, ‘Poetry’, ‘Shakespeare’, together with a residual ‘Other’. ‘Alice’ is the most significant but a brief look at the rest will be useful. With respect first to ‘Bible’, it is scarcely surprising that a clergyman’s son, for whom the family may have harboured hopes that he would feel called to the Ministry, should be familiar with the Bible (1611 Authorised Version) and the Book of Common Prayer (1662). However, Robertson early lost his faith and the number of references is consistently low. Similar arguments apply to ‘Classical’ for one schooled and encouraged as Robertson was. Here he not so much lost his faith as rebelled against an inherited persona to seek his own destiny. This is reflected in the pattern of references, which were few and far between after an initial flurry, to be found in work stemming from the pre-war period. Nevertheless, his

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familiarity with classical literature threw up references that provide clues to his economics, as we have seen. In the ‘Poetry’ category, we find references to familiar English poets and to Walt Whitman and less familiar foreign poets. There is a particular fondness for a couplet from Michael Drayton’s ‘Sonnets’: it appears three times, in a variety of versions. The literal version runs like this: Now if thou wouldst, when all have given him over, From death to life, thou might’st him yet recover, (Drayton, 1619, Sonnets; Idea, 1xi) From the contexts in which it is used, it can be seen as expressing concern for man’s innate preoccupation with the achievement of immortality through human artifice. The race is immortal but the individual must die and Robertson saw no prospect of his living on through offspring. It reflects his concern for the short run, for present consumption as opposed to the future prosperity of unborn generations, in the face of the unquenchable urge for economic growth. Given Robertson’s distinguished performances in classical stage roles, it is natural that Shakespeare should feature prominently among his allusions. The references appear throughout his work, though there is none in The Control of Industry (COI) (1923) or BPPL. Eight well-known plays are featured, with multiple references to Hamlet, Macbeth, King Lear and Antony and Cleopatra. ‘Other’ is a catch-all for miscellaneous references which do not find a home elsewhere or which are not readily identifiable. Here, inter alia, can be found Rupert Brooke, Thomas Carlyle, Charles Dickens, Samuel Johnson, Ben Jonson, Rudyard Kipling, John Milton, and Jean-Jacques Rousseau. The ‘Alice’ category includes references to the two best-known books of Lewis Carroll (the Reverend Charles Lutwidge Dodgson): Alice’s Adventures in Wonderland (1865) [AAW ] and Through the Looking-Glass and What Alice Found There (1872) [TLG]. They merit a category because of their high incidence, because the profession came to regard references to the ‘Alice’ books as a Robertson peculiar and because of their significance as clues to Robertson’s life-view and to his characteristic approach to economics. We shall accordingly look at them in more detail than the other categories and begin with some examples of the way in which Robertson deployed them. The first ‘Alice’ reference appears on page one of the Study but it is in his popular textbooks, Money and COI, that they came to form part of the

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characteristic Robertson style – to the extent that they became a ‘trade mark’ (Goodhart, in Presley [ed.], 1992: p. 9). ‘Alice’ quotations head each chapter and, in later editions of Money, part chapters. In Money, ‘Alice’ references also appear in the text, with increasing frequency as successive editions appeared. The final, 1948, edition contained a total of 19 quotations and references. The text of BPPL is uniquely devoid of references but there is a single quotation on the title page. This was a practice he followed in the case of his own section in Economic Essays and Addresses (1931, he jointly edited the book with Pigou), Economic Fragments (1931), Essays in Monetary Theory (1940), Utility and All That (1952), Lectures on Economic Principles (LEP) (1963). In each case, the quotations serve to introduce the contents and indicate its prevailing theme. It is a practice also followed by Hicks in his selection of Robertson’s papers for Essays in Money and Interest (1966). This was really a new and enlarged edition of Robertson’s Essays in Monetary Theory, from the title page of which Hicks takes the quotation. Just one example will suffice for the present (though we shall have occasion to return to the topic when we consider BPPL in more detail). Economic Fragments is a somewhat miscellaneous collection of pieces written over an extended period. The quotation on the title page deftly indicates this with an incident taken from TLG: ‘I hope you’re a good hand at pinning and tying strings?’ Tweedledum remarked. ‘Every one of these things has got to go on, somehow or other.’ Alice said afterwards she had never seen such a fuss made about anything in all her life . . . ‘Really they’ll be more like bundles of old clothes than anything else, by the time they’re ready!’ she said to herself . . . . (TLG, 1872: p. 242). In all cases of Robertson’s use of the ‘Alice’ quotations, it is their appositeness for the context in which they appear that has so delighted readers. In this regard, it is noteworthy that he was quite prepared to change the references as between editions of Money and to use the same quotations in different contexts. For example, in the 1922 edition of Money, Chapter III, ‘The Quantity of Money’, is headed by the White Knight’s comment, regarding the song he is about to sing, that ‘It’s long . . . but it’s very, very beautiful’ (TLG, p. 306). However, in the 1928 edition, the section that deals with the gold standard becomes a chapter of its own and the remainder, which is concerned with the various types of money,

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is now more appropriately headed by the Gnat’s question regarding the naming of insects: ‘What’s the use of their having names,’ the Gnat said, ‘if they won’t answer to them?’. ‘No use to them,’ said Alice; ‘but it’s useful to the people that name them I suppose’. (TLG, p. 222) Just as happily, the newly created chapter ‘The Gold Standard’, which discusses cause and effect in the relationship between the value of money and the value of gold, is headed by the exchange between Alice and the Red Queen on the question of causation: ‘The cause of lightening’, Alice said very decidedly, for she felt quite sure about this, ‘is the thunder – no, no!’ she hastily corrected herself, ‘I meant the other way’. ‘It’s too late to correct it’, said the Red Queen: ‘When you’ve once said a thing, that fixes it, and you must take the consequences.’ (TLG, p. 323) There are also two references to the first part of the quotation in the text of the chapter. The second part was later to appear on the title page of his collected lectures, LEP (1963). The first appearance of ‘Alice’ in Robertson’s published work is on page one of the Study, where Robertson’s point that most serious studies of the trade cycle can claim merit for the explanations they offer is illustrated by the Dodo’s pronouncement that ‘Everybody has won, and all must have prizes’ (AAW, p. 49). It is also used in COI at the head of Chapter XI, ‘Joint Control’. One more example will suffice. The quotation revealing the White King’s commitment to the principle of specialisation and the division of labour is first used, appropriately, in COI at the head of Chapter II, entitled ‘Large-scale Industry’: ‘I only meant that I didn’t understand’, said Alice. ‘Why one to come and one to go?’. ‘Don’t I tell you?’ the King repeated impatiently. ‘I must have two – to fetch and carry. One to fetch and one to carry.’ (TLG, p. 280)

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However, it is also referred to in the 1928 lecture, ‘Theories of Banking Policy’, where it is used to illustrate the point that the process of money creation by banks requires two parties to the transaction: ‘one to lend and one to borrow’ (in Hicks [ed.], 1966: p. 26). The aptness of the ‘Alice’ quotations and the prominent way in which he used them would suggest that Robertson believed himself to be particularly associated with them. There is certainly evidence to suggest that the association was established and accepted by 1932. In November of that year Keynes wrote to his publisher to comment on a point in the manuscript of Joan Robinson’s new book ‘Monopoly’ (The Economics of Imperfect Competition): I think that the quotation from Sylvie and Bruno should be deleted, not because it is not apposite, but because Dennis Robertson really must be considered to have a patent in quotations from Lewis Carroll in economic works. (Keynes, CW XII, p. 867) By 1953 the editors of a volume of readings compiled for the American Economic Association could write in the introduction to one of his essays: Professor Robertson is moreover an authority on the works of Lewis Carroll. The aptness of his quotations verges on the incredible, and provides an example of monopoly resting on superior talents. (Hansen and Clemence [eds], 1953: p. 166) There are many other references to show that the profession associated ‘Alice’ quotations with Robertson (see, for example, Samuelson, 1963: p. 518; Hicks [ed.], 1966: p. 13; Howarth, 1978: p. 138; Blaug, 1986: p. 205; Johnson in Johnson and Johnson, 1978: p. 136; Higgins in Harcourt [ed.], 1985: p. 140; Goodhart in Presley [ed.], 1992: p. 9; Bradfield to Fletcher, 23 January 1998). Using ‘Alice’ quotations was a tactic, moreover, that brought material benefits, as is indicated by this comment by Robertson himself regarding the durability of his most characteristic book: Thanks, as I am constantly being informed, mainly to its chapterheadings, this book, in spite of not having been revised since 1928, still finds a market . . . Anyway, there are still the chapter-headings – and two more of them. (Robertson, 1948b: p. ix)

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The first edition, of course, complete with its original set of chapter headings, had appeared as early as 1922, during a period in which quotation from Lewis Carroll had, it must be said, become fashionable among academic writers. R. B. Braithwaite, a Cambridge philosopher who became associated with the Keynesian faction in the Cambridge faculty, noted in 1932 that Indeed in Cambridge it is now de rigueur for economists as well as logicians to pretend to derive their inspiration from Lewis Carroll. (Braithwaite, 1932: p. 177) Consequently, it is by no means the case that Robertson was doing anything unusual in using ‘Alice’ to flavour his prose: the practice was widespread. In 1932, Braithwaite himself published an article in The Mathematical Gazette entitled ‘Lewis Carroll as a Logician’ which included Some discussion of the logical points involved in the solipsism of the Red King, the monism of the Other Professor and the nominalism of Humpty Dumpty. (Braithewaite, 1932: p. 174) Robertson’s case, however, was somewhat different. So nearly did he make the ‘Alice’ books his own that when reading them it is very easy to slip into the belief that they were written by Robertson himself! The clue to the importance that the books held for him lies in Braithewaite’s claim that academics pretended to derive inspiration from Lewis Carroll. That is, we might interpolate, they believed that references to ‘Alice’ would grace their dry lucubrations with an attractive veneer of Serious Thinker’s Whimsy. Robertson, however, did not pretend. For him the books held a deep personal significance: they were, he said, ‘another of my favourite sources of wisdom’ (Robertson, 1956: p. 154). They provided both a refuge – a reference back – and a philosophy for life. This view is given credence by two forms of evidence: the close parallels that exist between Robertson’s life and that of Lewis Carroll (the Reverend C. L. Dodgson) and the content of the ‘Alice’ books themselves. Charles Lutwidge Dodgson was a Victorian clergyman and Oxford mathematics don whose life-circumstances uncannily prefigured those of Robertson. His background was scholarly and clerical with a family tradition of service to the Church (and to the state rather than to education). He grew up in a country rectory (vicarage for Robertson). His father was a classicist and Anglican clergyman. He was a pupil at one of the great public schools (Rugby rather than Eton) and made his mark in

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the classroom rather than on the sports field. He was strong in the classics (but excelled in mathematics!) He was an undergraduate at the grandest college of his university (Christ Church, Oxford, as against Trinity College, Cambridge). He was made a fellow of his college. He served a stint as librarian (the College Library as against the Marshall Library – a specialist subject library – for Robertson). Within this general ambience of life and work, there were close parallels in their personal characteristics. Both possessed highly complex personalities with conflicting elements that cried out for resolution. Conflict-resolution led to repression with the repressed element being manifested in some form. With respect to the conflicts, both had a reputation for shyness but were attracted to the world of showmanship and the theatre; both were temperamentally artistic but were constrained by a sense of duty and public service, instilled in each case by the father’s precept and example. The nub of the argument, however, lies in their literary reputation: both were known for their literariness as well as for precise scholarship in their chosen field of study. The difference was that Dodgson’s was wholly original and entirely separate from his scholarly work; Robertson’s, by contrast, was derivative. He had no literary reputation outside his work and by clothing his economics in ‘Alice’ quotes he was employing a voice not entirely his own. The ‘Alice’ books were a by-product of Dodgson’s attempt to come to terms with his life’s predicament. Robertson, by using the quotes, was able to enjoy the fruits of Dodgson’s literary genius as a means of finding his own salvation. What Robertson found in the books was both a warm, safe refuge in the nostalgic picture of childhood they presented and a practical philosophy for facing up to life – to the harsh realities of human existence. The first attribute derives partly from the introductory materials to the tales, which provide a sympathetic ambience of summer suns and cosy fireside. These materials give the clue to the effect the ‘Alice’ books are intended to have. The second is implicit in the tales themselves, which provide a sort of hero-quest sequence of adventures in which Alice must face up to cruelty, rudeness, death jokes and logic-defying absurdity. The explanation for this dual quality lies in the purpose for which they were created and the circumstances under which they were conceived. Dodgson, like Robertson, felt a deep sense of insecurity. Possible explanations relate to humiliations experienced at school and the sudden death of a mother whom he greatly loved. Like Robertson he was past-fixated, with a need to find comfort in a sentimental, idealised world of childhood. Similarly, he was unable to find love within a conventional

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marriage. Though not homosexual, he was emotionally immature and sublimated his inability to find love with a grown woman by means of a series of friendships with (female) ‘child-friends’, who could safely be jettisoned and replaced as they approached puberty. He possessed an endless fund of stories for children and the ‘Alice’ books originated in stories told to Alice Liddell and her sisters, the daughters of Dr Henry Liddell, dean of Christ Church. The occasion was the famous boating expedition up the River Thames from Oxford to Godstow on 4 July 1862. All who took part remembered it (despite contradictory meteorological evidence) as a golden day of blazing sunshine. Partly for this reason, the stories in book form (Alice had begged him to write them down) assumed the warm, reassuring quality that brings delight to children and solace to troubled adults. However, the other relevant circumstance is that the expedition took place only a short time after the publication of Charles Darwin’s The Origin of Species by Means of Natural Selection (1859), an explanation of human evolution as a random process, which for many seemed to undermine the basis of Christian belief. Though he was a deacon in the established church, Dodgson was affected like everyone else and the ‘Alice’ stories can be seen as giving expression to his anxieties. That is, they conjure a universe that is both God-less and meaningless, cold and uncaring. In this allegory of life, as in the ‘Alice’ stories, it is necessary for our hero to assume a strategy for survival and sanity of mind: she must be brave, keep smiling, create a system of order and meaning in the moral void and find love (see Rackin’s essays in Phillips [ed.], 1972, Bloom [ed.], 1987 and Gray [ed.], 1992). At the same time, the self-same stories create an effect that is warm and reassuring. They are able to do this not only because of the circumstances in which they were conceived but also because they take the form of ‘nonsense’ tales. ‘Nonsense’ has been defined as a self-contained game played by known rules. Players in effect engage in a simplified form of life in which possible outcomes are limited and known. (Sewell, 1952). It is this that creates a sense of security and provides refuge from the rigours of real life with its many uncertainties and anxieties. It is this that allows the books to be not only a horrifying and daunting vision of a post-Darwin world but at the same time a means of escaping from it. The relevance of the ‘Alice’ books for Robertson the economist, however, lies in Sewell’s stipulation that as a game, nonsense must be composed of discrete elements and that the total must never be more than the sum of the parts (Sewell, 1952: pp. 53, 98). It is this that prevents nonsense from degenerating into the sort of fluid, undifferentiated

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mass that is the stuff of nightmares – which by definition, provide no refuge from anxiety. Now, just as Robertson was able to find refuge from personal anxieties in the nonsense world of ‘Alice’, so he rooted the new growth of his economic theorising firmly in the Classical economics from which he began. The (Classical) Cambridge economics of Robertson’s day had at its centre a microeconomics that was built on a foundation of atomistic, frictionless barter. This, like ‘nonsense’, was made up of discrete elements, of which any total could be no more than the sum of the parts. In this system, money was of little consequence, being seen as merely a veil which must be raised to reveal the reality beneath. Here we have a most important clue to the reason for Robertson’s implacable opposition to the Keynesian Revolution: Classical economics, therefore, would have the characteristics of a self-contained game, with little relevance for the real world of uncertainty. This is how Keynes saw it and his new economics, contained in the General Theory, differed in two essential respects. First, in recognising the uncertainty of the real world, it gave a new importance to money, an institution which had the effect of bringing together and combining discrete elements and so destroyed the game-like quality of classical economics. Second, in his concepts of the paradox of thrift and of the multiplier, Keynes introduced theoretical devices that produced totals that were different from the sum of the parts. For example, the expenditure multiplier produced answers that could not be deduced by adding up the individual elements. (Fletcher, 2007: p. 17) By these means, Keynesian economics overturned Classical economics. With it went Robertson’s professional roots and his emotional security: no wonder he remained obdurate in the face of Keynes’s triumph. The third distinctive feature of Robertson’s style is its widespread use of neologism – the practice of inventing new words or using familiar words in a novel way as an effective means of getting economic ideas across. His employment of this tactic seemed to spring naturally from his popular writing style and was utterly different from, say, Keynes’s use of new theoretical terms such as ‘multiplier’, ‘user-cost’ or ‘liquidity preference’, being witty and whimsical and an aspect of his charm. It first appeared as part of the characteristic lighter touch that marked the writing of Money and COI in the 1920s. From Money, of course, came ‘chequery’, used to describe ‘both a breeding-ground and a homing place for cheques, as a rookery is for rooks’ (1922: pp. 49–50), while from COI came the notion of

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‘octopoid’ industries which employ a ‘large and widely ramifying plant’ (1923: p. 114). Later, in an essay in which he sought to reassert his traditional views on the measurement of economic welfare, he followed Lewis Carroll in using a ‘portmanteau’ word, so called because ‘there are two meanings packed up into one word’ (TLG, p. 271). He coined the word ‘Ecfare’ as a shorthand way of referring to ‘the more material side of human happiness’ (a phrase of Edwin Cannan’s), ‘partly for brevity and partly in the hope of craftily dispelling the notion that the phrase “economic welfare’’ is bulging with ethics and emotiveness’ (Robertson, 1952: pp. 29–30). Carried to excess, of course, the practice of neologism produces what is, in effect, a private language. This is what happened in the writing of Robertson’s most important but also most difficult and uncharacteristic book, BPPL (1926), a subject to which we shall return. The fourth feature of the Robertson style is conciseness: his writing is not only elegant and precise but also economical in its use of words. This is, of course, an admirable quality but as with neologism if it is carried to excess the effect could be to render material uninviting and inaccessible and, therefore, too often, unread. Readers were divided on the point. To an ardent admirer such as Stanley Dennison the benefits were unalloyed. Not only was Robertson A master of compression; [in whose writing] every sentence is important, and many of them contain as much as most economists get into a paragraph. But also in approaching his work, It is often necessary to read and re-read before one perceives to the full the powerful and subtle mind, and the strength and symmetry of the analytical scheme, which lie behind the seemingly simplest of propositions or gentlest sallies of wit. (Dennison, 1963: pp. 43–44) However, as Dennison luxuriated, others floundered and the following former pupil of Robertson must surely be representative of an un-numbered multitude when he recalled that some of us had some trouble with Dennis Robertson because the exposition was so brilliant, but also so condensed, that one had to read every sentence many times before one understood anything at

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all about what he was trying to say.(Rt. Hon. Terence Higgins M. P., in Harcourt [ed.], 1985: p. 139) In the limit, the process produced a book, BPPL, in which the writing was so concise as to be almost impenetrable. Keynes, who collaborated with Robertson in working out the argument, saw immediately that this would greatly increase the difficulty of understanding a novel and complex piece of theory and that only after a sizable interval would comprehension of the argument become widespread (letters from Keynes to Robertson, towards the end of 1925). Years later, when assessing the accuracy of this prediction, Dennison seemed to applaud the triumph of obscurity: In the first comment Keynes was right, as shown by various reviews, not one of those now available showing any grasp of the argument . . . . The second was too optimistic, as for over sixty years many economists have found it very hard going and confessed failure fully to understand. (In Dennison and Presley [eds], 1992: p. 33) Among which economists can be counted the most illustrious names in the profession. Paul Samuelson spoke for others when he pronounced BPPL ‘almost unreadable’ (Samuelson, 1963: p. 518). The question to be asked is why it should be so? Much depends on what the writer is seeking to achieve. For Keynes it was ever to persuade and to convert. He fully realised the inherent difficulty of this when he remarked that ‘in economics you cannot convict your opponent of error – you can only convince him of it’ (Keynes, CW XIII: pp. 469–470). Even less eloquent but no less forceful writers such as Joan Robinson (with whom Robertson skirmished bloodily from the 1930s) wrote to explain their viewpoint and to assert the rightness of their ideas. It is not unequivocally obvious that Robertson’s adopted style was calculated to achieve these aims. It is true, as we shall see later, that special circumstances connected with resistance to Keynesian domination, together with the protection of his theoretical and therefore emotional security, dictated the way he wrote BPPL. It is also true that he grieved over the lack of recognition he received for ideas he claimed to have originated. But having admitted as much, it is also the case that especially when commenting on new developments or the work of others, there is a residual take-it-or-leaveit superiority, a rather arch and even camp tone that can repel many potential readers.

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This leads us to a closely related feature of Robertson’s style and the last which we shall examine, namely its ‘donnishness’. What we mean by this is that his writing is at once learned, scholarly and discriminating but also detached and remote. This feature marked him out not only as a natural critic and reviewer but also as one who exhibited no desire to reach out and convert. That is, his writing lacked any sense of urgency. The danger is, of course, that to be forever the commentator and critic and never to be pressing a positive line of argument or participating in the actual business of government is to invite the suspicion that one lacks commitment or seriousness of purpose. There are examples of ‘donnishness’ and also its consequences in his reaction to the approach to economic analysis taken by others and in the way he was regarded by those responsible for running the country’s affairs. With respect to the first, he is ever ready to find folly and futility in the work of those whose techniques he dislikes. He cheerfully dismissed Paul Samuelson’s use of some technical terms with the comment that ‘we all have our funny little ways of putting things’ (Robertson, 1952: p. 40) and belittled the efforts of economic forecasters as ‘all largely a matter of guess-work after all’ (Robertson, 1952: pp. 60–61). With regard to the second, it is clear that he was aware that his reluctance to accompany criticism of public policy initiatives with positive action and participation weakened his authority. This is indicated by the letter he wrote to the Chancellor of the Exchequer in August 1957, saying that he intended to decline an invitation to become a member of the proposed (Cohen) Council on Prices, Productivity and Incomes (he did in fact take part): my mind is moving strongly in the direction of feeling that I must decline. I know the criticism to which this lays me open from the P.M., yourself and Mr Governor, that I am always sniping on the sidelines but unwilling, when given the opportunity, to do a responsible job of work. (Quoted in Dennison and Presley [eds], 1992: p. 95) This looks alarmingly like a failure of that sense of duty for which he was renowned but there are points that might be raised in his defence. First, engagement with the machinery of government involved committee work, to which he was strongly antipathetic. Second, he believed that the economist’s proper function vis-a-vis government was to provide expert advice and to be persistent in warning of consequences but not, in the last resort, to pretend to the role of philosopher-king (see ‘On

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Sticking to One’s Last’, in Robertson, 1952: pp. 64–65: below pp. 224–225). Third, by temperament he was suspicious of the value of central planning and of the bureaucratic requirements of its implementation: It is of course easy for academic persons with infinite leisure – or so it is commonly supposed – to pick verbal holes in documents drafted by overworked civil servants and initialled by distracted ministers. But it is not, I think, surprising that the amiable woolliness of this particular document should have occasioned some bewilderment. Nor was that bewilderment allayed by the explanation given soon afterwards by a very highly placed person indeed of the precise manner in which, in respect of its most crucial aspect, this co-operation of the beplanned people with the planning government was expected to implement itself. (Robertson, 1952: p. 50) Nemesis would come, as we shall see, with the Second World War, when Robertson, now too old to flee to active service with the army, was cornered into taking a post in the Treasury. As a final comment on his style we should add that though it might lack urgency his writing could be sharp. When attacked, that is, he was not afraid to flourish the bare bodkin. Samuelson has referred to Robertson’s skilful use of the ‘stiletto of wit’ to achieve his ends (Samuelson, 1963: p. 518). Though he was often portrayed by friends as gentle and kindly (and by enemies as shy and pathetically ineffectual) he was also regarded as having feline qualities, in manner and in his writing. He was a cat-person and cats, as is well known, have soft furry paws that conceal sharp claws. As Alice observed of the Cheshire Cat: ‘It looked good-natured . . . still it had very long claws and a great many teeth, so . . . it ought to be treated with respect’ (AAW, pp. 87–88). This implies that his sallies would be couched in subtly barbed terms, designed to provoke fury in his more demonstrative opponents. In his published lectures he noted that Only Mrs. Robinson, I think, still finds the concept of loanable or investable funds so obscure as to compel her to perform prodigies of self-stigmatisation and expectoration. (Robertson, 1963a: p. 376n.) This quotation is the epitome of the Robertson style: literate, elegant, witty and sharp. It is a style that is utterly distinctive and worth exploring in depth as the revealing interface between Robertson the man and Robertson the economist.

11 Money in a Theory of the Cycle

Money was given something more than a walk-on part in the Study but its role was nevertheless seen as being relatively small and as supplementary to the main determinants of the cycle. Accordingly, it was not until the last chapter before the recapitulation of the argument that Robertson introduced an analysis of the influence of money on industrial fluctuations. This treatment was entirely in accord with his later-expressed ‘determination to keep money in its place’ (1948: p. xv) – a determination, it must be said, based not simply upon the presumption in favour of digging-down below the money surface but reinforced by the evidence which I thought I found of the divergence on many occasions between the behaviour of the construction and the consumption trades, [which] made me very suspicious of doctrines of the trade cycle couched primarily in monetary terms, or in terms of the ‘repercussion’ of one industry upon others through changes in monetary purchasing power (Robertson, 1948a: p. xii) It was thus on a triumphal note that he was able to report to his readers that not only had he been able to explain the cycle without having to resort to specifically monetary influences but also, and perhaps even better, of not having stated such an intention only to relapse, defeated, into monetary terms: The influence of a money, especially of a credit money, economy upon the course of trade is of such obvious importance that it has more or less completely hypnotised all but a very few of those who have contributed to the discussion of this problem. The fact that our long, complicated, and perhaps not unfruitful discussion has been conducted so far almost entirely without reference to specifically 109

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monetary phenomena relieves us of the necessity of a formal refutation of those who, like Clement Juglar and Mr Hawtrey, find in monetary influences the sole and sufficient explanation of industrial fluctuations [footnote reference to other writers]. It is to be hoped that it has also saved us from the fate of those who, like M. M. Aftalion and Baranowsky, while professing to dig below the mere money surface of things, are always prone to relapse into monetary terms at all critical stages of the argument (Robertson, 1915: pp. 211–212) The second of these sentiments was, of course, that which he had first rehearsed in his book reviews published in 1914 (Robertson, 1914a; See above, p. 59). Nevertheless, he was quick to acknowledge that his strictures did not absolve him from taking due account of the ‘real modifications introduced by a monetary system into our theory as it stands’ (1915: p. 212, italics added). In modern terms, this meant that industry would operate and fluctuations would occur in a credit-money economy. There is clear recognition that the key players would be the banks, as they were able to increase the command of the business classes over resources through the provision of loans. There is also recognition that this increased provision would have implications for the price level and hence for the value of savings. These ideas, together with a concomitant policy role for the banks, would be developed more fully when, later in the 1920s, Robertson struggled to determine the nature of the relationship between money, investment and saving in his theory of the cycle in a monetary economy. Another major feature of his later work which found its first adumbration in the Study was concerned with the effect of money on the extent of fluctuations (1915: pp. 211–228). Robertson saw that, with respect to the boom, as confidence and bank lending expanded, the money supply and the price level would rise, incentive values would be enhanced and the costs of financial intermediation, of savings and of labour inputs, would be reduced. This in turn would encourage an expansion of operations, leading to overproduction. In due course, incentive values would be revised downward and reduced industrial activity would be subject to further contraction as the costs of intermediation and of savings both rose. Also, the effects of a possible internal cash drain would be exacerbated as bankers became less accommodating. The availability of credit would fall and its cost would rise. As depression took hold, these negative influences would be reinforced by a paralysis of enterprise, as confidence collapsed and the price level progressively fell. The lag in adjustment downwards of money

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wages would increase the likelihood of involuntary unemployment (pp. 206–211, 241). For inspiration when writing this part of the Study, Robertson again had Part IV of Pigou’s Wealth and Welfare, Chapter IV of which set out Pigou’s examination of the causes of variations in the purchasing power of money – variations which had implications for the real earnings of the working classes and, therefore, their welfare (Pigou, 1912: pp. 423– 438). Pigou’s approach was based on the so-called cash-balances version of the quantity theory of money, which he had inherited from Marshall and for which he was to provide the definitive exposition in a classic article of 1917 (Pigou, 1917). The essence of the cash balances approach is that, as against the approach of Irving Fisher, it directs attention to factors determining the demand for money rather than the velocity of circulation. The idea of beginning with individual choice had the effect of setting the treatment of money firmly on the foundation of established value theory, so that the price level and the purchasing power of money would be determined by supply and demand. It would later provide the starting point for Keynes’s liquidity preference theory and, later still, Milton Friedman’s restatement of the quantity theory. Though dealt with in a fairly rudimentary way for the purposes of Wealth and Welfare, Pigou based his analysis of the determination of the price level on the supply and demand for money and on their elasticities. On the demand side, with elasticity assumed equal to unity, the demand for money was seen to vary with the national dividend and with the marginal utility of money relative to that of commodities. Given that at this stage Robertson was not primarily interested in monetary analysis, any thought he gave to the demand for money must be inferred and interest instead focuses on Pigou’s treatment of the supply side, for it is here that we find the starting point for much of Robertson’s later thinking. In general, Pigou concluded that the value of money will be more stable the lower is the variation in supply and the higher is the elasticity of supply of money. He made the all-important distinction between money proper and bank money, with the former being in the hands of the public and also providing reserves against bankers’ creation of the latter, through the extension of credit. With given reserve ratios, the supply of money will vary with the availability of money proper and, hence, with the nature of the substance of which it is composed (inconvertible paper, gold and so on). Elasticity will be lower the more rigidly reserve ratios are enforced. Elasticity will also vary with the composition of the money stock, being

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higher the higher is the proportion of money proper to bank money. From a welfare point of view, it is influenced by the different modes of payment employed by the upper as against the working classes, as increased working class demands for money proper as the economy booms will limit any expansion of bank money and hence reduce elasticity of supply. Thus price stability would be greater the smaller the proportion of transactions effected by money proper. Two insights that emerged from Pigou’s analysis produced later echoes in Robertson’s work. First, that government control of supplies of fiat money (backed by state promises rather than precious metal) could be used to force interest-free loans out of the populace (that is, extract real value). Second, that the bankers’ practice of allowing an automatic increase in the supply of (bank) money in the face of an accustomed short-term increase in demand for money proper on the part of the public (as where they increase their advances even as reserves of money proper drain away to finance Christmas or holiday spending, confident that they will shortly be returned), in effect, provided a compensatory mechanism, the operation of which could help to limit the variability of prices. For Pigou, therefore, it followed that instead of leaving such a beneficial occurrence to chance, a properly authorised and constituted compensatory mechanism could be set up with the express purpose of stabilising the price level. Just such an idea had in fact been suggested by Ricardo and elaborated as a scheme by Fisher (Fisher, 1911). In sum, in the Study Robertson had grasped the possibilities offered by Pigou’s ideas on money and developed them in regard to the role of banks in the provision of finance, the determination of the price level and the value of savings. Later, in BPPL (1926) he would make more specific use of the devices of the extraction of savings and of compensatory finance and put them at the heart of his path-breaking analysis of the relationship between money, investment and saving. What is not clear, however, is why money came to play such a large part in his work during the 1920s, given that he was not primarily a monetary economist, had introduced money only incidentally in the Study and had declared his intention of keeping money in its place. We shall see that his closer engagement with money, and his consequent advance in understanding of monetary theory, came through the agency of another person, a person who had an agenda of his own. We shall also see that the leopard did not change his spots and that the later analysis, though considerably more advanced, came essentially to the same conclusions regarding the relative importance of money.

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We should also be clear that the study of monetary phenomena was not pursued for its own sake. Rather, it was harnessed as part of his continuing project on the trade cycle in relation to human welfare. Before the war, his researches had revealed that the trade cycle was a real phenomenon and that industrial fluctuation was an inherent characteristic of the capitalist mode of production. Because economic growth involved capital formation, cycles were an integral part of the growth process. Growth was driven by the ‘procreant urge’ (the human urge to benefit descendants) that habitually led to the sacrifice of ‘the present upon the altar of the future’. In turn, as savings were absorbed into investment, the public suffered irrevocable losses of economic welfare, in terms of consumption denied, both in the long run (through the desire for economic growth) and over the resulting cycles (because of over-investment in the boom and reservation of stocks during the recession). The policy implications of the Study, therefore, were that people must be made aware of the nature of the choice they were making and of the causes of the cycle so that steps might be taken to reduce the amplitude of fluctuations. The horrors of modern war and the scale of the resulting harvest of death changed perceptions and the consequently increased desire for life in the present led to a demand for consumption that threatened the availability of savings for growth. After the war, therefore, the priority was to ensure that the economy delivered the amount of saving necessary to support the chosen rate of economic growth (and here, the exhortation to nations to choose a rate of growth remained a feature of his subsequent work in the field; see, for example, his ‘Stability and Progress’, 1956, in LEP p. 457) and that growth was achieved at the lowest possible cost in terms of lost consumption. This meant, in effect, managing the cycle and once the implications of modern monetary organisation were taken into account, of giving the key managerial role to the banks. Thus, the substance of Robertson’s post-war research programme was the production of a theory for the management of the short period in a growing monetary economy. At the same time, his evolutionary, or step-by step, approach to the development of theory meant that there must be no overturning of Classical assumptions and that the new insights must be built upon established foundations. This requirement was to impose formidable constraints on model building and seriously to compromise the outcome. Nevertheless, whatever its shortcomings, the work that embodied the results of his research programme in the 1920s, Banking Policy and the Price Level (1926), represented a significant milestone in the development of ‘macro-economic’ thought and we shall examine it in some detail.

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This programme of work, which was to occupy Robertson for the remainder of the positive, creative phase of his career as an economist, was not undertaken in isolation but within the context of Cambridge School preoccupations with problems of short-run adjustment and with stabilisation policy (for the Cambridge School, see Bridel, 1987; Bigg, 1990; Laidler, 1999). Also, crucially, it was carried out for much of the time in collaboration with J. M. Keynes, the man who was to have an immeasurable impact on Robertson’s life and work, as teacher, supervisor and colleague and as friend and confidant in personal and financial affairs. It is perhaps not surprising, therefore, that it is to the agency of Keynes that we must look when we ask how it was that Robertson came to acquire a new appreciation of the implications for analysis of the phenomenon of money-use. Keynes was the begetter and general editor of the series of Cambridge Economic Handbooks, which was intended To convey to the ordinary reader and to the uninitiated student some conception of the general principles of thought which economists now apply to economic problems . . . [and] to expound to intelligent readers, previously unfamiliar with the subject, the most significant elements of economic method. (Keynes in Robertson, 1922: pp. v, vi) The authors were all engaged in teaching in Cambridge and Robertson was allocated two of the handbooks: Money (1922) and The Control of Industry (1923). The second of these, on industrial organisation, is easily accounted for as Robertson took it on as a not altogether welcome chore after Barbara Wootton, to whom it was originally assigned, dropped it. The case of Money, however, is much more interesting. Keynes as a monetary specialist would have been the obvious choice to write the handbook on money. Instead he asked Robertson to take it on, citing lack of time to do the job himself. In the light of subsequent events we must seriously consider the possibility that Keynes, shrewdly assessing the possible benefits, had deliberately chosen Robertson as a means of training him for the role of collaborator (see Fletcher, 2000: p. 262). Certainly, given their respective positions, with Keynes as the senior figure, dominant and entrepreneurial, Robertson would probably have been only too willing to comply. At any rate, without this opportunity for concentrated thinking on the subject of money, Robertson would have been far less use to Keynes and Robertson’s own academic career would have taken a wholly different course. It opened a new avenue of opportunity in which Robertson was to obtain considerable distinction.

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Despite the brevity of the time available for preparation (the plan of the volume was laid out in the summer of 1920 and Preface is dated March 1921, see Money, pp. vii, viii), Money conveys no hint of hurried preparation. Instead all is measured and calmly and warmly reassuring. This was Robertson’s first attempt on any scale to unravel a complex subject in popular form and what emerged was his most successful book (it passed through several editions and was reprinted into the 1960s). Written in his inimitable and whimsical style and with each chapter headed by a quotation from Lewis Carroll’s Alice books, the book delighted readers both junior and senior. Pigou wrote to say that he found the whole thing ‘extraordinarily brilliant and charming’ and that he had ‘never looked to be “entertained’’ by a book on money’ (C1/4 RPTC). Similarly, the reviewer in the Pall Mall Gazette found that He entertains as he enlightens, and so makes what in some hands is the dullest of all sciences really interesting . . . [and more significantly that] Mr Robertson’s method is easy to understand and is expressed in familiar words but is none the less scientific on that account. (D7/4 RPTC) In other words, however entertaining it might be, the book had a serious purpose. It was inevitable, perhaps, given the year of its appearance that matters of contemporary concern should feature so prominently. Robertson examined possible explanations of, for example, the huge rise in prices between 1914 and 1920 and the role, as a causative factor, of Treasury Notes – ‘Bradburys’ – issued in lieu of the gold sovereigns withdrawn from circulation; the effects of this price-level rise and of the subsequent sharp fall on the working of the British economy; the operation of the gold standard and the question of whether Britain should return its currency to a gold basis (Robertson, like Keynes, was firmly opposed). It is noteworthy that even though these are no longer matters of pressing relevance, Robertson’s treatment yields insights into the nature of money and the working of a monetary economy. These matters, interesting as they are, do not, however, constitute the core of the book. Rather, and here recalling Pigou’s Wealth and Welfare, Robertson’s principal concern in Money is to provide an analysis of the factors determining the value of money (the price level) and of the consequences of changes in the value of money for the economic welfare of the community.

