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Response to Bateman’s Review of Dimand and Hagemann, eds., The Elgar Companion to John Maynard Keynes

Author(s):Tily, Geoff
Reviewer(s):Tily, Geoff

Published by EH.Net (March 2020)

Response to Bradley Bateman’s Review of Robert W. Dimand and Harald Hagemann, editors, The Elgar Companion to John Maynard Keynes — by Geoff Tily.

I am grateful to Bradley Bateman for his remarks on my essay in the Elgar Companion to John Maynard Keynes. My aim was to emphasize the over-riding importance of Keynes’s monetary initiatives, necessarily including the international as well as British perspectives. I did not address the details of subsequent academic and policy debate, and, as Bateman points out, I did not address the contributions of those who have departed from the conventional view of “Keynesianism.” However, elsewhere I have devoted a good deal of attention to the contemporary literature. Of most relevance are a review of The Return to Keynes (2010) and a review essay on the Cambridge Companion to John Maynard Keynes (2006), both edited by Bateman with others and published on each side of the “great recession” (Tily, 2013, 2011).

These reviews tackle contributions by a number of the scholars cited by Bateman. For example in the latter I devoted a good deal of attention to G. C. Peden, recognizing his important contributions on British policy and especially as one of the few who have addressed substantially Keynes’s monetary policy. I stand by my criticism that Peden portrays “… these matters as ad hoc, rather than as a permanent backdrop or preoccupation.”

Keynes’s theory and policy amounted to a great deal more than Bateman’s suggested “preference for low interest rates over fiscal deficits.” Keynes warned that permanently low interest rates (across the spectrum) were essential to the prosperity and stability of the economic system. For me, the ongoing economic (and political) crises of the twenty-first century are rooted in the loss of this practical conclusion and the dismantling of the associated policy and institutional infrastructure. A fuller and freely accessible take on these matters is in my “As If Keynes Had Never Lived,” which was originally given as a lecture at King’s College Cambridge at a conference celebrating the eightieth anniversary of The General Theory (Tily, 2016).

As an aside: this perspective gives me a very different take on outcomes, not least that Keynes should be judged against the successes of the golden age rather than the failures of chasing growth the 1970s. But I would not want the reader to have the impression that my essay is an empirical argument: the figures were intended simply to supplement and illustrate the story.

My fundamental concern with the approach of Bateman and those he champions is that Keynes is either contained in the past or deployed merely in support of the contemporary policy consensus (though any consensus has somewhat unraveled compared to the view in Bateman et al. 2010). In my book (Tily, 2006) I argue Keynesianism was a different and rival theory to Keynes’s own. A similar argument is made in the Cambridge Companion, where Keynesianism is found to originate in various “proto-Keynesian” contributions (a term attributed to Peter Hall). While I trace the origins of IS-LM to contributions by Dennis Robertson, the Cambridge Companion emphasizes widespread policy preferences for demand management and “deficit spending” (“in the interwar period in Sweden, Japan, the United States, France, Italy and Germany,” p. 284) and emerging preferences for formal mathematical models (e.g. p. 36). My review of the Companion betrays a serious frustration that having identified (or acknowledged) this intellectual sleight of hand — and moreover (partially) recognizing Keynes’s monetary policy initiatives — the opportunity for a material re-assessment of Keynes is immediately closed down. (Doubtless any frustration was exacerbated by my efforts to do the opposite almost in exact parallel.) Instead Keynes is renewed as an “activist,” willing creatively to deploy monetary and/or fiscal policy according to circumstance. And this approach is common to many of the scholars praised in Bateman’s review, not least D. E. Moggridge, Susan Howson and Peter Clarke. In his (2009) biography of Keynes, Clarke also finds the textbook interpretation incorrect. He harshly condemns any rethinking as “anachronistic ventriloquism.” Acceptable only is a “pragmatic Keynesianism,” which licenses “fresh approaches to the novel economic difficulties of our own era — to tackle them actively rather than take refuge in inert doctrinal purity” (180).

For me this is an absurd reaction to the realization that the textbooks got Keynes wrong. As global policymakers fall short in their efforts to resolve a global crisis of private debt akin to that which motivated The General Theory, the position appears reckless in the extreme. Though of course there is a certain convenience in Clark’s interpretation: with Keynes relevant only to the past, the crisis cannot be the fault of the economics profession getting it wrong. This is not to say that Keynes’s word is final, but I very much doubt we can make much progress without a proper understanding of the substance of his theory that has been denied by the Keynesian interpretation.

I hope these comments and the associated contributions convince Professor Bateman that my work is less “incomplete” than he judged from the essay in the Elgar Companion. But even more I hope to convince him to distance himself from attempts to close down any debate about “what Keynes really meant.”


Clark, Peter (2009) Keynes: The Twentieth Century’s Most Influential Economist, London: Bloomsbury.

Tily, Geoff (2006) The General Theory, The Rate of Interest and ‘Keynesian’ Economics, Basingstoke: Palgrave Macmillan.

Tily, Geoff (2011) “Another ‘Useful Fiction’?” review essay on Roger E. Backhouse and Bradley W. Bateman, Eds. (2006) The Cambridge Companion to Keynes, Critique of Political Economy, 1, Autumn, 121-52. Online at

Tily, Geoff (2013) Review of Bradley Bateman, Toshiaki Hirai and Maria Cristina Marcuzzo, Eds. (2010) The Return to Keynes, Cambridge, MA: Harvard University Press, Economica, 80, 190-4.

Tily, Geoff (2016) “As If Keynes Had Never Lived: The Second UK (and World) Crisis of Financial Globalization,” Paper for Conference at King’s College Cambridge: “Maynard Keynes in King’s College and The General Theory of Employment, Interest and Money (1936), October 2016. Online at

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Subject(s):History of Economic Thought; Methodology
Geographic Area(s):General, International, or Comparative
Time Period(s):20th Century: Pre WWII
20th Century: WWII and post-WWII

The Routledge Handbook of the History of Women’s Economic Thought

Editor(s):Madden, Kirsten
Dimand, Robert W.
Reviewer(s):Forget, Evelyn L

Published by EH.Net (August 2020)

Kirsten Madden and Robert W. Dimand, editors, The Routledge Handbook of the History of Women’s Economic Thought. New York: Routledge, 2019. xiv + 465 pp. $196 (hardcover), ISBN: 978-1-1388-5234-1.

Reviewed for EH.Net by Evelyn L Forget, Department of Community Health Sciences, University of Manitoba.


“By design this Routledge handbook is about women and about time and about economics. By design this handbook is global. Otherwise, this handbook is not easy to capture, condense, or consolidate into leading archetypes and primary themes” (p. 1). So writes Kirsten Madden on the first page of a fascinating adventure that draws together the wildly diverse writings of “a Soviet game theorist and a Liberian president; wives of noted nineteenth-century economists and Buddhist nuns from millennia past … revolutionaries, terrorists, even an assassin.”