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In other words, the role of money is to be examined with a view to determining its effects on matters of more ultimate concern: ‘the creation and distribution of real economic welfare’ and ‘the creation and apportionment of real wealth’ (Robertson, 1922: pp. 1, 2). Here, Robertson argues that changes in the value of money have pernicious effects in that they not only bring an arbitrary redistribution of ‘real wealth’ but also have a detrimental influence on its creation, the latter effect being due to the unsettling effects of price changes on the value of contracts – the fundamental basis of business arrangements. He also discusses the construction of index numbers as a way of overcoming the difficulties of measurement of changes in value. With respect to the question of causation, Robertson, as a member of the Cambridge School, lays emphasis on ‘the theory of money as a special case of the general theory of value’ (p. vii). This means that the price level is determined by factors affecting the supply of money and the demand for money and renders the quantity theory, when interpreted unqualified, as implying that the general level of prices will vary directly with the quantity of money available, as a ‘tedious truism’ and a ‘dowdy but serviceable platitude’ (Money, pp. 32, 34). As compared to his treatment in the Study, he is now more forthcoming on the ‘conditions of demand’ (p. 28), which depend partly on the ‘taste and habits of the community’, with respect to money-use, and thereafter on the ‘total volume of business transactions of all kinds which have to be performed within a given time with the aid of money’ (p. 28). In turn, that volume depends to some extent on the changes in the rate at which goods and services change hands within a given period (important in cases in which speculation enters into purchase and resale) but mainly on the ‘actual flow of goods and services to be disposed of’ (pp. 28–29). Again, however, it is the supply side of the equation, the quantity of money available ‘given the conditions of demand . . . ’ that provides the greater source of interest. Robertson quite properly notices that the quantity of money available differs from the quantity in existence by the extent of its average velocity of circulation per time period, which is a function both of the community’s payments habits and of the influence of expectations regarding future supply (an instance in which supply influences demand). With respect to the quantity in existence, Robertson provides an exhaustive taxonomy of money-types (taxonomy was an expository device in the use of which he excelled) and the relationship between them. Of the various constituents of the money supply, he emphasised the key importance of bank money – money created as a result of the

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banks’ extension of credit – and of the role of legal tender as a reserve base for banking operations. Here again, therefore, our attention is drawn to the strategic position of banks. At this juncture we might notice the ‘conclusion to which the book leads up’, namely that Money is after all a fundamentally unimportant subject, in the sense that neither the most revolutionary nor the ‘soundest’ monetary policy can be expected to provide a remedy for those strains and disharmonies whose roots lie deep in the present structure of industry, and perhaps in the very nature of man himself. (p. vii) Robertson’s message is that though an impaired monetary system must be made good, it cannot overcome the consequences of human nature and the technological structure of the productive process. Money is, therefore, cast in an essentially passive and enabling role in that The mending of the road over which the produce passes to market is no substitute for the digging and dunging of the fields themselves. No tinkering with counters will take us very far towards the discovery of an industrial system which shall supply both adequate incentives to those who venture and plan, and peace of mind to those who sweat and endure. (p. 178) There is obviously much truth in this but on the other hand, if money is seen to serve in the office of a road or, perhaps, a nineteenthcentury English railway or North American railroad, the effect of its introduction into a region would be far more active and transformational than Robertson seems to allow. Does he perhaps protest too much? The idea that he does so is suggested by the contrast between his clearly stated conclusions on money and some of the implications of his analysis. Specifically, there is all that is encapsulated in what he refers to as ‘The twin processes of real saving and the creation of bank money . . . ’ (p. 79). That is, when writing Money Robertson developed ideas that had potentially revolutionary consequences for orthodox thinking, on the relationship between saving and investment and between the established hierarchy of real and monetary factors. Say’s Law itself was called into question. Recall that for Robinson Crusoe, the decision to create a capital asset that he calculates will yield benefits in the future (that is, to invest), must

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be preceded by a period of going without consumption goods (that is, saving) in order to provide the means of subsistence during the gestation period of the new asset. On a broader Classical stage, Crusoe is generalised into all economic agents who are empowered to make individual decisions (to choose) to deny themselves present consumption in the expectation of a more prosperous future. Now, however, having discovered what it was that ‘bankers were really up to’ (1948: p. xv), Robertson laid bare the mechanism by which the operations of fractional-reserve banks could subvert this established sequence simply by pursuing their normal business activities. In brief, he showed that by extending credit a bank could allow investment to proceed without reference to the availability of savings and that the requisite going without would be imposed arbitrarily upon the community at large. For its portion the bank will receive interest on the outstanding loan. Perfectly aware of the implications of the words for orthodox theory, Robertson allows that it is enough to make the student tear his hair. He has learnt with toil and trouble that interest is the reward for saving – of piling up real goods and keeping your hands off them: yet here is the bank apparently getting interest for the service of creating money, which may be a very valuable service, but it is certainly not saving. (p. 76) It is all rather shocking in conventional terms but nevertheless is valid in itself. In Robertson’s example (pp. 76–78) there are four principal actors: banker, farmer, shop owner, boot-maker. The banker grants an overdraft facility to the farmer, who draws cheques to buy consumables from the shop owner, who in turn is enabled to increase his bank deposit to the extent of purchases (equal to the loan). After the harvest the farmer sells his crop to the shop owner who pays for it with the proceeds of his sales. The farmer repays the loan to the bank, which is now able to extend a new loan, this time to the boot-maker. The farmer’s crop represents savings in the form of real goods. This will provide the real-saving equivalent of the new loan to the boot-maker, just as the farmer’s cheques would have been drawn against some similarly existing real saving. Thus real saving and the creation of bank money go ahead together. The problem arises in situations which correspond more closely ‘to the conditions of real life’ in which ‘the additional loan, to be of any use to the borrower, must be created before his additional goods are ready for

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sale . . . In any case while the goods are coming to birth, the money created on the strength of them is going on its travels, flitting from chequery to chequery’ (89). In other words, There is not necessarily any corresponding preliminary accumulation of goods, such as was represented . . . by the farmer’s wheat-crop. And if there is not, any saving that is done is done during the currency of the loan, as it were impromptu and at the eleventh hour, by the members of the general public, who find the value of their money diminished, and are forced to abstain from consumption which they would otherwise have enjoyed. The community is in effect compelled, by the extra purchasing power put into the hands of the borrower, to share with him his current income of real things, and such hoards of real things as it may possess. (90) Note the implications here for the objective of maintaining price stability as a norm: Of course the additional loan will presumably justify itself by and by, by adding to the flow of real goods; and the shorter the period before the new goods are ready and the loan repaid, the less scope the money generated by the loan will have for running amok. But so long as it is outstanding, the loan is of the nature of a tax or compulsion to save imposed on the general community jointly by the borrower and the bank. And if the loan is for any thing like the full amount of the expected value of the goods, the goods even when they arrive will not exert so great an influence towards a fall of prices as the money created on the strength of them has exerted in the interval towards a rise of prices. (pp. 90–91) It is in this context that we must look again at the loan to the boot-maker, which appeared to be justified on the grounds that, as compared to the loan it replaced – that to the farmer – it would maintain a stable relation between ‘available money and available goods’ (92). This is because according to Robertson there are two relationships involved here, which, with an eye on what is to come, we can see as the basis of a stability condition he later specified for the economy. They are the period bounded by the point at which production is set in train and the delivery of goods to the consumer; the period for which the loan is outstanding. Now, boots can be produced more quickly than wheat, so that loans can be repaid more quickly, but change hands more slowly than wheat, in the

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sense that they make their market presence felt less frequently. Thus, as compared to the situation of the farmer’s loan, there are competing pressures respectively to reduce and to raise the general level of prices (92). It is clear that though Money was ostensibly intended as an introductory conspectus, Robertson had not shrunk from following his reasoning where it led. To the discerning contemporary reader, the book contained some highly suggestive and somewhat disturbing ideas and though the author was careful in his general conclusions to qualify his findings on the extent of money’s importance, we have noted that these conclusions were not wholly convincing, perhaps not even to Robertson himself. In the year following the publication of Money Robertson provided a useful summary of his views on what we have identified as his post-war programme in a lecture he gave to the 1923 Liberal Summer School. The subject of The Ebb and Flow of Unemployment was the trade cycle in relation to social welfare. The two were intimately related because the ‘instability of industry’ gave rise directly to social distress and embitterment through recurrent bouts of unemployment and the apparently unfair apportionment of rewards. Robertson believed that it was on the question of its ability to solve this problem that the success or failure of capitalism as a system would increasingly be judged. In seeking for a solution he pointed out that though commonsense would identify the boom as being preferable to the slump, it would be ‘dangerously false’ to conclude that attempts should be made to prolong the boom. He reached this conclusion by reference to a series of pairs of conflicting motives affecting mankind when engaging in industrial activity. One such pair was the choice between enjoyment and thrift. This recalls the ethical dilemma he had posed at the end of the Study for it concerns the need for man to reconcile himself to the idea of being only a temporary member of the human race though perhaps one having responsibility for it: the clash of interests between himself as an ephemeral being, passing away like a May-fly at the end of a summer’s day, and himself as a trustee in some undefined, uncomfortable way for the future, for a great undying corporation in which he had only a life interest. (Robertson, 1923b: pp. 5–6) Over the cycle, and recalling what was said in the Study concerning ‘sacrifices . . . made during the boom’ (Robertson, 1915: p. 254), the boom is now characterised in terms of thrift versus enjoyment as

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the future’s night out, a time when the leaders of industry are planning far ahead, when additions are being made daily to the capital equipment of industry, when houses are being built which will last hundreds of years, when ships are being ordered which will carry the world’s trade for a generation, when dealers hoard their stocks upon their shelves. (Robertson, 1923b: p. 7) Over-investment, and its inevitable nemesis, the slump, is the product of the boom. This, for the working class, means first being constrained to work such hours as will extract full value from the machinery and plant, only to be laid off as demand falls away to enjoy their enforced leisure as best they may. The remedy for industrial fluctuation and therefore the evils that attend them must lie in a policy of stabilisation: The lesson to be learnt, then, is that, if we want to abolish the trade cycle, we must recognise the real conflicts of interests and impulses to which man is subject in his business conduct, and seek to restrain him now from over-indulgence and now from starvation of those strands of his economic nature which give to western civilisation its character of restlessness and of progress. And it follows that our remedial thought and effort must be directed, not merely to providing stimulants for the depression, but to providing sedatives for the boom. The whole matter is summed up in one word . . . Stabilisation. (Robertson, 1923b: p. 8) In addition to a number of ‘real’ methods, including action by the state, suggested as a means of stabilising industry, Robertson comes at last to the question of ‘Monetary Stabilisation’. Here, he confirms his views that money is ‘of the first importance’ but essentially secondary in its effects as compared to real factors; that it influences industrial fluctuation by ‘vastly’ aggravating the ‘inherent strains and instabilities to which industry is subject’; that the proximate agent of this aggravation is the instability of the price level, for our professed standard of value is . . . grossly unstable . . . not only does the general level of prices continually fluctuate, but nobody has any idea what is the central level about which it is fluctuating. (Robertson, 1923b; p. 18)

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Note, however, that on the theory of the Study, to ‘abolish the trade cycle’ would be to abolish growth, for the cycle is an integral part of growth. Therefore, the contemporary desire for growth would seem to render fluctuation inescapable. This was a dilemma and one that was to haunt Robertson’s work throughout his career. The conflict was reflected in the title of a lecture he gave at a meeting of the International Economic Association in 1956: ‘Stability and Progress’. The following points are of interest (page references to LEP [1963]): 1. ‘there seems no reason to doubt the old view that an increase in the ratio of capital stock to output . . . has been not merely a symptom but a prime instrument of the enlargement of man’s enjoyments and the lightening of his labours’ (p. 461); 2. it is therefore desirable that nations should form some idea of the rate at which they would wish their national income to grow and consequently the proportion of current income that should be saved and invested in order to achieve the desired result (see p. 457) 3. it is unlikely that citizens will spontaneously provide the required amount of saving: that is, the amount required in addition to that done by governments and by industry (see pp. 463, 464) 4. in considering the reasons for this, Robertson goes back to the conclusions of the Study and his theme of enjoyment versus thrift, to argue that account must be taken of the disparity between the static population of automatons envisaged by economic theory and the living and dying generations of real human beings: The Ramseyan equation [Ramsey, 1928] depends on the assumption that the economic operator whose utility function is involved realises that its income and consumption are going continually to increase. But the ordinary man is well aware that on retirement his individual income is going to fall with a bump, and that at death his individual consumption is going to cease; and it seems to be not only inevitable but reasonable that his savings policy, while influenced also by regard for his heirs, should partly be governed by that knowledge. (pp. 458–459) These fundamental ideas, formulated over 40 years earlier, still guided his thought and recommendations. Now, however, present consumption is not to be viewed primarily as the means of liberation from the ‘Urge and urge and urge’ but as a restraint on the rate of economic growth. Robertson clearly saw that as compared to 1914, the changed perception

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of life and death had affected saving behaviour and that if the chosen rate of growth was to be achieved then active policy measures must be brought to bear. This was the justification for Robertson to develop further the theory and policy of ‘stabilisation’ – the management of the short period. It was a formidable challenge. Any successful policy would have to ensure the provision of sufficient savings to meet the chosen rate of economic growth; impose the minimum cost in terms of lost consumption on the present generation; be centred primarily on the regulation of the price level; accept that this was essentially a task for monetary policy and that in modern conditions this would give the principal role to the banks; that in the light of his discoveries regarding the provision by banks of finance to industry and the potentially explosive implications for the saving-investment sequence and for Say’s Law, it would be necessary so to arrange matters that primacy still lay with saving and with the free choice of the individual saver. Robertson’s attempt to provide the appropriate theory and policy for the management of the short period was the subject of his next and most innovative work, BPPL. The book appeared in January 1926, which means that he had completed work on it by 1925. Of course, much relevant analysis was already available from his previous research but the task of developing it further to meet the necessary criteria and of producing a sufficiently comprehensive and coherent scheme proved to be an intellectually arduous and emotionally draining experience.

12 An Odd Little Book

Within the overall development of Robertson’s thought, BPPL was the means of extending his views on fluctuation to the case of a growing monetary economy. As compared to the Study, the focus was narrower as he could assume the broader philosophical context and restate his conclusions on the real origins of the trade cycle from the parent work. This, together with the insights gained into modern banking from working on Money, allowed him to concentrate instead on ‘a discussion of the relation between saving, credit creation and capital growth’ (Robertson, 1949b: p. vii) and to use this analysis as the basis for making recommendations on the all-important questions of banking policy and the manipulation of the price level as a tool of economic management. In other words, BPPL was to provide the rationale for the use of monetary variation as a means of reconciling economic and ethical considerations in the provision of saving for the growth process. In retrospect, Robertson was to describe BPPL as ‘this odd little book’ (in the Preface to the Kelley Reprint edition of 1949: Robertson, 1949b: p. vii). He provided no justification for this view and the question of why he did so is all the more interesting because in some ways BPPL is deeply Robertsonian in character. For example, because he had an aversion for revisiting ‘dead stuff’, his practice was not to rewrite his books as a means of taking account of criticism and later thoughts (even his popular textbook Money was adapted to changing circumstances by adding new chapters and discarding redundant sections) but instead, to use the core of each of his major theoretical works as the basis for substantially new work. BPPL conforms to this pattern, with a restatement of his real theory of the cycle from the Study as the core around which is woven a theory of money, investment and saving. 124

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Banking Policy and the Price Level also conforms to Robertson’s socalled ‘evolutionary’ approach to theorising, whereby new insights are developed in sympathy with and build upon the work of respected (especially Marshallian) predecessors. The additive nature of Robertson’s theoretical work is apparent in the structure of the book. Finally, though BPPL harbours some potentially revolutionary ideas, the work as a whole conforms to the principles of Say’s Law and (the Cambridge Equation version of) the quantity theory of money; the orthodox hierarchy of real and monetary factors, in which real factors predominate, is scrupulously maintained. Nevertheless, there are two major features of the book that are decidedly ‘odd’ and which require explanation. These are the style in which the book is written and its subject matter, which is wholly focussed on the role of money in the theory of the cycle and economic growth. With respect to the first of these, BPPL is the odd one out among Robertson’s works, as the one that most tellingly belies his reputation as a literary economist. Brutally concise and forbidding, devoid of characteristic charm and whimsy and employing in its most important chapters a terminology replete with neologisms amounting almost to a private language, the book has been condemned as ‘almost unreadable’ (see Samuelson, 1963: p. 518). By default its message has often been gleaned via more tractable derivatives – especially the 1928 and later editions of Money and from his 1928 lecture ‘Theories of Banking Policy’ (Robertson, 1928a, b). The book itself, however, is a curiosity. How is it to be explained? Given that Robertson knew perfectly well how to write accessibly it cannot have been an accidental aberration. The answer lies in the nature of the subject matter and the circumstances under which the book was written. The subject matter presented Robertson with inherent difficulties of exposition. These stemmed from both the complexity of an argument that stretched the quantity theory to accommodate saving and investment analysis and from Robertson’s desire for precision of thought in relation to one of his great insights: the distinction between the consequences of a decision to save by one individual acting separately as compared to the same decision by all individuals acting together. Here the range of possible outcomes to be allowed for was such that a new terminology was deemed necessary. In this way the product of Robertson’s fertile taxonomic bent was matched by his corresponding ability to invent apt new terms. The result was a text at once exhaustive, scholarly and original but deterrent to all but the most determined reader.

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Also, Robertson can be seen as having applied with a vengeance the lessons learned from the reception of the first version of his fellowship dissertation. Pigou had criticised the rather undigested nature of the work and commended Marshall’s admonition to authors to ‘stew on’ their material until the ‘bones’ of his argument formed in his mind. In pursuit of this ideal Robertson reached an intermediate position in the Study (the final version of the dissertation) but in the case of BPPL there would be no compromise: The book may . . . offend in . . . that it is highly abstract and theoretical. Occasionally, but not often, I have tried to bring out the relevance of an analytical argument by concrete illustration. The book is not intended to be a comprehensive treatise but a theoretical skeleton and I want the bare bones to stand out strongly. (Robertson, 1926: p. 5. Emphasis added) In addition to the technical nature of the subject matter and to methodological considerations, we must take account of the circumstances of the book’s gestation and of the role played in this by Keynes. As colleagues and collaborators during the 1920s, the two worked together, suggesting and discussing ideas and reading and criticising each other’s drafts. In this process, Robertson came to play the part of keeper of Keynes’s conscience (see Robinson in Keynes, [ed.], 1975: p. 13; Patinkin and Leith [eds], 1977: p. 32; Harcourt, [ed.], 1985: p. 132). It was a responsibility he found increasingly stressful and irksome and the process of writing BPPL brought matters to a head. Despite the collaboration, however, it would be incorrect to regard BPPL as a joint book. It was Robertson’s book (he speaks of his not having preserved his ‘original draft’ and of his ‘first draft’: see Robertson, 1949a: pp. x, xi), to which Keynes made a large and indefinable contribution, in particular to the crucial chapters V and VI, and Robertson made handsome acknowledgement of his debt: I have had so many discussions with Mr J. M. Keynes on the subjectmatter of Chapters V and VI, and have re-written them so drastically at his suggestion, that I think neither of us knows how much of the ideas therein contained is his and how much is mine. (Robertson, 1926: p. 5) Even so, there is further support for the idea that Keynes was an important contributor rather than a joint author in Robertson’s later comment that ‘While Keynes must at the time have understood and acquiesced in

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my step-by-step method, it is evident that it never, so to speak, got under his skin’ (Robertson, 1949a: p. xi). The manner in which Keynes made his contribution, however, proved to be a painful experience for Robertson. He was struggling with new ideas on the relationship between money, saving and investment and Keynes, who was working in the same field – and had provided a component of the analysis (the notion of induced lacking) – formed his own ideas on the direction the book should take. An insight into the nature of the collaborative process can be found in a series of letters Keynes wrote to his wife at that time, which clearly indicates the progress of his changing reactions to Robertson’s text and the consequent pressure exerted on Robertson. The letters reveal Keynes, in glorious late-spring weather, sitting in the garden reading through the proofs and not liking what he found there. A second session confirmed his first impressions. The analysis was wrong and Robertson must seriously consider whether he should proceed with publication. Coercive visits to Robertson’s rooms in Trinity and notes delivered via the highly efficient University postal system left Robertson in no doubt as to Keynes’s views (Hill and Keynes, [eds]), 1989: pp. 325, 327). What should he do: bow to the superior wisdom of his masterful teacher and mentor or, against the odds and with grave misgivings, trust his own judgement? At such a late stage in the book’s gestation, this was clearly a dilemma. To his great credit Robertson remained resolute. He realised that he had grasped at ideas of great significance both for his own work and for the development of the subject, however imperfectly expressed they were or uncongenial to Keynes’s current lines of thought. Though consumed by doubt about his tentatively expressed ideas, he held out against the more powerful personality and even suggested that Keynes’s own thinking had hardened into a rigidity that prevented him from recognising the seminal importance of Robertson’s new departures. On 25 May he wrote to Keynes: It is an attempt to explain, to myself at least, why I am still inclined to go ahead and publish [despite the fact that] . . . I am afraid of being swayed into publishing by the desire to avoid disappointment and loss: but I am also afraid of being swayed against publishing by my tendency to believe you are always right! Sometimes when I have stood out against this weakness, I have been justified! I think it just possible that you have reached such clear conclusions on the matters in hand, and have got your own apparatus of words and thoughts for

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dealing with it so fixed, that you find it harder to follow the exact shades of my argument than someone approaching it with a less committed mind, and that what seem to you howlers may be only differences of emphasis and methods of approach. In any case I feel the truth is so obscure and uncertain that it isn’t wicked to publish what doesn’t pretend to be final truth. (Keynes, CW XIII: pp. 30, 33) His tenacity was justified when, at the end of May, Keynes began to see the light – now believing that Robertson had indeed developed ideas both novel and significant, however incorrectly expressed they were (Hill and Keynes, [eds], 1989: p. 332). This was a breakthrough and on 1 June Keynes could report that there had at last been a meeting of minds on the precise nature of the advances Robertson had made (Hill and Keynes, [eds], 1989: p. 333) Robertson then revised the text in the light of Keynes’s criticisms and shocked his collaborator with what was clearly an abrupt change of style: I like this latest version, though God knows it is concise . . . My general impression is that the ideas in your head are very important and very necessary to the clarification of our minds, but that, when you have got the matter quite straight, the whole thing can be put much simpler and shorter. (Keynes, CW XIII: pp. 39–40) Here we might note the significance of Keynes’s choice of words. It was to this clarification of his thinking that he later referred as the event (the discussions preceding the publication of BPPL) leading to his own revolution of thought. At the centre of the new thinking was the relationship between money, investment and saving and it was accordingly to this part of Robertson’s text that he drew attention on receipt of the proofs: I think that your revised Chapter V [’The Kinds of Saving’] is splendid – most new and important. I think it is substantially right and at last I have no material criticism. It is the kernel and real essence of the book. (Keynes, CW XIII: p. 40) This is because, although the analysis of the General Theory brought the three variables together in a wholly different way, Robertson’s ideas were pregnant with revolution and while Keynes would exploit them for their

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potential, Robertson would attempt to contain them within accustomed bounds. Keynes’s words were also significant for the shock they register. The revised version of the text was cast in the forbidding, deterrent style that sets this book apart from his others. With its chilly conciseness and thickets of neologisms, BPPL was partly an act of defiance, an expression of protest against domination by Keynes and partly an affirmation of his independence, the creation of an impenetrable stronghold for the theoretical position he would never yield. That is, the book would provide the secure foundation for his economic ideas and dependent emotional security. This theoretical position related, of course, to containment of the power of money. It is, consequently, denial of the dangers posed to orthodox relationships as well as denial of Robertson’s subservience to Keynes that is invoked by the quotation from Through the Looking Glass on the title page as a warning to potential invaders: ‘She’s in that state of mind’, said the White Queen, ‘that she wants to deny something – only she doesn’t know what to deny!’ ‘A nasty, vicious temper,’ the Red Queen remarked. (Through the Looking Glass, p. 319) In fact, collaboration continued but the publication of BPPL marked the beginning of a period of greater wariness on Robertson’s part that culminated in an intellectual parting of the ways in the 1930s (see Fletcher, 2000: pp. 141–142). In turn, this parting was on account of differences over the question of the power of money and it is to Robertson’s theoretical attempts to contain the power of money that we must attribute the second reason for which BPPL could be considered odd: the choice of subject matter. That is, that Robertson chose to devote the second of his two major monographs to a painstaking examination of the economics of a phenomenon that orthodoxy – and ostensibly he – considered to be of less than fundamental importance. In the new book, Robertson would attempt a definitive demonstration of his conviction that though money plays an important role in the economy, it alters nothing fundamental and, indeed, can be so regulated that the economy will function as though money did not exist: that is, is rendered neutral (on this see Danes, 1979: pp. 44–47; also Fletcher, 2007: p. 98, points 3 and 4). In other words, he would reaffirm the Classical hierarchy of real and monetary factors, the primacy of

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voluntary saving over investment and the validity of Say’s Law. By the same token, he would retain the Classical imperative of individual initiative and his own desire (Robertson, 1915, p. 254) that man should be free to choose between present and future consumption. He would also be in a position to answer disturbing questions about the validity of Cambridge economics, which was founded ultimately on the assumption of frictionless barter. Also, though this was not apparent in 1926, the question of the power of money would be at the centre of the controversy over the determination of the rate of interest, the peg upon which, in the 1930s, Robertson and Keynes would hang their differences. Robertson’s view was that a purely monetary theory of the rate of interest, imbued with the power to affect real outcomes, was given a leading role in the Keynesian scheme. Later, ‘Robertsonian’, writers would argue that by developing his monetary interest-rate (liquidity preference) theory first, Keynes was able to redeploy real factors for purposes of state management of the economy (see Presley, 1978: p. 182; Goodhart, 1989: p. 107). For the moment, however, he had convinced Keynes and it is important to mark this as a shared position, from which Keynes would subsequently depart, though Robertson never would. It is always possible that, with his positive attitude and revolutionary inclinations, Keynes would see the potential for development in Robertson’s new ideas in 1926 but fail to perceive their deeper purpose: that he would simply see them as a solution to an intellectual puzzle. Consequently, when the controversy was at its height, he would, in the face of Robertson’s intransigence, blame what he termed his ‘piety’ for his failure to accept what seemed to Keynes clear reasons for abandoning old lines of thought. To what extent, therefore, can Robertson be said to have achieved his objective with BPPL? For the moment he was safe but, along with its innovative and seminal contributions, the book harboured inherent flaws. This will become obvious as ignoring the sign to ‘Keep Out’ we begin our exploration of the argument.

13 Banking Policy in the Cycle

As a guide for the management of the short period, Robertson made the important distinction between ‘actual’ changes in output, resulting in a new ‘actual’ scale or rate of output and ‘justifiable’ changes in output resulting in a new ‘optimal’ scale or rate of output. The latter are defined in terms of a standard non-cooperative, non-monetary case in which producers vary output by reference not only to familiar criteria (lowered costs due to invention or greater efficiency induced by prolonged depression; increased desire for the products of others which leads to increased output of own product; a fall in the real cost of obtaining other products and where the effort-elasticity of demand is greater than unity) but now also to include the enlightened self-interest of employers, both because of their control over the ‘forces of technical progress’ and because the ultimate divergence between the interest of employer and employee may not be as great as the immediate divergence (Robertson, 1926: pp. 8–23). The rational simplicity of the standard case is complicated by the need to take account of the widespread use of very lumpy and expensive durable instruments of production, which are imperfectly divisible and so give rise to larger changes in output than utility and cost would indicate (1926: pp. 35–37). Of greater relevance for present purposes, however, are the reasons for which Robertson believed ‘actual’ fluctuations would tend ‘greatly’ to exceed fluctuations deemed ‘rational’ or ‘appropriate’. The main reason is seen to be ‘the stress of competition, aggravated by the length of time which is required to adjust production to a changed demand’ (1926: pp. 34, 37–38). It is, however, the ‘remaining causes’ which attract attention as these prove to be the fashionable causes of the trade cycle from orthodoxy, namely, psychology – the psychological interdependence of business, the herd instinct – and money (pp. 38–89). 131

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Though subordinate to the main cause, Robertson makes it clear that he regards the remaining causes as of ‘very great importance’ (p. 38) and one of them, money, is given very much more attention than the main cause. Money, of course, is the principal preoccupation of BPPL (its ‘main theme’, Robertson, 1949b: p. viii), as is reflected in the choice of title. Money’s role as a remaining cause begins with the idea of inducements to a producer to change output being ‘clothed in the form of an increased or (diminished) stream of money demand’ and of being to that extent ‘illusory’ (p. 39). That is, a false impression may be created (as the change in the price level affects not only revenue but also costs) so that ‘actual’ tend to exceed ‘appropriate’ changes in output. Consequently, the causes of fluctuations in a money-using economy will involve ‘an initial disturbance of the price level (p. 34). Also, monetary stimulus intended to bring about ‘appropriate’ changes in output could by the same token equally give rise to ‘inappropriate’ changes in output. Therefore, monetary policy should not settle for a simple rule governed by the ‘enlightened orthodoxy then current in Anglo-Saxon countries’ (Robertson, 1949b: p. viii) of seeking to stabilise the price level as a means of stabilising industrial output. Instead, because ‘rational and justifiable fluctuations in output will occur’ (p. 34), the aim should be to sanction price level changes necessary to achieve appropriate changes in output and to seek to prevent those which would lead to inappropriate changes in output (p. 39) and where the causes of the latter could be both real and monetary. The discrimination to be exercised by monetary policy in respect of changes in the price level is given added significance by the fact that ‘production takes time [is roundabout – makes use of capital] and requires the aid of saving, and of the manner in which this fact is intertwined with our monetary system’ (p. 34) and it is at this point, with the analysis of the complex relationships involved, that the argument of BPPL reaches its culmination. It is also, we might note, the point at which oddness of substance and oddness of style come together. It was this part of BPPL, Robertson later concluded, that ‘chiefly attracted attention’. That is, the attempts in chs. V and VI to elucidate – by means of a step-by-step analysis, some rather outré technical terms and some very primitive algebra – the inter-relation between credit creation, capital-formation and ‘abstinence’ or, as I preferred to call it, ‘lacking’. (1949b: p. ix) Robertson approached this crucial part of the argument with very pronounced views on the importance of money, though as we have seen,

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the confident and uncompromising conclusions he had recorded in the Preface to Money do not entirely reflect his findings on the relative importance of money revealed in the text, especially as regards the effects of bank-financed expenditure. Nevertheless, in BPPL, it was the orthodox position on money’s relative importance that was confirmed when Robertson began his discussion of the effects of the introduction of money into the real analysis: While the results of the causes of change [in the scale of industrial production] are correctly expressed by making the hypothesis of direct barter, the chain of motives brought into play by a monetary economy is different, and the results are reached in part by a different route. (Robertson, 1926: p. 23) The principle was illustrated by way of a worked example, with which Robertson also intended to demonstrate the validity of his view that a policy of price stabilisation was inefficacious (1926: pp. 24–34). The full significance of this conclusion will only become apparent when the analysis is extended to include saving and its relationship to investment. For the present we need only notice the mechanics of the money–commodity relation, in which, in true quantity theory fashion, we are to imagine the monetary authority directing a stream of money onto a commodity (like water from a hose) so that an impact price is established, followed by reaction, if any, on its output. The discussion of the nature of real and monetary forces in BPPL is a preliminary to the analysis of the relationship between money, investment and saving in Chapters V and VI. Here the interest lies in the way in which Robertson worked through the implications of his discovery of the power of money to subvert the primacy of real forces and of the means by which he sought to contain and nullify it. In Robertson’s scheme, modern industrial production requires the use of two different kinds of capital: fixed capital, the ‘fixed and durable instruments of production [such as] factories, railways, machinery and so forth’ (pp. 41–42), and circulating capital. Strictly, these are goods in all stages of production from raw materials to finished article together with fuels consumed, though during the course of his argument Robertson lapsed into his earlier usage of confining them to consumer goods (see 1926: pp. 43, 93, 94, 97), relating to the real saving of the Robinson Crusoe economy.

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The associated saving becomes ‘the activity of providing capital’ (p. 40), which involves the traditional idea of forgoing immediate enjoyment of consumption but which was not adequately described by the terms then available. Robertson favoured the phrase ‘going without’ as being neutral enough to avoid traditional connotations but substituted his own notion of ‘lacking’ as the basic unit of descriptive currency for a terminology sufficiently precise and comprehensive for his purposes. The merit of this is indicated by the definition of lacking: A man is lacking if during a given period he consumes less than the value of his current economic output. This is not always the same thing . . . as spending on immediate consumption less than his legal income during the period. (p. 41) The opposite of lacking is dis-lacking. Here, Robertson is attempting to take account of a very important insight. That is, in an economy consisting of more than one person, the amount of lacking done by any individual depends not only on his own actions but also on the actions of others. Specifically, a person’s attempts to lack or not to lack could be facilitated or frustrated by changes in the price level induced by others’ attempts to lack or not to lack and by banking operations. Notice that a similar principle was central to Keynes’s thinking in the General Theory (Keynes, 1936) but there the consequences of such interaction were mediated by changes in the level of income rather than a change in the price level. Lacking can be of two kinds, ‘spontaneous’ and ‘imposed’ (pp. 47, 49). Spontaneous lacking ‘corresponds pretty well to what is ordinarily thought of as Saving, and scarcely requires further definition’ (p. 47). If the proceeds are used for productive purposes, lacking is ‘applied’ (either ‘directly’ in the purchase of an instrument or ‘indirectly’ via a loan for productive purposes) but if they are hoarded, lacking is ‘abortive’. Note that in the case of applied lacking it is assumed that nothing is lost to aggregate expenditure so long as capital creation is set in train, so that the orthodox sequence of prior saving as a means of promoting investment is maintained. Imposed lacking can be ‘automatic’ or ‘induced’. Induced lacking involves the reduction of expenditure as a means of rebuilding real balances depleted by a rise in the price level. It was a theoretical innovation of Keynes’s and is ancestor to the Patinkin ‘real balance effect’. It has been featured by other commentators (see in particular Laidler, 1995, 1999)

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and is stimulated by the same process that imposes automatic lacking (p. 49). Automatic lacking occurs when an existing stream of money directed against a stream of goods is augmented by the increased expenditures of those who reduce their hoards or utilise credit created by banks. By driving up the price level, these individuals deprive others of part of their consumption: if consumption falls below what was intended, they experience ‘automatic stinting’; if below the value of their current output, automatic lacking also. In the opposite case, with reduced expenditures and a fall in the price level, the corresponding categories would be ‘automatic splashing’ and ‘automatic dis-lacking’. Another way of classifying lacking is by the type of industrial capital with which it is associated. Fixed capital is provided for by ‘long lacking’ and circulating capital by ‘short lacking’. The important distinction between them for present purposes is that whereas the majority of long lacking is (spontaneously) provided by individuals and corporations, a significant proportion of short lacking is obtained via the banks (p. 50). This was a crucial part of Robertson’s theory and he continued to maintain (controversially – see Hawtrey, 1926: pp. 432–433) that the banks customarily provided the bulk of the lacking required for circulating capital. It was through this device that money was introduced into the analysis. In providing both the finance and the money with which it is done, banks constitute the institutional basis for the working of the quantity theory and the mode of adjustment via changes in the price level. Because money also aggravates the extent of industrial fluctuation, monetary (banking) policy must bear the dual responsibility of providing sufficient short lacking to meet the needs of capital creation and of ensuring that actual fluctuations are at the justified level: that is, that money is rendered neutral. In Robertson’s scheme, banks play their part in the provision of short lacking in two ways. First as facilitators, enabling savers to realise their intentions by transforming spontaneous new hoarding into applied lacking by restoring the price level. In this way, price stability is maintained and individuals retain the initiative of choice between present enjoyment and provision for the future. Second as plunderers, raising the price level and forcing a reduction in consumption to meet what the authorities deem the long-term social interest. In the first (‘transformation’), the effects depend on the stage of development of the banking system. Simple ‘cloak-room’ banks will lend deposited metallic money to entrepreneurs and so, in effect, act as the

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agents of savers. Modern deposit-creating banks, however, will increase the money stock by extending credit: By expending these loans businessmen procure practically the whole of that part of the expansion of Circulating Capital which they are not willing to provide by direct lacking. (p. 51) With this development, therefore, even on Robertson’s terms, all is transformed. Investment is no longer saver-driven or saver-constrained, for the banks are able to give entrepreneurs command over real resources to an extent governed only by commercial considerations. That is, the banks are able to reorder the orthodox saving–investment sequence and also the distribution of income. Through the banks, money has real effects. However, in Robertson’s account, the operations of both types of banks are retained in the enabling category. Apparently aware of the danger posed by his need to ‘interweave’ the quantity theory (as modified to take account of modern monetary developments) with the saving–investment sequence, Robertson produces an ingenious solution: Since the expenditure of new money imposes Automatic Stinting on the rest of the public . . . it is tempting at first sight to suppose that under modern conditions a large part of the new Circulating Capital created during any given period of time is the product not of deliberate waiting; but of forced levies on the public. (p. 51) Nevertheless, he argues, perhaps nothing fundamental has changed after all: On the other hand, since the additional loans give rise to additional money deposits in the hands first of the borrowers and then of those from whom they make purchases, it is almost equally tempting to suppose that the new Circulating Capital is the product of the New Hoarding of the owners of these deposits. (pp. 50–51) Leaving aside the fact that by the time that the sellers are contemplating increasing their hoards, the investment process will have been set in train and forced saving imposed, what we have here is an application of the repercussive principle, which, in Keynes’s hands, later became the ‘multiplier’. That is, people make voluntary decisions concerning increments of money deposits (increments of income for Keynes) created and brought to them as part of a larger process of which they are not aware.

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Constrained by the terms of the quantity theory, however, adjustment for Robertson must come via relative movements of the price level. It is through this device that he sought to maintain the voluntary principle and the orthodox sequence. How successful was he? The proof of the pudding lies in the three cases he examines, in each of which Robertson allows the banks to take advantage of especially favourable circumstances to perform their enabling function, of ensuring the delivery of short lacking, by way of stabilising (restoring) the price level. The first, the simple increase in hoarding we have met before, is the most revealing. Some or all of the public increase the size of their hoards. The reduced flow of money onto the market causes the price level to fall and some (the remainder) or all of the public enjoy unexpectedly increased consumption. As a consequence, though some or all are saving, in aggregate there is no lacking. This is the cue for (modern) banks to make loans of appropriate amount to restore the price level and so enable savers to achieve their aims: The action of the bank [he envisages a single giant bank] imposes Automatic Stinting: considered in conjunction with the New Hoarding, it nips in the bud the Automatic Splashing which would otherwise occur as a by-product of the New Hoarding. The bank, therefore, while imposing Automatic Stinting is not imposing Automatic Lacking, but is in effect transforming Spontaneous New Hoarding into Applied Lacking very much as a ‘cloak room’ bank does when it accepts cash from the public and lends it out to entrepreneurs. (pp. 53–54) That is, though modern banks have the power to make redundant the traditional role of the voluntary saver in financing investment, and, therefore, the orthodox saving-investment sequence, they are acting here merely as agents – as cloakroom banks would do – so that the sequence is maintained. Or is it? When we look more closely, we find that even in the most favourable of the cases, Robertson is employing an elaborate apparatus, based on a sleight of hand, to suggest that nothing fundamental has changed. This has two aspects. The first is that, the banks are purloining real value from an unsuspecting public behind the smokescreen of a stabilised price level. In Robertson’s quantity theory framework, with a given output and all adjustment coming via the price level, the public are presented with a widow’s cruse of value. By increasing nominal hoards and so reducing the price level, they find that not only is their consumption maintained at the previous level but also their hoards grow in real

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terms. Or, that is the appearance, for in reality – the second aspect – the banks are skimming off the increase by way of loans to entrepreneurs – their favoured clients. The obvious answer to this charge is that this is how banks work, taking in deposits and passing them on, or raising the price level and forcing some to go without. But this defence is merely to confirm the power of money to effect real change, with the banks re-allocating resources from one group to another and from one use to another. Robertson’s justification would be that people are, undeniably, choosing to go without consumption on the one hand and that this is only the equivalent of the loans made to the banks on the other. That is, there is both going without and money loans to finance investment: two relatively unexceptionable notions that are at least a step on the road to a post-orthodox theory of investment and saving (leaving aside the remaining problem of the mingling of saving and money as means to finance investment). The deeper objection to Robertson’s solution is that he has not maintained the orthodox sequence at all. When Robinson Crusoe decides to build a boat or a jetty to increase his chances of catching fish, he perforce chooses to reduce consumption as a means of accumulating a sufficient stock of food to carry him through the investment period. That is, he chooses to go without as the necessary cost of acquiring capital goods. By contrast, Robertson’s hapless public choose to reduce consumption in order to accumulate money hoards – not to engage in investment. Again, Robertson’s answer would be that in the non-cooperative case the interests of employers and employed are ultimately closer than they realise and that it is in the enlightened self-interest of the entrepreneur to be given the initiative and so define the standard-case test for the appropriateness of fluctuations. This is justified so far as it goes but provides no solution to the problem posed for orthodoxy by recognition of the existence of money. That is, the public may now choose to hold money as an alternative to engaging in investment and it is the entrepreneurs who, with their allies and agents the banks, drive the investment process and loot value from the public on the grounds that it is in the public’s long-term interest. Individual choice and the saving-drives-investment sequence, however, are lost. The remaining two cases are even less convincing. In the first, the favourable circumstance does not even retain the appearance of choice. Here banks take advantage of a general increase in individual productivity to spirit away the real increase in welfare that should be the fruits of the productivity gains (acceptance of new working practices and so on). By restoring the price level, banks can

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Extract from the public an amount of Lacking – partly Automatic and partly Induced – equal to the increase which would have automatically taken place in the real value of the public’s money stocks. (p. 54) In the third case it is not even possible to maintain the appearance of price stability. Here, a rise in output resulting from an increase in the labour supply will only become available at the end of the period of production. In the meantime circulating capital must be financed and for this lacking must be found. If the new workers spend their wages and do not hoard during the production period, then because the new output will not be available the price level will rise and the lacking will occur. If workers then hoard as the new output becomes available the price level will fall and lacking will be impaired. In this situation, Robertson would be keen for the banks to return the provision of lacking to a voluntary basis as quickly as possible by raising the price level again (p. 56). In each of these cases, we have seen the banks taking advantage of fortuitously favourable conditions to deliver required short lacking by way of stabilising the price level. But what if ‘there is no increase in individual productivity and no change in the attractiveness of Hoarding’? What in that case would be ‘the rate at which, without disturbance to the price level, the creation of new ‘Circulating Capital can be procured through the bank’ (p. 57)? Before moving on to Robertson’s answer, we may pause to reflect on the significance of his emphasis on the maintenance of price stability. In the Study he opposed orthodox teaching in favour of price stabilisation as the means of stabilising the economy, by arguing for variation as a way of rationing scarce resources over the cycle, in the interests of economic efficiency and longer-term stability. This opposition to price stability was also the premise with which he began BPPL (p. viii). Later, in ‘Theories of Banking Policy’ (1928b), price stabilisation was adopted as a norm, from which departures could be sanctioned on approved grounds (see below). In BPPL, however, price stability serves both to disguise the depredations wrought by banking policy and to maintain the appearance of normality – that real relationships are preserved. Having exhausted the special cases which allow the extraction of lacking to go unnoticed, however, Robertson provided an equilibrium condition which he subsequently refined into the much noticed ‘four crucial fractions’. He was later to claim that his formulation was a precursor of the Domar equation for equilibrium growth and this in turn has given rise to an attempt

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to interpret Robertson as primarily a post-Keynesian growth theorist (Costabile, 1997). Instead, what Robertson provides is a means for deciding how far banks can go in obtaining supplies of short lacking, without disturbing the price level as the outward sign that the economy is working as before. If K = nD, circulating capital can be expanded at a uniform rate while maintaining price level stability (where K is the period of circulation of money, that is the public’s real hoarding/money stock as a proportion of annual money income, or income-velocity of circulation, D is the period of production and n is the proportion which circulating capital bears to annual output during a production period). If, however, K is less than nD – there is too high a proportion of abortive lacking – then either the growth of circulating capital must be restricted, or more lacking must be directly applied, or the price level will have to rise. With K and D being independently determined, price stability is a matter of good fortune and Robertson estimated that with a money stock valued at about half annual income (that is, K = 6 months), the period of production D not less than 12 months and n not less than three-quarters of this (p. 58 n. 3), England was not so blessed. This has implications for policy. While economic growth might require a continuously rising price level, the extent of this could be moderated by increases in individual productivity and by a change of saving habits such that more of the burden of finance could be borne by an increase in direct spontaneous short lacking. By contrast, in the conditions of the cycle, with short-period alternation of expansion and contraction, banking policy has the more exacting task of meeting the conflicting objectives of the maintenance of price stability and the provision of adequate supplies of short lacking (p. 59). It is in these conditions that banks are given the justification to play their part through the imposition of short lacking. Justification is necessary because imposed lacking violates the orthodox presumption in favour of price stability, the ethical imperative (stemming from the Study) in favour of voluntary going without and the saving-investment sequence of the Robinson Crusoe economy. It is at this point that economic necessity forces abandonment of any pretence of the real changes taking place. The fundamental feature of the upward swing of a trade cycle is a large and discontinuous increase in the demand for Short Lacking, occurring as the essential preliminary to an expansion of output [which is ‘justified’] (p. 21)

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In this situation only the banks can act fast enough to meet the demand. Therefore, It seems unreasonable to expect the banking-system both to ensure that appropriate additions are made to the quantity of Circulating Capital and to preserve absolute stability of the price level (p. 72) By making loans and forcing a rise in the price level, the banks have allowed capital expansion to proceed but at the cost of depriving individuals of the choice between present and future consumption, reversing the orthodox saving-investment sequence and pre-empting individual initiative. Note also, that even though the changes in output are ‘justified’, they would, in the absence of modern banking, be limited by the availability of short lacking: ‘The introduction of this slip-joint into the system, therefore, poses a dilemma which is resolved by a policy-decision in favour of the social benefits of long-term growth – of which fluctuation is a necessary part – over the individual choice of transactors (see, for example, pp. 78–79)’ (Fletcher, 2000: p. 275). In other words, when the pretence that nothing fundamental has changed can no longer be sustained, the last resort is a policy decision that says that it is necessary and really for the best anyway. It is, nevertheless, a risky procedure as, for a number of reasons (pp. 71– 76), the justified rise in the price level could stimulate further increases. These, added to the real causes of disturbance could give rise to ‘inappropriate’ fluctuations. Consequently, not only must the banks step in to facilitate justified increases in output, they must also act (using traditional banking methods) to prevent or check ‘these secondary phenomena of trade expansion’ (pp. 76–79). In addition, they must, in the contrary situation, prevent any unjustified decline in the scale of industrial output and uneconomic falls in the price level! This is both a key policy role and a formidable task for the banks and one that seems completely at odds with Robertson’s designation of money as unimportant or as of only secondary importance. That this role is of crucial significance in Robertson’s theoretical scheme – and not simply one of removing monetary froth from the top of more important real movements – is made quite clear by the part they play in the provision of lacking to meet the large demand during the upswing and by Robertson’s warning that should the banks, in turn, fail to control the ‘secondary phenomena’ then an ‘acute shortage of circulating capital’ could arise due to the impossibility of extracting any more lacking from the public. In this situation the only solution would be the unwelcome

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and economically damaging one of extended action drastically to reduce demand (pp. 79–80). The full extent of the banks’ role in managing the short period is revealed when we bring long lacking into the picture. The two differences of significance to take into account are as follows. First, that whereas short lacking is required during the production period but then released for ‘re-embodiment’ in the next batch of circulating capital, long lacking is required for fixed capital for an indefinite period (even after final sale) and at a rate equal to the increase in output. Second, that whereas banks are the primary source in the provision of short lacking, long lacking is presumed to be primarily the outcome of voluntary decisions. This is not, however, a clear dichotomy, as it is unlikely that voluntary (spontaneous) long lacking will be sufficient to meet demand. Consequently, it is, again, the banks that must step in to make good the shortfall by way of imposed lacking inflicted on the public and, as in the case of short lacking, to act in the crisis conditions of acute shortage to reduce demand (pp. 88–91). Once again, therefore, it appears that money and the banking system must play their part and in so doing subvert established relationships. In fact, however, Robertson introduces a twist that turns this notion on its head. This is because in the main, ‘the expansion of long lacking depends . . . on the initiative of investors’ (p. 91). Further, because Robertson views long and short lacking as complements, an expansion of long lacking will increase the demand for short lacking. Consequently, the ‘investors’ will dictate the rate at which short lacking must be supplied: ‘the pace is set by investors, with their increased offers of long lacking’ (p. 92). In other words, by arbitrarily introducing this device, Robertson is able to claim that the orthodox sequence is, after all, maintained and the banks must take their time from the individual decisions of voluntary savers. Nevertheless, even on Robertson’s terms, the banks’ role in the management of the economy is of breathtaking complexity, for it falls to them to maintain a proper balance between short and long lacking. This relationship is complicated by the fact that capital goods, unlike consumable goods, require the cooperation of short lacking during both the construction period and subsequently for their operation, so that the banks must take account both of the stage of the cycle the economy has reached and of the particular trades the needs of which they are seeking to manage (p. 92). When the relationship between short and long lacking is recast in terms of the goods for which they provide, namely circulating and fixed

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capital, we obtain a more recognisable picture. It was one of Robertson’s insights to understand that consumer goods and capital goods are complementary in production. Thus the task of the banks, in maximising the level of welfare, is to regulate the relationship between the cycle and the trend by adjusting the relative rates of output of consumer goods and capital goods. By this means they will achieve economic growth at lowest possible cost in terms of lost consumption. In conclusion, how successful can Robertson be said to have been in his enterprise? First and foremost, he had produced a remarkable book, at the heart of which was a seminal contribution to thought on the crucially important relationship between saving, investment and money. In this can be found ‘in embryo’ parallels of what seemed revolutionary in Keynes’s New Economics, though all the time retained within the boundaries of orthodox theory, as expressed in Say’s Law and (the Cambridge version of) the quantity theory of money. In Money (1922) Robertson had perceived the power of money to bring about real changes and in seeking in BPPL to disguise this fact, had succeeded only in reinforcing the impression. Though money is repeatedly referred to as unimportant or of secondary importance in Robertson’s work and is cast in BPPL as only a subsidiary cause of the amplitude of fluctuations being greater than that deemed justifiable, money constitutes the whole focus of the book. Money, through the agency of modern banking, not only furnishes otherwise unobtainable supplies of lacking and redistributes purchasing power but also provides the (price level) mechanism of adjustment in the relationship between money, investment and saving. As part of this, Robertson’s perception of the distinction between the effects of saving by one individual taken separately and of saving by all taken together is one of his most important, though this interdependence, central to his notion of lacking, is manifest only in fluctuations of the price level and it was left to Keynes to realise its full potential – as an expression of the fallacy of composition as the principle behind his theory of income-determination. In BPPL it is open to criticism on the grounds of the widow’s cruse fallacy: that is, the possibility of adjustment via price level variation depends on the assumption of a fixed output (Hawtrey’s charge: Hawtrey, 1926; Hawtrey–Robertson, 1933: pp. 699– 712; Hawtrey–Robertson correspondence in HPCC). Robertson was to accept that while this might be true in his pure theory, his whole preoccupation was with the variation of output (Robertson, 1949b: pp. xii–xiii). Money is also, in the hands of the banking system, the principal means for the management of the economy. By regulating the relative rates of production of capital goods and consumer goods, the banks can seek to

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ensure that the actual amplitude of cycles is no greater than the justified level and so play their part in meeting national growth targets at lowest possible cost in terms of lost consumption. Though Robertson is careful to say that monetary policy can only be one aspect of a broader policy of stabilisation (1926: p. 4), the amount of space devoted to monetary management and the exhaustive and elaborate nature of the analysis of the topic, can leave no doubt as to its relative importance. The most damaging criticisms of Robertson’s attempt to contain the power of money, in the interests of preserving intact the fundamentals of inherited theory, are as follows. First, he produced a monetary analysis that subverts the orthodox presumption in favour of the initiative of the individual and of the, Say’s Law, sequence of saving prior to investment. Second, the analysis also violates Robertson’s own ethical imperative regarding the choice between present enjoyment and provision for future generations’ welfare. Third, there is also the fundamental incompatibility posed by the introduction of money to a theory based ultimately on Cambridge microeconomics, which in turn has behind it the assumption of frictionless barter. As we have seen, Robertson claimed in BPPL that it is safe to continue to make the assumption and that money merely brings us to the same destination by a different route (Robertson, 1926: p. 23). Given the extent of money’s influence, however, it is not a tenable position and, to finish, we might note that Robertson was later to admit his failure to integrate the two sides of the analysis. In a draft letter to Marjory Tappan (later Hollond) he acknowledged that he had assumed ‘frictionless barter equilibrium’ but had failed to establish greater unity between the ‘first half of my book, in which I take “barter equilibrium’’ as the ideal, and the second half, in which I advocate a banking policy which is not such as to produce immediate b.e.’ [barter equilibrium]. (C/3/1/2 RPTC). All in all, the parting verdict on BPPL must be that Robertson had achieved far-reaching insights into the nature of the relationship between money, investment and saving and glimpsed the implications of this relationship for orthodoxy, for Say’s Law, for the micro-foundations of Cambridge economics and for individual freedom of choice in saving behaviour. This, however, meant that the enormous possibilities opened up for the future development of the subject were precluded by his need for a reference back to firm intellectual and emotional foundations. For Robertson, the theory of the whole economy would progress no further, except in the direction of refinement and restatement in alternative terms.

14 An Ideal Banking Policy

Of the post-1926 developments, one, the refinement of the policy implications of his analysis can be dealt with here. The others, concerned with the sequencing of his argument, its recasting in interest rate terms and the significance of the remarkable parallels that exist between Robertson’s 1920s and Keynes’s, revolutionary, 1930s ideas, will be discussed in the following chapters. In a lecture entitled ‘Theories of Banking Policy’ (‘TBP’), given at the London School of Economics in February 1928 and published in Economica in the following June, Robertson provided support for the idea that the position he took in BPPL was definitive by way of an unqualified reiteration of the theoretical argument. He did, however, take the opportunity to provide some elaboration of his theoretical analysis and policy recommendations. First, he elaborated the condition for equilibrium from the original form of K = nD, which gives stability of the price level where the monetary and real ratios are equal, to specify more fully the role of the banks. This new version takes the form aK = 1/2bD Now a becomes the proportion of their assets (liabilities) that banks devote to the provision of circulating capital, while on the other side, b becomes the proportion of existing circulating capital built up via bank loans rather than from spontaneous lacking. With a one-year period of production (D = 1) for England and the United States we have, as proportions of that one-year time period, a = b = K = ½. Then, with KR as the real value of aggregate bank deposits, DR as the real income or output during the period of production and C as the amount of circulating 145

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capital, the condition for equilibrium in the banking and industrial systems is aKR = bC and C = ½DR Substituting in and dropping R from both sides gives aK = ½bD That is, the banks are extending credit and creating deposits in the same proportion as bank lending is required to plug the gap in the financing of circulating capital left by the shortfall in spontaneous lacking. Robertson’s conclusion, the ‘climax’ of the process of building up ‘a rather elaborate scaffolding’, is Provided there is no change in the relative magnitudes of the proportions a and b, or in those of the proportions K and D, a uniform rate of growth in population and output can be sustained without rupture of equilibrium. But to this end it is necessary that the banking system shall add to the supplies of bank money at the same rate. Once more, therefore, in the case of the normal processes of progress as in the case of an increase in the desire of the average member of the public to perform monetary saving, the creation of additional money by the banks is seen to be not merely blameless, but a positive duty. (‘TBP’ in Hicks [ed.], 1966: pp. 31–32) Second, these refinements meant that the equation could prescribe banking policy in the face of real changes in the economy. Where, for example, there was acceleration in the long-run growth rate or, over the cycle, a short-run movement of industry through the first phase of recovery from deep depression. In such cases the various elements are ‘thrown out of gear’ (p. 32). The reasons for this are of great interest for an assessment of Robertson’s work. The key point is that the rise in output must be preceded by an increase in circulating capital. This will have two implications. First, that the proportion of circulating capital to annual output will rise above the C = ½DR specified for equilibrium; and second, and perhaps even more significantly, it must be provided, as Robertson now explicitly recognises, ‘before the real saving in monetary form which the new output facilitates is done’ (p. 32). Then, by casting the causal relationships involved in what are not strictly Robertson’s terms we shall

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be able to make the link with what is to come with what has gone before. Thus, what we might call the rate of voluntary saving out of increased income only becomes available after investment has occurred and, therefore, cannot help to make provision for it. Then, by deliberately leaving out of account any measures that might be employed to increase the amount of voluntary saving (the ‘various expedients’ that could help ‘to tempt the public into economy’, p. 32) and, thereby, obviating the question of whether it is possible to increase investment by increasing prior saving (a very classical possibility), Robertson places the whole responsibility for meeting the increased demand for circulating capital upon the money-creating powers of the banks. This produces a rise in the money supply and, therefore, in the price level and so extracts the necessary going-without by way of what he now refers to, in an attempt to become more comprehensible, as ‘forced saving’. The point to bear in mind is that if we were to leave out of account the latter ‘quantity theory’ effects, of a rise in the price level and imposition of forced saving, we are left with what suddenly seems a very different theory and one that would later become a familiar feature as part of Keynes’s New Economics. That is, that investment is financed by money balances, that increased investment produces increased output/real income and that this in turn gives rise to an increased rate of saving. But for his adherence to what he was later to refer to as the ‘ancient ceremony’ (Robertson, 1963a: pp. 327, 346) of the Cambridge version of the quantity theory, his need for a reference back to his intellectual and emotional roots, he would have something very revolutionary, something very Keynesian. First and last, ‘TBP’ was concerned with banking policy in relation to the price level and the provision of savings for investment and it was to established practice and preference that Robertson appealed to justify the role he accorded the banks. The assumption that industry typically had resort to the banks for loans to finance expansion was, in BPPL, the means by which money entered the system and activated the quantity theory mechanism of adjustment via the price level. Though crucially important for the working of his theory, this assumption was subject to empirical verification and was, as we have seen, condemned as invalid on these grounds (by Hawtrey, 1926). Nevertheless, in ‘TBP’ Robertson gave it further emphasis by arguing that over time the tendency to have recourse to the banks would grow so that bC would considerably exceed aKR. It is this disequilibrium that gives

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rise to an increase in the price level and imposes forced saving on the public. Robertson also used ‘TBP’ as the occasion for a review of various criteria for banking policy: the working of the gold standard, the principle of productive credit, price stabilisation. These criteria are of great interest because they can be seen to embody the economic and ethical aspects of the Robertson creed as worked out in the Study and modified for the post-war, monetary economy in BPPL. To test the criteria, Robertson asked three questions of each: First, can it be relied upon not wantonly to extort forced savings from the public? Secondly, can it be relied upon efficiently to transmute all real saving offered to it by the public into industrial capital? Thirdly, is it likely to respond readily to the genuine requirements of industry for exceptional supplies of savings in exceptional circumstances? (p. 34) In terms of all that has gone before, what is being asked is, can the banking principle in question be relied upon faithfully to put into effect the intentions of the public with respect to saving, but at the same time to be sufficiently flexible to respond as necessary to meet the demands of the growth process (including the integral cycle) when the community’s short-run saving plans must be overridden in the interests of long-run aggregate social welfare? His own solution, the ‘ideal banking policy’ that he thought best met the criteria, follows predictably from the analysis of BPPL and ‘TBP’. It shows him as not so much the radical in policy he claimed to be but, rather, a pragmatist who was willing to recommend necessary departures from an orthodoxy with which he was largely in agreement (much of the validity of his claim to be a heretic is in respect of the pricestabilisation policies pursued by the large industrial combines). Thus, Robertson’s ‘ideal banking policy’ might be one that was founded on the principle of price stabilisation as a norm, but which was ready to see the fruits of a prolonged and general increase in individual productivity shared in the form of lower prices, and perhaps to acquiesce in moderate price rises in order that advantage might be taken of discontinuous leaps in industrial technique. (in Hicks [ed.], 1966: p. 42) Finally, the policy measures are given perspective in the context of the Robertson view, in which economic problems are intimately related to the nature of man and in which, therefore, the solution of the problem would have to begin with the transformation of man himself:

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it would be a policy that did not claim omnipotence, or feel competent of its ability to cure the evils of uncertainty except in alliance with a much more comprehensive attempt to control and stabilise the desires and activities of the community than most monetary reformers – even, I think, most thoroughgoing Socialists – have yet visualised. (p. 42)

15 Varieties of Escape: 2, Traveller and Professional Actor

The reputation Robertson established in the 1920s, as an outstanding professional economist – and one moreover with a highly individual writing style – and as a gifted amateur actor, gave him his public face. But these were not the whole of his life. He had other interests and activities that, taken together, provided agreeable elements of intellectual amusement in engaging company and undemanding duty. The first came with a late call, probably in 1926, to membership of the Cambridge Conversazione Society, or Society of Apostles as it was better known. A confidential and exclusive club associated with ‘Bloomsbury’, the Apostles pursued a philosophy of life that took inspiration from the writings of G. E. Moore and emphasised love and beauty. Homosexual relationships were not uncommon. Regular meetings were held to discuss papers presented by members and at which the refreshments included anchovies on toast (‘whales’). Prospective members, ‘embryos’, were selected, usually in their first year, from the most intelligent, interesting, amusing and physically attractive of the undergraduates. Robertson had not been invited into membership in 1908 following vetting by Keynes, who thought there was ‘a good deal in his favour, but a little pudding-headed perhaps’ (quoted in Moggridge, 1992: p. 183). It must therefore have come as manna from Heaven when, at the advanced age of 36, he was given access to such a company of young men. If the date of 1926 is correct then his election would coincide with the publication of BPPL and thus at the end of a period of close collaboration with Keynes. Could it be that this was Keynes’s tribute to the impact of Robertson’s originality of thought on his own laggard theorising? There may also have been lobbying on his behalf from George Rylands, an established member with whom he was at that time in intimate relationship (see below). 150

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The second diversion was his service, from 1925 to 1931, as the first librarian of the Marshall Library. This specialist library, set up to serve the needs of staff and students in the faculty, was founded in 1925 by Alfred Marshall’s widow, Mary Paley Marshall, ‘largely with Alfred’s books’ (Dennison, in Dennison and Presley [eds], 1992: p. 6). Robertson’s duties, it seems, were of a part-time, formal and supervisory nature, with Mary Marshall herself carrying out the day-to-day work of a librarian: a role she energetically played for the rest of her long life. It is clear that the two got on well and that Mary Marshall appreciated what she regarded as Robertson’s warm, kindly and reassuring ministrations. All-in-all, during the 1920s, Robertson’s strategy for coming to terms with his personal dilemmas appeared to have been successful. With plentiful evidence of his success in economics and on the stage, his public self seemed to have achieved equilibrium between the demands of duty and desire. As might be expected with Robertson, however, things were not as they appeared: beneath the surface tranquillity he was still tormented by the (ever) importunate promptings of the unsatisfied private self. These, deriving from the warring constituents of his complex personal make-up, were necessarily incapable of solution. Economics, however, had seemed to supply the ideal compromise, allowing him to escape into a new self that also satisfied the duteous requirement to be ‘useful’. Outwardly it was a great success, especially as bolstered by his association with the ever-confident and ebullient Keynes. It was, however, a flawed strategy. The changing nature of economics grated on his aesthetic sensibilities and, most ironically, the very theoretical advances he achieved with Keynes in 1926 would lead inexorably to the cataclysm of the Keynesian Revolution. Their professional relationship came under increasing pressure and so weakened the support Robertson derived from it. It was thus easy for him to interpret the inability of economics to solve the insoluble as due to the strategy of compromise. That is, that if instead he had gone the whole way and followed his star he would have found peace in the realisation of his artistic proclivities. Consequently, continued dissatisfaction with his lot must necessarily keep alive the thought of final escape. The ‘Alice’ formula for coming to terms with the human condition included the requirement to find love and here Robertson, because of his homosexuality, was denied the conventional means for doing so. Though there is evidence of a female attachment soon after he returned from the war, his loves typically took the form of infatuations with young men. Robertson was included in a list of those who were castigated for

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making ‘an exhibition of themselves in their search for romantic relationships’ (Newsome, 1980: p. 367). The best known of his amours was that with George ‘Dadie’ Rylands, with whom he had a nine-year intimate affair. Alternately blissful and stormy, it provided for Robertson not only romance and physical release but also much heartache and emotional laceration. Cameo glimpses of its early stages were recorded by Benson in his diary and indications of its later progress are given by Robertson’s letters and Rylands’s own recollections. The Rylands affair is important from several points of view. First, because of Rylands himself who, for Robertson, filled the role of desired self made flesh. A King’s Scholar at Eton, Rylands went as a scholar to King’s College rather than to Trinity, read English rather than classics and after an interval working for Leonard and Virginia Woolf at the Hogarth Press, during which he wrote his fellowship dissertation, he returned to King’s as fellow and lecturer in English literature. As an undergraduate and fellow, Rylands was thus a citizen of ‘the great and shining metropolis of the Universe’, an authorised inhabitant of Robertson’s ‘land of lost content’ and a vision of Robertson as he would like to have been. An added attraction was that he proved to be a highly talented actor-director and was for many years a mainstay of the Marlowe Society and the ADC. In 1921, however, when he first appeared in Cambridge, it was his stunning good looks that set pulses racing and Robertson had many rivals. The two went on walking tours together, shared accommodation in London during Rylands’s spell there and, in 1927, relived Robertson’s tales of the desert war with a holiday in Egypt on the return leg of Robertson’s Asian tour. Love affairs by their nature are prone to emotional ups and downs but to this must be added the fact that Rylands was more gregarious and had a wide circle of friends, whereas Robertson wanted Rylands to himself. His possessiveness and jealousy and failure to obtain exclusive access finally led to his breaking off the relationship, in 1930. There is a parallel here with a future incident, when Robertson, after years as Keynes’s collaborator and elbow-critic, grew jealous of Keynes’s increasing involvement with Joan Robinson and Richard Kahn and withdrew from participation in debate. Second, because Rylands’s intimate involvement with Robertson over a period of years gave him a unique insight into the nature of Robertson’s problems. He believed that Robertson had an inferiority complex: that despite his prowess as an economist and as an actor, he thought of himself as a failure. This lack of self-esteem derived in part from his sexuality as, in the climate of the times, he could not ‘be himself’. Also, he

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faced the growing awareness that he could not do maths. This again lent importance to (the continuance of) his collaboration with Keynes and the approval it implied (and that as their relationship deteriorated his sense of inadequacy would increase). As a comment on this we might note that the sense of having failed was a constant of Robertson’s life, a manifestation of the private self. We recall an earlier parallel instance when Robertson was visited in his first year at Cambridge by Benson, who noted in his diary that despite his acknowledged brilliance and ability to win prizes, Robertson seemed hopeless and to be looking forward to nothing (see above, Chapter 3). Of course, at that time Robertson still at least had his youth but by the 1920s youth had fled and Rylands discerned two other sources of discontent: Robertson thought of himself as both old and as unattractive. With respect to his age, it is true that circumstances – his four years as an undergraduate, two years as a research student and five years in the army – had conspired to make him older than might have been expected. By 1923, the year of COI, he was already 33. More important, however, was that he looked old, so much so that his aged appearance attracted unsolicited comment. Lionel (Lord) Robbins, a friend and admirer, wrote I am not clear when first we met – I think it was in Hugh Dalton’s company in the twenties. There was already the characteristic appearance, the diffidence of manner, the hunched shoulders out of which there emerged, like that of some peculiarly gifted turtle, the nearly bald head with the face of a thinker . . . . (Robbins, 1971: p. 221) Baldness and age also featured in Keynes’s report to his wife of Robertson’s appearance at the time of his return from his Asian tour, in April 1927: only moderate – rather older, very bald, with the bones of his skull showing more than they did . . . very Chinese. (27 April 1927, quoted in Skidelsky, 1992: p. 283) Thirty years later, Corin Redgrave, in his biography of his father, (Sir) Michael Redgrave, distinguished actor and Robertson’s long-time friend and correspondent, observed the same characteristic features, now emphasised by the passage of time. He also employed an almost exact zoological parallel to that used by Robbins (tortoise). Corin likened his father’s world to Plato’s Symposium, which, it will be recalled, features a banquet at which guests in turn discourse in honour of

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love from a variety of viewpoints. It is Socrates who raises the discussion from the physical to the intellectual plane. In a company characterised by male beauty, it is the repulsively ugly but infallibly wise Socrates who is thus rendered supremely attractive. It was, of course, Robertson, at that time appropriately enough one of the ‘three wise men’ of the Cohen Council on Prices, Productivity and Incomes, who was given the distinctly dubious honour of being cast as Socrates (Redgrave, 1995: p. 111). It is true that these descriptions do not make him seem particularly attractive but in addition, unattractiveness may not stem from physical features alone. There is also the rather forbidding haunted, worried look that is detectable in photographs of the time and which arose perhaps from his consciousness of his life situation: an outward token of the unhappy private self. Though he felt himself to be old and unattractive, his manner in everyday encounters showed that he craved affection. The desire was conveyed to a wider public in his stage appearances. We recall that ‘at Cambridge he came to specialise in old men’s parts’ and that ‘his ancients, deservedly or not, became rather sympathetic characters’ (Butler, 1963: p. 40). The explanation is that Robertson was playing himself, the self he disliked, and appealing to the audience to find him attractive. Thus, as the 1920s wore on, the defects of Robertson’s compromise solution to his life’s predicament became increasingly evident. The nature of economics, his lack of mathematics and the turbulence of his emotional life must all be set against the professional recognition he received. With Robertson, that which came easily was typically disregarded in comparison with the aspects of life he felt were denied him. Furthermore, his relationship with Keynes, which had proved a mainstay, now came under increasing strain and, in terms of wholehearted collaboration, broke down over the writing of BPPL (see Chapter 12). This was the event that brought matters to a head and prompted the long-delayed attempt at final escape with, as a sort of preliminary or trial run, a period of absence from all that was accustomed and familiar. This preliminary was a tour of Asia, for which Robertson obtained leave of absence from August 1926 to April 1927 – a period of over eight months. He travelled first to Russia with, in Moscow, a glimpse of Lenin’s ‘white and waxy little body’ (embalmed and much shrunken after a stroke). Then on via the Trans-Siberian Express to Manchuria, where he was appalled by the expatriate representatives of Empire he met in

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the English Club at Mukden. A stay of 12 days in Japan allowed visits inter alia to the ancient cities of Kyoto (the old capital) and Nara (where he was much impressed by the university’s Department of Economics), before travelling to China. Here he viewed the Great Wall, the Ming Tombs and the sights of Peking – which he found ‘supremely undisappointing’ – and visited the cities of Nanking, Shanghai and Canton. Crossing Indo-China, he saw the ruins of Angkor and visited Bangkok and then moved speedily on through Malaya (looking at tin and rubber) and Ceylon (for the tea-growing) to South India, which was to provide the highlight to the whole tour. This was a visit to the Laccadive Islands in company with the inspecting officer, for which the pair were rowed ashore in island boats accompanied by fireworks and singing. This ‘delightful little Odyssey’ left an indelible impression and some years later Robertson decided to share his memories with a wider audience in a broadcast talk given in 1931. This was printed in The Listener and included with a collection of his economics articles published as Essays in Monetary Theory in 1940. Even today such an extended tour would be seen by many people as a journey of a lifetime but in the 1920s it would have been an altogether much greater enterprise. Of course, Robertson was used to sojourning abroad, after his war service, and he was clearly something of a privileged traveller, mixing in diplomatic circles and enjoying the best facilities available. Also, these foreign tours were not unknown and had become in fact rather the fashion. The Albert Kahn Travelling Fellowships existed to facilitate them, though they were not granted automatically and Robertson’s application was unsuccessful. More significant is the timing of Robertson’s absence from Cambridge and here Hicks points obliquely to the reason with his comment that Robertson went ‘after Banking Policy [BPPL] was off his hands’. There is no doubt that a refreshing break would have been welcome at such a juncture. He had been hard at work since he returned from the war in 1919 and the period had culminated in the gruelling process of composing BPPL. The problems arose both because of the inherent difficulties involved and because the ideas were thrashed out with the benefit of Keynes’s notoriously heavy-handed collaboration. The struggle over BPPL was in fact the latest episode in Robertson’s collaboration with Keynes during the 1920s, a role that, for reasons already explained, the performance of which he found increasingly onerous (see above, p. 126). Austin Robinson, who had himself collaborated with Keynes, had warned against the dangers of keeping too close and of the importance

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of seeking a period away for reflection and for the establishment of an independent identity out of Keynes’s shadow: I, like a few others, stayed on in Cambridge and became his [Keynes’s] very much junior colleague. It was at this stage of achieving maturity that some of us, at least, found the necessity to stand back, to escape from our self-imposed surrender and to try to see him more objectively . . . to stand back and to get out for a period from under his shadow. What was more important was that most of us, having recovered our own initiative, came back and learned a more independent, a less subservient, relation . . . when I look at my friends and colleagues I cannot help cataloguing them into those still in the phase of uncritical adulation, those struggling for independence and those who have won through (in M. Keynes [ed.], 1975: p. 11) Taking his own advice, he had spent two years in India as tutor to the Maharaja of Gwalior, thus removing himself from the company of a titanic figure whose influence could be both exhilarating and stifling. Robertson’s own response, as we have seen, was to write his most important book in a private inaccessible style and, like Robinson, to take himself off to foreign parts. Though the two would remain on friendly personal terms and Robertson would turn instinctively to Keynes for help and advice in times of perplexity, BPPL heralded a phase of greater detachment on Robertson’s part and the pursuit of a more independent line. Once back in Cambridge, however, he was absorbed into the accustomed routine of academic life with no discernible change in the pattern of his life: In the Michaelmas [autumn] term 1927 he was again lecturing on Principles for Part I of the Tripos, doing his stint of College teaching, and producing a steady flow of articles, book reviews, lectures for conferences, as well as pursuing his other interests, including acting. (Dennison, in Dennison and Presley [eds], 1992: p. 24) Nevertheless, two factors, one negative and one positive, came together to ensure that the Asian tour was indeed only a preliminary to a more fundamental move. First, the loss of the emotional and professional support he had derived from wholehearted collaboration with Keynes; and second, another resounding affirmation of his prowess as an actor provided the stimulus for Robertson to seek to leave behind his old duteous self and find the self he had always desired. In 1928 he appeared as Menenius in Shakespeare’s Coriolanus, a performance

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that drew appreciative notices, including one in the Cambridge Review of 9 March that compared it with his triumph as Subtle in Jonson’s The Alchemist 14 years before. It was this that seems to have provided the final spur. Though the picture is not unequivocally clear, the impression is that Robertson sought to leave Cambridge and academic life for a career as a professional actor. The evidence is as follows. George Rylands believed (interview 17 February 1994) that Robertson had gone to Stratford to be interviewed with a view to a career on the professional stage: I think he was interviewed at Stratford by Glen Byam Shaw (dead some time ago) – probably after his success as Pandarus in 1922 and Menenius in 1928. (Rylands to Fletcher, 7 April 1994) The difficulty here is that, at the time in question, Byam Shaw would not have been sufficiently far advanced in his career to have provided an authoritative assessment (his first stage appearance was in 1923 and he did not direct his first independent production until 1946). However, in 1953, he was appointed co-director with Anthony Quayle of the Shakespeare Memorial Theatre company at Stratford and took over as sole director in 1956. Given that Robertson himself recorded that he was ‘rejected’ by Byam Shaw at Stratford in 1959 (see endorsement to A7/109 RPTC), it is likely that Rylands was running together two separate incidents. In the first, a letter of 1929 refers to a situation in which Robertson had had to agonise over a decision connected with a production of King Lear in London and that he subsequently endured feelings of ‘disappointment’ and was tormented by doubts as to the rightness of his decision. Whatever the precise nature of the question, the upshot was that he had to watch someone else in a coveted role (letter from his sister Gerda, 22 January 1929, A1/11 RPTC). So, even if he had not been explicitly rejected but had instead decided against taking the opportunity to escape into a new life, it is at least possible to see in his failure to move, the triumph of duty over desire and that he was still a prisoner of the past. In the second, it is apparent that regardless of the events of 1929, Robertson never gave up his dream of a career on the stage. In 1949, for example, he was corresponding with Anthony Quayle, with whom he had acted in Troilus and Cressida at Cambridge in 1932, over the question of Robertson’s going to Stratford to play as a guest artist. Subsequently, however, mould was his portion as in 1957 he was (ironically, given the success he had enjoyed in the role) dropped from the part of Menenius

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in Rylands’s BBC recording of Coriolanus. Then, two years later, hope springing eternal – even at the age of 69 – he applied to Byam Shaw in 1959, only to receive the ‘dreadful blow’ of rejection and ‘another indication that he had failed’ (Rylands, interview 17 February 1994; see also, Bromley to Hicks, 19 August 1963, in G11 RPTC). Nevertheless, there is just an outside chance that there may be some significance in Rylands’s reference to the earlier date. Byam Shaw’s fellow actor Michael Denison has recorded that, after his schooldays, Byam Shaw next came to notice as a professional actor, apparently without training, in a play at Torquay. Now, untrained, but clearly talented, professional actor was precisely the status to which Robertson aspired. Furthermore, Byam Shaw’s first London appearance, as early as 1925 with John Gielgud in Chekhov’s The Cherry Orchard, led to his appearance in three more Chekhov plays during the following four years. If Byam Shaw could so easily become a prominent actor then why could not Robertson do the same? It was on this basis that Byam Shaw’s opinion would have carried weight. The familiar fly in the ointment, however, was that of looks. Denison noted that, these were the years of the matinée idol and Byam Shaw was recognised as being strikingly handsome. Furthermore, a cousin who was a close friend of the actress Ellen Terry may have provided the encouragement to get him started (Denison, in Harrison [ed.] 2004: Vol. 50, pp. 98–100). Poor Robertson: no striking good looks and as far as support from theatre people was concerned, even Rylands thought Robertson aged his characters without any justification from the text of a play. It has been worth spending time on this as the matter was so dear to Robertson’s heart and the sense of rejection he felt went so very deep. Of course, for someone blessed with his advantages in life, to disdain that at which he excelled for that which was temperamentally beyond his grasp seems perverse and could only give rise to disappointment and failure. Failure was, however, inevitable because in the long-running battle between duty and desire, duty would always prevail. In any case, the evidence is that though he was an outstanding amateur actor, he was judged to lack whatever it was that could have allowed him to escape to his desired life in his ‘land of lost content’. In the late 1920s, therefore, the loss of his two lifelines, the dream of final escape and the support he derived from his wholehearted collaboration with Keynes, left him dependent on economics and, therefore, vulnerable to future shifts in the professional landscape. The stage was set for the upheavals of the 1930s and the crisis brought by the Keynesian Revolution.