This Handbook has an impressive geographical scope: women economists from Austria, Britain, China, India, Italy, Japan, Russia, the Soviet Union, sub-Saharan African nations and the U.S. are profiled. Chapters are organized by time, and most focus on the nineteenth and early twentieth centuries but the first chapter, written by Sheetal Bharat, on Indian women’s literature reaches as far back as the fifth century BCE, while the final chapters extend well into the twenty-first century. Almost all of the authors are women, with the exception of two male co-authors, and contributors range from senior scholars to graduate students.

Diverse themes are addressed. Eleven chapters address issues of gender and economy, exploring topics such as the crowding hypothesis and pay gaps, minimum wages, affirmative action, co-operation and household decision making. Other chapters explore colonialism, trade, economic development, economic statistics and finance. The experiences of women economists are not neglected; many of the economists in this collection confronted significant barriers to leave a record of their analyses. In fact, Madden writes, “one … concept crosses all the chapters: exclusion” — either because the economist herself was forced to overcome exclusionary practices or because she constructed works that spoke to the experiences of others excluded by economic practices (p. 2).

The Handbook does not aim to be exhaustive, nor does it establish a canon. It offers a selection of fascinating contributions of which many of us were unaware. As one might expect in such a variegated collection, contributions are somewhat uneven in tone and emphasis. Some chapters, such as “The First 100 Years of Female Economists in Sub-Saharan Africa,” by Lola Fowler and Robert Dimand, Giandomenica Becchio’s “Austrian School Women Economists” and Kirsten Madden’s “Anecdotes of Discrimination,” focus almost entirely on biography. Others, such as Shoshana Grossbard’s “Women’s Neoclassical Models of Marriage, 1972–2015,” lean heavily towards economic thought, traditionally understood. Other chapters combine the two and strive for a balance between the experiences of women economists and their writing. These include contributions such as “The Economic Thought of the Women’s Co-operative Guild” by Kirsten Madden and Joe Persky, Cléo Chassonery-Zaigouche’s analysis of the changing positions of Beatrice Potter Webb, Eleanor Rathbone and Millicent Garrett Fawcett on equal pay, and Marianne Johnson’s “Daughter’s of Commons; Wisconsin Women and Institutionalism.”

Co-editors Kirsten Madden, of Millersville University in Pennsylvania, and Robert Dimand, of Brock University Canada, have compiled a wonderfully diverse collection that should encourage us all to think more broadly about the history of economics. This collection, though, makes it very clear that we are at the very beginning stages of recovering the contributions of women economists. It is impossible to read any of these chapters, entertaining as many of them are, without asking some serious questions about historiography, and that may be the greatest contribution of this Handbook.

Historians of economics should be asking ourselves these questions.

Why do we need a Handbook of the History of Women’s Economic Thought? On one level, the answer is obvious. Existing collections, textbooks and even Handbooks of the History of Economic Thought include very few women. But why are women’s contributions not integrated into our understanding of “schools,” periods and themes? What are the consequences of exclusion? How does it affect the kind of histories we write?

If women economists were routinely included in standard histories of economics, would there still be a reason to have a Handbook of the History of Women’s Economic Thought? Is there some theme that binds together women economists and makes their work different from that of men? Madden’s focus on exclusion deserves more careful thought: how did exclusion manifest in particular times and places, and what were the consequences for the development of economic thought? Are there parallels, similarities and differences between the contributions of women economists and those of racialized economists?

How should we best organize a Handbook of Women’s Economic Thought? The editors’ decision to use a simple timeline makes sense at this stage of our knowledge, but should we organize by theme rather than date of contribution? If so, how do we identify the relevant themes? It isn’t obvious that the way we delineate standard histories of economic thought should be the most appropriate way to organize women’s contributions.

If we think about “themes” in the history of women’s economic thought, are there some that deserve greater attention than they have received to date? One thing that has always struck me, and it is apparent in this collection as well, is that women economists are very often embedded in the economies they write about in ways that “professional” economists, male and female, may not be. The women in this collection are activists more often than they are scholars and, while this may also have characterized male economists of the past, it persisted well into the twentieth and twenty-first centuries for many women writers. For example, Jessica Gordon Nembhard’s Collective Courage: A History of African American Cooperative Economic Thought and Practice (2014) delineates the dual role of economic writers and highlights the contributions of women. It builds on W.E.B. DuBois’s (1907) Economic Cooperation among Negro Americans, and brings another perspective to many of the same themes addressed in “The Economic Thought of the Women’s Co-operative Guild” written by Kirsten Madden and Joe Persky.

Every library needs a copy of this Handbook, and it should also find its way into the collections of historians of economics. This book will extend the boundaries of what is sometimes a very narrow field, both by including people who have been excluded, and by asking us to think again about some of the ways we define the field of economics and organize our knowledge of its past. We owe to Kirsten Madden and Bob Dimand, co-editors, as well as all the authors in this collection, a large vote of gratitude.


Evelyn L Forget is Professor of Economics in the Department of Community Health Sciences at the University of Manitoba, Canada. She is past president of the History of Economics Society, and her most recent book is Basic Income for Canadians: From the Covid-19 Emergency to Financial Security for All.

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Subject(s):History of Economic Thought; Methodology
Geographic Area(s):General, International, or Comparative
Time Period(s):General or Comparative

Banks and Finance in Modern Macroeconomics: A Historical Perspective

Author(s):Ingrao, Bruna
Sardoni, Claudio
Reviewer(s):Rubin, Goulven

Published by EH.Net (June 2020)

Bruna Ingrao and Claudio Sardoni, Banks and Finance in Modern Macroeconomics: A Historical Perspective. Cheltenham, UK: Edward Elgar, 2019. vii + 281 pp. $145 (hardcover), $31 (ebook), ISBN: 978-1-78643-152-3.

Reviewed for EH.Net by Goulven Rubin, Sciences Économiques, Université Paris 1 (Panthéon-Sorbonne).


Banks and Finance in Modern Macroeconomics by Bruna Ingrao and Claudio Sardoni aims to explain the eviction of banks and finance from the mainstream of macroeconomics before the Great Recession occurred in 2008. The book begins with two chapters on the “giants” of pre-Keynesian revolution macroeconomics. Chapter 2 compares Knut Wicksell and Irving Fisher, two economists who analyzed the role of banks’ supply of credit in order to complete the quantity theory of money. Chapter 3 discusses the contributions of Joseph Schumpeter and Dennis Robertson who both argued that banks’ intervention in the economy is a precondition of innovation and growth. Chapter 4 shows how, in the early 1930s, John Maynard Keynes (1931) and Fisher (1933) analyzed the destabilizing effects of deflation on the financial structure of the economy. Chapter 5 opens the story of how the mainstream excluded banks and finance from its models. It argues that, from 1930 to 1936, Keynes progressively expelled commercial banks from his theoretical apparatus. Chapter 6 and 7 follow the evolution of mainstream Keynesian macroeconomics from 1937 to the 1970s. This mainstream is related first to John Richard Hicks’ “attempt to expound macroeconomic theory in the context of a general equilibrium model” (p. 114) in “Mr Keynes and the Classics” (1937) and in Value and Capital (1939). But the main focus is on the contribution of Don Patinkin and Franco Modigliani. Patinkin erased the financial structure of the economy by assuming away distributive effects and risks of default. A similar simplification of the financial sector is found in Modigliani (1963). In the 1960s, only two lines of research emerged from the wreckage. John Gurley and Edward Shaw (1960) showed the importance of financial intermediaries for the process of growth. James Tobin attempted to incorporate banks and equity markets in the IS-LM framework beginning in the 1960s. Chapter 8 discusses the contribution of Milton Friedman and ends up with the Real Business Cycle literature, which represent the last step in the “disappearance of money.” Chapter 9 surveys the macroeconomic literature spanning the last forty years that considered banks and finance from the perspective of imperfect information. The conclusion of the book explains the authors’ dissatisfaction with the current mainstream. If they credit the post-2008 DSGE literature with a rediscovery of banks and finance, they consider that “the general environment within which the analysis is carried out” (p. 243) remains unfit. The Arrow-Debreu intertemporal general equilibrium model that serves as a benchmark for macroeconomics is not consistent with models incorporating money and imperfections. Ingrao and Sardoni thus end up with a plea for a return to the insights of the giants of the inter-war and to practices less tied to mathematical modelling and more open to the complexities of history, the role of institutions and the reality of behaviors characterized by bounded rationality.

To my knowledge, Ingrao and Sardoni’s book is the first attempt to explore systematically the attention that macroeconomics has paid to banks and finance since its beginnings. It is history of ideas at its best, a practice of history that takes the time to assess the consistency of the theories under scrutiny and to discuss their limits, preparing the reader to “study the present state of economics from the standpoint of past authors” (Kurz, 2006: 468). In this respect it will probably remain a landmark. It provides simultaneously a big picture of the subject and a myriad of subtle case studies to which the above summary cannot do justice. The book is a must-read because of its breadth. But this breadth goes along with a lack of comprehensiveness that blurs the picture and leaves open questions.

Concerning the 1960s and the 1980s, Ingrao and Sardoni’s presentation is too selective. Where they conclude that banks and finance were absent from the mainstream, I would argue that these decades saw a boom of research on the topic. In the 1960s, the book ignores the works of Modigliani and his team to develop the first macroeconometric model at the Federal Reserve Board, the MPS, which featured a detailed finance sector (Acosta and Rubin, 2019). It also ignores the attempts of Karl Brunner and Alan Meltzer to propose an alternative to the IS-LM model with an equity market and financial intermediaries. Concerning the 1980s and 1990s, Ingrao and Sardoni fail to acknowledge the importance and the centrality of the burgeoning literature on credit market imperfections. What we need to explain is why, in spite of the waves of research on banks and finance that marked different periods, those key aspects of the market economy did not become part and parcel of all workhorse models before 2008. Ingrao and Sardoni put all the blame on the Arrow-Debreu model and on the “troubled marriage” of macroeconomics with it. But how exactly did the Walrasian benchmark influence the way banks were defined and modelled or the way they were excluded when it was the case? Was general equilibrium theory really the prime influence here? Matters of tractability or available empirical evidence should also be considered. On this score, I find the discussion too cursory. To take only one example, Ingrao and Sardoni present the version of IS-LM introduced by Hicks (1937) as a Walrasian model. As I have explained elsewhere (Rubin, 2016) following the contributions of Young (1987), Dimand (2007) or Barens (1999), IS-LM originates in the works of Keynes and is not Walrasian. What is lacking is a more careful discussion of the complex interaction between the pure theory of general equilibrium and the impure and simpler macroeconomic models.


Acosta, Juan and Goulven Rubin (2019). “Bank Behavior in Large-scale Macroeconometric Models of the 1960s,” History of Political Economy, 51 (3): 471-491.

Barrens, I. (1999) “From Keynes to Hicks – an Aberration? IS-LM and the Analytical Nucleus of the General Theory,” in P. Howitt et al (editors) Money, Markets and Method: Essays in Honour of Robert W. Clower, Cheltenham: Edward Elgar.

Dimand, Robert (2007) “Keynes, IS-LM, and the Marshallian Tradition,” History of Political Economy, 39 (1): 81-95.

Fisher, Irving (1933). “The Debt Deflation Theory of Great Depressions,” Econometrica, 1(4): 337-357.

Gurley, John G. and Edward S. Shaw (1960). Money in a Theory of Finance, Washington: Brookings Institution.

Hicks, John R. 1937. “Mr Keynes and the Classics: A Suggested Interpretation,” Econometrica 5: 147-59.

Hicks, John R. [1939] 1946. Value and Capital. An Inquiry into Some Fundamental Principles of Economic Theory. Oxford: Clarendon Press.

Keynes, John Maynard (1931[1972]). “The Great Slump of 1930” in Essays in Persuasion, London, Macmillan, vol. 9 of The Collected Writings of John Maynard Keynes.

Keynes, John Maynard (1936). The General Theory of Employment, Interest and Money, vol. 7 of The Collected Writings of John Maynard Keynes: London: Macmillan.

Kurz, Heinz (2006). “Whither the History of Economic Thought? Going Nowhere Rather Slowly?” European Journal of the History of Economic Thought, 13(4): 463-488.

Modigliani, Franco (1963). “The Monetary Mechanism and Its Interaction with Real Phenomena,” Review of Economics and Statistics, 45 (1): 79-107.

Rubin, Goulven (2016) “Oskar Lange and the Walrasian Interpretation of IS-LM,” Journal of the History of Economic Thought, 38 (3): 285-309.

Young, Warren (1987) Interpreting Mr Keynes: The IS-LM Enigma, Cambridge: Polity Press.


Goulven Rubin is Professor at Sorbonne School of Economics, University Paris 1 Panthéon-Sorbonne, and Deputy Head of laboratory PHARE. He is a specialist of the history of macroeconomics and the author of articles on Don Patinkin, John Richard Hicks, Oskar Lange, Franco Modigliani and the IS-LM model.