16 The 1930s: Robertsonian Theory and Policy in the Decade of Keynes

The 1930s proved to be another crowded and eventful decade for Robertson. It opened with his appearance as an expert witness before a committee set up by the government to enquire into possible financial means of alleviating the depressed state of British industry; saw the publication of two articles that, respectively, refined his ideas on saving behaviour and recast his theory of fluctuation in interest rate terms; gave him the opportunity for another sojourn abroad, though this time on official business; presented him with his greatest professional – and personal – challenge when Keynes published his The General Theory of Employment, Interest and Money in 1936; observed him in the same year, in effect, hailed as one of the world’s leading economists; saw his counsel being sought by national and international official bodies; found him in conflict as collegiality in the Cambridge faculty broke down in the fervour of the Keynesian Revolution and, finally, witnessed his departure from Cambridge for greener pastures in London. It was inevitably the controversy with Keynes that came to colour views of the decade, largely because of the long shadow it cast and this will, in consequence, loom large in what is to follow. This was not, however, the whole story and as indicated above there is much else of interest and importance. The committee of enquiry to which Robertson presented his evidence was the Committee on Finance and Industry (the Macmillan Committee). It was set up in November 1929, held its first meeting in the same month and completed its report in June 1931 (Cmnd 28897) The occasion for its appointment was the deteriorating economic situation as indicated by the unemployment figures, which had averaged over 10 per cent during the preceding six years of the 1920s and then rose steeply to more than 21 per cent over the period during which the Committee sat. Also, prices had been falling for a decade and there was a fear 159

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of continuing and worsening deflation. Possible explanations for this malaise lay both in conditions peculiar to British industry and to those stemming from the deepening depression in world economic activity. The main focus, however, was to be on the role of banking, finance and credit and the constraints governing their operation, both national and international; also, the means by which they could help in promoting the development of economic activity. These were matters upon which Robertson might feel particularly well qualified to pronounce. His theory of credit in relation to saving, investment and the cycle (BPPL) had been before the public for over four years prior to the presentation of his evidence and he had drawn out the main points in more accessible form in ‘TBP’. Keynes, by contrast, much more the public figure and man of affairs, who was to dominate the Committee and to use it as a forum for the promulgation of his newly wrought ideas, had still to complete his promised book. This, ‘his own version of the Theory of Credit’, which, Robertson had reported in 1926, ‘is to be published very soon’ (Robertson, 1926: p. 5), did not in fact appear until late in 1930, as A Treatise on Money. For Robertson, as acknowledged pioneer and established expert in the field, this was an opportunity to apply his theories to the problems of the real world. He submitted a substantial Statement of Evidence in April 1930 and so recondite did the Committee find the material he supplied that he was called to provide oral explication on two consecutive days in May. Robertson revealed himself as both advanced and innovative in his thinking and radical in his policy recommendations. It was an important test of his ideas as the chairman, H. P. (later Lord) Macmillan, would several times press him to make plain the practical measures to which his theories might lead (see, for example, Qs 4723 and 4732, Minutes of Evidence, 1931). Otherwise, for anyone familiar with Robertson’s previous work there were few surprises, though there was a characteristic neologism and a favourite literary allusion. Within the overall framework given by his theory of the cycle in a growing monetary economy and the supply and demand (Cambridge cash balances) approach to the determination of the price level, Robertson’s argument is as follows. Saving by the public gives rise to investment. By changes in the amount of that part of their savings they entrust to the banks the public vary the velocity of circulation of bank deposits and hence the price level. An increased desire to save would, cet. par., reduce velocity and bring about a price fall. The role of the banks is to make saving plans effective by offsetting the fall in the price level and so prevent thrift being dissipated in increased consumption at low prices. If they fail there cannot be the

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requisite going-without on the part of the public. Banks attempt to offset the price fall by extending credit via loans and investments. In this regard it is most important that ‘they should take the trouble to make such loans as will bring the money created as a result of those loans rapidly and easily into touch with commodities, whether of a consumable or an instrumental kind’ (Macmillan Evidence, Q. 4731 and para. 8 of the Statement). The problem they face is the practical one of extending credit in an adverse economic climate. That is, quite apart from restraints imposed by adherence to the international gold standard (which was, incidentally, absolved of being the primary cause of Britain’s problems) or restrictive reserve requirements, banks’ lending might be limited by a lack of demand to finance the purchase of both consumption goods and, of particular interest, capital goods. This was a major concern to which he had given voice in ‘TBP’. There he had drawn attention to the difficulty of the US Federal Reserve, in 1927, in their efforts to raise the price level, given that industrial progress had shortened the period of production and therefore reduced entrepreneurs’ demand for circulating capital and with it recourse to the banks for loans. With demand for business loans falling away there had been a massive increase in loans to the public for the purchase of consumer goods. And if this was what was required in a time of prosperity, to what shifts might the authorities be driven if conditions were depressed: ‘if these things are done in the green tree, what shall be done in the dry?’ (Robertson, 1928b: p. 41; Macmillan, Evidence, Q. 4807). What will happen should the United States ‘ever become even temporarily saturated with fiftystorey buildings and motor cars’? In such a situation, monetary policy on its own might not be adequate and more radical methods of stimulation, such as public works projects, might be required: ‘the deliberate spacing through time of government and other large demands for constructional work’ (see Robertson, 1928b: pp. 41–2). This was prescient as the following year the Wall Street Crash signalled the onset of the World Slump. Notice that it is the lack of demand for bank credit that stems from a lack of demand for goods and services and not the other way round. It is due to the market being – at least temporarily – saturated. There is a limit to the capacity of the market to absorb; there is a limit – at least temporarily – to human wants. To describe this situation Robertson had, true to form, introduced his own term which, in this instance, provides an example of his penchant for neologism not endearing him to everyone.

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[Chairman] You have started by inventing, I think, the most inelegant word that I have seen in the English vocabulary – it is quite new to me, I am glad to say – ‘gluttability.’ By that I suppose you mean the circumstances when the limit of saturation of wants has been reached? [Witness]-Yes. (Macmillan Evidence, Q. 4701) As a cause of industrial depression Robertson attached particular importance to his notion of gluttability. In consumption goods it could arise as the result of a rapid increase in production temporarily outstripping the absorbency of the market. In the case of capital goods, which play the key part in his theory of fluctuations and growth, the problem is particularly acute as investment ‘proceeds discontinuously – in lumps and by jumps’ (para. 11). The task of the banks is, in the first case, to encourage the emergence of new patterns of demand and, in the second, to be prepared to abandon their accustomed preoccupation with liquidity and reserves and to become more adventurous in their lending policy, to the extent of finding ‘ways and means of financing permanent investment’ (para. 7). This is all, as we have noted previously, a heavy burden for the banks to bear and the only reason for which they are to be so taxed, in terms of lost profitability and increased risk-bearing, in pursuit of a higher level of employment, is because of Robertson’s theory of saving. Saving in his view cannot be preserved. Unless it is used the instant it is created it will run to waste in consumption. Hence the banks must be active at the time when saving and investment are required. Of the other possible expedients for stimulating activity, Robertson, when pressed by Keynes, agreed that a very low rate of interest would help to promote investment. His summation, however, was that he attached little importance to the interest rate as in time of depression an extremely low long rate for borrowers would have to be combined with a relatively high long rate for lenders, so that equilibrium could not be reached (Macmillan Evidence, Qs 4831–4841 and footnote to Q. 4831; Q. 4933). With respect to wages and the question of their being at an uneconomic level, he attached less importance than some people to the effect of money-wage rigidity and more to upward pressure from trade unions. Also, that while a high wage rate would in principle maintain workers’ demand for products it might also reduce the demand for labour so that the wage bill and therefore total expenditure would be lower. Most interestingly, here, Keynes drew attention to an aspect of Robertson’s evidence that marked him out from other witnesses. This was Robertson’s insight, of potentially far-reaching significance, that an outcome which would proceed from the action of one member of a group

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taken individually would not necessarily be true of the action when taken by all members of the group acting together. Mr. Keynes: The extreme importance of what Mr. Robertson has been saying to us is not rebutted because it is contrary to what other witnesses have been telling us . . . It may be that witnesses who have been thinking that we shall have a very large increase [in exports due to a reduction in (wage) costs] have been looking at it from the point of view of the individual manufacturer. (Q. 5009) It was this insight that had inspired his concept of lacking in BPPL. Here he is applying the same insight to the relation between wages and expenditure. The curiosity is, of course, that the insight never extended to recognition of the paradox of thrift. In general, Robertson would not be in favour of a drive against wages but would willingly accept a reduction of, say, 10 per cent (the margin by which the pound was said to be overvalued internationally) if it were freely offered by the unions without friction (Macmillan Evidence, paras. 16–20; Qs 5000–5009). Finally, he attached less importance to international factors in Britain’s adverse economic situation than did others as the country faced problems which could be encountered in a closed economy. Hence, given the limitations of conventional remedies, Robertson was prepared to embrace the more radical option invoked in The Ebb and Flow of Unemployment (1923) and in ‘TBP’ (1928). This was the resort to schemes of public works, at a time when commercial demand for capital assets was at low ebb due to gluttability (para. 13): Now if thou would’st when all have given him over, From death to life thou might’st him yet recover. (Michael Drayton, Sonnets: Idea, lxi, in Macmillan Evidence, para. 13. See also above, p. 97 and Fletcher, 2000: p. 132) The doctrine of gluttability in turn justified public works as it contradicted the ‘Treasury View’ that public schemes merely absorbed resources that would otherwise be utilised by the private sector and so were ineffective (para 13). Such schemes would be judged not on grounds of profitability but as being useful in creating employment and as an extension of the normal public provision of capital assets. Moreover, they should be viewed not as a drug to cure but as a diet for recovery and

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health (Q. 4983). Though their use would in many cases be temporary – until private enterprise took up the slack – the actual period could be protracted and some would be long term, in the social interest. I do not accept the view that these public works are merely emergency things; some of them are activities which under modern conditions will fall to governments to do anyhow. I think my view in that respect is more socialistic than some people’s. I do not visualise an end in the immediate future to a Government policy of house-building, for instance. (Q. 4916, italics added) In terms of the extent of public works schemes which he would be prepared to advocate, he was clear that he would ‘like to go a very considerable way’ (Q. 4879) and that he accepted ‘Up to a point’, the chairman’s proffered rendering of his view as ‘The state can spend money better than we can ourselves?’ (Q. 4932). Here indeed were the radical measures at which he had hinted in ‘TBP’ (in Hicks [ed.], 1966: p. 42). The Macmillan Committee was, of course, set up to suggest solutions to problems the effects of which were felt by the country at large. Robertson sought to meet the concerns of this wider audience in a series of six broadcast talks entitled ‘Why Does Poverty Continue’, which were printed in the Listener in November and December 1931 (Robertson, 1931). Turning to the theoretical side of Robertson’s work, the earlier years of the decade saw a significant development when he recast the analysis of BPPL in interest rate terms. In so doing, he was following something of a trend as the idea of analysing fluctuation by reference to natural and market rates of interest was ‘the common (Wicksellian) element in Keynes’s Treatise on Money (1930) and Hayek’s Prices and Production (1931)’ (Hicks [ed.], 1966: p. 64 n. 2). This was new territory for Robertson and he advanced across it in a measured and deliberate manner, taking two articles to accomplish the feat. The recasting itself was undertaken in ‘Industrial Fluctuation and the Natural Rate of Interest’ (1934) for which ‘Saving and Hoarding’ (1933) provided the necessary preparation of the ground. Both, in their different ways, were important. ‘Saving and Hoarding’ was concerned with reaffirmation and refinement. It reaffirmed the analysis of Chapter V of BPPL (‘The Kinds of Saving’) and this, to obtain the necessary degree of precision in the face of available alternative analyses, involved a return to the use of ‘certain strange and barbarous language’ that he had jettisoned when writing ‘TBP’ (in Hicks [ed.], 1966: p. 24). The publication of ‘Saving and Hoarding’ was a display of confidence in the superiority of his scheme and

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a reminder of his own precedence in the development of the concepts now being debated. Set, moreover, within the private universe bounded by lacking and dis-lacking, stinting and splashing, it provided a secure base from which his advance could be mounted. The subject matter of ‘Saving and Hoarding’ was the definition of saving, the concept which he correctly identified as being of crucial importance when dealing with the theory of the whole economy. The refinement of his theory, which offered ample scope for the exercise of his taxonomic bent, involved the spelling out of a dynamic period analysis of saving based on the concept of the Robertsonian ‘day’. ‘Days’ measure notional intervals of time and govern both the disposal of earned income, which is disbursed with a one-day’s lag (the Robertsonian lag), and the velocity of circulation of money. Also, as compared to his previous expositions, more emphasis is given to the role of hoarding. Thus, falls in the price level on any day must be seen to proceed from the hoarding done by some group or other on that day; it can alternatively be defined in terms of the excess of saving over investment on that day, with investment remaining zero throughout (Robertson, 1933: pp. 51, 55). We might also notice that the definition of ‘stinting’ as referring to consumption falling below what was intended is now seen more clearly as applying to the ‘experience of consuming less . . . than one would have done if other people had not altered their expenditure’ (Robertson, 1933, in Hicks [ed.], 1966: p. 48). There are references to both Keynes and Hayek, the work of both of whom provided the background to his own restatement. Two points are of particular interest. First, in opposition to the Keynes–Kahn ‘simpleminded’ definition of saving, with its ‘disconcerting result’ of making saving and investment ‘necessarily equal’, Robertson affirms his own position, which is that Saving and Investment are not necessarily equal, and it is on the difference between them that the movement of the price level (not as in Mr. Keynes’s scheme, the state of the price level as compared with some normal state) depends. (Robertson, 1933, in Hicks [ed.], 1966: p. 61) Second, he criticised Keynes’s scheme for failing to distinguish between two types of burden which credit-fuelled inflation inflicts on the public: first, that imposed by the expenditure of the newly created money by newly employed workers (to create additional working capital); and second, that imposed by the fall in consumption due to contracts

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distorted by a previous rise in prices and which allows ‘increased Saving and Investment by the entrepreneurs in whose favour contracts have been distorted’ (Robertson, 1933, in Hicks [ed.], 1966: p. 62). With regard to Hayek, he commends an historical study by Hayek of conceptions of forced saving and concludes that while some previous writers have had a hazy idea at best of the true nature of the burden imposed, ‘Until there is a greater measure of agreement as to what ‘Forced Saving’ really consists in, I do not feel able to abandon my own inelegant terminology!’ (Robertson, 1933, in Hicks [ed.], 1966: p. 63). The reason for this careful defence of his own position becomes apparent as we move on to consider the second of the two articles, ‘Industrial Fluctuation and the Natural Rate of Interest’, and read the quotation from Through the Looking-Glass that is set at its head: ‘This must be the wood’, she said thoughtfully to herself, ‘where things have no names. I wonder what’ll become of my name when I go in? I shouldn’t like to lose it at all – because they’d have to give me another, and it would be almost certain to be an ugly one. But then the fun would be, trying to find the creature that had got my own name!’ (TLG, p. 225) The lesson from this is that while there is no correspondence between things in the world and their names, except as it lies in the mind of those who name them, giving names to objects is part of the process of creating meaning out of meaninglessness. Therefore, to create a private universe in which things bear the names that have meaning for us is to create the basis for establishing identity and finding security. To venture beyond, into a universe created by others, is to risk losing one’s identity and one’s security. The necessary defence when setting out, therefore, is to be sure of one’s names and, consequently, one’s meanings. Thus confident in the integrity of his own position, Robertson proceeds to restate his theory in interest rate terms. What we have in ‘Industrial Fluctuation and the Natural Rate of Interest’ is an analysis of the course of the cycle that we traced in BPPL – but all now done in the new terms. Having taken the trouble to reaffirm and refine his categories and definitions in the preliminary, 1933, article, it is noticeable that they make no appearance in that of 1934. That is, there is no mention of lacking and dis-lacking, stinting and splashing, hoarding and dis-hoarding. This, we may surmise, is because Robertson regarded the two modes of expression as equivalent and parallel approaches. He made no attempt to combine the one with the other, despite the fact that we

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are aware that whichever we choose, the theory will simultaneously be working itself out in terms of the alternative scheme. Robertson preferred his own approach because it brings us more into touch with the fundamentals of a growing monetary economy, with saving, investment and, most of all, the all-important movements of the price level. The interest rate version, although equivalent, can from Robertson’s point of view be seen as a gloss on this. It was this version of BPPL that became known as the Loanable Funds theory of interest rate determination, in opposition to Keynes’s later Liquidity Preference theory. Nevertheless, his loyalty ever lay with what he regarded as the more illuminating mechanism of the Classical quantity theory and the Cambridge cash-balances approach. In April 1933, when engaged in arguing out the Treatise with Keynes, Robertson expressed his regret at the passing of what he considered to be a superior method: I know I shall never reconvert you to the old K and V method, but I can’t refrain from suggesting how much stronger they make the prima facie case for public works . . . prima facie money once effectively introduced into circulation may be expected to stay there, and to circulate (thus affecting prices or employment as the case may be) with a velocity of circulation approximating to that of existing money, unless and until it is withdrawn by taxation, deflation, etc. (Robertson to Keynes, 1 April 1933, in Keynes, CW XXIX: p. 17) Robertson’s new ‘Wicksellian’ analysis of fluctuation was duly carried out in terms of the relative movements of two rates of interest: a representative single ‘actual’ rate, the behaviour of which is governed by the action of the banks, and the equilibrium ‘natural’ rate. This was the theoretical apparatus employed by the so-called ‘indirect mechanism’ of the Classical quantity theory, whereby changes in the quantity of money affect prices through their influence on the rate of interest. Wicksell’s contribution had been to defend this mechanism by explaining that expansion (contraction) in the economy depends on the actual, or market, rate being below (above) the natural rate and that stability of the price level is achieved, cet. par., when the market and natural rates are equal. By this means he was able to meet criticism based on Gibson’s Paradox, by which interest rates could be observed to rise rather than fall in times of rising prices (see Wicksell, 1935: v. II, pp. 205–207). It is an analysis that lends itself to graphical exposition and in Figure 16.1 two curves represent, respectively, productivity and thrift: the

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S2

S

S1

r2 r1 r0 D1

r3

D

D2

M4

M

M 3 M2

M1

Figure 16.1 Industrial fluctuation: In interest rate terms

first (D) as a declining function of the rate of interest (‘the rate per atom of time at which industry could employ new lendings at various rates of interest’); and the second (S) an increasing function (‘the rate of new available savings per atom of time’ at various rates of interest). At the equilibrium rate of interest (r0 ) new available savings are being absorbed by industry. When an expansionary ‘shock’ occurs, such as ‘the discovery of the Diesel engine, South America or what not’, the demand schedule shifts bodily to the right (D1 ). There is now an excess demand for funds at the initial rate of interest. This can be supplied in various ways. If the banks step in, total lending will exceed new saving and the money supply will increase. If instead they allow nature to take its course, the excess demand will draw the actual rate upwards and this will have the effect of substituting newly mobilised past savings for bank lending. That is, it will release hoarded money into circulation. However, Robertson also points out that the rise in the money supply actively available will both raise income and cause a redistribution in favour of entrepreneurs that will increase saving (entrepreneurs, note, because the ‘shock’ leads them to initiate

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expansionary projects). This in turn will shift the savings schedule to the right (S1 ). What happens after this is one of Robertson’s particular interests. Never one to accept unimproved the analysis of others, he sees the two ‘real’ schedules intersecting at what he terms a ‘quasi-natural’ rate (r1 ), which would Equate industrial requirements and available new savings under the new conditions, towards which the actual rate is likely to rise, and which if it is reached will give quasi-equilibrium, with no further moneycreation or mobilisation of past savings. (Robertson, 1934, in Hicks [ed.], 1966: p. 67) The point about the quasi-equilibrium is that it is unstable, as forces are in motion to undermine it. Here we recall that in Robertson’s theory of the cycle, the hubris of the boom leads ineluctably to over-investment, crisis and depression. In the new terms, two forces can be identified, which will have the following effects. First, wages will rise, cutting back profits and reducing (entrepreneurs’) saving. The saving schedule will shift back, raising the quasi-natural rate (towards r2 ) and dragging up the actual rate after it. Borrowings fall as the demand for instrument goods falls off. Second, the acute oversupply of instrument goods greatly reduces their marginal product and the investment demand schedule moves sharply to the left (D2 ). This produces a fall in incomes and a redistribution in favour of non-savers; there is also some ‘distress borrowing’ by firms and households. The savings schedule moves left. The quasi-natural rate has fallen to a low level (r3 ) and so long as the actual rate remains above it there will be an excess supply of savings. As a consequence, bank lending will be curtailed and savings will be channelled into (immobilised in the form of) bank deposits (that is, hoards). When, in time, the actual rate falls to the level of the quasi-natural rate, a new quasi-equilibrium will be established. This is likely to prove more durable than the old, due both to the long life of capital (marginal productivity will remain low) and to the resistance of wage earners to further falls (movements of savings will progressively slow). Having thus forged a consistent theory of the cycle in the old terms and glossed it in the new, Robertson appeared armoured against all attacks. Nevertheless, more fundamental movements in the development of economic theory were in train as Keynes struggled towards a revolutionary reordering of the variables relevant to the analysis of the whole economy.

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This is the process that culminated in the publication of his The General Theory of Employment, Interest and Money in 1936, the book that would directly challenge the validity of Robertson’s economics and with it his emotional security. Ironically, while Robertson’s work would come to be known chiefly in the interest rate terms he adopted for the recasting, Keynes’s new book would find no role for the natural rate; much to the consternation of Hayek, he abandoned the concept in the course of moving on from the Treatise to the General Theory. In the interim, however, during the period in which Robertson’s two articles appeared, a diversion was provided in the form of a three-month sojourn in India. This arose as the result of an invitation from the Government of India to take part in an investigation into ‘the existing organisation and range of statistical and other information bearing on the economic condition of India with special reference to the gaps which exist at present and the means of filling them’ (Dennison, in Dennison and Presley [eds], 1992: p. 25). The particular requirements were for the establishment of a central department of statistics, the feasibility of undertaking a census of production, the means whereby the national income and wealth might be measured and the proper provision of index numbers of wages and prices and so on. This was obviously a daunting task and Robertson was at first understandably reluctant to take it on. Nevertheless, apart from any part that his abiding sense of duty may have played, the confidence to go ahead came from the knowledge of whom his collaborator in the project was to be. This was A. L. Bowley, an economic statistician of the first rank, whose principal contributions to economics arose from his work as a collector and compiler of economic statistics and who had pioneered work in precisely those fields required for the study. They left for India in December 1933, after having done a great deal of work on material provided by the Indian Finance Department, arriving on the 22nd and spending three months on their enquiry, almost one-half of the time on tours to various centres. Although they had the support of many Indian economists and administrators, their achievement in producing a report by 20 March 1934 was remarkable. (Dennison, in Dennison and Presley [eds], 1992: p. 25) Or perhaps it was not so remarkable, given the calibre of the two collaborators. In any case their report provided the basis for all subsequent work in the field.

17 Robertson and Keynes: Parallels and Differences

The Robertson–Keynes controversy, which came to dominate the latter years of the 1930s, arose out of the different directions taken by the two protagonists following the meeting of minds over BPPL. Robertson’s path lay, as we have seen, in the refinement and restatement of his theoretical apparatus and in setting out its policy implications to meet contemporary needs. Though the theory itself was innovative and intellectually productive and the policy recommendations appropriate to the extraordinary economic situation, it was all well within the, relatively modest, scope of his economic vision. That is, it was limited to the management of the short period as a means of maximising current enjoyment given the demands of the growth process. This is so even if the unusually exaggerated nature of the slump phase of the cycle demanded special measures. Robertson’s vision seemed relatively modest because Keynes’s, by contrast, had an altogether more restless and utopian complexion and went far beyond economic management to encompass the transformation of economic society. This difference of vision stemmed in turn from Keynes’s outlook and temperament as compared to that of Robertson. On the face of it, the two had much in common. Keynes, like Robertson, came from a solid Victorian middle-class family which provided ample intellectual stimulation, was an outstanding King’s Scholar at Eton, won an open scholarship to Cambridge, was made a fellow of his college and became a distinguished economist. Against these similarities the differences stand out all the more sharply. While Robertson’s family were of the established church, Keynes’s had a history of non-conformism and radicalism. At Eton, Keynes shone in mathematics as well as classics and was offered a Cambridge scholarship in 171

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both. He chose mathematics and graduated eleventh wrangler (eleventhbest first class). Also, his college was King’s, which was the object of Robertson’s yearning, and he duly flourished in its freer intellectual and artistic climate. Similarly, while Robertson, except for relatively brief periods, remained in Cambridge, Keynes divided his time between his fellowship at King’s and a life outside, pursued in government service, the financial world of the City of London and campaigning journalism. He was also a member of Bloomsbury, the avant-garde group of intellectuals, writers and painters which had its origins in friends and near-contemporaries from Cambridge. It was at first based in Gordon Square in London but increasingly associated with Charleston, a farmhouse in Sussex. The names of the members are well known: Duncan Grant, Clive and Vanessa Bell, Lytton Strachey, Leonard and Virginia Woolf, Roger Fry, E. M. Forster and others. Equally envied and despised by commentators, membership of the group exerted a powerful influence on Keynes, who was as much at home with its artistic expression of all that was unconventional – whether ideas and beliefs or modes of behaviour – as he was with the starchy figures of the political, financial and business establishment. In more personal terms, though both Robertson and Keynes had lost their Christian faith and were homosexual (Robertson more exclusively than Keynes), Keynes seemed altogether happier with his lot. He found lasting happiness in marriage – at the age of 42 – with a Russian ballerina and did not so much face life with fortitude and regret as consume it with zest and irrepressible optimism. And this is the real difference between them. All depends upon each man’s attitude to life and death in a Godless and uncaring universe. Is death to be regarded as completion, as a fulfilment and natural journey’s end, or as a negation, an event which renders ultimately futile all human endeavour and lifetime achievement? While Keynes’s life was governed by the first of these (see Bonadei in Marzola and Silva (eds), 1994: pp. 42–43, 54–55; Skidelsky, 1992: p. 517), Robertson’s, with his view of the ‘harshness of human destiny’ (Butler, 1963: pp. 41–42) was, as we have seen, governed by the second. In turn, these attitudes determined which philosophy of life each man would adopt. With regard to Robertson, that philosophy is to be discovered in the ‘Alice’ books. For Keynes, by contrast, positive and progressive, there would be a desire to seek rules governing the way in which life might be lived most intensively and enjoyably in the present, without reference to a past golden age or to the promise of bliss beyond the grave. In professional terms, though Keynes had been nurtured in the

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same Cambridge (Marshallian) School of thought as Robertson, he was, by contrast, a supremely confident free thinker and cheerful iconoclast, unhampered by any (emotional or other) need of his own to preserve ‘ancient monuments’ (see Keynes, CW XIV: p. 259). He did, nevertheless, value the check imposed on his theoretical flights by Robertson’s scrupulous caution. In the public mind, Keynes’s name was made synonymous with the economics of the short period by his memorable statement in A Tract on Monetary Reform that ‘In the long run we are all dead’ (Keynes, 1923, in CW IV: p. 65). But the Tract was principally concerned with the problems of monetary management and not with human motivation or human destiny. Earlier, however, in The Economic Consequences of the Peace (Keynes, 1919) [ECP], he had referred to a process similar to that of Robertson, of people sacrificing consumption as a means of building up the capital stock under the influence of conventional behaviour. Here, the spur to economic growth is seen to lie in the collective subconscious of society, which seeks (for reasons unspecified) to reward posterity with the fruits of its present labours, by conferring on those who come after relief from want and the leisure to ‘proceed to the nobler exercise of their faculties’ (Keynes, 1919: p. 18). It is this theme, ‘the promise of a future millennium of plenty, a golden age of art instead of industry’, which is taken up in subsequent publications, culminating in the ‘frame materials’ of the General Theory (see Fletcher, 2007: pp. 141ff.). In a little Hogarth Press book of 1926, The End of Laissez Faire, Keynes acknowledged that capitalism was the most successful of the available economic systems and offered the best hope of advancement to the promised land. The fly in the ointment was that the principle on which capitalism was justified, a Darwinian struggle for survival which relied on ‘an intense appeal to the money-making and money-loving instincts of individuals’ (Keynes, 1926, in CW IX: p. 293), was morally objectionable in a civilised society. Moreover (and more substantially, perhaps?), the theory of laissez-faire economics was flawed because it began from inappropriate assumptions. That is, it began from an ideal system rather than from the facts of the real world; it failed to recognise that economic relationships may be organic; it assumed, in effect, full-information, frictionless barter (Keynes, 1926, in CW IX: p. 284). The implication was that scope existed for collective management and the introduction of a new theory. Nevertheless, when we reach ‘Economic Possibilities for our Grandchildren’ (Keynes, 1930), we find an optimistic prediction that the economic problem will solve itself. This is because the depressed conditions then

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prevailing were to be seen as a painful but necessary period of transition from one stage of technical advance to another, all as part of a process of economic progress that had marked the economic history of the modern era. Given certain favourable assumptions, so great would be the rate of capital accumulation over the ensuing century that the capitalist/Darwinian system would become redundant and the money motive would atrophy as the majority of the population entered upon a new age of economic plenty with infinite leisure to cultivate more exalted pastimes. What an extraordinary and arresting idea! Man’s evolution has been governed by the need to solve the economic problem, with appeal to the money motive as the means to induce participation in the struggle. Once the age of plenty is attained, however, learned behaviour will banish avarice and usury in favour of the cultivation of ‘the art of life itself’ (Keynes, 1930, in CW IX: p. 328). Furthermore, life will be lived wholly for the present, with no suggestion that people might wish to use some of their economic abundance to make those who come after relatively better off. Evolution, now redundant, would come to an end, posterity would be forgotten or (for the childless) would not exist and the process of capital formation, which had improved the lot of each succeeding generation, would cease. In the event, however, the economic situation and the impetus of theoretical development decreed that the achievement of the favoured outcome was not to be left to the working out of ‘economic progress’. Instead, Keynes’s new analysis of the economic problem, reached after a headlong process of intensive thought and discussion, produced a suggested policy as radical as the vision that engendered it. In The General Theory of Employment, Interest and Money (1936), Keynes developed a short-period theory of a laissez-faire economy based on assumptions relevant to the real world. This theory implied that, to secure full employment in the present and abundance in the relatively near future, we must think beyond individual schemes of public works. At the root of the problem was a wholly artificial scarcity of capital which could be overcome ‘within one or two generations’ by way of ‘a somewhat comprehensive socialisation of investment’. As a bonus, the disappearance of capital scarcity would also wipe away another blot on Keynes’s aesthetic landscape, the class of passive interest-takers, the ‘functionless investors’ or ‘rentiers’ (Keynes, 1936, in CW VII: pp. 374–378). Beyond this, however, Keynes would not wish to go further towards a system of ‘State Socialism’. While he saw that many would regard his proposal as a ‘terrific encroachment on individualism’, Keynes would be

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happy to defend it as the only means of safeguarding personal freedom and the liberal economic system against the flight to authoritarianism as the means of economic salvation (Keynes, 1936, in CW VII: pp. 378, 380). In addition, we might see it as the egregious, Keynesian, realisation – as compared to that of Robertson – of Marshall’s injunction to go forth and improve the social condition. Finally, though not socialism, Keynes’s scheme does seem to favour the notion of a forced march to utopia. Keynes’s new economics was set in the dimension of history rather than of equilibrium and thus required that account be taken of the real-world factors of uncertainty and its concomitant, money in substantive form. The theory was thus an expression of the man. Keynes, the ‘Alice’ figure, ever optimistic and progressive, sought to impose order on chaos by battling against uncertainty and ignorance. In Dawkinsian, gene-theory, terms, his is the complete economics of learned behaviour, refusing to submit to blind forces and seeking always to guide his (and others’!) destinies. The theory itself was shaped by his philosophical outlook, which was strongly organicist. His exemplar was the philosopher G. E. Moore, the apostle of the Cambridge Apostles and of Bloomsbury, whose teachings as set out in Principia Ethica (1903) provided the justification for a life lived consciously and intensively for the present moment. The epitome of the good life was the experience of passionate states of contemplation in the pursuit of love, beauty and truth (love and beauty we recall are the two supremely unitive enemies of Sewellian nonsense-as-game). Moore stressed the importance of the state of affairs as a whole and his central organising principle was organic unity, the doctrine that the whole is greater than the sum of the parts. Consequently, because the world is organic, to seek to interpret it via a theory based on discrete, additive elements will lead to the ‘grossest errors’ (Moore, 1903: p. 36). It was this doctrine that greatly influenced Keynes’s new thinking. The importance of the Keynesian Revolution for Robertson can be gauged from the following. First, it was adjudged to be a success and where Keynes was seen to have succeeded, Robertson must by definition be seen to have failed. By the same token, Keynes’s success marked the failure of economics in its role for Robertson as the compromise between duty and desire. In professional terms, it exposed the weaknesses in Robertson’s theory. Finally and more fundamentally, it overturned the foundations of Classical Economics and, therefore, Robertson’s emotional security, based as they were on the worlds, respectively, of Cambridge microeconomic theory (atomistic frictionless barter) and

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‘Alice’ interpreted as nonsense as game. We can better understand the nature of the threat if we look more closely at two of these: first, the more philosophical differences and then the differences of theory. Notice first the equivalence, as unitive elements, of love (with respect to ‘Alice’) and money (with respect to economics). Notice also the equivalence of the one big ‘One’ (with respect to Walt Whitman) and the doctrine of organic unity (with respect to Moore) and its economic manifestations. The relevance of these equivalents to the course of the Robertson–Keynes controversy can be explained as follows. First, in a system of frictionless barter, the full-information world of classical theory-behind-a-theory, money is absent or is at best a numeraire. Second, recognition of the importance of money implies recognition of the nature of a monetary economy, which is characterised by uncertainty, ignorance and chaos (in other words, the real world). Money provides both a means of communication and the basis for creating macroeconomic magnitudes (Carabelli, 1992; see also Carabelli, 1994). Here, money as a unifying, bonding agent is the equivalent of love. Third, that to recognise the concept of macroeconomics is to recognise that economic relations are organic in nature. Recognition is indicated by acceptance of the relevance of the fallacy of composition, in both the positive and negative forms, respectively, of (a) the multiplier, which gives the sequence: investment, income, saving; (b) the paradox of thrift, which ensures that saving cannot determine investment. The point to notice here is that both of these produce outcomes at variance with predictions of Classically based theory and its eminence-grise, atomistic barter. Fourth, there is the question of method, of how a theory is constructed. Here, Robertson provided a valuable insight by way of the contrast he drew between himself and Keynes, in terms of his glow-worm–lighthouse metaphor. Robertson sees himself as the former, casting a soft glow on all relevant objects equally and, therefore, seeking to keep the key variables of his theory in their proper dispositions, like ships in a convoy. By contrast, Keynes is the latter, throwing things out of proportion and out of their proper stations with his powerful but distorting lighthouse beam (Robertson, in Keynes CW XXIX: p. 166). The question of the disposition of the key elements in a theory of the whole economy, of the proper relationship between the variables, lies at the heart of all the disagreements. This is because of the theoretical parallels that exist between the rival schemes, of the occurrence of concepts common to both. In a sense, to look at Robertson’s theory is to see Keynes ‘through a glass darkly’. All depends, therefore, on the different

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ways in which they are related. We will examine these – the parallels and the way they were related – in turn. With respect to the parallels, we may regard these as ideas conceived by Robertson or possibly jointly between Robertson and Keynes but later associated with Keynesian economics. Seven parallels may be identified. First, the notion that what may be true as the outcome of an action taken by one individual alone may not be true of the same action when taken by all individuals together. Second, that investment has the power to determine saving at a rate equal to the change in investment. Third, that money, rather than saving, finances investment. Fourth, that the shortperiod finance of investment is performed by a given fund, endlessly circulating between successive projects. Fifth, that a rise in investment produces a rise in output (real income) and that consumption and therefore saving is a lagged function of income. Sixth, that Robertson accepted the percussive principle that foreshadows the multiplier. Seventh, that investment goods and consumable goods are complements rather than substitutes in production (dealt with at greater length in Fletcher, 2000: pp. 291–294). As an addition, we might mention that both Robertson and Keynes advocated schemes of public works. For Keynes, it was an implication of his view that the contemporary unemployment arose from an insufficiency of aggregate demand and, more expediently, that by means of a comprehensive programme the promised-land of economic plenty could be reached more quickly than otherwise. For Robertson, it was to be used as a means of increasing demand in the economy, for the purpose of raising the price level, at a time when neither entrepreneurs nor consumers were receptive to further injections of bank credit because their wants could not keep pace with output. That such parallels should exist is not in itself remarkable, given the collaboration that occurred in the development of ideas. What is remarkable is that following the measure of agreement reached in BPPL, there should have been such divergence; for though Robertson adhered to his chosen precepts Keynes took a radically different path. With respect to the structure of the models in which the parallel ideas were incorporated, the evolutionary and revolutionary approaches, respectively, of Robertson and Keynes produced very different outcomes. Robertson, with his additive approach, sought to make his new insights compatible with inherited wisdom. Thus, supply must take precedence over demand, saving over investment and real over monetary; also, the price level must be a monetary phenomenon. This accounts for the convolutions of thought required in the construction of the theory of BPPL

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(1926) and visible in the structure of the theory restated in ‘Industrial Fluctuation and the Natural Rate of Interest’ (1934). Keynes, by contrast, caught at a new paradigm, based on a newly relevant philosophical principle, that made supply subordinate to demand, gave investment dominion over saving and accorded money a new importance that ranked it equally with real factors. The relative positions of the variables in each of the theories are determined by the answers to five questions: the nature of saving; the relationship of saving to investment; the finance of investment; the nature of interest; the determination of the rate of interest. These questions were always inherent in the development of the theory of the whole economy but are particularly helpful in assessing Keynes’s departures as he moved on from the Treatise on Money and increasingly away from Robertson.

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The work by which Keynes is chiefly remembered, the General Theory, was not intended to be his Big Book. This was the role that was originally accorded to the Treatise on Money. As a treatise it was intended to present an authoritative view on the economics of money in all its aspects, theoretical and applied, and Keynes intended that it should establish his reputation. He worked on it for ‘seven years off and on’ and it was published in two volumes at the end of October 1930 (Keynes, 1930). It is interesting to note that whereas Robertson set out his theory of fluctuation in a monetary economy, as it were, in two steps, first with money, saving, investment and the price level and then in terms of interest rates, Keynes did it in one. That is, the Treatise sets out the conditions for the achievement of price stability – and therefore stability of the economy – in alternative saving and investment and interest rate terms. Differences between saving and investment or between the (Wicksellian) natural and market rates of interest could indicate discrepancies between, on the one hand, output of consumption and investment goods and the incomes arising from those outputs and, on the other, the disposal of those incomes between consumption expenditure and saving. These discrepancies, in turn, affect consumption-goods producers’ receipts versus costs and so would give rise to ‘windfall’ profits or losses and hence an incentive to vary output and employment. As part of the general price level, the price of investment goods was determined by way of a ‘bearishness function’, by which accumulated savings were subject to portfolio choice between financial assets and bank deposits. This concept was important as the forerunner of the liquidity preference function of the General Theory. 179

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In writing his book, Keynes was careful to acknowledge his debts to other economists, including Robertson to whom he accords a pioneering role. First, with respect to the distinction between saving and investment, he recognises that ‘But so far as I am concerned – and I think the same is true of most other writers in the English-speaking world – my indebtedness for clues which have set my mind working in the right direction is to Mr D. H. Robertson’s Banking Policy and the Price Level published in 1926’. (Keynes CW V: p. 154n.) Second, with respect to the relationship between saving, investment and money, Keynes was keen to distinguish Robertson’s contribution from that of other prominent writers: But none of these writers clearly apprehend the direct effect on prices of disequilibria between savings and investment and the part played by the banking system. The pioneer work at this point is due to Mr D. H. Robertson (Banking Policy and the Price Level). (Keynes CW VI: p. 90) Finally, he twice indicates sympathy for Robertson’s view that the price-rises associated with the boom phase of the cycle would be more conducive to the growth of economic prosperity than would deflation. However, he is not convinced that the retention of the cycle is a prerequisite for economic progress but that a general inflation might be more beneficial. Ultimately, however, he settles for a policy position close to that enunciated by Robertson, though he seems not to be aware of the fact: I conclude, therefore, that Mr Robertson’s contentions, though they deserve serious attention, are not sufficient to dispose of the prima facie presumption in favour of aiming at the stability of purchasing power as a general rule, in preference to the oscillations of the credit cycle. (Keynes CW V: p. 266; also p. 246, 263) Publication of the Treatise provoked reaction from both within Cambridge and beyond and Robertson was only one among a number of economists – Pigou, Kahn, Kaldor, Shove, Hobson, Hawtrey, Hayek – with whom Keynes entered into debate. Particularly effective

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and influential in this regard was the ‘Cambridge Circus’, a group of Keynes’s younger colleagues (Austin and Joan Robinson, Richard Kahn, Piero Sraffa, together with James Meade, soon to return to Oxford). The proceedings of the meetings of the ‘Circus’ were relayed to Keynes by a privileged spokesman, Keynes’s protégé, Richard Kahn. It was Kahn who replaced Robertson as Keynes’s elbow-critic during the move forward towards the General Theory. Positive and life-loving, he proved a most useful and congenial collaborator. The most productive criticisms concerned assumptions and definitions. At the heart of Keynes’s theory were his ‘Fundamental Equations’ which, though intended to be purely formal, took on a more operational role in practice. Because they encapsulated the mechanism of price-determination they became the focus of criticism. Hawtrey pointed out their tautological nature: if on Keynes’s eccentric definitions investment was defined to include the profits arising from an excess of prices over costs, the cause of the rise in prices could not be attributed to an excess of investment over saving defined to exclude profits. Precedence in detecting the ‘widow’s cruse fallacy’ went to members of the ‘Circus’: to Austin Robinson for pointing out that the Fundamental Equations assumed that output was fixed – as the necessary condition for adjustments being articulated via movements in the price level – and to his wife, Joan Robinson, for naming it. If, instead, disturbances were to provoke changes in inventories instead of prices, Keynes’s mechanism would not operate. This was precisely the criticism levelled at BPPL but whereas Robertson evaded the issue, Keynes took the opportunity to move on. An implication of Keynes’s definitions was that the more that profits were devoted to consumption the greater those profits would be (a widow’s cruse) while retrenchment in times of business losses would bring further losses (a Danaid Jar). Robertson pointed out, though Kahn took precedence in this, that because of Keynes’s definitions of saving and investment, in a depression when business losses were being made, saving must always exceed investment and a situation of disequilibrium would continue. The depression must not, therefore, be attributed to the excess of saving. If instead, business profits and losses were treated, respectively, as additions to or deductions from incomes, then the inequality between investment and saving would disappear along with the notion of departures from a ‘normal’ level of income! But this would, of course, leave the level of income/output as the variable to be determined.