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Subject(s):History of Economic Thought; Methodology
Geographic Area(s):General, International, or Comparative
Time Period(s):20th Century: Pre WWII
20th Century: WWII and post-WWII

The Elgar Companion to John Maynard Keynes

Editor(s):Dimand, Robert W.
Hagemann, Harald
Reviewer(s):Bateman, Bradley W.

Published by EH.Net (February 2020)

Robert W. Dimand and Harald Hagemann, editors, The Elgar Companion to John Maynard Keynes. Cheltenham, UK: Edward Elgar, 2019. xxi + 648 pp. $250 (hardcover). ISBN: 978-1-84720-008-2.

Reviewed for EH.Net by Bradley W. Bateman, Randolph College.

Rarely does one read a reference work for pleasure. After all, would you take the Encyclopedia Britannica or the New Palgrave to the beach for your holiday? Not likely. And yet, there are reference books that one not only depends on, but enjoys. These might be surveys of the literature such as G.C. Peden’s little gem, Keynes, the Treasury, and British Economic Policy (1988); or they might be traditional multi-volume works like the Dictionary of National Biography. A good reference work can take many forms; but when you find a well-written and authoritative work that can help you in your research, you turn to it regularly and, yes, can even come to enjoy it.

If you have a shelf of books like this, you may want to add to it The Elgar Companion to John Maynard Keynes, edited by Robert Dimand (Brock University) and Harald Hagemann (University of Hohenheim). Dimand and Hagemann, two top historians of economics, have put together a comprehensive, one volume reference book on John Maynard Keynes. The Companion covers everything from Keynes’s parents to New Keynesian macroeconomics. And while there is a fair representation of young scholars among the contributors, the vast majority of the entries are written by well-established experts: John Davis on Ludwig Wittgenstein, Heinz Kurz on Piero Sraffa, Susan Howson on James Meade, and Bruce Littleboy on G.L.S. Shackle. The essays on Keynes’s great trilogy are, likewise, written by experts: Robert Dimand on A Tract on Monetary Reform, Ingo Barens on A Treatise on Money, and Robert Skidelsky on The General Theory.

Four of the best entries in the book are by D.E. Moggridge, the editor of Keynes’s Collected Writings. Moggridge is also an eminent economic historian and he is thus able to set the context authoritatively for Keynes’s work in his four essays: The India Office, World War I, Keynes and British financial policy in the inter-war years, and World War II. Keynes was, of course, deeply entwined in the debates about economic policy during his lifetime and Moggridge beautifully lays out the twists and turns in his career.

The Companion also contains unexpected gems such as Sherry Davis Kasper on “The End of Laissez-Faire” and Robert Dimand’s entry on Mabel Timlin.

The only uneven section of the Companion is the final one, Keynesianism in Various Countries. Many of the essays here are excellent and build on the literature in this field. For instance, the essay on Japan by Masazumi Wakatabe takes the reader far beyond the indeterminate conclusions of Eleanor Hadley (1989). Likewise, Piero Bini’s entry on Italy expands nicely upon the classic essay by Marcello de Cecco (1989). Harald Hagemann’s entry on Germany, Goulven Rubin’s on France, and Robert Dimand’s on Canada are indispensable for scholars who study how Keynes’s ideas were (or were not) spread in various countries. There is new material here for even the most seasoned scholar. These essays are definitive surveys of the literature.

But against these many excellent country studies are two that take a quite different tack: Geoff Tily on the U.K. and Mathew Forstater on the U.S.

In the case of the United States, the standard narrative in the literature lays out how countercyclical fiscal policy first came to be implemented in 1938 without any reference whatsoever to Keynes or The General Theory (Stein 1969, Backhouse and Bateman 2011). Forstater mentions none of this history and chooses instead to focus more on analytical debates about the evolution of the Keynesian model in the U.S. There is nothing wrong with this, per se, and eventually the Keynesian model(s) did become central to policy debate in the United States. But it is an unorthodox take on the history of “Keynesianism” in the U.S. since, in fact, Keynes is not present at the moment when many people assume he was taking center stage.

The question of Keynes’s role in the development of British economic policy is much larger, however, than the question of his role in the States. He was, after all, British and his central role in British economic policy debates shaped not only his own thinking but the course of his nation’s history. There is a huge literature in economic history on the question of Keynes’s influence in British policy making (Peden 1988, Peden 2005) and leading British historians have weighed in on the question of his influence(s) (e.g. Clarke 1988). However, none of that debate is even mentioned in Tily’s entry. Instead, he depends on tables of government expenditure and deficits and argues from these for the centrality of Keynes’s vision to 1930s British policy making (p. 570). His revisionist approach is certainly a legitimate method and Tily highlights several important facts about Keynes’s thinking that are often overlooked, such as Keynes’s preference for low interest rates over fiscal deficits; but as his results about Keynes’s success in the policy sphere differ quite notably from those in a well-established literature, he owes it to his reader to explain the differences. The method of argument is not necessarily wrong, but it is certainly incomplete.

By far, however, most entries in this Companion are authoritative, well-written, and useful. For instance, the pieces on Don Patinkin (Goulven Rubin), Axel Leijonhuvud (Hans-Michael Trautwein), and Hyman Minsky (L. Randall Wray) tell a compelling history of how Keynes’s ideas were extended and reshaped by others. They limn otherwise fading chapters in the history of twentieth century macroeconomics.

One might suppose that the likelihood of wanting to have this excellent reference volume in one’s library would depend on one’s proclivities in political economy: Free marketeers would not want it, while interventionists would. And that may be true for many historians of economics. But regardless of one’s own political economy it is a valuable tool and it should absolutely be in all university libraries where it will serve well the interests of all curious students of the discipline.


Roger Backhouse and Bradley Bateman. 2011. Capitalist Revolutionary: John Maynard Keynes. Cambridge: Harvard University Press.

Peter Clarke. 1989. The Keynesian Revolution in the Making, 1924-1936. Cambridge: Cambridge University Press.

Marcello DeCecco. 1989. “Keynes and Italian Economics,” in Peter Hall, ed. The Political Power of Economic Ideas: Keynesianism across Nations. Princeton: Princeton University Press.

Eleanor Hadley. 1989. “The Diffusion of Keynesian Ideas in Japan,” in Peter Hall, ed. The Political Power of Economic Ideas: Keynesianism across Nations. Princeton: Princeton University Press.

G.C. Peden. 1988. Keynes, the Treasury, and British Economic Policy. London: Macmillan.

G.C. Peden. 2005. Keynes and His Critics: Treasury Responses to the Keynesian Revolution, 1925-1946. London: British Academy.

Herbert Stein. 1969. The Fiscal Revolution. Chicago: University of Chicago Press.

Bradley W. Bateman is Professor of Economics and President of Randolph College. He is the author of Keynes’s Uncertain Revolution (1996) and is most recently a co-editor of Liberalism and the Welfare State: Economists and Arguments for the Welfare State (2017).

Copyright (c) 2020 by EH.Net. All rights reserved. This work may be copied for non-profit educational uses if proper credit is given to the author and the list. For other permission, please contact the EH.Net Administrator ( Published by EH.Net (February 2020). All EH.Net reviews are archived at

Subject(s):History of Economic Thought; Methodology
Geographic Area(s):General, International, or Comparative
Time Period(s):20th Century: Pre WWII
20th Century: WWII and post-WWII

The General Theory and Keynes for the 21st Century

Editor(s):Dow, Sheila
Jespersen, Jesper
Tily, Geoff
Reviewer(s):Dimand, Robert W.

Published by EH.Net (September 2019)

Sheila Dow, Jesper Jespersen and Geoff Tily, editors, The General Theory and Keynes for the 21st Century. Cheltenham, UK: Edward Elgar, 2018. xx + 208 pp. $130 (hardcover), ISBN: 978-1-78643-987-1.

Reviewed for EH.Net by Robert W. Dimand, Department of Economics, Brock University.

In July 2016, a conference at University College London celebrated two eightieth birthdays, those of John Maynard Keynes’s General Theory of Employment, Interest and Money (1936) and of Victoria Chick, professor emerita at University College London and author of a landmark contribution to Post-Keynesian economics, Macroeconomics after Keynes: A Reconsideration of the General Theory (Chick 1983). Sheila Dow of the University of Stirling, Jesper Jespersen of Roskilde University in Denmark, and Geoff Tily, a senior economist at the Trades Union Congress, have edited two volumes of selected papers from the conference — the present volume focused on Keynes’s revolution in macroeconomics and its continuing relevance and a companion volume on contemporary Post-Keynesian contributions to monetary economics and economic methodology (Dow, Jespersen and Tily, eds. 2018). Together these volumes revisit the themes of Victoria Chick’s selected essays (Arestis and Dow, eds., 1992) and an earlier festschrift (Arestis, Desai and Dow, eds., 2002). This volume opens with an eloquent argument “On the Relevance of The General Theory at 80” by Victoria Chick, making a persuasive case for the continued relevance of both the conference’s honorees. Professor Chick also contributed (with A. Freeman) on “The Economics of Enough” to the companion volume.

Robert Skidelsky, Keynes’s biographer, usefully summarizes the difference between Keynes and orthodoxy: “Since orthodox theory … believed that unimpeded markets had an automatic tendency to full employment, the orthodox explanation for the abnormal employment after the war emphasized a blockage, or set of blockages, to the price-adjustment mechanism, the remedy for which was to remove such impediments. Both the political Left and the political Right subscribed to the blockage theory” (p. 31). This blockage theory is still the belief that crucially keeps modern orthodoxy, whether called New Classical or New Keynesian or “new neoclassical synthesis,” from absorbing Keynes’s message.

Perhaps the single most substantial contribution among the fourteen chapters, and the one most likely to be frequently cited on its topic, is by Radhika Desai on “John Maynard Pangloss: Indian Currency and Finance in imperial context.” While acknowledging “elements of truth” in claims that some aspects of Keynes (1913) prefigured his later views on international monetary reform, such claims “privilege the technical over the political … ignoring the fact that the genius of the Bretton Woods proposals which, by contrast, were original to Keynes, lay not in the technicalities of managing money but in Keynes’s vastly changed conception of the purposes for which to do so” (pp. 116-17). While other contributors are hesitant to be unenthusiastic about anything that Keynes wrote at any stage of his career (upholding Keynes not just against his neoclassical critics but against non-neoclassical economists such as Kalecki), Desai (p. 124) states frankly that “While there was intellectual merit in his lucid and informative synthesis [in Keynes 1913], that is all it was.”

Gerhard Michael Ambrosi lucidly examines how the Gibson Paradox of a positive correlation between the interest rate and the price level, described by Keynes (1930) as “one of the most completely established empirical facts within the whole field of quantitative economics,” was entirely absent from Keynes (1936), but I would have liked to see more attention to how correlation between interest rates and the rate of change of prices complicates empirical observation of correlation between interest rates and the price level. Andy Denis, drawing on his 1988 MA dissertation on Marx and Keynes, argues surprisingly, but with some intriguing supporting quotations, that Keynes held a labor theory of value. He also relates Keynes’s decreasing marginal efficiency of capital to Marx’s falling rate of profit due to a rising organic composition of capital, but Keynes’s downward-sloping investment-demand schedule, at a moment of time, does not seem to me close to Marx’s tendency for the profit rate to fall over time.

Maria Cristina Marcuzzo (p. 26) quotes Robert Skidelsky’s important reminder, in his biography of Keynes, that “There are many different ways of telling the story of the General Theory of Employment, Interest and Money, and many different stories to be told about it.” Nonetheless, the contributors mostly share a story about the General Theory that emphasizes unquantifiable uncertainty (without mention of Frank Knight, or of limited knowledge invoked by Hayek and other Austrian economists to reach anti-Keynesian policy conclusions) with other stories viewed, to quote the title of a book by one of the editors, as Keynes Betrayed (Tily [2007] 2010). There is no mention of the Clower-Leijonhufvud story that takes seriously Keynes’s rejection of Say’s Law of Markets, arguing that it (or Walras’s Law) applies only to notional demands, not to quantity-constrained effective demands. The amount of unsold labor, multiplied by the wage rate, should not be counted in the budget constraint for goods, so excess supply of labor need not imply excess demand for anything else. The only mention of Say’s Law (by Heinz Kurz on p. 186) quotes an introductory remark by Keynes (1936) viewing Say’s Law as the proposition that “the economic system was always operating at its full capacity” without going on to Keynes’s later, fuller explanation that under Say’s Law parts of the economy could operate below full capacity provided there was an equal amount of excess demand elsewhere in the economy (so that, according to such classical economists as Ricardo, adjustment would only require shifting resources from industries in excess supply to those in excess demand). There is also no mention of the General Theory’s Chapter 19, on changes in money wages, which has been invoked by Hyman Minsky and James Tobin to argue that faster adjustment of prices and money wages, instead of restoring full employment, would be destabilizing (but Minsky and his financial instability hypothesis appear in a footnote in Heinz Kurz’s chapter on Schumpeter and Keynes, p. 195n).