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Finally, Hayek perceived the weaknesses highlighted by the other commentators and, in addition, claimed that Keynes did not understand the (Austrian) theory of capital and so had no theory of the natural rate of interest (accounts of and references for the criticisms are given in Moggridge, 1992: pp. 532–533; 1993: pp. 87–88; Skidelsky, 2003: pp. 481–483; Laidler, 1999: pp. 133–140). Keynes at first sought to defend his formulations but was himself conscious of the book’s many unsatisfactory features and in a surprisingly short time was looking for a new expression of his intuitive inklings. The outcome, finished five years later at the end of 1935, was the General Theory (Keynes, 1936). Elements of continuity with the earlier book may be discerned but otherwise the change is dramatic. In particular, Keynes now had a theory of income determination that discarded the notion of a normal (Classical full-employment) level of income in favour of the possibility of equilibrium at any level of income. To obtain this outcome, variables and concepts old and new were now to be found in unfamiliar relationship. The main (relevant) features of the General Theory are as follows. Employment is now (proximately) a function of real income/output and not the real wage. Income is determined by the level of aggregate demand, made up in a laissez-faire economy of consumption plus investment. Investment is the more active component and is related to the consequent change in expenditure and income by the ‘multiplier’ relationship, a ‘percussive’ concept by which income received is passed on to create more incomes and expenditures but diminished by a proportion of saving at each step until a new higher equilibrium level of income is reached. The size of the multiplier and, therefore, the extent of the change in income are determined by the marginal propensity to save (mps); that is, the proportion of each increment of income received and not passed on. For example, with an mps of 0.25, the multiplier value would, by the formula k = 1/mps, be 4. With a change in autonomous investment of, say, £10 m., the change in income would be £40 m. Say’s Law gives place to the principle of effective demand, by which entrepreneurs employ labour and other factors based on their estimate (expectation) of the profit-maximising output. This output is a shifting target and difficulties of prediction give rise to fluctuations and unemployment. The interest rate is no longer determined by the Classical forces of productivity and thrift and so no longer operates to balance the flows of investment and saving in the capital market. Instead, investment

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and saving are equilibrated by fluctuations in income and the equality of investment and saving becomes a condition of equilibrium income. The notion of there being a natural rate is abandoned on the grounds that now there is no level of equilibrium income at which investment would not be equal to saving. Instead, the rate of interest is determined in the money market and becomes, proximately, a monetary phenomenon equilibrating the supply of and demand for money. In turn, the demand for money, or ‘liquidity preference’, is determined on the basis of motives for holding money (transactions, precautionary, speculative and finance). Keynes’s treatment of money stems from his insistence that the working of a monetary economy cannot be understood by utilising the theory appropriate to a barter economy. Money is no longer a ‘veil’ but is full-bodied and has an asset demand. The monetary economy is the uncertainty economy of the real world. Uncertainty influences economic activity through its effects on investment-planning and the asset demand for money. Interest and money are brought together in Keynes’s speculative motive for holding money, whereby uncertainty as to the future course of the rate of interest causes speculators to move between holdings of money and financial assets and so determine the actual course of the market rate. There is also a special case held to explain the depressed economic conditions of the Western World. With the value of capital being determined by its scarcity, old economies which were capital-rich would experience a falling rate of return on capital. This would be checked in its fall by a long-term rate of interest composed mainly of risk premiums and the expectations of the rentiers. Because the urge to accumulate wealth would remain unsatisfied, saving would continue. With a zero net rate of capital formation, continuing saving would so reduce incomes that depressed conditions would continue. This was the ‘stagnation thesis’. From Robertson’s point of view it could scarcely have been worse. A theory that reversed established causal relationships, challenged Say’s Law not on grounds of circumstance but in principle and turned upside down the old order of precedence – that, among the key variables, the mighty were put down from their seat and the humble and meek were exalted – could not but engage Robertson’s attention to the point where it became an obsession. That this was not obvious to contemporary observers is clear from the comments they made. As early as 1938, Pigou wrote to Keynes that

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Dennis has been spending years meticulously examining and criticising Mr Keynes on this and that, instead of getting on, as I think would be much better, with constructive work of his own. (Keynes, CW XXIX: p. 177) Looking back to a letter that he wrote about Robertson’s work in 1942, Hicks explained that I really wrote the review for him, to persuade him to turn away from the polemics which I had felt had become sterile, and to turn to more constructive work, on the basis of what I felt had already been achieved. (Hicks, 1982: p. 127) Later, in 1953, T. Wilson echoed the sentiment: The defects of Keynes’s theory of the rate of interest have engaged Professor Robertson’s attention for many years – too much so, perhaps, because he had tended to neglect his own vastly important theory of the connection between economic progress and the trade cycle. (Wilson, 1953: p. 556) To Robertson, however, the real reason was all too apparent. From wholehearted collaborator he now became Keynes’s most obdurate and unremitting professional critic. First in private correspondence with Keynes and in the journals, then in bitter exchanges with Keynes’s disciples, then in his articles and in the revised editions of Money and finally in his very lectures to the undergraduates, Robertson drew attention to the perceived inadequacies and misunderstandings of the Keynesian approach. He never wavered from his view that in going forward after the years of their collaboration, Keynes had taken a wrong turning: In the early 1910s and again in the 1920s I did do a bit of scrambling towards the frontier [of economic thought], firmly roped to the man of genius [Keynes] who has perished there. Sometimes, I venture to think, I was even a little bit in front of him; but in the end he went on beyond me and it is my belief – an unpopular one, I know, but I cannot help it – that he got a bit off the track and set the flag in places where it is not destined to rest. (In an address of 1947, quoted by Presley, in Presley [ed.], 1992: p. 86) In doing so, thought Robertson, he had unleashed forces destructive to the progress of economic theory. More personally, however, he had

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initiated changes that directly threatened Robertson’s own emotional security. Wilson correctly specified the rate of interest as the subject of controversy and this is a view supported by informed commentators (contributions reviewed in Fletcher, 2007: pp. 155–163). The reason for this – at the risk of wearying the reader with repetition – lies in the nature of money as an essentially unitive element that is destructive of the one-and-one-and-one of atomistic barter, which in turn lies behind Cambridge (micro) economics. When recasting his theory in interest rate terms – the loanable funds approach – Robertson was careful to reproduce the hierarchy of fundamental (real) and subordinate (monetary) factors of his earlier work. Consequently, in the new terms, the important natural rate, at which investment is equal to saving, was determined by the real forces of productivity and thrift; while the market rate, which fluctuates around the natural rate, was determined by monetary forces. Robertson’s view of what Keynes was up to and his own reaction to it is clearly seen in articles he wrote between 1936 and the beginning of the 1950s. First, with respect to the strategic position he believed the rate of interest to hold in Keynes’s scheme and his own scepticism regarding it, he drew a distinction between ‘the snake’ and ‘the worm’ as explanations of the mass unemployment of the 1930s. The first represented a phase of the familiar trade cycle, though of particularly marked amplitude and exaggerated by a phase of structural change. The second represented deeper tendencies supposedly inherent in capitalist economies. Coming just a few months after the publication of the General Theory, which he saw as dominated by the stagnation thesis, this could only be seen as a direct questioning of the new economics. It is rather a conflict of view between those who still believe that cyclical fluctuation is the worst enemy which controlled capitalism has yet to subdue, and those who think that they detect, lurking beneath the coils of the cyclical snake, a more insidious enemy still. This alleged enemy is a chronic and endemic tendency towards the stifling of enterprise, the leakage of thrift, and a consequent running down of the whole system – a sort of worm seated at the very heart of the institutional and psychological bases of our society, and battening on the very growth of wealth which he strives unavailingly to prevent. Is he a real worm, or is he the figment of generous imaginations tortured by the tragedies of the worst and deepest slump in history? (Robertson, 1936 in Hicks [ed.], 1966: p. 92)

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The clear implication being that it was the latter. In Robertson’s view the rate of interest held a far less exalted position and should, moreover, be kept firmly in its place, as was made clear in the following: . . . if I have a personal heresy in these matters, it is that in recent years, alike in academic, financial and political circles, we have heard rather too much about that entity [the rate of interest] in connection with the processes of trade recovery and recession. (Robertson, 1937 in Hicks [ed.], 1966: p. 118) The issues at stake could be stated simply and exemplified by the views of Optimists, Pessimists and Blondinians (after the balancing feats of the famous high-wire artist): Thus the Blondinian, less sanguine than the Optimist about the power of the monetary authority to make the rate of interest what it pleases, is also less apprehensive than the Pessimist about the power of the hoarding instinct to oppose a chronic resistance to such a secular fall in the rate of interest as the forces of thrift and productivity may dictate. That is the nearest which I can get to putting in words of (approximately) one syllable the upshot of all this pother about the rate of interest. (Robertson, 1937 in Hicks [ed.], 1966: p. 123 This then raised the more fundamental question of the determinants of the rate of interest and their relative importance. That is, whether theory more nearly approaches reality when we allow the effects of changes in the supply of money and changes in people’s demand for money to hold (as security in uncertain times) to modify conclusions reached on the basis of the influence of productivity and thrift alone. With respect to money held as security, even at the cost of sacrificing a return, Robertson makes clear that he is referring to liquidity preference (Robertson, 1937 in Hicks [ed.], 1966: pp. 119, 120). His answer of course was to stress the importance of the real as against the monetary, as is made clear in the following quotations. First, in a lecture he gave at the London School of Economics and Political Science (LSE) in 1939, he hastened to reassure his sympathetic audience that his exchanges with Keynes had not given rise to any revisionist ideas:

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In the course of one of our brushes, Mr Keynes has suggested that I am a recent and reluctant convert to the view that the rate of interest is ‘in some sense a monetary phenomenon’. This is, I am afraid, a misapprehension. (Robertson, 1939 in Hicks [ed.], 1966: p. 150) Over a decade later, in 1951, Robertson was still quite clear as to the relative importance of real and monetary factors. In ‘Some Notes on the Theory of Interest’, he confirmed his continued adherence to the ‘Classical’ approach: . . . in the convenient sense of the word ‘classical’ in which it stands not for the work of the writers of a particular period but for an analysis conducted on the assumption that the monetary system operates in such wise as to interpret and not to distort the influence of real forces. (Robertson, 1951 in Hicks [ed.], 1966: p. 203) The implication of holding a view that favours theory grounded deep in real foundations is to be suspicious of theory which appears to be less substantially based. On this view, Robertson’s criticism of Keynes was not only on the grounds that he had exalted money but also that he had excluded real forces. It followed that liquidity preference, in which expectations played a key role, must be seen as an altogether too vague and inadequate basis for a variable with such a key role. Notice that the importance of liquidity preference theory in Robertson’s eyes stems from his interpretation of it as a purely monetary theory of interest in which money held sway free of the dominance of real forces. He was able to do this by relating the quantity of money available only to the speculative demand for money and ignoring demand arising from the transactions and precautionary motives, which was determined by real forces. This is all made clear in the LSE lecture, later published as ‘Mr Keynes and the Rate of Interest’. Though Robertson hedged his bets to some degree by arguing that it is with respect to the long period that real forces played the greater part, he also felt that Keynes’s treatment denied productivity and thrift their due contribution ‘from the momentary market point of view’. Here, instead, Keynes’s speculative forces were held to reign supreme. Note the apposite quotation from AAW: Thus the rate of interest is what it is because it is expected to become other than it is; if it is not expected to become other than it is, there is nothing left to tell us why it is what it is. The organ which secretes it has been amputated, and yet it somehow still exists – a grin without

188 Dennis Robertson

a cat . . . If we ask what ultimately governs the judgements of wealthowners as to why the rate of interest should be different in the future from what it is today, we are surely led straight back to the fundamental phenomena of Productivity and Thrift. (Robertson, 1939 in Hicks [ed.], 1966: pp. 174–175) It was an incorrect interpretation but a powerful and influential one. First, it implied that because of the strategic role that the rate of interest and therefore money was seen to play in Keynes’s theory of unemployment equilibrium the attack on the Keynesian Revolution had to be focused on Keynes’s interest rate theory. Second, the principal object of Keynes’s attack had to be seen to be Robertson’s own theory of interest, in which real forces played the more fundamental role. Third, Keynes must be seen as seeking to deny any influence on the rate of interest of the Classical forces of productivity and thrift (in the form of investment and saving). The real forces thus set free could be otherwise employed, to make good the gap left by the alleged invalidity of Say’s Law. The implications are twofold. The first is that on this view the liquidity preference theory becomes the linchpin of the Keynesian system and that if it could be shown to be invalid then all the rest of Keynes’s scheme would fall along with it. By the same token, liquidity preference must be seen as taking priority in Keynes’s scheme and, by extension, of having been formulated first in chronological order in the move forward from the Treatise to the General Theory. It is on the question of the validity of these propositions that the dispute between Robertson and Keynes can be resolved.

19 A Resolution of the Controversy

Matters of dispute between Robertson and Keynes can be resolved in two stages: 1. by examining the question of Keynes’s alleged exclusion of real forces; 2. by investigating the question of the sequence in which Keynes developed his theory between 1930 and 1936. With respect to the first, from Robertson’s point of view the sequence of events is as follows. 1. Keynes sought to exclude the influence on the rate of interest of the Classical forces of productivity and thrift by the introduction of the multiplier. Now the equality of saving and investment is brought about by a change in income rather than the rate of interest. 2. The multiplier process generated just the right amount of voluntary saving to finance investment without any resort to the idea of forced saving or disturbance to the rate of interest. 3. Keynes was able to do this because he failed to understand the distinction between ex ante and ex post and so could assume that the multiplier worked instantaneously. 4. He confirmed this idea with his notion that not only is saving equal to investment in equilibrium (S = I) but also is equal by definition (S ≡ I). 5. In the real world the multiplier works subject to lags so that saving becomes available only after the investment has taken place; a compensating increase in the money supply would be required and the requisite going-without would impose forced saving. 189

190 Dennis Robertson

6. It was to evade this issue that Keynes introduced the finance motive, which gives rise to a temporary demand for money for finance while investment is still ex ante and before it becomes ex post. 7. Faced with Robertson’s criticisms, Keynes recants, as is indicated by a) His acceptance of Hicks’s IS-LL (later Hicks–Hansen IS-LM) representation of his theory which was compounded of both liquidity preference and loanable funds theories but in which Classical, loanable funds, elements predominated. For Robertson, this indicated that Keynes accepted the influence of productivity and thrift, as is shown by a shift to the right of the IS curve (representing investment and saving), which would increase income and force up the rate of interest. At this stage, therefore, the link is indirect, via the change in income, rather than direct as in Robertson’s scheme. b) However, the relationship between investment and the rate of interest becomes direct with the introduction of the finance motive, which directly increases the demand for money. 8. Having given way in the face of pressure from the loanable funds school, Keynes tries to protect his position: a) Against the accusation that he has reintroduced forced saving, by assuming that output is perfectly elastic below full employment. b) Against the charge that he has acknowledged the influence of productivity and thrift by postulating the idea of the liquidity trap (a term invented by Robertson to explain as a normal occurrence a situation for which Keynes could find no example hitherto), namely the maintenance by liquidity preference of the rate of interest at a level above that corresponding to full employment. The empirical validity of the phenomenon thus becomes the criterion for judging Keynes’s case. 9. Against the tactic of seeking to defend liquidity preference on the grounds that it explains the short-run situation while loanable funds with its real forces explains the long-run, Robertson points to Keynes’s introduction of the notion of the ‘safe’ or ‘normal’ rate, to which dealers refer when forming their expectations. This, he claimed, must represent the forces of productivity and thrift, for without this anchor, the rate of interest cannot be explained (as he pointed out in the ‘Mr Keynes and the Rate of Interest’ extract: see above pp. 186–187, the ‘grin without a cat’ (Robertson, 1939: p. 174; also AAW, p. 91)

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This is how matters appeared from Robertson’s point of view. The significance of the multiplier is, as this sequence makes clear, immense. It denied Say’s Law by denying individual choice through saving decisions and passed the initiative decisively to investment. It could be seen as a theoretical manifestation of the Moorean principle of organic unity, for it produces results not obtainable by summing the individual elements and so shifts the real and monetary variables out of their accustomed dispositions. In Classical terms, the multiplier, to accomplish its task, must be seen to work instantaneously. Then, from Robertson’s revelation that in reality it must work with a lag and so cannot perform the function assigned to it, the rest of the sequence consists of Keynes’s apparent attempts to effect repairs by the introduction of an expedient, the finance motive; Robertson’s demonstration that this will lead back to Classical conclusions; and finally, Keynes’s desperate attempts to deny this outcome by means of further expedients, the assumption of perfectly elastic supply below full employment and the liquidity trap. Though Robertson denied the validity of the multiplier concept, he clearly sensed its potency, for he continued to criticise it to the end. As a part of this process he resorted to the language of belittlement. He referred to the marginal propensity to save, which he never, incidentally, succeeded in distinguishing from the rate of saving, as merely a ‘potentially useful little brick’ (in Money, 1959: p. 178) and to the multiplier itself as ‘a magic carpet to waft us from one platform to the next’ (Money, p. 177). Further dismissive remarks can be found in ‘Effective Demand and the Multiplier’ (in Hicks [ed.], 1966: p. 145); also in Lectures (Robertson, 1963a: p. 420). It is astonishing that two people who had worked together over the years could be so at odds in their interpretation of the same set of relationships. When we remember the nature of the relationship, however, and what Robertson perceived to be at stake, it all becomes much more understandable. From Keynes’s point of view, real and monetary were brought together but combined in a different relationship. The key idea is that investment is not financed by saving (saving is – on a ‘simple-minded’ definition – that part of total income generated by the multiplier that is not consumed). Instead, investment as well as consumption is financed by the circulating stock of money. The demand for money thus engendered in conjunction with the supply available determines the rate of interest.

192 Dennis Robertson

This means that there is no longer any need for a separate savings channel to guide income saved into new investment. Instead, all economic activity is financed by the stock of money times the velocity of circulation. Also, saving and investment do affect the rate of interest but only via their affect on the level of income and therefore the demand for money. In the light of this it was extremely ill-advised of Keynes to attempt to reach out by introducing the finance motive, to provide a bridge between the two modes of thought and which resulted in the accusations of recantation. In assessing the differences between the two protagonists, therefore, all depends, as we noted earlier, on how each answers questions concerning the nature of saving, the relationship between investment and saving, the finance of investment, the nature of interest and the determination of the rate of interest. For Keynes, Robertson’s disagreements on the answers to these questions stemmed from confusion of thought and, in commenting in 1937 on the issues that divided them, he wrote It is Mr Robertson’s incorrigible confusion between the revolving fund of money in circulation and the flow of new saving which causes all his difficulties. (Keynes, 1973, in CW XIV: pp. 232–233) Confusion, that is, on the question of whether investment is financed by saving or money. For Robertson, with his faith in the notion of adding to established theory the benefit of new insights, we must always begin with saving. This was the basis of the concept of loanable funds, which is a composite made up of saving and net money balances coming onto the market. For Keynes, freed from old constraints, this sort of thinking produced ‘the worst muddles of all’ (Keynes, 1936, in CW VII: p. 183). We can observe the same differences between the two in their understanding of the problem they believe to be expressed in the ‘Treasury View’. They both rejected this argument against the efficacy of public works to relieve unemployment but did so for very different reasons. For Robertson, it was on the orthodox grounds that the Treasury View implied a shortage of saving. That is, by using scarce savings, public works would pre-empt (‘crowd out’ in later parlance) private sector investment. In Robertson’s view crowding out would not occur because in a depression people’s saving intentions are frustrated and so do not eventuate in the creation of capital goods. As early as the Study (1915) he was clear that Hawtrey’s attack on the expenditure proposals of the Minority Report of the Poor Law Commissioners was without substance:

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Mr Hawtrey’s attack . . . scarcely deserves formal refutation. He asserts that ‘the Government by the very fact of borrowing for this expenditure is withdrawing from the investment market savings which would otherwise be applied to the creation of capital’. The whole point is that in times of depression savings are not otherwise so applied. (Robertson, 1915: p. 253) When later he modified his ‘real’ analysis to allow for the effects of monetary influences, including the money-creating activities of banks and the desire of individuals to hold money, . . . common sense remarks about hoarding by farmers became transformed into the formal doctrine that under certain conditions the process of individual saving, so far from finding vent in the accumulation of useful stocks, may become completely abortive (Banking Policy and the Price Level, pp. 45–46, 96–97). (Robertson, 1948a: p. xv) The implication is that because of Robertson’s ‘evolutionary’ method of procedure, the saving that financed investment was first real (a stock of consumer goods) and then real and monetary (with the addition of new bank money and hoards which would facilitate or frustrate the intentions of savers). This provides the basis of the ‘muddles’ and ‘incorrigible confusion’ of which Keynes accused him. For Keynes, the problem posed by the Treasury View was somewhat different. He believed that he had avoided the morass into which Robertson had stumbled because of the very different way in which his own theory had developed. For Keynes of the General Theory, saving was that part of ex post real income not devoted to consumption. The finance for investment was obtained by gaining access to money balances. This meant that the role of the multiplier in defeating the Treasury View was not that of providing just the right amount of saving to finance investment. It was an incorrect interpretation that stemmed from a Classical way of thinking. Rather, the problem is occasioned by an increased demand for money, consequent upon the expansion of income, which raises the rate of interest and so chokes off private sector investment. In other words, The investment market can become congested through shortage of cash. It can never become congested through shortage of saving. This is the most fundamental of my conclusions within this field. (Keynes CW XIV: p. 222)

194 Dennis Robertson

The implication is, presumably, that the congestion could be relieved by increasing the quantity of money available. Such a conclusion would give point to Robertson’s plea for the ‘old K and V method’ in which money would go on working for expansion until withdrawn from the system, ‘thus affecting prices or employment as the case may be’ (see Robertson to Keynes, 1 April 1933, in CW XXIX: p. 17). On the other hand, for Milton Friedman the same argument would later provide support for the Monetarist view of the causes of inflation. The explanation for the different approaches taken by Robertson and Keynes to the question of the finance of investment (or, more properly perhaps, why Keynes so radically diverged from a shared heritage) can be attributed to the different positions they held on the significance of the fallacy of composition, in the form of the paradox of thrift. It was Robertson’s great insight and seminal contribution to take account, in his theory of saving, of the distinction between action taken by one individual acting alone and the same action taken by all together. It gave rise to his highly original notion of stinting, the situation in which a person’s saving is different from that intended due to the saving behaviour of others in the population. This new departure, however, was applied within the iron-bound confines of Classical thinking, to the saving-gives-rise-to-investment sequence and to the quantity theory relationship between money and the price level. For whatever reason – and we have suggested reasons relating to temperamental factors – Robertson never carried over the same thinking to allow him to reach a sympathetic interpretation of Keynes’s new thinking. That is, Robertson’s ‘incorrigible confusion’ stemmed from his failure to see the universal applicability of the paradox of thrift. In commenting on Keynes’s treatment of the relationship between investment and saving and Robertson’s incomprehension of it, Presley noted that

The encouragement of thrift is no longer a virtue but a vice in a depressed economy; an increase in the propensity to save out of total income . . . reduces the value of the multiplier, yielding less output from a given level of investment, and more unemployment. It does not bring a lowering of the rate of interest and a subsequent encouragement to invest. If disposable income falls, consumption will decline . . . It also yields less total saving since disposable income is reduced. DHR [Robertson] did not comprehend this fact (see Lectures on Economic Principles, p. 387), failing to appreciate the paradox of thrift. (Presley, 1978: p. 182 and note 18)

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This conclusion, that Robertson failed to see the significance of the paradox of thrift, is explored and given support in Fletcher (1987: pp. 49–52); the literature on the issue is reviewed in Fletcher (2000: pp. 397–400). It is a failure that helps to explain Robertson’s sense of bewilderment as he surveyed the components of Keynes’s new theory and looked in vain for the novelty they might contain: Both over the Treatise and this book I have gone through real intellectual torment trying to make up my mind whether, as you often seem to claim, there is some new piece on the board or rather a rearrangement, which seems to you superior, of existing pieces (Robertson to Keynes, 29 December 1936, in Keynes, 1973, CW XIV: p. 95) Whereas, of course, the fallacy of composition is a new piece on the board that, in turn, produces a new arrangement of pieces. We also have his reaction to a little book on the principles of the new economics that Joan Robinson published in the following year. Robinson made clear the importance, to Keynes’s theory of investment and saving, of the fallacy of composition in the form of the paradox of thrift (Robinson, 1937, Chapters I–V). Robertson’s comments again reveal his incomprehension of the processes at work (see, for, example, Robertson, 1961: p. 174; 1963: p. 352). Finally, we could point out that had Robertson appreciated that this phenomenon underpinned the construction of macroeconomics (the product of Keynes’s new thinking), as a system that produced fundamentally different aggregate outcomes from those which would be forecast on the basis of a simple aggregation of individual outcomes, he would not have been affronted in the late 1940s by ‘a prevalent tendency to suppose that the behaviour of “output as a whole’’ first attracted the attention of economists in the 1930s’ (Robertson, 1948a: ix). In complete contrast, it was the essence of Keynes’s breakthrough in the early 1930s to see the significance of the fallacy of composition for the construction of a theory of the whole economy (see Fletcher, 1987, Part II; 1996; 2000, Ch. 28). It was this insight that determined the pattern of his theorising because it became necessary to arrange the variables into an order consistent with it. As a consequence, a sequence of theorybuilding was imposed in which as Keynes solved one problem he was forced in turn to solve others. It is with this question of sequence that we reach the second stage of our two-part process of settling matters of dispute between Robertson and Keynes.

196 Dennis Robertson

We recall that for Robertson the theory of liquidity preference was the key to Keynes’s new economics, both because it supposedly gave undue prominence to the role of money and denied the Classical forces of productivity and thrift and because it was the linchpin upon which all other components depended. This led on to the idea that it took precedence and came first in the sequence of theory-construction. This viewpoint is exemplified by the following: Keynes’s main attack on the classical school was directed against this [Cambridge School inspired by Alfred Marshall’s] theory of the determination of interest rates. In place of interest rates adjusting to equilibrate planned investment and saving at full employment, he developed a theory of liquidity preference whereby the interest rate instead equilibrated the demand and supply of money . . . With interest rates thus separately determined by liquidity preference the way was open for the establishment of the general level of incomes and output as the variable that would equilibrate planned investment and saving via multipliers, accelerators and all that collection of quantitative adjustment mechanisms. (Goodhart, in Hill [ed.], 1989: p. 107) If, therefore, this sequence were shown to be correct, Keynesian economics would stand or fall on the empirical validity of liquidity preference. If, on the other hand, the sequence were shown to be incorrect, such that liquidity preference was found to be in a subordinate role and as coming late in the sequence, then the case against Keynes would collapse. In fact, there is a strong case for arguing that the second of these possible conclusions is the more likely and that the sequence of development runs the opposite way from that assumed by Robertson: The evidence clearly shows that Keynes, beginning from the incomeconsumption relation, first determined that saving is wholly the creature of investment and that it is not possible – due to the ‘paradox of thrift’ – to increase the rate of investment by saving more at some prior date; also, that given the relation between investment, income and saving, there could be no rate of interest at which, in equilibrium, saving would not be equal to investment. This . . . left Keynes without a theory of the rate of interest. The solution, which, he tells us, came to him appreciably later, began with the everyday, schoolbook definition of interest itself and gave the rate of interest as the liquidity premium on money ruling in the market. (Fletcher, 1989b, in Hill [ed.], p. 131)

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This alternative view is based on evidence which has emerged from the debate over the nature and timing of the transition in Keynes’s thought between the Treatise and the General Theory. The contributors to the debate have suggested a variety of criteria for identifying and dating the various points of departure (Dimand, 1988, and Clarke, 1988, have most of the references but see also Patinkin, 1993, and Dimand, 1994). Clarke points out that the choice is principally between a strategy of seeking clear evidence of progress towards the exposition of the theory in a form suitable for a professional readership (as specified by Patinkin) and that adopted by Clarke, of judging progress by looking for evidence of the originator’s initial insights, coming to him, perhaps, in flashes of illumination (Clarke, 1988). Clarke emphasises the central importance of the fallacy of composition in the process, arguing that it is built into the inspiration and structure of the whole work (Clarke, 1988: p. 270). He makes reference to Keynes’s letter to Harrod of August 1936, together with other available evidence, to date Keynes’s ‘moments of transition’. This produces four chronological stages (Clarke, 1988: pp. 229–230, 256–282): 1. by May 1932: the consumption function (the fundamental psychological law) 2. summer 1932: effective demand – the supply and demand for output as a whole 3. October 1932: the rate of interest and liquidity preference theory 4. much later: the marginal efficiency of capital On this basis, Keynes’s interest rate theory succeeds rather than precedes the innovations regarding the relationship between investment, real income and savings. The nature of saving demands that, logically, it must follow rather than lead investment and that finance for investment must be sought in the money market and the capital market rather than in prior saving. A qualification is provided by Moggridge, who plays down the importance of the fallacy of composition as an innovatory element in the process and warns against the adoption of the Clarke criterion. Adopting a cautious approach, Moggridge seeks evidence to show that flashes of illumination were indeed a reliable guide to progress and not a series of misleading mirages (Moggridge, 1992: p. 559). The evidence for which he is looking is that which marks Keynes’s progress as judged on a criterion previously suggested by Patinkin (1976),

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namely ‘the development of the theory of effective demand, most notably the equilibrating role of changes in income implicit in the multiplier’ (Moggridge, 1992: pp. 559, 561, 562). On this basis, Moggridge favours 1933 rather than 1932 as the year of inception of the General Theory and he throws some doubt on the strict acceptance of Keynes’s account of the sequence of development (Moggridge, 1992: pp. 562–563). The adoption of somewhat different criteria is likely to bias the outcome of the investigation but there are good reasons for giving weight to the Keynes–Clarke version of events. First, Keynes himself confirmed the relative dating of the components of his theory, which he gave in the letter to Harrod, in his article ‘Alternative Theories of the Rate of Interest’ of 1937b (Keynes, 1973: p. 212): . . . the initial novelty lies in my maintaining that it is not the rate of interest, but the level of incomes which ensures equality between saving and investment. The arguments which lead up to this initial conclusion are independent of my subsequent theory of the rate of interest, and in fact I reached it before I had reached the latter theory. But the result of it was to leave the rate of interest in the air. Whatever the date of appearance of an acceptably recognisable theory of effective demand, Keynes is clear that his interest theory came later than his theory of investment and saving. In the account given to Harrod, the theory of the rate of interest came ‘appreciably later’. Second, although Keynes may have been aware of the fallacy of composition since his undergraduate days, so that it ‘can thus hardly be “new’’ to the General Theory’ as Moggridge points out, he concedes that Keynes ‘may have recognised the greater significance of organicism in economics as he grew older’. Also, we should recognise that the addition of this ingredient to the mixture had a transformational effect on his theoretical landscape. It enabled Keynes to see old and familiar ideas in a new light and to give them new life. In this way, the nature of saving became clear so that the causal relationship between investment and saving was reversed. Also, the bearishness function was salvaged from the Treatise and given its perfected form once it became necessary to rethink the theory of the rate of interest. Third, acceptance of the fallacy of composition in the form of the paradox of thrift, together with its corollary the expenditure-determinesincome relation, argues for acceptance of the Keynes–Clarke account, as

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this gives emphasis to the initiatory, breakthrough phase of the revolution in Keynes’s thought from which other consequential theoretical changes followed. By contrast, the Moggridge–Patinkin account gives emphasis to the completion of the process; that is, to the ‘other consequential theoretical changes’, as is indicated by Moggridge’s search for evidence that the ‘penny had firmly dropped’ (Moggridge, 1992: pp. 562, 564). In other words, the Keynes–Clarke account of events sits better with Keynes’s expenditure-determines-income sequence than does that of Moggridge and Patinkin, which emphasises the completion of that sequence, as income changes to restore equilibrium. Despite the very real setback for Robertson’s case that this conclusion implies, might it not be possible to argue, as Goodhart does, that at bottom Robertson ‘assumed a different ordering of events’ and that ‘within his own framework of assumptions, DHR’s logic [is] impeccable’ (Goodhart, in Presley [ed.], 1992: pp. 15–16)? But here again there is unfortunately no hiding place. This is because Robertson’s price-output adjustment mechanism contained a weakness which had long been known to students of his work and which was mentioned by Goodhart himself (see Goodhart in Presley, [ed.], 1992: p. 20) There are several aspects to this. First, Robertson was ultimately concerned with changes in output but his formal theory assumed output constant. We recall that this problem had dogged Keynes of the Treatise and that it was only after the ‘Circus’ recognised it as the ‘widow’s cruse fallacy’ that Keynes was set on to recast his theory in quantity-adjustment terms. No such development-dynamic disturbed the brittle tranquillity of Robertson’s economics. Second, the principal means of adjustment in Robertson’s model was price level fluctuation. In turn, this depended for its operation on Robertson’s resolute refusal to recognise the nullifying effects of changes in stocks of finished goods as urged on him by Hawtrey. Third, Robertson envisaged a two-stage process in which a change in demand would influence only prices in stage one, which price changes would then provide the mechanism of adjustment (including forced saving) and so lead to a change in output in stage two. Goodhart was forced to concede that . . . the weakness of DHR’s position is that he fails to appreciate sufficiently that initially shifts in demand will be met by fluctuations in inventories at given prices, rather than by price changes . . . he himself can, I believe, be criticised for not giving enough weight to the critical

200 Dennis Robertson

role of inventory adjustment, for example as argued by Hawtrey and Harrod, in causing fluctuations in nominal expenditure to impinge initially on real output rather than on prices. Even when attacked directly on this point, Dennis tended to duck the issue. (Goodhart in Presley, [ed.], 1992: p. 20) It is a sad story. The man who did so much to re-orientate thought, shunted himself into a siding because he could not let go of old certainties. During one of their encounters, Keynes, exasperated, commented: ‘Even the muddiest river winds somewhere safe to sea’ would be a good title. I feel after reading it, that the strictly intellectual differences between us are probably very small indeed at bottom. But I am trying all the time to disentangle myself, whilst you are trying to keep entangled. You are, so to speak, bent on creeping back into your mother’s womb; whilst I am shaking myself like a dog on dry land. (letter to Robertson, December 1937, in Keynes CW XXIX: p. 165) But too much was at stake. In conjunction with his perennial attacks on Keynesian economics Robertson continued to hold to the view that saving determines investment with never a word of acknowledgement of the logical weakness at the heart of his theory. He reaffirmed his belief in explicit terms in 1954 and repeated it in identical terms in his lectures as published in 1963, the year of his death (see Robertson, 1954, in Hicks, 1966: p. 244; Robertson, 1963: pp. 421–422). In the following passage we find him clutching at any new straw that appears to bolster his position: The increase in saving may itself generate an increase in capital outlay . . . highbrow opinion, you know, is like a hunted hare; if you stand long enough in the same place, or nearly the same place, it is apt to come round to you in a circle. Mr. Kalecki, than whose no brow is higher . . . offers the following thought: ‘A reasonable interpretation of the inter-relation between the level of income and investment decisions should be based I think, on the fact that with the high level of income there is correlated a high level of savings and that the stream of new savings stimulates investment because it makes it possible to undertake investment without increased indebtedness’. The wheel has come full circle. If you want to be really up to date you can now say that it is not so much investment which governs savings as savings which governs investment. But you had better be careful to give Mr. Kalecki as your authority, otherwise you may be suspected of vulgar schoolboy error. (Robertson, 1963a: pp. 421–422)

20 The LSE and the Treasury

At the end of August 1936, Robertson was, almost literally, in limbo between two contrasting facets of his life: that represented by what he had temporarily left behind in Cambridge, England, and that represented by his destination, in Cambridge, Massachusetts. He was on board the Cunard-White Star liner ‘Georgic’ in New York harbour and obviously feeling the need to unburden himself on matters that weighed upon him. A letter he wrote to Keynes from his ark of refuge indicates very clearly what these cares were. It was but a few months after the publication of the General Theory and Robertson’s failure to endorse the revolution of economic thought it represented had brought alienation from the Keynes circle and the division of the Cambridge faculty into two warring camps. Though personal relations between Robertson and Keynes were strained they never broke down. It was a different story, however, with some of the Keynesian zealots and in particular Joan Robinson, with whom the feuding was bitter. While she became increasingly strident in her denunciations of the loanable funds approach and in her invitations to him to settle matters in the intellectual equivalent of public combat, he replied with deft thrusts of his feline wit. In his letter, Robertson was reluctantly agreeing to the lecture-list arrangements which gave Joan Robinson the power, as he saw it, to influence unduly with Keynesian ideas those coming to economics for the first time. There was also a more personal concern. He was seeking Keynes’s advice on whom he might consult about his ongoing psychological problems. The need to obtain help had become pressing and one must wonder whether this greater sense of urgency was because of the effects of the threat to his fragile emotional state posed by the publication of the General Theory (see Robertson to Keynes, 28 August 1936, in L/R/117 KPKC). 201

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The other facet of his life was far more positive. He was en route for Harvard University to take part, as an invited guest, in the Tercentenary Celebrations scheduled for September. Among delegates from many universities and other learned bodies throughout the world, he was listed as a representative of the British Academy (of which he was made a fellow in 1932). He was to be doubly honoured at this special time, for, in company with all the other leading scholars invited to deliver a lecture at the Tercentenary Conference and not previously honoured, he was to be awarded an honorary doctorate. This was recognition indeed of his international standing and of the esteem in which his contributions were held. The citation which was read out as the degree was conferred spoke of him, perfectly aptly, as ‘An academic man who has thought deeply concerning industrial and banking problems, his writings have left their mark on modern economic theory’. And here, perhaps, he fared better than the geologist with apparently miraculous powers: ‘whose skillful questioning of the Scottish Highlands drew forth revealing answers’ (Harvard, 1937a: pp. 217, 220). His lecture was delivered in the symposium devoted to ‘Authority and the Individual’, which was to consider the ‘economic, social, political, and intellectual factors in the structure of society which act upon the individual through social institutions and through accepted ideas’ (Harvard, 1937b: p. vi). To one contemporary observer, however, his long-term sparring partner, Paul Samuelson, there was something here that left a feeling of unease – not on account of the very worthy economist who was there but on account of the one who wasn’t. Samuelson’s point was that Robertson had perhaps been invited because the Harvard economists would find his views on the subject congenial, at a time when such thinking was coming under threat. Except in one respect, the choice was an excellent one. Robertson was urbane and cultured. He gave a nice speech, in which he pointed out the difference between cycles and secular stagnation; he warned against doing too little, and warned even more against doing too much. One suspects his hosts appreciated the latter message, for those who live in Newcastle invariably love to import people whom they expect will bring them coals. As a student at Harvard in the days before Hansen, I can testify that the coals of caution concerning doing too much about unemployment were not scarce goods in 1936 Cambridge . . . The scandal was not with the man who was there, who had after all been invited to the party. What constituted the scandal

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in Cambridge, Massachusetts in the fall of 1936 was the man who was not there. The fact that every reader will know his name confirms the justness of my diagnosis, which I may add did not have to be formulated with the wisdom of hindsight. (Samuelson, 1963: p. 521) Robertson’s half-hour lecture was entitled ‘The State and Economic Fluctuation’. It was the one we referred to earlier which distinguished between the two possible causes of the current economic distress: the snake (the cycle) and the worm (stagnation through the failure of the rate of interest to fall to a full-employment level on account of the ‘liquidity trap’). Robertson subsequently re-titled it in its published form as ‘The Snake and the Worm’. It warned against too-ready acceptance of the message of the General Theory on the grounds both that the Keynesian dash for growth to achieve a utopian state of post-Darwinian leisure would incur unreasonable distribution effects, as between the social classes, and that what was believed to be evidence of the existence of a ‘worm’ could in reality be due to the effects of cyclical depression made worse by a phase of structural change, for which the correct remedy was very different from ‘Boost and Bolster’. There is also in this regard a reappearance of the phenomenon to which Robertson had drawn attention in ‘TBP’ (1928b) and his Macmillan evidence, namely the decline in the role of the banks in the provision of working capital so that their traditional function (in the Robertson scheme of things) of acting as a conduit for thrift was impaired – to the extent that savings were running to waste and so giving the appearance of the existence of endemic slump because of the existence of an endemic worm! Whatever may be judged to be the truth of the matter, we may recall that the Robertsonian caution, which in his pure theory landed him in a half-way house, had its more positive side in his open-eyed realism and, as compared to the apparently more worldly Keynes, his more acute understanding of human nature. It is this that lends authority to his policy pronouncements. He consequently held a vision which was, as compared to that of Keynes, modest and rather prosaic but altogether more realistic and useful. As against Keynes’s anticipated paradise of Bloomsbury for the general should be set the likelihood that No¨el Coward’s observation (from his enduringly popular song from the late 1920s, ‘Poor Little Rich Girl’) – that people with infinite leisure exhibit an increasingly intense desire for pleasure (rather than learning, aesthetic appreciation and philosophical debate!) – would become the norm for behaviour (Fletcher, 2004b: p. 18).

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In any event, the Harvard gesture must have come as welcome support to one who felt increasingly beleaguered. On the other hand, of course, it must never be forgotten that Robertson’s natural position in the ordering of affairs was that of minority-of-one. How he would have coped had he found himself driving a band-wagon as leader of a revolution is hard to predict. Though ever the reluctant committee-man, Robertson could be counted upon dutifully to serve his turn. In the latter years of the decade he was much in demand. In 1930 the government had announced the setting up of an Economic Advisory Council, the purpose of which was, in summation, to advise the government on ‘all aspects of national, imperial and international economy with a bearing on the prosperity of the country’ (Treasury Minute, 27 January 1930). Robertson’s participation was only proximate. In 1935 he served on a sub-committee (on the trend of unemployment) of the Committee on Economic Information, which was a standing committee of the Economic Advisory Council, and then served on the committee itself between 1936 and 1939. Also, between 1936 and 1938 he was advisor to the financial section of the League of Nations, in particular with respect to the economist Jan Tinbergen’s empirical testing of theories of the trade cycle. In 1939 he was a member of the Treasury (Phillips) Committee on the Control of Savings and Investment. Despite his natural disinclination for such work, these tasks may actually have come as a welcome diversion from the acrimony of his disputes with the Keynesian revolutionaries. As the climate at Cambridge turned colder and less hospitable, however, the question of whether he should seek relief of a more permanent kind came to the fore. Robertson had always resisted the temptation to move elsewhere: to become High Master of Manchester Grammar School in 1924 (when he read the schedule for a typical day in the post he commented ironically that he couldn’t think of ‘anything more suitable’) and – more realistically and in the midst of his troubles at Cambridge – to the Price Chair of International Economics at Chatham House in 1937. All-in-all his considered opinion was that, despite the problems, it would be better for him to remain at Cambridge. There was, nevertheless, another leading centre of economic studies of the time, the academic staff of which included many kindred spirits and with which Robertson had long-standing and very cordial links. This was the London School of Economics and Political Science, founded in 1895 by the social reformer, Sidney Webb, and devoted, as its name

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suggests, to the study of the social sciences. Over the years the LSE attracted leading scholars and students from home and abroad, its intellectual batteries constantly recharged by the contributions of visiting professors and speakers at its seminars. Though its founder was a convinced socialist and Fabian, the LSE was never in thrall to the Fabian Society and became associated instead with neoclassical economics. Robertson’s links came through the monthly meetings of the London and Cambridge Economic Service – from the 1920s – and through the regular interchange of external examining and advising duties between the two institutions. In the 1930s, these brought him into close relationship with Lionel (later Lord) Robbins who was an ardent admirer of his works. There was also, inter alia, A. L. Bowley, with whom he had undertaken the statistical survey in India in 1933–1934, Hugh Dalton, whom he knew well, and, most significantly, F. A. Hayek, the Tooke Professor of Economic Science and Statistics from 1932 to 1949, with whom he shared an implacable opposition to Keynesian economics. This relationship with the LSE bore fruit in 1938 when he was made external advisor for the purpose of filling the Sir Ernest Cassel Chair of Economics (with special reference to currency and banking) that was being vacated by T. E. Gregory. Then, after some persuasion and much deliberation, he allowed his own name to go forward as a candidate for the chair and was duly appointed. At the least he would now be able to work in a congenial atmosphere with like-minded colleagues but would have to leave behind his familiar Cambridge haunts for life in the metropolis. He found what seemed ideal accommodation in Clifford’s Inn (formerly an Inn of Court which had recently [1934–1935] been rebuilt as a block of flats) but the traffic noise was such that he opted for a flat in Artillery Mansions, in Victoria Street SW1. Here, however, was another deprivation, important for Robertson: he was not allowed to keep his beloved cat, which in Cambridge had free access to his rooms in college via a flap in the door. He took up his appointment in January 1939 but as things turned out, he served only two terms at the School before being seconded to the Treasury on the outbreak of war. To complete the circle, the LSE was then evacuated to Cambridge! In the Treasury, Robertson was appointed as a ‘temporary administrative officer’ to Sir Frederick Phillips, third secretary and head of the Finance Division, who set him tasks which some observers thought undervalued his capacities. Initially he spent his days doing arithmetical calculations (often not too accurately according to his own judgement)

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on foreign exchange. Hicks heartily puffed it up but he was clearly not convinced: watching, and so far as possible controlling, the balances of payments (the separate balances of payments) with the individual non-sterling countries with which trade was still open, with a view to the management of the nation’s dwindling gold and foreign exchange reserves. It was a task which required far more economic judgement than might appear at first sight; its importance to the nation does not need to be underlined. There were some who thought that in this specialised task he was being underused; but he did not think so himself. It was an important service, and he was glad to do it. (Hicks [ed.], 1966: p. 18) For Robbins, a faithful supporter, it was work that was ‘very definitely’ below his capabilities and he believed that the same phenomenon could be observed when the focus of operations shifted to Washington. For some reason Phillips, normally attuned to developments in the world of economics, had a lower opinion of Robertson’s potential than his professional standing would suggest (G11/24, 25 RPTC). This view was confirmed by Robertson himself, who reported in a letter from the United States that in Phillips’s absence for a few weeks, he had not been left in charge (A1/11/61 RPTC). What can account for this? We can only conjecture but it would seem that Robertson was here, once again, the victim of his own style: that his wit and whimsy and ‘Alice’ allusions, the very characteristics that made him ‘the most deeply loved economist of his time’ (see Lee, 1963: p. 312; Butler, 1963: p. 44), led to his being cast, in the eyes of more earnest types, as someone who could not be taken wholly seriously; that he was one who did economics ‘lightly’ (Johnson and Johnson, 1978: p. 136). Nevertheless, Robertson was destined to make a significant contribution to the war-effort, through his participation in the all-important financial negotiations with the Americans. It was a role in which he was to earn Keynes’s highest praise but also in which he was to suffer at his hands a slight which scarred Robertson for life. The negotiations with the United States arose out of Britain’s desire to achieve four interrelated objectives. These were, successively (1) to counter Nazi propaganda, in the shape of Dr Walther Funk’s proposed ‘New Order’ for Europe, by presenting to people at home and abroad the prospect of a better life than the one experienced during the 1930s; (2) to secure supplies of materials required for the prosecution of the war on the most favourable terms possible; (3) to devise institutional arrangements

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that would promote the growth of trade and international prosperity in the post-war world; (4) to secure for Britain the means by which her foreign exchange obligations might be met during a possibly extended post-war period of economic reconstruction and restoration. Problems arose both because of differences of opinion as to the means by which the objectives might be met and by the clear disparity in negotiating positions between the parties, with Britain as the economically weaker and supplicant ally and the United States as the economically more powerful – the most powerful to emerge from the war – and able, ultimately, to dictate terms. Britain’s difficulties were exaggerated by their sheer scale. The decision to assume the role of major ally to the United States and the Soviet Union and to pursue that role à outrance, with a reckless disregard of the cost, led to the loss on a huge scale of assets and markets in the present and to the mortgaging of the future. As Churchill, the descendant and heir of Marlborough, plotted his campaigns and planned his war memoirs, the economists were left to find means of settling the bill. Throughout, the team assembled was of superlative quality but woefully thin on the ground. Several members sacrificed their health and even their lives in the task. Some idea of the phasing of the negotiations can be gained from the planners’ own perceptions. Three stages were envisaged: Stage I would cover the defeat of Nazi Germany; Stage II the Pacific War against the Japanese; Stage III the transition to a peacetime economy. The timescale envisaged allowed for a start to be made on the business of Stage III as the centre of attention moved from Europe to the Far East – so moderating the extent of liabilities that would ultimately have to be met. Complications arose because Stage I lasted longer than envisaged and Stage II proved to be of much shorter duration because of the advent of the atomic bomb. The effect was to exacerbate the extent, and to accelerate the arrival, of the economic crisis. This was because the arrangement known as Lend-Lease (Mutual Aid, for arrangements with Canada) whereby Britain was supplied with war materials without the demand for ready payment (negotiating-objective 2) was terminated at the conclusion of hostilities; there was no opportunity (after the defeat of Germany) for the economy to be eased into a phase of reconstruction during which Britain would continue to have major military and other commitments abroad; of a number of disagreeable options, a loan from the United States was deemed the least bad means for the country to survive (objective 4) and though the financial terms obtained were not unfavourable, obligations incurred with

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respect to the convertibility of the pound into foreign currencies (stemming cumulatively from all four objectives) meant continued austerity and hardship for a population long inured to shortage and overwork. It was this last circumstance – the question of convertibility – that was to give rise to the problems between Robertson and Keynes. Robertson participated in the three principal sets of negotiations during 1943 and 1944. The first was the set of informal discussions on the topics covered by the notorious Article VII, of the Lend-Lease Agreement, which covered the ‘consideration’ to be exacted in return for the provision of war supplies. Potentially, these topics dealt with matters relating to the liberalisation of trade and currency exchange that would involve many nations. For the moment, however, there was an attempt to dispose of matters of specific interest to Britain and the United States before they became the subject of international negotiation. Accordingly, a strong British delegation crossed the Atlantic in the autumn of 1943 for talks to be held in Washington. There the mission was joined inter alia by Robertson who was by that time attached to the British Embassy. Interest centred on the two major schemes proposed as the basis for post-war international currency arrangements: the Clearing Union, or Keynes Plan, named after its begetter and leader of the British team; the International Stabilisation Fund (with associated Bank for Reconstruction), or White Plan, named after the leading US negotiator, Harry Dexter White. Robertson had been carrying on informal discussions with his American opposite number (Henry Morgenthau) but this was the first full-scale airing of differences. To expedite business, separate groups were set up to discuss the various topics and these in turn reported to plenary meetings. Robertson served on the Monetary Group, with Keynes leading for Britain. Inevitably it was the White Plan, modified, that became the basis for international financial arrangements and it was White’s proposals that gave birth to those twin pillars of the post-war trading world, the International Monetary Fund and the International Bank for Reconstruction and Development (the World Bank). Details of these were agreed at a conference of 44 nations held at Bretton Woods in the White Mountains, New Hampshire, from the end of June 1944, and for which a smaller, drafting committee, meeting in Atlantic City, New Jersey, was seen as a necessary preliminary. Again the British delegation crossed the Atlantic, accompanied by delegates of other nations, and arrived with two drafts, concocted during the voyage, relating respectively to arrangements for the Fund and the Bank. The British party included Robertson, by this time back in Britain

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having, in March 1944, been appointed to the Chair of Political Economy at Cambridge (it was reported in The Times on 9 March). As senior American negotiator, White had the control of business. He proved himself a skilful stage manager. At the Atlantic City meeting he cooperated with Keynes to produce agreed British-US provisional texts which could be presented as alternatives to the full conference at Bretton Woods but to which each ally would take up a pre-arranged position. When the delegates moved on to New Hampshire, however, the business to be transacted was divided between three separate commissions. Of the two principal ones, White arranged for the pre-agreed business, which concerned the Fund, to be dealt with by Commission I, which he was to chair, leaving Keynes to chair Commission II, which was concerned with the Bank. Keynes, thus preoccupied, would be less able to oppose American intentions on matters still to be decided. Given that it was Fund business that would directly affect the conditions Britain would face in Stage III, through exchange rate policy, currency convertibility and access to Fund resources – matters upon which Keynes could be expected to fight tooth and nail – this must be accounted a shrewd move. The effect was to throw added responsibility onto the British delegates on Commission I, Robbins and Robertson. Matters to be discussed were technical, complex and contentious and in these circumstances Robertson proved his true worth. Robbins has hinted that Keynes was ‘persuaded’ to include him in the British team (letter to Hicks, 28 September, 1964, G11/24, 25 RPTC), though persuasion was necessary, perhaps, only because Robertson had returned to Cambridge. If this is so then Robertson amply repaid the confidence shown. His intellectual capacity and mastery of detail made him a formidable negotiator. He also got on extremely well with his American counterpart, Edward Bernstein of the US Treasury. Keynes recorded his unreserved praise in a letter of commendation: If anyone is picked out I think it would have to be Dennis, who has been absolutely indispensable. He alone had the intellectual subtlety and patience of mind and tenacity of character to grasp and hold on to all details and fight them through Bernstein (who adores Dennis), so that I, frequently occupied otherwise, could feel completely happy about the situation. (Keynes to Sir Richard Hopkins, 22 July, 1944, in Keynes CW XXVI: p. 109) He also wrote to his mother that ‘Dennis Robertson is perhaps the most useful of all – absolutely first-class brains do help!’ (25 July 1944).

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On matters concerning the Fund, Robertson played an important coordinating role. The significance of this is that the British mission was, as usual, undermanned and overworked. The volume and variety of work to be got through and the incessant round of meetings to be attended meant that it was difficult to maintain communication between delegates and between delegates and officials. Moreover, the time available was strictly limited as the hotel that housed the conference would be required for other guests at the expiry of the booking (there was a slight extension). As the days dwindled down, the atmosphere became more febrile as the increasingly exhausted representatives struggled to resolve the last knotty issues. The British left the conference without seeing a consecutive draft of the matters agreed. In these circumstances the scope for errors and misunderstandings is obvious enough. For Robertson the implications were to be disastrous. Just as he and Keynes seemed to have reached a renewed level of mutual respect and admiration and therefore a basis for personal and professional harmony, events set it all at nought. The problem was, in essence, as follows. The principal motivation behind the setting up of the Fund was the establishment of order, stability and confidence in international trading arrangements such that trade would be promoted and prosperity increased. At the heart of this lay the twin principles of freedom of trade and convertibility of currencies. Traders would export goods confident that they would be paid in their own currencies. Countries with balance of payments problems would have the right of recourse to Fund resources on specified terms. In entering into the agreement, the United States expected to be a creditor nation while Britain expected to be a debtor nation. These expectations shaped attitudes to policy. The particular problem between Robertson and Keynes arose over the question of convertibility. Britain’s obligation to pay foreign currencies in exchange for sterling could potentially arise both in respect of current transactions and of accumulated sterling balances. Within the Empire, Britain was at the centre of the sterling area, within which trading countries could hold sterling as a reserve currency instead of demanding payment in their own currencies. Beyond those balances acquired during wartime and during the transition to a peacetime economy, the liability to make sterling balances convertible increased the more closely those balances could be associated with current transactions. What would be a country’s liability in a situation in which a deficit country had exhausted its right of recourse to the Fund? The situation was dealt with under Article VIII of the Fund agreement in wording that left the meaning open

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to interpretation. Once the problem had been recognised at government level, it was regarded as sufficiently serious to warrant delay of many months in Britain’s ratification of the agreement. The matter had to be reopened with the US Treasury at a time when the bill containing the provisions of the agreement was to begin its journey through Congress and when any whiff of disagreement over meaning could result in the bill’s rejection. At Bretton Woods the point was naturally dealt within Commission I and it had fallen to Robertson to negotiate the technicalities involved. In talks with the Americans he was constrained by the instruction from the War Cabinet to safeguard the position of the sterling balances but, given the ambiguity in the draft provisions, the matter turned on the question of a country’s ability unilaterally (that is, without reference to the Fund) to restrict convertibility in respect of current transactions. Robertson’s interpretation was that although a country possessed the right with respect to balances, arbitrary restriction did not extend to current transactions. In this he was in agreement with the US and Canadian delegates. Keynes, by contrast, assumed and maintained throughout that where a country had exhausted its ‘drawing rights’ or otherwise become ineligible for assistance from the Fund, it was thereby absolved from responsibility to maintain convertibility in respect both of balances and current transactions. To avoid breakdown of negotiations, Robertson accepted the implications of his interpretation and agreed to the current wording. Not only was this a realistic course of action but he also believed he had Keynes’s consent. Because of the difficulties of communication at the conference, the agreement was sought through a third party, who, because of pressing business of his own with Keynes, may not even have raised the matter. Robertson went ahead, therefore, ‘completely sure of [Keynes’s] concurrence’ (letter from Robbins to Keynes, 17 January 1945, quoted in Pressnell, I, 1986: p. 173). Keynes, however, was furious and was later to claim in a note to the chancellor that ‘his attention had not been drawn to the matter at Bretton Woods, and that it was only sprung on him afterwards by Robertson (whom this assertion greatly wounded)’ (Pressnell, I, 1986: p. 173). Robbins, in other correspondence, went so far as to claim that, without warning and in Robertson’s presence, Keynes had announced to the chancellor that ‘he had been betrayed by his delegate on this particular clause and the matter must be taken up forthwith with the Americans’ (Robbins to Hicks, 28 September 1964, G11/24, 25 RPTC). He also told Pressnell that Robertson ‘carried the wound to the grave’ (Pressnell, I, 1986: p. 189, n. 71).

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In fact, the search for an agreed standpoint to be adopted by the chancellor began on the delegation’s return to London. All unawares, Robertson had set out his own views on the matter in ‘A Note on the International Monetary Fund: An Essay in Rabbinics’ (31 July 1944), which revealed both his restricted, bilateral, interpretation of the notion of convertibility and the inherent ambiguity of the published provisions, and to this Keynes had replied. Subsequent events made a protracted and a tangled tale. Eventually, there was a respite when the Americans came round to the British point of view – on the grounds that unresolved issues on trade left scope for just such an interpretation. However, the earlier interpretation was to be reaffirmed and enforced, during the talks on the terms for the American loan to Britain, later in the year (the various developments can be followed in a number of authoritative accounts including Pressnell, I, 1986: pp. 170–182, Moggridge, 1992: pp. 748–753, Keynes CW XXVI, pp. 114–174) and skidelsky, 2000, Chapter 10. What is of greater interest for present purposes is what this episode tells us about Robertson’s perceptiveness, tenacity and pragmatism: also, however, how thin-skinned and vulnerable he was. Though Robertson’s innocence in the matter was explained to Keynes, Keynes never communicated whatever new understanding he had of the affair to Robertson. For Robertson, that Keynes could have taken the attitude he did towards a colleague and former collaborator – and moreover one who had contributed so crucially to the success of the conference – cast a shadow across the remainder of his life. Back in Cambridge even Rylands could sense that something had happened (interview, February 1994) but for Robertson any recollection was painful and he never spoke of the matter. It was all most unfortunate.

21 Professor at Cambridge: 1, Faculty Politics, Public Service and Lecturing

When Pigou retired from the Chair of Political Economy at Cambridge in 1943, Keynes was the obvious person to succeed him. Keynes, however, declined the offer of the post when it was made, both because he did not need it and because he did not relish a return to lecturing. Instead, he recommended Robertson, who, after some hesitation, accepted. It cannot have been an easy decision. Dennison, surely correctly, reported that Characteristically, the decision to return to Cambridge involved much heartsearching and consultations. Keynes was, of course, consulted, and in spite of his many other preoccupations gave it sympathetic attention, and favoured the move. (Dennison, in Dennison and Presley [eds], 1992: p. 51) In other words, this was not to be seen as the chance of a happy release from exile. Robertson was installed in a department of high repute among colleagues who valued him not just as a distinguished academic but as one in sympathy with their ethos. To leave after so short a stay and return to the cockpit of the Cambridge faculty, in which the Keynesians were so clearly in the ascendant, risked a return to strife and harassment. He could not know that the restraining hand of Keynes would so soon be removed from the situation. On the other hand, this was the chair of his exemplar, Marshall, and he could return to his accustomed life in Trinity. His going was hailed as a great loss at the LSE and met with relief and congratulation from the electors and from well-wishers at Cambridge. Robertson’s tenure of the chair, from taking up the post in 1944 to his eventual retirement in 1957, was curiously and, perhaps entirely predictably, two-facetted. On the one hand he came, so to speak, into his glory, with abundant and tangible indications of the world’s recognition of his achievements. On the other hand, the feuding between the Keynesian 213

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and the Loanable Funds factions flared up anew and the consequences darkened what should in all justice have been years of fulfilment. From the start the honours flowed in. He was, we recall, already a fellow of the British Academy (1932). For his war-work he was appointed CMG (Companion of St Michael and St George) in 1944 and a knighthood followed in 1953. To his honorary doctorate from Harvard, he now added a clutch of honorary degrees from universities at home and abroad: Hon. D. Comm. (Amsterdam), Hon. Litt.D. (Durham, Manchester and Sheffield), Hon. D. Econ. (Louvain), Hon. D.Sc. Econ. (London), Hon. D. H. L. (Columbia). His election as a Fellow of Eton College, in 1948, gave him particular pleasure. Among other tokens of recognition there were his election as president of the Royal Economic Society (1948–1950), an invitation to deliver the Page-Barbour Lectures at the University of Virginia in March 1953 and a letter of congratulation from his ‘American friends’, including the names of some of the world’s most prominent economists, on the occasion of his 70th birthday in 1960 (23 May 1960 in C18/182 RPTC). Clearly the prophet was never without honour, except, perhaps, in his own country. As chairman of the Faculty Board he had to battle against hostility and obstruction on crucial matters such as appointments and the syllabus. A particularly sharp thorn in his flesh was Joan Robinson, with whom he shared a fundamental incompatibility of temperament. She sought to obtrude Keynesian influences into teaching and research at every opportunity while he attempted to exclude her wherever possible and to block her progress and perhaps that of her acolytes within the faculty. No quarter was given and each side blamed the other for atrocities committed, whether real or imagined. Harry Johnson, whom Robertson was later to invite back to Cambridge, has left a vivid impression of life in the faculty in the immediate post-war years. Though his judgements are not always reliable, the following can be taken as an accurate reflection of the situation by one who was actually there at the time. Note that Robertson was seen as not without his own supporters but that they did not command the same level of intellectual fire-power where it mattered as the Keynesians: Even at that time [1945–1946] the fight between the liquidity preference and loanable funds groups was going on. Robertson had a little coterie of people who believed in loanable funds. Unfortunately for him, they were not really sharp theorists. They were mostly involved in peripheral subjects like industrial organisation (on which the British have always been extremely weak), labour economics, and other

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similar subjects, so about all they could do was declare their faith and manoeuvre behind the scenes in the academic politics of the place, trying to get more of their kind elected to positions and keep out the opposite crowd. The Keynesians were the sharp theorists, and they made their points by caricaturing an orthodoxy that no one equally sharp (apart from Robertson) was there to defend. (Johnson, in Johnson and Johnson [eds], 1978: p. 131) That the situation depicted was not simply a skirmish but an episode in a long-running war of attrition can be gauged from the following. In a speech which he gave as chairman to a meeting of the Faculty Board, in 1946, Robertson sought to defend himself against accusations that he was seeking to restrict coverage of Keynesian economics in the subjects to be taught for the Tripos. In phrases that would turn up in his published work he argued that though his own interest and contribution to economic theory lay chiefly in the field of fluctuations and money, the popularisation of the field had been brought about by a book (the General Theory) that misrepresented ideas and contained much muddled thinking and a strong bias towards inflation; the effect on economic understanding, teaching and policy-making had been wholly deleterious and time would prove him right on the matter. That the Keynesians nevertheless seemed to have gained the upper hand can be judged from an incident nine years later. Robertson, at the age of 65, decided to postpone his retirement for two years, as was his right, in the face of a vote of no confidence by the Faculty Board in its action of excluding him as senior professor from the all-important committees concerned with appointments to the academic staff and with the composition of the syllabus. Such was the climate in which he lived out his latter years. Beside these scenes of domestic strife, however, he was much in demand in the outside world. He remained a favourite for invitations to serve on official committees and commissions and when he could not reasonably refuse to heed the call, serve he did. There was, right at the beginning, the Royal Commission on Equal Pay (1944–1946) and later, in the 1950s, at the time of Corin Redgrave’s observations of Robertson’s role in the Redgrave circle, he served on the Council on Prices, Productivity and Incomes (1957–1958) – chaired at first by Lord Cohen. Here, prior to his resignation from the council, he became one of the ‘Three Wise Men’ and in typical fashion he subsequently expressed his views on the exercise in an address entitled ‘Reflections of an Ex-Magus’ (1959, reprinted in Dennison and Presley [eds], 1992: pp. 95–115). This followed the

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publication of two reports of the committee which were chiefly the work of Robertson as the economic expert present. ‘Reflections’ is concerned with the, mostly hostile, reception accorded to the reports and is interesting because of its affirmation of NeoClassical, Robertsonian ideas in a time of ‘Keynesian’ orthodoxy. Under this orthodoxy – little related to the economics of the General Theory – prices were expected to rise year on year as an incentive to producers to expand production and too-rapid increases in prices were seen to be the outcome of wage-push by trade unions rather than demand-pull due to excessive levels of aggregate demand. This was the justification for setting up an enquiry into the efficacy of incomes policies. The perennial question regarding the relevance of the growth of money supply to price inflation was to be answered firmly in the negative (the Radcliffe Committee which dealt with questions of money supply and velocity of circulation was set up in 1957 and reported in 1959: it found great difficulty in both defining money supply and envisaging any limit on the velocity of circulation). In the ‘Reflections’, therefore, Robertson dealt with the two principal questions, regarding policy on the general price level and on wages. With respect to the first, he began by taking to task Nicholas Kaldor, a Keynesian at Cambridge from the end of the 1940s, for allegedly misusing passages from Money (1922) to imply that Robertson was then in favour of a policy of ever-rising prices but now of price-stability. If we recall the argument of the book, Robertson used as an expository device the tactic of advocating policies both of rising prices and of falling prices, before settling for price stability as the via media. This policy of price stability as a norm but with scope for departures to accommodate particular circumstances became his established position. It was a conclusion based on the findings of the Study as modified by his further work in Money. It became definitive with the publication of BPPL and ‘TBP’. In a clear reflection of Robertson’s own analysis, the first report argued that the course of prices over the cycle was such that prices would rise (money’s value would fall) in the boom time and that this would be checked and reversed (money’s value would rise again) in the period of slump. In pursuit of general price stability, therefore, the desirability of avoiding acute recessions is best served by moderating the excesses of the boom. The council blamed inflated demand as the ‘main cause’ of the postwar inflation and cited the ‘full employment pledge and the flabbiness of the post-war monetary system’ as the main reasons for this. In judging the role in this process of trade union wage demands and producers’

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price-setting behaviour, the question to be asked in each case is to what extent is that behaviour constrained by the economic situation in which the actors respectively find themselves?. To demonstrate this, Robertson employed the kind of parable he used so successfully in Money, whereby Mr Bun the Baker, a trader in an inflationary world, is influenced first in his rising labour costs and then in his ability to raise sales prices. In support of this argument, Robertson was pleased to find that J. C. R. Dow, though he wrote an explicitly critical review of the report, had, in a paper to the Royal Statistical Society, found a greater influence of demand than he had expected. He also cited A. W. Phillips’s famous article (Phillips, 1958) which postulated an inverse relation between the rate of change of money wages and the percentage level of unemployment – a measure, that is, of demand pressure. Reassuringly, Phillips had reached the conclusion that price stability – in which wages rise no faster than productivity – could be achieved with an unemployment level of only two and a half per cent. This was a welcome finding as according to ‘Reflections’, price stability would not require heavy unemployment but ‘only a definite change of atmosphere’ (Robertson, 1959 in Dennison and Presley [eds], 1992: p. 112). Nevertheless, Robertson’s sense of realism envisaged great difficulties in accepting as an enduring truth any conclusion based on the reduction of myriad economic and other influences to a mathematical formula. This was prophetic in view of Friedman’s later discrediting of the Phillips curve as a dependable relationship. The first two reports of the council, as reviewed in ‘Reflections’, are important for any appreciation of Robertson’s thinking on economic policy. They give a late, clear assertion of old-established values and at the time did nothing to enhance his popularity in fashionably orthodox circles. Robertson also gave evidence to expert enquiries after the manner of that which he gave to the Macmillan Committee. In 1948 there was the Committee on the Rating of Site Values and, closer to his own interests, there was his last major task, his evidence to the Canadian Royal Commission on Banking and Finance (reprinted in Dennison and Presley [eds], 1992: pp. 170–195). His memorandum of evidence was written in 1962 (it was published in 1963 just a short time after he died) and he travelled to Canada to give oral evidence in September 1962. Given that it was produced at such an advanced stage in his life (a photograph taken during the conferment of his honorary degree at Sheffield in 1961 shows him as looking immensely old, even though he was only 71).

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The Memorandum exhibits no signs of any failing of powers and it is a not insubstantial document of something less than 8000 words. Moreover, in place of the highly abstruse technical exposition that might have been expected we have instead a systematic and easily accessible compendium of matters to be considered by persons charged with arranging the economic affairs of a nation: a sort of statesman’s handbook of political economy. Drawing on ideas and experiences garnered over many years from sources relatively ancient and modern – the Study, BPPL and ‘TBP’, together with the Bretton Woods ‘Articles of Agreement for an International Monetary Fund’, ‘Reflections of an Ex-Magus’ and his similarly more recent comments on ‘The Radcliffe Report’ (reprinted in Dennison and Presley [eds], 1992: pp. 116–122) – he sets out the various topics needful in the formation of policy, the alternative avenues for action available for each together with the associated arguments and then makes a recommendation in respect of each. Though there is necessary resort to the Robertson taxonomic method, the mood is relaxed and unlikely to alarm the non-specialist. Thus there is mention of changing fashions in national economic objectives, with price level stability giving way to full employment to be replaced in turn by economic growth, which for Robertson was of course always a primary consideration and one upon which peoples and governments are required to reach a conclusion as to a desired rate. Accordingly, after mention of population and hence labour supply growth and (important for Canada) regional considerations, he introduces the twin engines of growth represented by the rate of capital formation – a matter upon which government may be able to exert a significant influence – and technical progress, which of course has a mind of its own. Thereafter, the analysis of BPPL and ‘TBP’ is invoked to argue that growth is to be obtained at minimum short-run cost (the cycle) through adherence to a policy of maintaining monetary equilibrium. This means that the banks must expand their lending on a scale that will allow the intentions of savers to be made effective and, even when allowing for population, capital and output growth, adhere to the rule of maintaining stability of the final average price level as the most practicable target for policy. Then, in pursuit of this policy, budgetary decisions must be mindful of the balance to be struck in respect of taxation versus deficit finance, for one of the problems in Britain’s case had been reluctance on the part of the government to pay the sufficiently high interest rates which

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would encourage long-term lending by the public. This had resulted in an undue reliance on short-term borrowing by means of Treasury bills which, being non-commercial borrowing by the government, did not contract in response to a rise in short-term borrowing costs as the traditional means of controlling the money supply (as pointed out by the Radcliffe Committee, 1959). Echoes of Robertson’s earlier monetary analysis are also raised in his discussion of the means of regulating the rate of flow of money demand for final goods and services. We recall the notion of a stream of money (‘like water from a hose’) coming into contact with a flow of goods and services in the determination of the price level. Here, the importance of the banks in their influence on the velocity of circulation is recognised by the mention of the possible official imposition of ratio controls, special deposits to neutralise reserves and advances control. Equally, account is taken of the demand side with a caution that hoarding behaviour could inopportunely depress velocity. These observations are then applied to particular situations, as follows. In deflationary conditions when stimulation of economic activity is required, an easing of credit conditions may not be sufficient and resort to programmes of public works may be necessary (a long-advocated Robertson expedient). In the opposite case, of inflationary conditions, restriction of the level of monetary demand could be hampered by the ineffectiveness of interest rates at a time of rising profit expectations, the mobilisation of idle balances (hoards) and the growth of non-bank financial intermediaries as a source of accommodation for borrowers. Robertson notes (prophetically, in the light of the Competition and Credit Control de-regulatory reforms less than a decade later) that continued emphasis on control of banks’ operations would not only become ineffective but breed a consciousness of unfair treatment. In these circumstances a much wider spread of credit controls, the operation of the central bank’s lending rate and the role of fiscal measures would have to be considered. The wisdom obtained during his service as a ‘magus’ is invoked with Robertson’s recognition that though wages cost-push, whatever its origins, may become an autonomous influence, much may be achieved by way of a ‘change in atmosphere’ in money demand such that ‘a good deal of the steam’ goes out of the movement (Robertson, 1962, in Dennison and Presley [eds], 1992: p. 186). As an adjunct to other policies, an incomes policy, despite the drawbacks, may be useful if it were to be successful in fostering a sense of cooperation in action for the common good.

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Of course, Canada, along with the United States, was with Robertson at Bretton Woods in his battle with Keynes over the convertibility issue. Now, however, despite his recalling the sterling work done by the Canadian delegation, he had to recognise that Canada had rather soon been obliged to secede from her obligation to maintain a fixed rate of exchange against other currencies. While he accepted that in certain circumstances it may be necessary for a government to exercise control over imports and exports, Robertson made clear and reaffirmed his commitment to the principle of free trade and, in exchange-rate policy, that he could give no support to the idea of a return to the self-interested anarchy that prevailed in the 1930s. Finally, he was emboldened to note the scope in Canada’s case for an improvement in the field of coordination and communication between the government, the central bank and the rest of the financial system and was pleased to note signs that things were going in the right direction. Altogether, this document, written at the literal end of his career, can be seen as a true reflection of long-held and accumulated beliefs. Robertson is revealed, yet again, as the transmitter of traditional, liberal beliefs and values who, in the practical world of policy measures, shows himself the innovator in his advocacy of ideas that could be seen as novel, heretical and radical. Another repository of accumulated wisdom in economics was his Lectures on Economic Principles. These lectures, delivered between 1945– 1946 and 1956–1957 for Part II of the Tripos, were published in three volumes, which dealt respectively with value theory – the usual microeconomic topics of utility and demand, the theory of the firm and market structures and so on; distribution theory, that is, the determination of the shares of national income accruing to the factors of production (land, labour, capital and enterprise) and, lastly, with his principal interests of money and the theory of fluctuation. The individual volumes appeared successively in the years 1957, 1958 and 1959, with a final omnibus volume published posthumously in 1963. Harry Johnson has left a picture of Robertson the shy, nervous lecturer who needed to write his lectures out in full (and rewrite them each September for self-assurance) so that he could read them to the students as a formal, theatrical, performance (Johnson and Johnson, 1978: pp. 129, 136–137). The truth is very different. Robertson was, as we know, a most accomplished amateur actor and would be used to working from a full script. More important, however, he was constantly revising and polishing the lectures with a view to their ultimate appearance in published form.

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Consequently, the published lectures are the closest we get to a definitive statement of Robertson’s views on economics in general. As the second-year undergraduate lectures they purport to be they are something of a fraud because they are so condensed and contain verbatim chunks of his journal articles and lectures to professional audiences. They had also, in the absence of the published volumes – and modern innovations like overhead projectors and ‘power-point’ – to be comprehended solely from the spoken word and, according to one auditor, spoken in Robertson’s (distracting) drawling, ‘languid . . . old-fashioned homosexual’ manner (Marris to Fletcher, 1995). In reality, they are what they were intended to be: a statement of Robertson’s contribution to economic thought as recorded at the end of his career. As such they reproduce many ideas, views, words and phrases familiar from a study of his previous writings. Just by way of illustration we may make mention of two topics: Robertson’s comments on the nature of economics and on Keynesian economics. First, his distaste at the aridity of economics and its markedly subordinate situation in comparison with the beauty and excitement of other disciplines: But while economics thus is or aims at being a branch of objective study, it is a branch which in sheer intellectual interest is inferior, or so I think most people would admit, to many others which are open to our pursuit. When one considers the wonders of modern physics or the glories of ancient Greek or modern English literature, one is driven to the conclusion that as an intellectual pastime economics is rather a drab and second-rate affair. If it is worth pursuing – and it certainly is – it is mainly worth pursuing not for its own sake, but with a practical object. (Robertson, 1963a: p. 14) It is with the proviso contained in the final sentence that Robertson escapes censure as a subversive who has sold the pass and let in daylight on magic. It is noteworthy that in seeking to justify the study of economics, he reached back to the beginning of his own attraction to the subject to invoke the economics of welfare as expounded by his predecessor in the Cambridge Chair, Pigou, and also as commented on by of one of the pillars of economics-teaching at the LSE, Edwin Cannan. With respect to his comments on what we would now refer to as macroeconomics and the role of the Keynesians, there is, in addition to many little jibes at the expense of ‘Mrs Robinson’, a genuinely regretful and

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affectionate tribute to one who was responsible for many of the ups and downs of Robertson’s life-experience, Keynes himself: I regret . . . that some part of what I have to say is inevitably controversial, and critical of the work of my generous friend and brilliant teacher Maynard Keynes. There is no doubt that the modern concentration of interest on this range of subjects is due to him more than to any other single person. But if you have read any of my writings on these themes you will know already that I am definitely of opinion that in his later work Keynes, while he continued to contribute to, also marred by distortions and exaggerations of various kinds, a fruitful body of doctrine which had been being moulded over several decades by many hands . . . Nevertheless I am proud to have been Keynes’s pupil, and to remember that, whatever he thought of our lack of receptivity to his later doctrines, he once in print described Hawtrey and myself as respectively his ‘grandparent and parent in the paths of errancy’. (Robertson, 1963a: p. 326)

22 Professor at Cambridge: 2, Public Addresses, Querulous Dissent and Scenes from College Life

Lectures to the undergraduates were, of course, part of the duties for which he was paid as professor. Because of his eminence and prowess as a public speaker, however, he was always in demand for lectures to be given to a wide variety of audiences – to academics, public bodies and industrial and commercial organisations. These together with other contributions to economic debate and book reviews appeared in a steady stream in published form and were collected in a series of volumes of essays (Robertson, 1952, 1953, 1956; these joined earlier collections, of 1931a, 1931b, 1940). The two comments that immediately occur to the reader of these essays are, first, that Robertson remained, as the decades passed, a most industrious and conscientious holder of the Chair of Political Economy and, second, that he was the consummate professional, taking immense care over his addresses and lectures – to more or less august audiences – and polishing them for publication. As a bonus, addresses and lectures were often embellished with the characteristic comments that so endeared him to his listeners and leavened even the dullest of topics. As examples, mention might be made of the following. First, in an address given to the Lombard Association in 1946 entitled ‘Is there a Future for Banking’, he began by apologising for a protracted delay in responding to their invitation to speak: I am very glad to take advantage, though after rather a long delay, of the kind invitation which you sent me in June 1939. In those days I had just become a Professor of Banking, and, aware of my difficulty in remembering the difference between an order and a bearer cheque, I clutched eagerly at the opportunity of learning something about that art. Nowadays, I am relieved to say, I am only a Professor of 223

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Economics, whom nobody expects to know anything about anything in particular. Nevertheless, I am still inquisitive about banking; so here I am. (Robertson, 1952: p. 185) This, of course, was being not a little disingenuous. Robertson had always had an interest in banking: he had, after all, handed the banks a task of fiendish complexity in the management of the cycle and maintenance of monetary equilibrium. Banks were given responsibility for making thrifty intentions effective. He had, further, noted the problems caused for the banks in meeting their obligations by the shortening of the period of production. Now all this – the origins of banking and money creation, the prerogative of liquidity and the provision of working but not fixed capital, the shortening of the production period – was related to his audience in the most fanciful and light-hearted way. Robertson’s serious message was, though delivered in the gentlest possible manner, that though to make up the decline in their preferred business banks had not been averse to lending against public-sector debt, the effects of two major wars and the socialisation of the economy had landed the banks with balance sheets dominated by government debt and with precious little opportunity for the exercise of banking expertise. The future of banking, therefore, lay in seeing in what way changes in ‘banking outlook and practice’ might be necessary to release traditional skills in the current economic environment (Robertson, 1952: p. 191). Next is his presidential address to the Royal Economic Society in June 1949, ‘On Sticking to One’s Last’, in which he argued that economists, like cobblers, are most effectively employed when confining themselves to the role they were trained to perform. He drew attention to the increasing tendency for professional economists to seek an ever more direct role in guiding public affairs and urged restraint: the economist should not seek to present himself as universally wise but always to bear in mind the fallibilities of his methods. This warning was required, he thought, because economists’ new-found confidence in their abilities had led them to couch their recommendations in ever more precise and quantitative terms. With a characteristic dig at the pretensions of economists of the quantitative and Keynesian persuasions, Robertson called attention to actual examples of failures of prediction: of the working of the ‘consumption function’ in the United States and manpower targets for various industries in the United Kingdom. He noted, however, that, nothing daunted, these economists explain their failures by reference to random events and so reveal themselves as relying on nothing more substantial than guesswork.