The contributors have no tolerance for restatements of the General Theory as a system of simultaneous equations (see Marcuzzo on p. 18, quoting Chick). In December 1933, in the concluding lecture of eight lectures on “The Monetary Theory of Production,” Keynes summarized his theory as a system of four equations (see Rymes 1989, Dimand 2007) but discarded that approach in his book, either because it was a tentative formulation that he found wanting or because he followed Marshall’s advice to use mathematics as an aid to inquiry, translate into English and then burn the mathematics. The editors quote one of those four equations in their introduction (p. xv) without mentioning the system of equations (or that Lorie Tarshis’s frustration with that lecture was because Keynes used W for “the state of the news,” having used the same symbol in earlier lectures for the money wage). Marcuzzo (p. 18) observes that “it has been a matter of puzzling disappointment to many of us as to why Keynes did not oppose … the IS-LM distortion.” David Champernowne and W. Brian Reddaway, authors of the first published translations of the General Theory into simultaneous equations, both attended that December 1933 lecture. Keynes had discarded the simultaneous-equations expression of his theory well before publication but might hesitate to publicly repudiate young economists who were reading his book in the light of his own lectures. The equations in the IS-LM articles neglected a crucial feature of Keynes’s lecture: explicit inclusion of the “state of the news” as an argument in each of the consumption, investment and liquidity preference functions.

Overall, these well-written, lively essays will appeal to Post Keynesian economists and more widely to readers interested in Keynes’s General Theory and, together with the companion volume, form a worthy tribute to Victoria Chick’s contributions to economics.


Philip Arestis and Sheila Dow, eds. (1992) On Money, Method and Keynes: Selected Essays by Victoria Chick. London: Macmillan.

Philip Arestis, Meghnad Desai and Sheila Dow, eds. (2002) Money, Macroeconomics and Keynes: Essays in Honour of Victoria Chick, 2 volumes. London: Routledge.

Victoria Chick (1983) Macroeconomics after Keynes: A Reconsideration of the General Theory. Cambridge, MA: MIT Press.

Robert W. Dimand (2007) “Keynes, IS-LM, and the Marshallian Tradition,” History of Political Economy 39(1): 81-95.

Sheila Dow, Jesper Jespersen and Geoff Tily, eds. (2018) Money, Method and Contemporary Post-Keynesian Economics. Cheltenham, UK: Edward Elgar.

John Maynard Keynes (1913) Indian Currency and Finance. London: Macmillan.

John Maynard Keynes (1930) A Treatise on Money, 2 volumes. London: Macmillan.

John Maynard Keynes (1936) The General Theory of Employment, Interest and Money. London: Macmillan.

Thomas K. Rymes, ed. (1989) Keynes’s Lectures 1932-35: Notes of a Representative Student. London: Macmillan.

Geoff Tily ([2007] 2010) Keynes Betrayed: The General Theory, the Rate of Interest and ‘Keynesian’ Economics. Basingstoke, UK: Palgrave Macmillan.

Robert W. Dimand is Professor of Economics at Brock University, St. Catharines, Ontario, Canada, and recently author of Irving Fisher (Palgrave Macmillan, 2019) and editor of The Routledge Handbook of the History of Women’s Economic Thought (with Kirsten Madden, 2018) and The Elgar Companion to John Maynard Keynes (with Harald Hagemann, 2019).

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Subject(s):History of Economic Thought; Methodology
Geographic Area(s):General, International, or Comparative
Time Period(s):20th Century: Pre WWII
20th Century: WWII and post-WWII

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Santos, Joseph M.
Santos-Redondo, Manuel
Saunders, Dawn
Sautet, Frederic
Schachter, Hindy Lauer
Schaefer, Donald F.
Schaps, David M.
Schell, William ,Jr.
Schenk, Catherine
Schenk, Catherine R.
Scherner, Jonas
Schiffman, Daniel A.
Schiltz, Michael
Schneirov, Richard
Schramm, Jeff
Schuler, Kurt
Schulze, Max-Stephan
Schwab, Robert M.
Schwartz, Anna J.
Schweikart, Larry
Schwekendiek, Daniel
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Scott, Peter
Scranton, Philip
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Selgin, George
Sent, Esther-Mirjam
Sexton, Terri A.
Shammas, Carole
Shanor, Charles A.
Sharpe, Pamela
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Shubik, Martin
Shughart, William F.,II
Shy, John
Sicilia, David B.
Sicotte, Richard
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Siklos, Pierre
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Silver, Morris
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Simpson, James
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Sivin, Nathan
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Snowden, Kenneth A.
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Snyder, Jonathan
Sokoloff, Kenneth L.
Sorensen, Todd
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Stabile, Donald R.
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Stanciu Haar, Laura N.
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Steckel, Richard H.
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Steindl, Frank
Stewart, Larry
Stitt, James W.
Stobart, Jon
Subramanian, Lakshmi
Sullivan, Richard J.
Sullivan, Timothy E.
Sumida, Jon
Sundstrom, William A.
Surdam, David
Surdam, David G.
Sutherland, Heather
Suzuki, Masao
Swearingin, Steven D.
Sylla, Richard
Szenberg, Michael
Szostak, Rick
Tabak, Faruk
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Tandy, David
Tarry, Scott E.
Tassava, Christopher
Tauger, Mark B.
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Tilly, Richard
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Tollison, Robert D.
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Tomlinson, Jim
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Toniolo, Gianni
Touwen, Jeroen
Traflet, Janice M.
Trescott, Paul B.
Triner, Gail D.
Troesken, Werner
Tulchin, Joseph S.
Tuttle, Carolyn
Tweedale, Geoffrey
Twomey, Michael J.
Tympas, Aristotle
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Vedder, Richard K.
Velde, François R.
Ventry, Dennis J.
Verdon, Nicola
Ville, Simon
Virts, Nancy
Vitell, Scott J.
Vivenza, Gloria
Volckart, Oliver
Voth, Hans-Joachim
Vries, Peer
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Wahl, Jenny B.
Wale, Judith
Wallis, John J.
Wallis, John Joseph
Wallis, Patrick
Walsh, Lorena S.
Walsh, Margaret
Walvin, James
Wanamaker, Marianne
Ward, Marianne
Wardley, Peter
Waterman, A. M. C.
Weber, Cameron M.
Wegge, Simone A.
Weidenmier, Marc D.
Weiher, Kenneth
Weir, Robert E.
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Ó Gráda, Cormac

Celebrating Irving Fisher: The Legacy of a Great Economist

Author(s):Dimand, Robert W.
Geanakoplos, John
Reviewer(s):Jovanovic, Franck

Published by EH.NET (May 2009)

Robert W. Dimand and John Geanakoplos, editors, Celebrating Irving Fisher: The Legacy of a Great Economist. Malden, MA: Blackwell Publishing, 2005. xv + 456 pp. $40 (cloth), ISBN: 1-4051-3307-4.

Reviewed for EH.NET by Franck Jovanovic, Department of Labour, Economics and Management, TELUQ-UQAM (Universit? du Qu?bec ? Montr?al).

Irving Fisher is undeniably one of the economists who have most influenced the discipline, because, among other things, he counts among the first to have introduced mathematical economics and modern economic theory to the United States. While his excessive optimism during the 1929 stock market crash damaged his reputation as an economist, his contributions to economics covered many areas of the discipline and are still widely influential.