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on the whole the practitioners of the art of predictional arithmetic appear to be pretty good . . . at coming up smiling, explaining that the connection between their variates must sometimes be taken to be stochastic rather than functional (this, as you know, is now the dignified way of saying that it is all largely a matter of guesswork after all), and returning to the charge. (in Robertson, 1952: pp. 60–1) In the light of these reverses it was incumbent on the economist to play his humbler part as a watchdog for economic welfare by being ever ready to warn but to leave the final decisions to those duly charged to take them: . . . in the last resort I want him . . . to be rather humble – more humble than some of his great predecessors were disposed to be – content to bow to the judgment of the prophets or even the men of affairs if he is convinced that his case has been properly understood and fairly weighed. Then, weighing the suitability of the faithful hound of the Irish harper and the priest-king of Salem as role models, he concluded that In fine, I like to think of him as a sort of Good Dog Tray rather than as a Priest for Ever after the Order of Melchizadek. (Robertson, 1952: p. 65) In 1954 Robertson was invited to deliver the Stamp Memorial Lecture before the University of London (published by the Athlone Press for the University of London and reprinted in Economic Commentaries, Robertson, 1956: pp. 129–146). Robertson, somewhat ironically in the light of his role as a ‘magus’ only three years later, chose wages as the subject of his lecture. He took as his starting point the recommendation of a court of enquiry that in weighing the merits of claims for increases in industrial pay, it would be helpful to have the views of disinterested experts who could comment on the wider, including economic, considerations of a claim. Even more ironically, he envisaged a situation in which, conceived in the similitude of a nightmare, he is appointed a member of the expert panel; is called upon to set out the possible economic considerations; soon resigns and is replaced by Professor Phelps Brown of London University! Precisely the course of events that attended his membership of the Cohen Council in 1957–1958!

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At the heart of the lecture is an exhaustive rehearsal of the economic arguments involved in seeking to answer three questions: Is the general level of wages obtaining appropriate for the country as a whole? Does the wage level in the industry under consideration stand in the correct relation to the general level? In situations of conflict between general and particular levels of wages, as regards their absolute and relative positions, to which should priority be given? Again, his taxonomic gift is called upon to set out systematically the meaning and implications of changes in relative factor shares, the relevance of marginal productivity of labour, changing degrees of competitiveness in the labour market and wage levels in relation to changes in the structure of industry. The argument is supported by data and the possible outcomes as the basis for recommendation are set out in the form of a matrix. All this could, of course, make for a rather exhausting and tedious experience for his listeners but in fact they are treated to a vintage Robertson performance. The fictional chairman is a breezy old admiral who is obliged to follow the twists and turns of the argument by hand signals from the economist, who couches his exposition in the form of a Socratic dialogue between ‘Champion’ and ‘Critic’. In addition, there is a typical disclaimer as regards Robertson’s competence in the realm of mathematics and statistics: If you feel moved to buy the printed version, you will find at the end a little nosegay of figures, culled in the garden of the Central Statistical Office but arranged, with some defiance of the warnings of the gardeners, by my own fumbling fingers. You will also find a humble and non-quantitative example of the kind of criss-cross contraption without which no self-respecting paper on economics is now complete, and which is known, I believe, as a matrix. I shall allude to these things later, but the things themselves are fit only for the eye, not the ear. (Robertson, 1954: p. 5) When the revised edition appeared, there was more of the same: The fingers mentioned on the opposite page proved to be even fumblinger than I feared! The nosegay has now been skilfully refashioned by Mr. A. Adams and Mr. P. R. Fisk of Cambridge, with generous assistance from the compassionate gardeners (who very reasonably point out that they are not yet in a position to grow roses without thorns) . . . (Robertson, 1954: p. 4)

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Next are the two lectures delivered at the universities of Copenhagen and Aarhus in 1955, ‘Some Recent Writings on the Theory of Pricing’, in which he ventured into a field in which he had not previously spent much time, the theory of value. In surveying contributions, he traced the modern work in the field back to his exemplar, Alfred Marshall, and apologised for what he regarded as the ‘arid’ and ‘crabbed and forbidding’ nature of the subject matter (Robertson, 1956: p. 12). In an address delivered before the Nationalokonomisk Forening of Denmark in 1955, ‘The Role of Persuasion in Economic Affairs’ (Robertson, 1956: pp. 155–172), he explained the importance in matters of economic management of the policy, supplementary to either rigid planning or free enterprise, of ‘a code of communication of looked for behaviour’. In other words, in addition to sticks and carrots as means of getting the donkey to move forward, much may be achieved by stroking his ears. He identified the two principal exponents of ear-stroking in the British economy as the Bank of England and the Board of Trade and argued for a proper framework of institutional arrangements and accompanying system of incentives and disincentives such that the ‘precious qualities of persuasiveness and persuadability’ could be effectively utilised. In 1957 he spoke to the summer school of the National Assistance Board, a body now assumed into the Department of Social Security, charged with making payments of public funds to those who qualified as claimants. Here Robertson cast himself in what he saw as the traditional role of the economist – ‘that of the skeleton at the feast’ – in that he sought to sketch in the economic framework in which the board’s ‘beneficent activities’ had of necessity to be conducted and in relation to the many rival claimants on the resources available. He urged that it was necessary, in making choices amid the conflicting pressures, to observe the overriding importance of promoting the restoration, in a time of rising prices, of ‘a stable standard of value’ (Dennison and Presley [eds], 1992: pp. 83, 93–94). These are just a few out of the many addresses and lectures that he gave during his tenure of the Cambridge Chair. All were based firmly on economic principles (whether or not one accepts the particular point of view expressed) and were typically ingeniously constructed and often wrought as works of art. This makes them a pleasure to read but not always easy to comprehend. Robertson’s style means that it is rarely possible to decide what precisely he is arguing without close and repeated scrutiny.

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It has been worth spending time on this aspect of Robertson’s professional activities as it affords ample illustration of his talents in the arts of composition, verbal exposition and preparation for publication. Another area in which he excelled, however, was in reviewing and a stream of book reviews joined the polished-up lectures and addresses in the journals and volumes of essays. Rather arbitrarily but entirely appropriately, his reviewing style can be gauged by his comments on Howard Ellis’s important edited volume A Survey of Contemporary Economics (1948). Robertson dubbed this, in part, ‘A Revolutionist’s Handbook’ on the grounds that it would provide a handy and authoritative crib for the busy generalist who was anxious to keep in the van of a rapidly changing discipline, in which new fashions were constantly challenging established lines of thought:

For . . . it is, I suppose, one of the purposes of this book to bring aid and comfort not only to the creative specialist but to that humble individual, the ‘general purposes’ teacher of economics, who is apt, as it seems to him, to be pulled out of bed every six months with the news that his subject has undergone another revolution and that everything he has learnt is once more in the melting-pot. Sorely indeed does he need a vade mecum to consult hurriedly as he runs cheering into the street to join in the assault on each new Bastille. (in Robertson, 1952: p. 66)

Robertson had been a creative specialist once but the work that lifts him from the ranks of the major economists and qualifies him as one of the great thinkers in the discipline was well behind him. It was essentially a product of the 1920s. During the years of his professorship there was nothing to compare with BPPL. Also, there was a rather negative and not wholly attractive feature that marked his writing from the late 1930s onward, which was apparent to all sides, supporters and opponents. Samuelson in his obituary put it as follows:

a new note enters into Robertson’s writing which was to remain until the end – a querulous note of protest over the pretensions and correctness of so-called new ideas and a somewhat repetitious defense[sic] of earlier wisdom . . . I mention it because it is there, recognised by foe, friend and Robertson himself and it may put readers off unduly. (Samuelson, 1963: p. 520)

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Samuelson qualifies this by pointing out that Robertson’s protests were not without substance and would have been accepted as contributions had they issued from the Keynesian side. Nevertheless, protest it was – criticism of someone else’s programme from one who had none of his own. We have already seen how this feature marked his lectures to the candidates for the Tripos, though in his warning to the undergraduates he may not have realised just what an impact this feature would have on his audience: . . . he was desperately anxious that the undergraduates all understood what Keynes was trying to say, not least I think to explain where he thought Keynes had got it wrong . . . It was, I think, a remarkable experience for us but it did perhaps colour for us, the undergraduate view at that time towards Keynes, because Keynes at that time had departed from the scene. (Higgins, in Harcourt [ed.], 1985: p. 139) The stain was not confined to his lectures: it suffused other work, including that intended for an impressionable audience. In the 1948 edition of Money an extra chapter, entitled ‘Problems of Words, Thought and Action’, contains a surprisingly direct appeal to the reader to see the justice of his case. The subject of his appeal is, as might be predicted, a perceived intellectual sleight of hand, involving an implied criticism of his own approach, perpetrated by Joan Robinson. It concerns Robinson’s perfectly valid and comprehensible explanation of the sense in which saving can be both equal by definition and made equal, by way of successive increments of income, to the additional capital outlay (Robinson, 1937, Chapter II). To Robertson, however, Robinson is merely defining one phenomenon in two equivalent ways, in order to reconcile Keynes’s supposedly irreconcilable statements of the case: Reader, do you see what has happened? An assertion that two quantities are by definition identical has been transmuted into an assertion that the establishment of equality between them is a condition of equilibrium. It seems to me that this is very confusing, and that I have not been unfair in comparing economists who write in this way to a naturalist who, having defined an elephant’s trunk and its proboscis in identical terms, should then go on to explain the profound biological forces which tend to adjust the size of the trunk to the size of the proboscis. (Robertson, 1948b: pp. 175–176)

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The more significant point is that this is an indication of just how profoundly the Keynesian Revolution had affected him. Just as in the 1930s the undue preoccupation with Keynes had become the subject of comment by colleagues, so now we see that the blight fell across the remainder of his life and career. It seemed to paralyse thought or at least so to constrain it that any substantial new venture was rendered impossible. The obvious field for this would have been a synthetic work which would become the standard recourse for those seeking an authoritative and appropriately astringent exposition of the matters at issue in the field in which he and Keynes had made their major contributions. There was encouragement from well-wishers but to no avail: I’m afraid there is no chance of my responding to your challenge and trying to produce a full length synthetic Theory of Money or Fluctuations or What-you-will. I’m too old and too lazy! But even if I were younger and less lazy, I think history had made it impossible. I believe that once Keynes had made up his mind to go the way he did it was my particular function to . . . [elucidate and criticise the details of his work] . . . and to go on pegging away at them (as is still necessary). It will not be easy for anyone for another twenty years to produce a positive and constructive work which is not in large measure a commentary on Keynes, – that is the measure of his triumph. For me, it would now be psychologically impossible, and the attempt is not worth making. (Letter to T. J. Wilson, 31 October 1953, quoted in Danes, 1987: p. 210) Here we have confirmation that the Keynesian Revolution marked the transition between Robertson’s happy and unhappy public selves. While it is entirely understandable that this sort of work would pose insurmountable psychological obstacles, there was similarly no attempt to emulate his revered master, Alfred Marshall, and to produce the modern equivalent of the Principles. The exhortation in this instance (which no doubt made explicit the wishes of others) came from far away, in a long review of Utility and All That (1952) in the Indian Economic Weekly. In this review, Bhabatosh Datta suggested a clear distinction between economists such as Marshall, Pigou, Keynes, Hicks and Joan Robinson, who had all risen to prominence by way of the positive contributions they had made, and Robertson, who had achieved his position of eminence in the role of censor – the man who said ‘No’! Such was his influence

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that the unwary reader might be deceived into concluding that nothing of any value had come out of the new developments. Thus it fell to Robertson, rather than anyone else, to put his immense knowledge and understanding of the literature to produce a positive synthetic treatment of theoretical developments old and new, the modern equivalent, that is, of Marshall’s Principles of Economics. In so doing, his achievement would outshine that of Keynes himself (Datta, 1953: pp. 695, 697–698 in D7/6 RPTC). It is likely that Robertson’s problems with the narrower conception of a synthetic work would apply equally to the broader. To have attempted an impartial textbook by way of which the world might obtain an unbiased survey of economic knowledge does seem in the light of all that had transpired to have been a doomed hope. He differed too strongly on the major developments in modern economics: Keynesianism, mathematical models, quantitative forecasting, development economics, welfare economics and close control of the economic and social life of the nation. Instead we have the Lectures and Money to record the Robertson viewpoint and many delightful essays to remind us that the popular conception of economics books as necessarily dismal, arid, tedious and boring too often reflects the qualities of those who wrote them and that it is not a quality inherent in the subject. But as the writers of ‘crabbed’ (a favourite Robertson description), technical, scientific economics proliferated, there was a parallel decline in those who relished the prose of Gibbon and Macaulay. It may be, however, that it was not all a function of changing fashions, methodological advance and the Keynesian Revolution. As late as 1946 Robertson had referred to the Study as ‘my only real book’. This in turn supplied the core for the seminal analysis of BPPL. After that he got no further than refinement and restatement. With his innovations set firmly on the rock of inherited wisdom, which was so important for his emotional security, it is difficult to see in what direction he would have gone had Keynes perished at the end of the 1920s. It is, however, much more likely that a fully articulated system of Robertsonian economics and/or a new ‘Principles’ would have been forthcoming. Without the shadow cast by Keynes he would have walked in the sunlight as leader of the dominant school of thought. Imagine also, the possibilities opened out by his promotion of the Cambridge-London axis as an even more prominent world centre for economic study. In his private life the warm reassuring voice that spoke through his published addresses and lectures and book reviews was apparent also to his Cambridge pupils, who revered him as the ‘most deeply-loved

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economist’. It was not always apparent in other areas of his life. The man who had ‘a profound sense of the harshness of human destiny’ but would ‘never yield to cynicism or defeatism . . . found comfort in music and his friends’ (Butler, 1963: pp. 41–42). He was, nevertheless, bearing up in a hostile Cambridge environment. Professor J. C. Gilbert entertained him at home in Sheffield at the time of the conferment of his honorary degree and recorded his impression of Robertson’s ‘hurt feelings and how isolated he felt himself to be at Cambridge’ (Gilbert, 1982: p. 11). On a later visit, the whole household was left sleepless by the noise of a gale and Gilbert remembers Robertson reciting Housman’s ‘On Wenlock Edge’ (1982: p. 11 n. 65). For Robertson, throughout his life, time was seen as the great healer and final arbiter of dilemmas to be faced. He would have taken comfort in the thought that, in the words of the poem, the wind which kept him awake that night was the same as that which roused the Roman and that time has settled all his troubles: ‘To-day the Roman and his trouble/Are ashes under Uricon’ (Housman, 1896: p. XXXI). Moreover, he perceived that things he held dear were threatened by dark forces loose in the world. The image of the beleaguered toff is evident in the following comment by John Vaizey, an undergraduate in austerity Cambridge and later a distinguished economist, who believed that Robertson ‘saw reds under all non-Etonian and some Etonian beds’ (Vaizey, 1977b: p. 17). In Trinity, Robertson occupied rooms overlooking Great Court and situated between the Master’s Lodging and the Chapel. He had inherited this desirable ‘set’ from a cat-loving professor of Arabic who had had the flap fitted in the door. A colleague remembers Robertson talking to ‘Pussy’ and seeing the animal come and go through this device (Bradfield to Fletcher, 23 January 1998). In these rooms he entertained his guests and his pupils (supervisees) and held the meetings of the Political Economy Club which he took over from Keynes and organised very efficiently. Vaizey recalls ‘frugal’ teas being served and if this was due at least in part to the food rationing prevalent in the early days after the war, Robertson was never, according to Rylands, ‘lavish’ with his hospitality. In fact he seemed to relish discomfort. He had nursed a life-long fear of poverty and there had been frights accorded by losses on his personal fortune at the time of the Wall Street Crash. Even so, suffering seems to have been taken to inordinate lengths. Robbins, in judging Robertson’s life to have been ‘lonely and often depressed’, noted that

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. . . even in regard to his physical environment he had an almost unique capacity for self-torture – he made his rooms at Trinity, splendidly placed looking over the great court, as uncomfortable and chilling to the spirit as it is easy to conceive. (Robbins, 1971: p. 221) Among the fellows of Trinity College he had many warm friendships and was much respected. When J. R. G. Bradfield became junior bursar, he was ‘an elderly Fellow of great distinction’. Bradfield entered into correspondence with Robertson about his rooms and recalls his modesty in disclaiming any requirement to address him as ‘Sir Dennis’, on the grounds that there must be ‘no honorifics between Fellows’ (Robertson, as we have repeatedly seen, was just as likely to invent new English words as he was economic terms!). This modesty extended to his membership of the College Finance Committee, when Bradfield was secretary/senior bursar and was no doubt a further manifestation of his long-standing dislike for committee work: . . . his views were always expressed with great diffidence – indeed he spoke rather little but was always extremely well worth listening to when he did speak. (All Bradfield quotations from Bradfield to Fletcher, 23 January 1998) Robertson thought of himself as old from an early age and it is true that the process seemed to advance rapidly as the years went by. The task, typically not shirked even at so late a stage, of composing the Memorandum of Evidence for the Canadian Royal Commission in 1962 and of travelling to give evidence in person later in the year, must have taken a great toll. On his return he became increasingly frail and then gravely ill. He entered the Evelyn Nursing Home – the final destination of many eminent Cambridge scholars – where he died on 21 April 1963. The funeral was held at Cambridge Crematorium a few days later but there was a memorial service for him in Trinity College Chapel towards the end of May. Those who were gathered to pay tribute gave thanks for . . . his life of service to the College, to the University, and to the nation, for his wit and wisdom, and for the simple and unfailing goodness of his heart . . . (Order of Service in G11/7 RPTC)

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Of the hymns there was that by Paul Gerhardt, in the translation by Robert Bridges, the first line of which contains an apt valediction for one who was so greatly influenced in his behaviour by his sense of duty and who always felt the need ‘to be useful’: The duteous day now closeth . . . .

23 A Question of Legacy

The Great Thinkers in Economics Series is designed to illuminate the economics of some of the great historical and contemporary economists by exploring the interaction between their lives and work and the events surrounding them. In the case of Dennis Robertson, we have seen that his life and career and his contribution to economics were determined by the interplay of the elements in his complex personal make-up. On the one hand he was endowed with a superlative intellect which, sharpened and stimulated by his childhood exposure to the precariousness of economic well-being, set him on to find salvation in academic achievement. On the other hand there was a temperamental need to find emotional security in past certainties and in the realms of myth and fancy. There was a parallel struggle between a deeply inculcated sense of duty and the force of family tradition and a desire for escape into an existence which would satisfy his essentially artistic nature. Economics was the compromise which could satisfy both his sense of duty, in that he could respond to Alfred Marshall’s messianic call to Cambridge men to aid the work of social melioration, and provide an escape from the Classics. Art could be served on a part-time basis through the exercise of his very considerable acting abilities and by the adoption of an inimitable literary style in much of his professional writing. Success brought the opportunity for research on the trade cycle and the production of a classic work in the field. Contact with Keynes brought the opportunity to acquire an insight into the nature and the power of money and for collaboration on the crucial ‘macroeconomic’ question of the time – that of the proper relationship between money, investment and saving. Robertson led the way and produced a seminal analysis that, heavily influenced by Keynes, came to assume the form of his most innovative work: BPPL. The theory was refined and developed and then recast in 235

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an alternative, interest rate form. Tragically, it had also sown the seeds of revolution in Keynes’s mind and led to triumph for Keynes and disaster for Robertson. It brought conflict in Cambridge and the failure of economics in its role in Robertson’s life plan. As Keynes’s ideas soared in the summit of Heaven, Robertson’s were left in a shadow that lay across the remainder of his life. If Keynes had departed the scene 20 years earlier than he did, on the publication day of BPPL, the story would have been very different. Even so, Robertson found further success and honour and continued to add prolifically to economic literature during the long years of his professorship at Cambridge. But what was his legacy? We have seen that according to Dennison, his work is largely unknown in many universities. Even those acquainted with his name may not have any great depth of knowledge or desire to increase it. Robin Marris, though admittedly in the Keynesian camp at Cambridge, surely spoke for countless others when he wrote that In retrospect I do not really see . . . what his reputation as a major contributor to macroeconomics is based on. But I admit I have not read too much of him. (Marris to Fletcher, 7 April 1995) Much the same could, of course, be said of many other economists whose lives and concerns lie in the past. Economics moves on and for many, especially younger, members of the profession, there is precious little utility in spending time on the history of economic thought. Nevertheless, familiarity with the origins and development of economic knowledge and with the contributions of individual prominent economists should be seen as a valuable aspect of human learning – for the professional, for the student and for the educated, intelligent layman. This is particularly so for those economists deemed to be Great Thinkers – even when their work is not readily accessible. The particular problems in this regard in Robertson’s case is that his works are either formidably technical and concisely written or charming and whimsical but angled always to those whose minds are stocked with the same intellectual furniture as his own. Typically, his treatment of any topic is marked by his apparently endless taxonomies of possible considerations and outcomes. Though this merely mirrors the complexities of the real world, it can deter all but the resolute enquirer. Robertson achieved his status as a world-class economist by the contributions he made in all three branches of the discipline: economic theory, applied economics – the application of economic principles to the solution of economic problems – and to the debate on the role

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and formulation of economic policy at the national level. The scope of his contributions is indicated by Goodhart’s ‘tentative allocation of his books and main papers’ into five major categories: trade cycles, industrial structure, monetary economics, microeconomics, macroeconomic commentary and policy advice (in Presley [ed.], 1992: pp. 14ff.; there is a summary table on pp. 16–17). His elevation to Greatness of Thought, however, came through his contribution to an understanding of the problems inherent in the management of the short period in the pursuit of economic growth. This had two aspects. First, economic growth demanded sacrifice of present consumption in the provision of saving for the growth process. This raised the dilemma – many years later the subject of evo-economics – of how much of current output should be enjoyed in the present and how much should be given up in favour of increased prosperity for generations yet unborn. The solution, given that the drive for economic growth is unrelenting, is to service that growth with the minimum of loss of economic welfare in the present. Second, this in turn demands management of the short period such that only the degree of fluctuation necessary for growth actually occurs. Inappropriate fluctuations are to be minimised by the actions of the banking system, which will manipulate the price level so as to enable thrifty intentions to become effective. Monetary equilibrium, in which fluctuations are limited to those which would occur in a competitive non-monetary economy, the standard case, can be achieved by adherence to a specified rule. As part of the analysis from which the rule is derived, Robertson threw new light on the all-important relationships involved in monetary expansion and contraction, the business of banking and the provision of finance to industry, the determination of the price level, saving behaviour by individuals and groups and the provision of the necessary ‘going without’ specified by orthodox investment theory. The actions required of the banks in relation to both working and fixed capital and at different stages of the cycle are carefully specified. However, though this explains his principal contribution to economic understanding, the notion of a legacy is of something left behind, of something bequeathed to those who come after. In this respect, Robertson left a strong trace in having given birth to a Robertsonian School of thought which espouses the ideas and theories associated with Robertsonian economics. This has at its heart the Loanable Funds theory of the determination of the rate of interest and its accompanying real

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and monetary relationships involved in saving and investment, hoarding and money supply. It is a theory still represented in the textbooks and is favoured by money market practitioners because it provides categories to which actual variables can plausibly be allocated. More negatively for Robertson, he was Keynes’s ‘parent in errancy’ and so inadvertently set Keynes off on the path that led ultimately to the revolution in thought that had such far-reaching effects on world economics. Equally undesirable, from Robertson’s viewpoint, was the controversy between the Keynesian School and the Robertsonian School which was sparked off by Keynes’s change of direction: a controversy that itself added so much to the understanding of the relationships between critically important variables. Another palpable trace is represented by the so-named Robertsonian lag, in which consumption outlays necessarily lag income receipts, which are periodic rather than continuous, by the extent of a Robertsonian ‘day’. The concept of the ‘day’ was developed in the 1933 article ‘Saving and Hoarding’. Thereafter, the notion of a bequest enters the realms of semantics. There are ideas that bear Robertson’s name, which have not survived as named contributions but which embody features of enduring worth that make them worthy of mention here. Similarly, there are ideas that were brought to popularity in the hands of other economists who were not consciously influenced by Robertson’s own earlier work but of which Robertson could be judged to be a precursor. Examples spring to mind but for an account, we shall turn to Robertson’s own claims and to the suggestions of commentators, friendly and hostile, who came after. We begin, however, with Samuelson, who in his obituary of 1963 identified – and subjected to non-too gentle handling – eight of what he deemed to be ‘a few of Dennis Robertson’s lasting contributions to economics’ (Samuelson, 1963: p. 522). Some of these will also crop up later but for the moment we concentrate on those related to the Robertson–Keynes controversy. First under the heading of ‘The synthesizer and critic’, he recorded that on re-reading Robertson’s collections of essays, he ‘felt anew what a shame it was that his many criticisms of Keynesian writings from 1936 to the mid-1950’s had not come from within that tradition’. There are several instances. For example, Robertson had been right to question the treatment of the equality of saving and investment by early Keynesians as simultaneously an identity and as an equilibrium condition. Also, that in neither case can the operation of the multiplier ensure against inflation. He was similarly right to oppose Keynes in his insistence that the

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multiplier held instantaneously and (with Haberler) for drawing attention to the tautological nature of the multiplier formula (note, however, that with respect to the first and third of these assertions, the reader is referred to our discussion in Chapters 17, 18 and 19, above). On the other hand, he thought that Robertson was wrong in seeking to deny the importance of the concept of the multiplier, failing to see the significance of shifts in the consumption function as a function of income, that the notion of forced saving required careful qualification in an economy with high unemployment and that in hailing Hicks’s A Contribution to the Theory of the Trade Cycle (1950) as a brilliant book, he was ‘thereby conceding that the General Theory was a classic’ (Samuelson, 1963: p. 524). Second, Robertson provided a plausible, dynamic alternative formulation for those who resisted Keynes’s 1936 definitions of savings and investment as equivalent, in his theory involving the ‘Inequality of investment and lagged Robertsonian saving’. This formulation was, however, itself deeply flawed because of the tautological nature of his assertion that ‘income will rise (or fall) when observed investment exceeds (or runs short of) Robertsonian saving, which is defined as the difference between last period’s income and this period’s consumption’, as compared to the causal sequence implicit in the consumption function hypothesis (Samuelson, 1963: pp. 524–525). Third (‘Eclectic insights’), Robertson’s criticism of Keynes’s specification of the speculative demand for money was based on the notion that such a demand would arise merely because people would be willing to pay a premium to hold cash as against risk-bearing assets irrespective of any overwhelming expectation of a rise in interest rates. Experience shows that far from being destructive, this is actually a superior statement of Keynesian liquidity preference. Less successfully, however, his tussle with Joan Robinson over the question of whether an increase in thrift will lower interest rates directly or only indirectly via a fall in income cannot be resolved in his favour on account of his failure fully to specify his case, which left loose ends to be tied up: It was characteristic of Robertson that he resisted setting up a definite and determinate macroeconomic system either of dynamic or static type . . . [and while a Keynesian formulation may be too simple to cope with transitional states] you can look at it, examine its deficiencies, even bomb it. What hostages has Robertson given to fortune – i.e., to testable science? Actually, in the absence of the Pigou effect . . . Robertson too will come in the end to the conclusion that

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a lowering of the c(Y) relationship will reduce income. When people save more, income will fall unless there is an easing of interest rate and credit great enough to expand investment in full compensation. (Samuelson, 1963: p. 526) Robertson’s failure, for whatever reason, to understand or take account of this relationship, which is based on the fallacy of composition and the two-sided nature of transactions, was as we have seen (above, Chapter 19) one of the major flaws that weakened his theoretical case. Next, an example of an attempt in more recent times, by scholars sympathetic to his cause, to promote Robertson and his economics at the expense of Keynes and Keynesian economics and so reverse or temper the verdict of history as to the outcome of the Robertson–Keynes controversy. Here, the intention is to establish Robertson as the precursor of a modern theoretical development, combined with criticism of the corresponding Keynesian approach. The case in point is the promotion of the buffer-stock theory of the demand for money, which Robertson’s work is seen to prefigure (Mizen and Presley, 1994), as a complement to the questioning of the adequacy of the liquidity preference theory (Goodhart, 1989: pp. 106–120). This can thus be seen as a further blow directed against the Keynesians in the long-running dispute over the determination of the rate of interest that began in the turmoil that followed the publication of the General Theory. As a counterblast to this development, a recent study by Tily (2007) presents a decidedly heartfelt argument for the recognition of Keynes’s economics as being principally concerned with money and the rate of interest, rather than with fiscal policy. Along the way Tily explores the gestation of Keynes’s ideas on the central topics of money, interest, investment and saving and the controversies with other leading economists that accompanied the process. Tily’s principal thesis is that Keynes’s ideas were lost to the world because, surprisingly quickly after his death, they were buried under ‘Keynesian economics’, which was a separate and different theory with Classical origins. Robertson, along with Hawtrey, is cast as the chief culprit in the origination of this model and for which the IS-LM formulation merely supplied the algebraic representation. The idea that he should have been cast in this role would, it may be supposed, have brought Robertson rather mixed feelings. Less directly related to the post-1936 controversy, though still with a detectable Keynesian dimension, is an essay by Costabile (in Arestis et al., [eds], 1997: pp. 310–325) which seeks to re-establish the links between money, cycles and growth in Robertson’s work ‘unduly severed’

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by other – even sympathetic – writers and to re-establish Robertson as a precursor of later work by others. Specifically the case is made for recognition of ‘Robertson’s role as a precursor of the post-Keynesian approach to money, interest and cycles’ – an aspect hitherto neglected because of commentators’ preoccupation with the Robertson–Keynes controversy. One of the matters at issue raised here is that of whether Robertson’s analysis was essentially long-run or short-run in nature. There is a variety of opinion on the answer to this question (see Costabile, 1997: pp. 322 n.13, 323, 324). However, we have seen that Robertson’s contribution was to give a new importance to the economics of the short period – the economics relevant to the dimension of biography – and to the question of its management, though always set in the context of an economy bent on the achievement of economic growth. The answer is, therefore, equivocal but the emphasis is decidedly on the short period and the question of the cycle. Out of the Keynesian shadow, Robertson has found champions for his work as originator of later developments in the Classical tradition. One of the most interesting has been a move to establish Robertson as a pioneer of the Real Business Cycle Theory (RBCT), who in some respects took ideas further than the later American exponents (Goodhart in Presley [ed.], 1992: pp. 8–34; also Goodhart and Presley, 1994). Many years before, Samuelson – considering Robertson’s ‘Exogenous investment as an important source of fluctuations’ as one of his attributed ‘lasting contributions’ – had applauded his introduction, into the British context, of ideas which were current on the Continent: ‘Robertson did well to emphasize real factors in the business cycle, such as innovation and capital intensity’ (Samuelson, 1963: p. 522). Certainly, there are those who would argue that invention and innovation could not provide a sufficiently comprehensive explanation as to be able to account for cycles in national income and these criticisms have been applied equally to the RBCT as they were to Robertson’s claims. He, however, had derived his conclusions from his empirical findings and could point to the great and widely ramifying nature of the industries affected. We could easily think of those which have shaped modern life: canals, railways, steam-shipping, chemicals, electricity, the internal-combustion engine, radio, television, plastics, transistors, micro-processors. Equally, however, the shocks to the theoretical model produced by innovation give rise to shifts in the short-run aggregate production function and these in turn have implications for the pattern traced by the level of aggregate output/real income. In the case of the RBCT, they

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produce shifts in the trend of output which present the appearance of there being cycles in the conventional sense. But does this apply also to Robertson’s theory – or does Robertson’s theory describe deviations from a trend? For Blaug, in his standard text on the history of economic thought, it is this feature that would disqualify Robertson as a true precursor of the RBCT: . . . the character of the recent real business cycle models is quite different from, say, that of Robertson in the 1920s or Schumpeter in the 1930s. It is predominately concerned with the statistical properties of economic time series and comes down to the argument that the data are unable to reject the hypothesis that GNP follows a ‘random walk’, meaning not only that it is unpredictable but also that any observed change in GNP is permanent in the sense that output shows no tendency to revert to its former trend following a shock. These shocks are assumed to be due to technological change but, whatever their source, they imply that the observed fluctuations in GNP are not in fact fluctuations around a smooth trend but fluctuations in the deterministic trend itself. There is no distinction between trend and cycle as was traditionally assumed: the trend is cyclical. (Blaug, 1996: p. 686) This does seem to present a strong objection to the acceptance of Robertson as a precursor of the RBCT, despite his emphasis on real factors. Nevertheless, one possible solution would be to argue that Robertson’s condition for equilibrium growth does not suggest the existence of an implied smooth trend but is, rather, a condition for monetary neutrality by which fluctuations do occur – and are necessary to growth – but are restricted to those which would be found in a competitive, non-monetary economy. In other words, the standard case would envisage the occurrence of cycles such as would be produced by successive expansions which result in over-investment and inevitable downturn. Therefore, growth would occur under the influence of technological progress (invention and innovation) and fluctuations would be generated by the inherent characteristics of capitalistic production. Growth would be achieved, in effect, by changes in trend which would present the appearance of cycles. Each cycle would be different with none of the symmetry of the sine wave. On top of that, inappropriate fluctuations would, to the extent that they were not controlled by the banks, exaggerate the amplitude of the cycles. There is certainly – given the empirical foundations of Robertson’s theory, based as it was on actual historical

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experience of many trades over a long period of years – enough here to give it at least a familial similarity to the RBCT. On this score, Samuelson, in identifying one of Robertson’s ‘lasting contributions’ to be the ‘Overinvestment aspects of a turn-down’, draws attention to the effects of ‘animal spirits’ which produce a boom which ‘lives on its own acceleration’ until it is pricked or for reasons unknown pricks itself. The question then arises as to the application of remedial action to prevent recession from developing into a secondary depression. Samuelson points to the stimulation of consumption expenditure as the least controversial means – and cites Robertson as favouring this course in the face of ‘Hayekian deflationism’ (Samuelson, 1963: p. 523). We should recall, however, that Robertson added ‘a note of caution . . . [Study p. 253] to the approval which I expressed of devices for increasing consumption in the depression’, the reason being, of course, that the goods would be ‘found highly useful in the ensuing expansion’ (Robertson, 1948a: p. xv). Another area of Robertson’s contribution in the Classical tradition lies in the discovery of an early delineation of the natural rate of unemployment hypothesis, later popularised by Friedman (Boianovsky and Presley, 1998). Also, Laidler (1995, 1999) has argued that in the 1920s, Robertson anticipated the work in the 1930s of Austrian economists on forced saving (see also Fletcher, 2007: pp. 70, 112–115). Shimodaira (2003) has explored the somewhat neglected topic of Robertson’s views on capitalist, industrialised society. The notion of Robertson the originator of ideas later associated with others was, of course, begun by Robertson himself. He found, for example, that the emphasis he had always placed on agriculture as a significant factor in the causation of the trade cycle was being hailed as his own discovery by William Beveridge (Robertson, 1948a: p. x). In this regard, we might just notice in passing that as against Samuelson’s dismissive ‘Time permits us to filter out Robertson’s overemphasis on factors such as agriculture . . . ’, Robertson continued to think it important, even calling for someone more expert than himself to ‘re-examine the behaviour of the solar leopard [the sun-spot theory] over the last thirty years in the light of . . . [his] attempted improvement (p. 146) [of the Study] on the original Jevonian speculation!’(Robertson, 1948a: p. xi). Better known and more explicit examples are found, however, in the informal talks given in seminars at Harvard and Princeton in 1953 when Robertson vouchsafed his ‘Thoughts on Meeting Some Important Persons’. These were not in fact real people but concepts – autonomous investment (Harrod, Hicks), the Domar Equation, the Kalecki Effect – to which he claimed to have given birth but which had grown up and

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become famous in association with the names of others. Of these, we shall look more closely at the first and second. With respect to the third, we simply comment that whereas Robertson interpreted the Kalecki Effect as support for his continued belief that investment would be stimulated by and must wait upon prior saving, the Keynesian view would be that the only way in which increased prior saving could help the situation is by reducing aggregate demand in an economy approaching full employment so that autonomous investment could produce expansion with a lower level of inflation. Robertson’s claim to be the originator of the concept of autonomous investment is interesting because it arose from his late-flowering enthusiasm for the importance of the acceleration principle as a factor in the generation of fluctuations. The meaning he attached to this principle was, as against its treatment by more modern writers, derived from his reading of Aftalion during research for his fellowship dissertation: ‘that a given increase in the demand for final output would lead to a greater proportionate increase in the demand for capital equipment, the increased supply of capital equipment following after a lag, and the increased supply of final output – or most of it – coming along last of all’ (Robertson, in Hicks [ed.], 1966: p. 237). Moreover, he believed that, in the modern world, the principal forms of investment would be less tightly related to demand for consumption goods and more dependent on ‘fairly vague estimates of the future progress of whole areas and populations’ (in Hicks [ed.], p. 235) and as such more amenable to regulation by monetary policy. Thus, while autonomous investment in this sense might be relied upon benignly to produce a steady means of stimulation to the economy, it could also produce more violent shifts in either direction under the influence of shocks to expectations, in which case more drastic correctives might have to be applied. In the Domar Equation, the specification of the conditions for equilibrium growth takes explicit account of the dual effects of investment in both generating income and creating capacity. Essentially similar conclusions were independently arrived at by Harrod so that the approach is now referred to as Harrod–Domar. Robertson denied any claim, even in his ‘most deluded moments’, to the invention of the Domar Equation, ‘And yet – and yet – the more I look at it, the more familiar some of its features seem to be’ (Robertson in Hicks [ed.], 1966: p. 239). The claimed parallels are with his equation for stable growth stemming from his work in BPPL. It is a claim for which there is support from Samuelson in the seventh of the ‘lasting contributions’, ‘Those four crucial fractions’: ‘this

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1926 strain of analysis has some valid claims to have foreshadowed the Harrod–Domar type of equilibria’ (Samuelson, 1963: p. 527). In the 1926 form, the condition for stability of a stationary economy – such that there is neither inflationary nor deflationary pressure – was K = nD. This equation, as we recall, made certain assumptions regarding the composition of the money stock and of bank assets, the source of finance for working capital and the channelling of thrift into either working capital (via the banks) or fixed capital (via a smoothly functioning capital market). Adapted for economic growth, the equation becomes K = nD (1 + r), ‘in Harrodese to enable the warranted rate of growth to be maintained and to correspond with the natural rate’ (in Hicks [ed.], p. 240). In comparing his own formulation with the Domar equation, Robertson accepts that it is concerned only with working capital whereas Domar encompasses both kinds. Here, Robertson thinks his equation can be seen as, in some respects, too pessimistic with its assumed rigidity of banking practice and too optimistic in respect of its assumption of a capital market which smoothly converts all non-banked thrift into fixed capital. However, despite its limitations compared to Domar, Robertson sees advantage in his assumption of a constant D, the period of production, as it draws attention to the quantitative importance of goods in process and their organic identity as compared with other types of capital. Moreover, when faced with a change in the proportion of capital equipment to the annual stream of output (the capital-output ratio), it offers institutional means of relieving the problems created (by means of changes in traditional banking practice). We saw earlier how Robertson modified his equation to ease the assumptions regarding banking behaviour and from this form there arose the famous ‘four crucial fractions’. It is in this form that Samuelson deals, somewhat critically, with the ‘lasting contribution’ and raises a point of interest here. That is, that Robertson believed that his equation could be used to refute the ‘real bills doctrine’. This doctrine states that it is not possible to over-issue money if it is only used to purchase bills of exchange drawn against actual commercial transactions. It was an argument, we might interject, used, erroneously, in defence of the Bank of England when the bank was accused of causing inflation by over-issuing notes during the Suspension (after 1797, when gold was no longer offered in exchange for notes). Robertson based his refutation on the near miracle required for the two sides of his equation to balance. Samuelson, in casting about for the meaning behind the terms of the formal equation, finally settled on the problem we have met several times before.

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That is, the fall in firms’ requirement for inventories in the 1920s, for technical reasons, reduced their demand for bank advances to finance them. This in turn brought problems for banks in finding alternative outlets for their lending and hence in keeping the growth of money supply at the level required to offset a population-growth induced rise in output. The resulting fall in the price level could produce deflationary conditions (Samuelson, 1963: p. 531). He finds this outcome unrealistic as changes in banking practice and government debt management to increase the availability of suitable assets could be used to overcome the problem thrown up by the unbalanced state of Robertson’s equation. In Robertson’s defence, however, we may recall the argument of ‘TBP’, his evidence to the Macmillan Committee, his lecture to the Lombard association in 1946 and his Memorandum of Evidence to the Canadian Royal Commission, in which the problems associated with both possible changes in banking practice and the dangers of balance sheets becoming overburdened with public-sector debt were made explicit. We have now examined sufficient examples to conclude that Robertson left a strong legacy of contributions to economics in a number of areas: the theory of the trade cycle, the treatment of money in relation to investment and saving, an approach to policy commentary which though often cautionary was always realistic; more generally, in the notion that explanations of economic phenomena may not be reducible to neat scientific formulae. With respect to the style in which he couched much of his writing, it was inimitable and we shall not see his like again.

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Robertson, D. H. 1914b, ‘Some Material for A Study of Trade Fluctuations’, Journal of the Royal Statistical Society, (January), 159–173. See also copy of notes for eponymous lecture, 16th December 1913, in D4/1 RPTC. Robertson, D. H. 1915, A Study of Industrial Fluctuation: An Enquiry into the Character and Causes of the So-Called Cyclical Movements of Trade, London: P.S. King and Son. Robertson, D. H. 1922, Money, Cambridge Economic Handbooks II, London: Nisbet & Co. Robertson, D. H. 1923a, The Control of Industry, Cambridge Economic Handbooks IV, Reprinted 1924, London: Nisbet & Co. Robertson, D. H. 1923b, The Ebb and Flow of Unemployment, ‘The New Way’ Series No. 6, London: The Daily News. Robertson, D. H. 1926, Banking Policy and the Price Level: An Essay in the Theory of the Trade Cycle, London: P.S. King. Robertson, D. H. 1928a, Money, Cambridge Economic Handbooks II, revised edition, Reprinted 1937, with new Preface, Reprinted 1946, London: Nisbet & Co. Robertson, D. H. 1928b, ‘Theories of Banking Policy’, Economica, VIII (June), 131–146. Reprinted in Hicks, J. R. (ed.) 1966, Essays in Money and Interest, London: Fontana Library, pp. 23–42. Robertson, D. H. 1931a, ‘Statement of Evidence’ and oral evidence, in Minutes of Evidence, Committee on Finance and Industry (Macmillan Committee) HMSO, London, pp. 321–347. Robertson, D. H. 1931b, Economic Fragments, London: P.S. King & Son. Robertson, D. H. 1933, ‘Saving and Hoarding’ Economica, 43 (September), 399–413. Reprinted in Hicks, J. R. (ed.) 1966, Essays in Money and Interest, London: Fontana Library, pp. 46–63. Robertson, D. H. 1934, ‘Industrial Fluctuation and the Natural Rate of Interest’, Economic Journal, 44 (December) 650–656. Reprinted in Hicks, J. R. (ed.) 1966, Essays in Money and Interest, London: Fontana Library, pp. 64–74. Robertson, D. H. 1936, ‘The Snake and the Worm’, originally Harvard Tercentenary Conference Paper ‘The State and Economic Fluctuation’. Reprinted in Hicks, J. R. (ed.) 1966, Essays in Money and Interest, London: Fontana Library, pp. 85–94. Robertson, D. H. 1937, ‘A Survey of Modern Monetary Controversy’, a paper read before the Manchester Statistical Society, November. Reprinted in Hicks, J. R. (ed.) 1966, Essays in Money and Interest, London: Fontana Library, pp. 105–124. Robertson, D. H. 1939, ‘Mr. Keynes and the Rate of Interest’, Lectures at the London School of Economics, Summer Term. Reprinted in Hicks, J. R. (ed.) 1966, Essays in Money and Interest, London: Fontana Library, pp. 150–187. Robertson, D. H. 1940, Essays in Monetary Theory, London: P.S. King & Son. Robertson, D. H. 1948a, A Study of Industrial Fluctuation: An Enquiry into the Character and Causes of the so-called Cyclical Movements of Trade, Reprinted with a New Introduction as No. 8 in the Series of Reprints of Scarce Works on Political Economy, London: London School of Economics and Political Science. Robertson, D. H. 1948b, Money, Cambridge Economic Handbooks II, revised edition with additional chapters, reset 1959, Reprinted 1961, London: James Nisbet & Co.

256 Bibliography Robertson, D. H. 1949a, ‘What has happened to the Rate of Interest’, Three Banks Review, March. Reprinted in Hicks, J. R. (ed.) 1966, Essays in Money and Interest, London: Fontana Library, pp. 187–202. Robertson, D. H. 1949b, Banking Policy and the Price Level: An Essay in the Theory of the Trade Cycle. Reprinted with a new Preface, New York: Augustus M. Kelley. Robertson, D. H. 1951, ‘Some Notes on the Theory of Interest’, In: Money, Trade and Economic Growth: Essays in Honour of John Henry Williams, New York: Macmillan & Co. Reprinted in Hicks, J. R. (ed.) 1966, Essays in Money and Interest, London: Fontana Library, pp. 202–222. Robertson, D. H. 1952, Utility and All That, London: Staples. Robertson, D. H. 1953, ‘Thoughts on Meeting some Important Persons’, seminar talks in USA, April. Reprinted in Hicks, J. R. (ed.) 1966, Essays in Money and Interest, London: Fontana Library, pp. 234–244. Robertson, D. H. 1954, Britain in the World Economy: The Page-Barbour Lectures at the University of Virginia, London: George Allen and Unwin. Robertson, D. H. 1955, Wages: The Stamp Memorial Lecture delivered before the University of London on 9th November 1954, revised edition, London: The Athlone Press. Robertson, D. H. 1956, Economic Commentaries, London: Staples Press. Robertson, D. H. 1963a, Lectures on Economic Principles, London: Fontana Library. Robertson, D. H. 1963b, Lectures on Economic Principles, London: Fontana Library. Reviewed in The Economist 6th June 1963 p. 936. Robertson, D. H. and Pigou, A. C. 1931, Economic Essays and Addresses, London: P.S. King and Son. Robinson, E. A. G. 1963, ‘Sir Dennis Robertson C.M.G.’, in The Times, 22nd April 1963, p. 22a. Robinson, E. A. G. 1977, ‘Keynes and his Cambridge Colleagues’, In: Patinkin, D. and Leith, J. C. (eds) Keynes, Cambridge and the General Theory, London: Macmillan. Robinson, E. A. G. 1985, Discussion of M. K. Danes, ‘Dennis Robertson and Keynes’s General Theory’, In: Harcourt, G. C. (ed.) Keynes and his Contemporaries: the Sixth and Centennial Keynes Seminar held at the University of Kent at Canterbury, 1983, Basingstoke and London: Macmillan. Robinson, Joan 1937, An Introduction to the Theory of Employment, London: Macmillan. Robinson, Joan 1975, ‘What has become of the Keynesian Revolution’, In: Keynes, Milo (ed.) Essays on John Maynard Keynes, Cambridge: Cambridge University Press. Rutherford, Donald (ed.) 2004, Biographical Dictionary of British Economists, London: Thoemmes-Continuum. Rymes, Thomas K. (ed.) 1989, Keynes’s Lectures 1932–35: Notes of a Representative Student, Basingstoke: Macmillan. Samuelson, P. and others 1993, ‘The Economics of Altruism’ [A Symposium], American Economic Review, LXXXIII, Pt. 1, Papers and Proceedings, pp. 143–161. Samuelson, Paul A. 1963, ‘D.H. Robertson (1890–1963)’, Quarterly Journal of Economics, LXXVII: 4 (November), 517–536.

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Sanfilippo, Eleonora 2005, ‘Keynes’s Valuable Opponent and Collaborator. The Correspondence between Keynes and Robertson’, In: Marcuzzo M. and Rosselli, A. Economists in Cambridge: A Study through their Correspondence, London and New York: Routledge. Sewell, Elizabeth 1952, The Field of Nonsense, London: Chatto and Windus. Shimmin, Hugh (‘A Local Artist’) 1866, Pen and Ink Sketches of Liverpool Town Councillors, Liverpool: Howell. Shimodaira, H. 2003, ‘Dennis Robertson’s View on Industrialised Society’, Conference Paper, ‘Cambridge School of Economics: From Marshall to Keynes’, 6–7 December 2003, Hitotsubashi University, Tokyo, Japan. Skidelsky, R. 1983, John Maynard Keynes, Volume I: Hopes Betrayed, 1883–1920, London: Macmillan. Skidelsky, R. 1992, John Maynard Keynes, Volume II: The Economist as Saviour, 1920– 1937, London: Macmillan. Skidelsky, R. 2000, John Maynard Keynes, Volume III: Fighting for Britain, 1937–1946, London: Macmillan. Skidelsky, R. 2003, John Maynard Keynes, 1883–1946: Economist, Philosopher, Statesman, London: Macmillan. Smith, Adam (1776), An Enquiry into the Nature and Causes of the Wealth of Nations, Reprinted in Todd, W. B. (ed.) 1976, Glasgow Edition of the Works and Correspondence of Adam Smith, Oxford: Oxford University Press. Liberty Classics Edition 1988. Indianapolis Liberty Press. Strachan, Alan 2004, Secret Dreams: A Biography of Michael Redgrave, London: Weidenfeld and Nicolson. Tappan, M. 1928, ‘Mr. Robertson’s Views on Banking Policy: A Reply to Mr. Harrod’, in Economica (N.S.), 8 (March), pp. 95–109. Thomas, Imogen 1987, Haileybury 1806–1987, Haileybury: The Haileybury Society. Tily, G. 2007, Keynes’s General Theory: The Rate of Interest and ‘Keynesian’ Economics, Basingstoke, UK: Palgrave Macmillan. Togati, T. D. 1998, Keynes and the Neoclassical Synthesis: Einsteinian Versus Newtonian Macroeconomics, London: Routledge. Tougan-Baranowsky 1913, Les Crises Industrielles en Angleterre 2nd edn, Paris: Giard & Briere. Vaizey, (Lord) John 1977a, ‘My Cambridge’, In: Hayman, R. (ed.) My Cambridge, London: Robson Books. Vaizey, (Lord) John 1977b, ‘Keynes and Cambridge’, In: Skidelsky, R. (ed.) The End of the Keynesian Era, London: Macmillan. Waskow, Howard J. 1966, Whitman: Explorations in Form, Chicago: Chicago University Press. Wicksell, K. 1935, Lectures on Political Economy, Classen, E. (Trans.), Edited with an introduction by Robbins, L., 2 vols, London: George Routledge and Sons. Wilkinson, L. P. 1980, A Century of King’s 1873–1972, Cambridge: King’s College. Wilkinson, L. P. 1981, Kingsmen of a Century 1873–1972, Cambridge: King’s College. Wilson, T. 1953, ‘Professor Robertson on Effective Demand and the Trade Cycle’, Economic Journal, 63 (September), 553–578. Reprinted as Chapter 6 in Presley,

258 Bibliography J. R. (ed.) 1992, Essays on Robertsonian Economics, Basingstoke and London: Macmillan. Wilson, T. 1980, ‘Robertson, Money and Monetarism’, Journal of Economic Literature, XVIII (December),1522–1538. Reprinted as Chapter 3 in Presley, J. R. (ed.) 1992, Essays on Robertsonian Economics, Basingstoke and London: Macmillan. Wilson, T. 1985 ‘Comment’ on Anyadike-Danes, ‘Dennis Robertson and Keynes’s General Theory’, In: Harcourt, G. C. (ed.) Keynes and His Contemporaries, Basingstoke and London: Macmillan.

Index

acceleration principle, 67, 68, 244 acting career as escape, 40; failure of, as escape, 158 success of, 24, 28–9, 88–9, 157 adhesiveness, 84 Aftalion, A., 59–61, 75, 244 age of plenty (Keynes), 174 aggregate net receipts, 72 aggregate volume of consumption, 72 aggregative theory, 76 agriculture, 66–7, 71, 73, 74, 243 Alice stories, 9, 22, 24, 96–101 Alington, Cyril, 18 Allen, Gay Wilson, 84 ‘Alternative Theories of the Rate of Interest’, 198 Amateur Dramatic Club (ADC), 26, 28, 152 animal spirits, 243 Apostles, see Cambridge Apostles Anyadike-Danes, M. K., 76–7 Arestis, P., 240 Article VII (Lend-Lease Agreement), 208 ‘Articles of Agreement for an International Monetary Fund’, 218 Artillery Mansions, 205 Ashton, T. S., 67 Asia, tour of, 154–5 atomic bomb, effects of, 207 atomistic frictionless barter, 175 Automatic Lacking/Splashing/ Stinting, 135, 136, 137 autonomous investment, 243, 244 banking policy, 124, 145–50 Banking Policy and the Price Level, 67, 87, 113, 124, 180 in interest-rate terms, 164 style of, 106, 125, 129

Bank for Reconstruction (White Plan), 208 banks shortening of the period of production, and, 161, 224, 246 fractional-reserve, 118 and lacking, 135, 140, 141 and lending, 110, 169, 218 money, 118 policy, 124, 139, 145–50 power of, 136 role of, 112, 123, 142, 145, 160, 162 strategic position of, 117 types of, 135 and working capital, 203 barter, frictionless, 176 Basileon, 31 behaviour, learned, 84 Bell, Quentin, 172 Benson, A. C., 33–5, 37, 152 Bernstein, Edward, 209 Beveridge, William, 243 Bigg, R. J., 65, 114 Blaug, Mark, 100, 242 Bloom, H., 103 Bloomsbury Group, 32, 172, 175 Boianovsky, Mauro, 243 boom, 61, 74, 110, 120, 169, 216 ‘Boost and Bolster’, as economic policy, 203 borrowing distress, 169 short-term, 219 Bowley, A. L., 170, 205 ‘Bradburys’ (Treasury Notes), 115 Bradfield, J. R. G., 233 Braithwaite, R. B., 101 Bretton Woods, 208, 209, 211, 218, 220 Bridel, P., 114

259

260 Index Britain’s Industrial Future (Liberal Industrial Enquiry), 87 British Academy, Robertson and, 202, 214 Brooke, Rupert, 32 buffer-stock theory, 240 Butler, J. R. M., 18, 24, 37–8, 43–4, 89, 154, 172, 206, 232 Cambridge Apostles, 175 ‘Cambridge Circus’, 181, 199 Cambridge Conversazione Society (Apostles), 150 Cambridge Economic Handbooks, 87, 114 Cambridge Review, 157 Cambridge School, 114 Cambridge Union Society, 27 Cambridge University achievements at, 29–30, 209 career at, 209, 213 Classical Tripos, 16–17, 25 conflict at, after Keynesian Revolution, 204, 215 fellowship, 26, 40–2 King’s College, 18–19, 31, 32, 152, 172 non-academic activities, 26–30 shift to economics, 37, 39 Trinity College, 19, 23, 25–6, 87, 88, 209 Cambridge University War and Peace Society, 42 Canadian Royal Commission on Banking and Finance, 217, 233, 245 capital accumulation, 174 Austrian theory, 182 circulating, 136, 139, 146 expansion, 141 fixed, 61 gestation period of, 70 goods, 72, 162 and lacking, 135 length of life of, 76 marginal efficiency of, 197 return on, 183

scarcity of, 174 types of, 133 capitalism, 173 capitalist/Darwinian system, 174 capitalistic production, 59, 75, 76, 113, 242 capital-output ratio, and Robertson’s stability condition, 245 Carabelli, A., 176 Carroll, Lewis, 7, 9, 10, 22, 24, 83, 97, 100–3, 105, 115 Carver, Michael, 44, 45 cash balances approach, 111, 167 Cassel, Ernest, 205 Cavalry Squadron (Cambridge OTC), 43–4 Chair of Political Economy, 209, 213 Chancellor’s Gold Medal for English Verse, 26, 30 ‘chequery’, 104 Churchill, Winston, 207 circulating capital, 136, 139 civil service, 45 Clapham enquiry, 87 Clarke, P., 197 Clark, Kenneth (Lord), 19 Classical Tripos, 25 Clearing Union, 208 Clemence, Richard V., 100 Clifford’s Inn, 205 CMG, see Companion of St Michael and St George Cobden Club Prize, 26, 42 (Cohen) Council on Prices, Productivity and Incomes, 154 College Finance Committee (Trinity), 233 Committee on Economic Information, 204 Committee on Finance and Industry (Radcliffe Committee), 88, 159, 164, 245 Committee on the Rating of Site Values, 217 Companion of St Michael and St George, 214 compensatory mechanism (banking policy), 112

Index competition, effect on economic fluctuation, 131 composition, fallacy of, 194, 195, 197, 198 consumption, 3, 55, 72, 79, 165 function, 197, 224, 239 Contribution to the Theory of the Trade Cycle, A, 239 Control of Industry, The, 93, 114 convertibility, of currencies, 208, 210, 212, 220 cooperative, non-monetary economy – as standard case, 77 Costabile, Lilia, 140, 240–1 Couch, Arthur Quiller (Sir), 29 Council on Prices, Productivity and Incomes, 215 Craven Scholarship, 26, 29–30 credit and banks, 136 extension of, in the face of falling demand, 161 and saving/investment/cycle, 160 credit-money economy, 110 creditor/debtor nations, 210 crowding out, 192 currency exchange, schemes for in post-war world, 208 Curse of Electra, The, 23 Dalton, Hugh, 205 Danes (Anyadike-Danes), M. K., 76–7, 129, 230 dark forces, perceived as threats by Robertson, 232 Darwin, Charles, 84, 103 Datta, Bhabatosh, 230–1 Dawkins, Richard, 84 debates (Cambridge Union Society), Robertson in, 27–8 Decemviri, 44 deflation, 160, 219, 245 demand conditions of, 116 demand-side changes, 71 effective, 182, 197 effort-elasticity of, 68, 74 excess, 168 lack of, 161, 177

261

new patterns of, 162 pressure, 217 prolonged, 60 Dennison, S. R. (Sir Stanley), 2, 26–7, 38, 39, 41–3, 46, 87, 90–1, 93, 105–7, 151, 156, 170, 213, 215, 217–19, 227, 236 depression, economic, 110, 159–60, 162, 181, 183, 203 diaries, of A. C. Benson, 33–5 ‘digging down’, to underlying reality, 58, 65 Dimand, R. W., 197 disequilibria, between saving and investment, 180 dis-lacking, 165 dissertation, for fellowship, 40–2, 46, 49, 56 dividend, national, and economic welfare, 54 Dodgson, C. L. (Lewis Carroll), 23, 100–3 Domar equation, 139, 243, 244, 245 ‘donnishness’, of Robertson, 106 Dow, J. C. R., 217 Drayton, Michael, 97, 163 duty/desire conflict, 9, 30, 32, 158 Ebb and Flow of Unemployment, 120, 163 ‘Ecfare’, 105 economic distress, 203 expansion, 55, 61, 74 literature, 93 stability, 179 welfare, 54, 55, 65, 116 Economica, 145 Economic Advisory Council, 204 Economic Consequences of the Peace, The, 65, 173 Economic Fragments, 98 ‘Economic Possibilities for our Grandchildren’, 173 economics, 51–2, 53, 221 Classical, 175 Keynesian, 104 Robertsonian, 4, 15, 50 and solar disturbance theory, 66

262 Index Economics of Welfare, The, 53 economy, management of via the banks, 143 ‘Effective Demand and the Multiplier’, 191 Effort-elasticity, of demand, 68, 74 elasticity, supply/demand (of money), 111–12 Eliot, George, 22 Ellis, H., 228 Empire, the, and sterling area, 210 employment, 55, 174 see also unemployment End of Laissez Faire, The, 173 entrepreneurs, 136, 138, 166, 168, 182 equilibrium, 145, 162 of income, 182, 183, 199 monetary, 218, 237 quasi–, 169 escape, strategy of, 47–8 ‘Essay in Rabbinics, An’, 212 Essays in Monetary Theory, 98, 155 Essays in Money and Interest, 98 ethics, 66, 81 Eton College, 18, 19–20, 24, 171, 214 Eton College Chronicle, 19, 20 Evelyn Nursing Home, 233 evo-economics, 4, 85, 237 evolution, 174 theory of, 84 exchange value, and the theory of the cycle, 71 exogenous investment as an important source of fluctuations, 241 expansionary shock, and the theory of the cycle, 168 expenditure-determines-income sequence, 198 Fabian Society, 205 Federal Reserve, US, 161 Fellowship in Economics, 26 Fellowships, Trinity, 40 Final Cause, of economic growth and fluctuations, 85 finance motive, 190, 191 Finsbury Rifles, 44 fiscal policy, 87

Fisher, I., 111–12 Fletcher, Gordon, 6, 8, 20, 22, 30, 80, 82, 100, 104, 114, 129, 141, 157, 163, 173, 177, 185, 195–6, 203, 221, 232–3, 236, 243 fluctuations, 131 and acceleration principle, 244 and banking system, 237 in employment, 60 industrial, 113 and interest rate, 159, 168 and money, 110, 132, 220 theory of, 51, 59, 77 welfare-reducing, 55, 64 Wicksellian analysis of, 167 forced saving, 147, 190, 243 four crucial fractions, 139, 245 free trade, 220 frictionless barter, 144, 176 Friedman, M., 111, 194, 217, 243 Fundamental Equations (A Treatise on Money), 181 Funk, Walther, 206 General Theory of Employment, Interest and Money, 7, 134, 170, 173, 174, 179, 182 gene theory, 84 gestation period of capital, 70 Gibson’s Paradox, 167 Gilbert, J. C., 232 Girdler’s Lecturer, 88 gluttability, of wants, as cause of industrial depression, 162, 163 gold standard, 99, 114, 161 Goodhart, C. A. E., 73, 87, 90, 91, 93, 98, 100, 130, 196, 199, 200, 237, 240–1 goods in process, in Robertson’s stability condition, 245 Grahame, Kenneth, 22 Granta, 43 Grey, Donald, 103 growth, 113, 122, 123, 139 Haberler, Gottfried, 239 Hansen, Alvin H., 100, 190 Harcourt, G. C., 100, 126, 229 Harrod-Domar equilibria, 245

Index Harrod-Domar, see Domar Equation Harrod, R. F., 68, 197–8, 243–5 Harvard University, honorary doctorate, 202 Hawtrey, R. G., 135, 143, 147, 180–1, 192, 199, 240 Hayek, F. A., 164–6, 170, 180, 182, 205, 243 Heraclitan flux, 82, 84 Heraclitus, 82 herd instinct, in the theory of the cycle, 131 Hicks, J. R., 1, 5, 12, 16, 37, 42, 56, 57, 93, 148, 156, 169, 184, 185, 191, 200, 206, 230, 239, 240, 244–5 Hill, P., 127–8, 196 hoarding, 136, 137, 165, 169, 219 Holme, Samuel, 13 homosexuality, of Robertson, 20, 35, 151 horsemanship, 44 Housman, A. E., 32, 40, 232 Howarth, T. E. B., 100 Hurricane Smock Company, 13 Hutt trial, 14 imports/exports, Canadian exchange-rate policy and, 220 income determination, 182 equilibrium, 183 fall in, as adjustment mechanism in the theory of the cycle, 169 Incomes policy, 219 index numbers, 116 India, statistics project in, 170 industrial activity/agricultural activity in the Study, 72 ‘Industrial Fluctuation and the Natural Rate of Interest’, 164, 166, 178 inflation, 165, 194, 219 interest controversy over, in causing economic depression, 185 determinants, 186 and investment, 190 and liquidity preference theory, 197 and money, 191

263

natural rate of, 182, 183 rate of, 130, 162, 167, 182, 183 role of, 188, 197 International Bank for Reconstruction and Development (World Bank), 208 International Economic Association, 122 International Monetary Fund, 208, 209, 210 International Stabilisation Fund (White Plan), 208 international trade, theory of, 3 inventory adjustment, and the theory of the cycle, 199–200 investment, 181 autonomous, 243, 244 finance of, 194 and interest rate, 162, 190 market, 193 period of gestation, 75 permanent, 162 and saving/money, 178, 182–3, 191, 192 investment-saving relationship, 78 and the theory of the cycle, 65, 72 investors, 142 IS-LL/IS-LM, 190 ‘Is there a future for Banking’, 223 Jevonses, the, 66 Johnson, E., 26, 91, 100, 206, 215 Johnson, H. G. (Harry), 26, 91, 214, 220 Kahn, Richard, 152, 181 Kaldor, Nicholas, 216 Kalecki Effect, 243, 244 Kalecki, M., 200 Keynesianism, Robertson as critic, 11, 171, 183–200 Keynesian revolution, 4, 6, 151, 159, 175, 230 Keynes, J. M. (Maynard), 1, 3–5, 39, 100, 106, 126, 130, 150, 159–70, 171–8, 179–88, 195, 203 and Robertson, 7, 114, 126–9, 150, 155, 177 Keynes Plan (Clearing Union), 208

264 Index King’s College, 18–19, 31, 32, 152, 172 King’s metic, 31 King’s Scholar, 18, 152 Kut el Amara, 45 K and V method of monetary analysis, 194 Labordère, M., 58, 59 lacking, 135, 141, 165 types of, 126, 134–5, 137, 139, 142 Laidler, David, 114, 134, 182, 243 laissez-faire, 27, 63, 173, 174 Layton, Walter, 39 League of Nations, 204 Leaves of Grass, 83 Lectures on Economic Principles, 51, 67, 220 Lee, Frank (Sir), 6, 44, 93, 206 leisure, age of infinite, 174, 203 Leith, J. C., 126 Lend-Lease, 207, 208 Les Crises Industrielles en Angleterre, 59 Les Crises Périodiques de Surproduction, 60 Liberal Industrial Enquiry, 87 Liberal Party, 27, 87 Liberal Society, 26 Liberal Summer School, 120 liquidity preference, 111, 179, 183, 186, 187, 188 theory, 167, 196, 197, 240 liquidity trap, 190, 191 Listener, 164 literary approach, to economics, 9 literary economist, Robertson as, 10, 88, 89–94, 95, 96–102 Liverpool, Robertson family and, 12, 13 loanable funds approach, 185, 201 Loanable funds theory of interest rate determination, 167, 237 loans, from the banks, 119, 161 Lombard Association, 223, 245 London and Cambridge Economic Service, 87, 205 London School of Economics and Political Science, 186, 204 longevity of instrument goods, 76

long/short periods, 62, 65 love, 33, 83–4, 102, 151 Macmillan Committee, 88, 159, 164, 245 Macmillan, H. P. (Lord), 160 macro-economics, 113, 176, 195, 221, 239 manpower targets, and failures of economic prediction, 224 marginal utility, 55, 59, 61, 71, 72–3, 74 market, saturation of (gluttability), 161 Marlowe Society, 26, 28, 152 Marris, Robin, 236 Marshall, Alfred, 7, 37, 42, 51, 84, 92, 111, 151, 175, 213, 230, 235 Marshall Library, 151 Marshall, Mary Paley, 151 Marx, Karl, 61, 76 Marzola, A., 172 Material Cause, 85 mathematics, 21 Meade, J. E., 181 Memorandum of Evidence to the Canadian Royal Commission, 233, 245 Menenius, role as, 88, 156–7, 157–8 Mesopotamian Picnic, 45 microeconomic theory, 175 Middle East, 47–8 military career, 42–6 Military Cross, 20, 45 Minority Report of the Poor Law Commissioners, 192–3 miscalculation, in the theory of the cycle, 80 Mizen, P., 240 Moggridge, D. E., 38, 86, 150, 182, 197–9, 212 monetary economy, 183 equilibrium, 237 policy, 123, 132, 135, 161 monetary stabilisation, of industry, 121–3

Index money bank, 116–17, 118 and cycles/growth/interest, 240, 241 and the economy, 65, 143 elasticity, supply/demand, 111–12 and fluctuations, 220; extent of, 131, 132 influence of, 76, 109, 178 investment/savings, 144, 191 and Keynes, 183 as economic equivalent of love, 176 purchasing power, 111 quantity theory, 125 role of, 117 theory of, 87, 116 types, taxonomy of, 116 value of, 115, 116 Money, 87, 93, 114, 120, 184 money-commodity relation, 133 Monopoly (The Economics of Imperfect Competition), 100 Monthly Bulletin, 87 Moore, G. E., 150, 175–6 Morgenthau, Henry, 208 motivation/human drive, giving rise to instability, 83 ‘Mr Keynes and the Rate of Interest’, 187, 190 multiplier, the, 67–8, 136, 189, 191, 239 National Assistance Board, 227 national income (dividend), 54, 55 Nationalokonomisk Forening of Denmark, 227 natural rate of unemployment hypothesis, 243 natural selection, 84 neologism, 104–5, 125 net utility, of community, 72 Newcastle scholarship, 19 New Economics, 143, 175 new hoarding, see hoarding ‘New Order’, for Europe, 206 Newsome, D., 33, 35, 152 Nivelle Offensive, 45 non-bank intermediaries, 219

265

nonsense (tales), 103–4 ‘Note on the International Monetary Fund, A’, 212 octopoid, 105 Officer Training Corps (OTC), 42–3 oneness,/wholeness as man’s destiny, 84 organicism, 175, 176, 198 organic unity, 175, 191 ornithology, 16 over-investment, 60, 70, 71, 76, 79, 121 theories, 58, 59 overproduction, 61 Oxford Union Society, 27 Page-Barbour Lectures, 214 Pandarus, role as, 88 Paretian theory, 53 Pareto, Vilfredo, 53 Patinkin, D., 126, 134, 197, 199 period analysis, 91 pet theory/aversion, 66, 67 phenomena of supply, 70 Phillips, Frederick, 205 Phillips, Robert, 103 Phillips, A. W., 217 Pigou, A. C., 37, 39, 41–3, 47, 52–9, 63, 111, 180, 213, 239 Pigovian welfare economics, 53–6 poetry, 21, 22, 26 Political Economy Club, 232 ‘Pop’ (Eton Society), 19 Porson Scholarship, 25 post-war loan, from USA, 207 Presley, J. R., 2, 41, 50, 56–7, 58, 73, 90, 100, 156, 170, 194, 200, 215, 237, 243 Pressnell, L. S., 211, 212 price-determination (A Treatise on Money), 181 price level, 115, 116, 124, 132, 177 Prices and Production, 164 price stability, 80, 112, 119, 135, 139–40, 179 policy of, 133, 216 and unemployment, 217

266 Index Principia Ethica, 175 Principles [of Economics], 39 private self, 21, 32, 36, 151, 154 ‘Problems of Words, Thought and Action’, 229 production, period of, 60, 245 productivity, increased, 74 psychic income, 54 psychic return, of satisfaction, 54 public self, 24, 30, 151, 230 public works projects, 161, 163, 164, 177, 192, 219 purchasing power, monetary, 60 quantity theory, of money, 111, 125, 136, 137 quasi-equilibrium, 169 quasi-rent, 62 Rackin, Donald, 103 Radcliffe Committee, 219 Radcliffe Report, 218 real forces, 189 monetary forces, and, 177 saving, 58, 60 real bills doctrine, 245 Real Business Cycle Theory (RBCT), 241, 242 reconstruction, post-war economic, 207 Redgrave, Corin, 153, 215 redistribution, in the theory of the cycle, 169 ‘Reflections of an Ex-Magus’, 215–16, 217, 218 religion, Robertson and, 21–2, 33 rentiers, 174, 183 repercussion, principle of, 67–8, 69, 71, 74, 109, 136 retrenchment (in A Treatise on Money), 181 Ricardo, David, 112 Robbins, Lionel (Lord), 26, 33, 153, 205–6, 209, 211, 232–3 Robertson, Ainslie, 13 Robertson, D. H. (Sir Dennis), 1–11, 29, 32, 36, 44, 63, 70, 82, 95, 133,

135, 140, 145, 159–70, 171–8, 179–88, 195, 243 character of, 7, 104, 106, 152, 206, 235 early life, 5, 8, 13, 14–16, 19–20 as evolutionist, 7 international reputation, 86 and Keynes, 9–10, 114, 126–9, 150, 154, 177, 184, 222 lack of recognition, 1–2, 10, 91 legacy of, 236–9, 243–4 and Lewis Caroll, 100–3; see also Alice stories and Marshall Library, 151 and mathematics, 89–91, 92 and money, 112, 117, 129, 143, 144 as ‘Presidential Man’, 30 and religion, 33 and Rylands, 152–3 shift to economics, 39 state of mind, 23, 25, 30–1, 34–6 success of, 24, 202, 214 in the Treasury, 205 University career, 87, 88, 209 war experiences, 44–6, 47–8, 206–12 writing style, 93–100, 104–5 Robertson, Gerda, 14, 22 Robertsonian day, 238 Robertsonian economics, 4 Robertsonian Economics, 50 Robertsonian lag, 238 Robertson, James Revd. Dr. (father), 12, 14 Robinson, E. A. G. (Austin), 37–8, 89, 90, 155, 181 Robinson, Joan, 100, 106, 181, 195, 201, 229 ‘Role of Persuasion in Economic Affairs’, 227 ‘roundabout’ system of production, 59 Royal Commission on Equal Pay, 215 Royal Economic Society, 214, 224 Royal Institute of International Affairs (Chatham House), 87 Royal Statistical Society, 46, 59, 61, 70, 217 Rylands, George, 32, 150, 152–3, 157, 212

Index Samuelson, Paul A., 28, 67, 90–1, 100, 106, 125, 202, 238–9, 241, 243, 244–5 style of Robertson, 28, 228 saving, 118, 165, 198 forced, 147, 166, 243 saving behaviour, 4, 123, 159 ‘Saving and Hoarding’, 164–5, 238 saving and investment, 65, 72, 117, 189, 192 Keynes, 180, 181 and price, 165, 166 Say’s Law, 4, 125, 130, 144 called into question, 117, 123, 182, 188, 191 selfish gene, 84 Sewell, Elizabeth, 103 Shallow, Mr. Justice, role as, 88, 89 Shaw, Glen Byam, 157, 158 Shimmin, Hugh, 13 Shimodaira, H., 243 shock, expansionary, 168 shortage of saving theory, 59 short period, 4, 65, 173, 174, 241 management of, 113, 131, 142, 170 short run, 80 Silva, F., 172 Skidelsky, Robert (Lord), 153, 172, 182 slump, 121, 161, 170, 185 Smith, Adam, 39 smoking-concerts, 29 snake and worm, 185, 203 Society of Apostles, 150 solar disturbance, and economics, 66 solar leopard (sun-spot theory), 243 ‘Some Material for the Study of Trade Fluctuations’, 46, 61 ‘Some Notes on the Theory of Interest’, 187 ‘Some Recent Writings on the Theory of Pricing’, 227 Spiethoff, A., 58 splashing, 165 automatic, 135, 137 Spooner, Gertrude, 23 stabilisation monetary, 121 policy of, 123 ‘Stability and Progress’, 122

267

stagnation thesis, 183, 185 Stamp Memorial Lecture, 225 ‘State and Economic Fluctuation, The’, 203 Sterling, safeguarding, 211 ‘Sticking to One’s Last’, 224 stinting, 165, 194 Study of Industrial Fluctuation, A, 47, 49, 53, 56, 63 Subtle, role as, 157 sun-spot theory, 66, 243 supply, 70, 71, 177, 191 Survey of Contemporary Economics, A, 228 Tappan, M., 144 taxation and deficit finance, in economic management, 218 ‘Theories of Banking Policy’, 100, 125, 139, 145, 147–8, 164 theory of credit, in relation to saving, investment and the cycle, 160 theory of effective demand, timing of appearance of, 198 theory of saving, 162, 194 theory of unemployment equilibrium, 188 theory of value, 227 Thomas, Imogen, 14, 97 ‘Thoughts on Meeting Some Important Persons’, 243 ‘Three Wise Men’ (Council on Prices, Productivity and Incomes), 215 thrift, paradox of, 68, 120, 163, 194–5, 198 Tily, G., 240 Tinbergen, Jan, 204 Tomline mathematics prize, 19, 21 Tougan-Baranowski, M., 58, 59, 60 T ract on Monetary Reform, A, 173 trade cycle abolition of, 121, 122 managing the, 113; see also short period, management of theory of, 3, 40–1, 49, 56, 58, 204 and welfare, 120 trade, freedom of (and International Monetary Fund), 210, 220 trades, in the theory of the cycle, 72

268 Index trade unions, 60, 162 Treasury bills, 219 Treasury Notes (Bradburys), 115 Treasury (Phillips) Committee on the Control of Savings and Investments, 204 Treasury View, 192, 193 T reatise on Money, A, 160, 164, 178, 179, 180 Trinity College, 19 achievements at, 25–6 employment at, 87, 88, 209 scholarship to, 23, 25, 31 T rinity Review, 93 Tuesday Club, 87 uncertainty, role in Keynes’s theory, 183 unemployment, 159, 177, 185, 192, 217, 243 see also employment United States, post-war loan, 207 University of Virginia, 214 ‘Urge and urge and urge’, in the theory of growth and fluctuations, 83, 85, 122 US Federal Reserve, 161 utility cardinal, 53 net, 72 Vaizey, John (Lord), 15, 26, 232 value, general theory of (and theory of money), 116 value theory, 3 velocity of circulation, 116, 160, 219

wages, 163, 169 cost-push, 219 Wall Street Crash, 161 War WWI, 42, 45, 64, 82, 113 WWII, 206–12 Waskow, Howard J., 84 wealth accumulation, 183 Wealth of Nations, 39 wealth, real, 116 Wealth and Welfare, 52–3, 55, 63, 111 welfare economic, 65, 116 and fluctuations, 55–6 public, 78 welfare economics, 54 welfare losses, over the cycle, 79 White, Harry Dexter, 209 White Plan, 208 White Queen, the, 24 Whitman, Walt, 83–4 ‘Why Does Poverty Continue’ (radio talks), 164 Wicksell, K., 167 Widow’s cruse fallacy, 181, 199 Wilkinson, L. P., 32, 36 Williams, E. T., 28 Wilson, Constance Elizabeth (mother), 12 Wilson, T., 184, 185 windfall profits/losses, 179 Wind in the Willows, 22 Wootton, Barbara, 114 working-class, 60, 76 World Bank, 208 Yule, G. U., 61