The major challenge of this book, edited by Robert Dimand and John Geanakoplos, therefore is to lead contemporary economists who are not historians of economic thought in a discussion of Fisher?s contributions and the themes he analyzed. The book rises to and meets its challenge. This tour de force highlights the fact that Fisher?s work continues to influence current research in economics and, as James Tobin emphasizes, ?Fisher is cited for substance rather than for history of thought? (p. 20). However, while this book focuses on Irving Fisher, it is important to specify that it is not strictly speaking a work of history of economic thought, but a work of economic analysis on contemporary themes that Fisher analyzed several decades ago.

The book is a new edition of a special issue published in 2005 in the American Journal of Economics and Sociology (Vol. 64, No. 1), which collected revised versions of papers presented at a symposium at Yale in May 1998 to commemorate the fiftieth anniversary of the death of Irving Fisher. In addition, some of these articles had previously been published, such as the three Tobin contributions or the introductory chapter which is an adaptation of Dimand (1997). By way of a dozen themes, this book presents the main contributions of Irving Fisher to the discipline of economics. Each topic is treated in one article and then commented upon by one or several other contributions, totaling twenty-seven contributions.

James Tobin and William Barber each wrote one of the two biographical articles on Fisher. They place the work of Fisher back into the institutional landscape of his time and back into the history of economics. One of their focuses is the importance of mathematical economics and of the empirical in Fisher?s work. It is his interest in mathematics that led Fisher to break with the practices of economists of his time who were influenced by political economy. In addition to these two contributions, the foreword by George Fisher, a grandson of Irving Fisher, the introductory chapter by Dimand and Geanakoplos and two chapters by James Tobin about two publications by Fisher, Elementary Principles of Economics and The Nature of Capital and Income, constitute the chapters whose content is most informative for a reader interested in economic thought.

William Brainard and Herbert Scarf analyze how Fisher studied a general equilibrium model in his thesis, defended in 1891. They use Matlab software to simulate and, consequently, test the hydraulic model (with pumps and levers) developed by Fisher; they also go beyond the analysis of Fisher by simulating the dynamics of such an equilibrium.

Robert Hall examines, in his contribution, Fisher?s proposal to stabilize the price level in an economy. He suggests that Fisher?s work is particularly relevant for countries that have no central bank, such as Chile in the second part of the twentieth century; a suggestion that James Tobin denies in his commentary on this article.

Peter Phillips focuses on two major issues for which Fisher remains known today: the question of the real rate of interest and on what nowadays is called the Fisher effect (i.e., the real interest rate is independent of the nominal interest rate). Phillips tries in particular to overcome the lack of consensus about the time series of the real rate of interest by supposing that they are not stationary and by proposing a semi-parametric model. However, as noted by John Rust in his commentary, like Phillips? contribution, the literature that attempts to test the validity of the Fisher equation ?has employed increasingly sophisticated econometric methods to test an equation that even Fisher admitted had dubious validity? (p. 175).

Robert Dimand comes back to the concept of Corridor of Stability. This concept, which was originally introduced by Leijonhufvud in 1973, states that an economy will adjust itself only if the shocks of demand are sufficiently small. Dimand suggests that this concept already existed in the work of Tobin, Keynes and Fisher. This article, based on the ?debt-deflation? theory, proposed by Fisher in 1933 to explain the importance of the crisis of the 1930s, stresses that, by separating the major shocks from the small shocks, models based on the concept of corridor of stability could explain why the adjustment mechanisms of conventional macroeconomic models are often invalid, especially during severe recessions.

The contribution of Shoven and Whalley on tax policies is based on Fisher?s book Constructive Income Taxation, published in 1942. Among all contributions to this book, this article provides the best actualization of Fisher?s work. It suggests that Fisher?s idea to replace a tax on income alone with a consumption tax (spendings tax), a progressive tax on income less savings, was particularly innovative for its time. This situation could explain the relatively small influence of Fisher?s book.

In his article, John Geanakoplos examines the theory of impatience that allows Fisher to determine the interest rate in a model of an economy with a finite number of periods. This article shows that in some overlapping generations models (OLG) the interest rate at steady state depends on impatience. Thus, it goes beyond an apparent contradiction between the results of OLG by ?proving that in stationary OLG economies with land, the interest rate at the unique steady state does depend on impatience? (p. 257).

Erwin Diewert suggests the rehabilitation of the work of Bennet and Montgomery, two authors who are contemporaries to Fisher. They developed a theory of index numbers, which is another question for which economists and statisticians still recognize Fisher?s contributions today. By this way, this article aims to offer an alternative approach to that proposed by Fisher.

The last two articles deal with considerations on the health of populations. William Nordhaus suggests that the measurement of economic welfare might be improved by including the evolution of the health of populations. In a commentary paper to Nordhaus, Robert Dimand makes links between this article and Fisher?s work. Victor Fuchs uses some recommendations and positions taken by Fisher during his life to extrapolate on how he might have assessed the evolution of health public policies taking place in the United States during the twentieth century.

This book could interest readers familiar with Fisher?s work who want to discover the current economic work on topics studied by Fisher, topics that are still central in economics. Readers who are not familiar with Fisher?s work will be probably more confused because, as such, there is no presentation of Fisher?s work. In fact, the contributions update and test some models, assumptions or findings by this economist. It is regrettable that the book, whose title suggests that it is dedicated to the work of Irving Fisher, neither offers an exhaustive presentation of the work of the author nor an analysis of his contributions. Moreover, some contributions of this book only hold a tenuous link with the work of Fisher: they seize questions that Fisher dealt with, but they do not make any direct link with the writings of Fisher. Similarly, it is unclear if the notations are those of Fisher or those of the authors; therefore it is not always possible to separate the work of interpretation done in this book from the work of Fisher himself.


R. Dimand, 1997. ?Irving Fisher and Modern Macroeconomics,? American Economic Review, 87: 442?444.

A. Leijonhufvud, (1973) 1981. Information and Coordination: Essays in Macroeconomic Theory, New York: Oxford University Press.

J. Tobin, 1987. ?Irving Fisher,? in J. Eatwell, M. Milgate and P. Newman, editors, The New Palgrave: A Dictionary of Economics, vol. 2: 369?76.

Franck Jovanovic is Professor of economics at TELUQ-UQAM (Universit? du Qu?bec a Montr?al). He is working on the history of financial economics. His recent publications include the edition of a special issue of Revue d?Histoire des Sciences Humaines on the history of financial economics; ?The Construction of the Canonical History of Financial Economics,? published in History of Political Economy (40. 3: 213-42); and Pioneers of Financial Economics: Twentieth-Century Contributions, volume 2, edited with Geoffrey Poitras, Cheltenham: Edward Elgar.

Subject(s):Macroeconomics and Fluctuations
Geographic Area(s):North America
Time Period(s):20th Century: WWII and post-WWII

The Development of Monetary Economics: A Modern Perspective on Monetary Controversies

Author(s):O'Brien, D. P.
Reviewer(s):Dimand, Robert W.

Published by EH.NET (June 2008)

D. P. O’Brien, The Development of Monetary Economics: A Modern Perspective on Monetary Controversies. Cheltenham, UK: Edward Elgar, 2007. xv + 265 pp. $115 (hardcover), ISBN: 978-1-84720-260-4.

Reviewed for EH.Net by Robert W. Dimand, Department of Economics, Brock University.

The eminent historian of classical political economy Denis O’Brien, Professor Emeritus of Economics at the University of Durham, has gathered together his work on monetary economics from Jean Bodin in the sixteenth century to Thomas Joplin and Walter Bagehot in the nineteenth century. Some of the chapters have been previously published, while others are new. All have been written since his Thomas Joplin and Classical Economics (1993) (one chapter of which is reprinted here) and since his earlier collection, Methodology, Money and the Firm (2 volumes, 1994). A companion volume collects his writings in the same period on non-monetary aspects of classical economics. Seven of the nine chapters (not counting the five-page introduction) have been published from 1993 to 2003, but the book is a unified, coherent historical analysis of the classical theory of monetary policy and its roots, parts of which were published as the project progressed, rather than an ex post assemblage of disparate essays. Any scholar interested in the Currency School/Banking School debate or in the emergence of the concept of a lender of last resort will need, and want, to read this material. Any such scholar will, indeed, have already read parts of the book that have appeared in prominent and easily accessible places, such as the three chapters published in History of Political Economy (on Jean Bodin’s quantity-theoretic analysis of inflation in 2000, on monetary base control and the 1844 Bank Charter Act in 1997, and on the concept of lender of last resort in 2003). An essay on Bagehot and stabilization appeared in the Scottish Journal of Political Economy in 2001, and two chapters, on the Banking School/Currency School controversy and on the stability analysis of those two schools, are reprinted from Blaug et al., The Quantity Theory of Money from Locke to Keynes and Friedman (1995). But the two new chapters, on John Law’s Money and Trade (1705) and on John Locke’s debate with his critics about the rate of interest (the two chapters being linked by Law’s borrowing of Locke’s argument that a plentiful supply of money encourages economic growth), are also necessary reading for anyone studying that era of monetary economics, and it is well worth rereading the other essays together as components of a connected historical narrative and analysis. O’Brien argues that a close look at the critiques of Locke by Joseph Massie and David Hume, and at their empirical claims about how the interest rate is related to the profit rate, reveals that historians of economics have been too generous to Massie and Hume as critics of Locke, and too harsh on Locke. Given the extent and accessibility of the reprinted chapters, and given the price of academic books, the temptation is to persuade one’s university library to order the book, rather than buying a personal copy. Apart from the chapter on Jean Bodin, in which the Salamanca School is also discussed, the story is exclusively British (and David Hume appears primarily as a critic of Locke, rather than as a pioneering theorist of international monetary equilibrium).

As O’Brien’s readers have come to expect, these essays are erudite and clearly argued, and include rational reconstruction of earlier theorizing as formal models. Chapter 9, the one chapter from O’Brien (1993) reprinted in the present volume, is “Joplin’s Model: A Formal Statement.” (O’Brien discerns in Joplin a complex model that anticipated the neo-Keynesian synthesis of income-expenditure and monetary models.) Chapter 3 includes “A Formal Statement of Law’s Model.” Chapter 8, on Bagehot, includes “A Formal Treatment of Stability” (showing that the model is stable when Bagehot’s prescription is followed for the Bank Rate, emphasized by Bagehot as the core policy tool). Chapter 10 is a formal treatment of the stability analysis of the Banking and Currency Schools with an inbuilt cycle and with the money supply (rather than the Bank Rate) as the policy variable. As O’Brien (p. 5) summarizes the findings of Chapter 10, “Employing a formal treatment, it proves possible to demonstrate that the prescriptions of the Currency School would, had they targeted the right money supply, have been stabilizing, while those of the Banking School left the price level indeterminate and magnified fluctuations. At best, and only after filling a major gap in the theoretical position of the Banking School, any equilibrium would only be a saddle point.” The clause about targeting the right money supply is crucial. O’Brien presents careful regression analysis in Chapter 6 to argue that the British price level was controlled by the country bank note issue rather than by the Bank of England note issue, and that the Bank of England note issue did not act as a monetary base controlling the country bank note issue, so that Thomas Joplin (in many ways the hero of O’Brien’s story) was correct that the Bank Charter Act of 1844 targeted the wrong money supply. The Currency School’s advocacy of counter-cyclical control of the money supply by the Bank of England to stabilize the price level and the balance of payments had a sounder theoretical basis than the Banking School’s leaning to a more passive money supply, but, as a matter of fact rather than theory, the Bank of England did not control the British money supply.

Not only was Joplin insightful in his critique of the Bank Act of 1844, but, according to O’Brien, Joplin’s analysis of the liquidity crisis of 1825 set out the case for a lender of last resort that is usually attributed to Walter Bagehot (with earlier partial discussions by Sir Francis Baring and Henry Thornton). Joplin stressed the importance of a central reserve that would enable the lender of last resort to lend freely at a penalty rate during a liquidity crisis (contrast the actions of the Federal Reserve since August 2007, expanding credit during a liquidity squeeze but also repeatedly lowering its target for the overnight inter-bank rate) and argued that lending by the lender of last resort during a liquidity crisis would not raise the price level because of the increase in demand for precautionary balances. O’Brien (pp. 163-66) notes that Joplin’s 1825 analysis was immediately taken by Vincent Stuckey, of the banking firm Stuckey and Bagehot, and speculates that, through Stuckey, Joplin’s 1825 article influenced Stuckey’s nephew Walter Bagehot.

O’Brien’s blend of careful reading, historical context, representation by formal models, and cliometrics is skilful and lucid. These essays are of lasting value and have established O’Brien alongside David Glasner, Thomas Humphrey, David Laidler, Anna Schwartz, and Neil Skaggs as one of the foremost authorities on British classical monetary economics. This has been one of the most studied areas of the history of economic thought, yet, as O’Brien demonstrates, there are still new and important things to say about the subject.


Mark Blaug, Walter Eltis, D.P. O’Brien, Don Patinkin, Robert Skidelsky, and G. Wood, 1995. The Quantity Theory of Money from Locke to Keynes and Friedman. Aldershot, UK: Edward Elgar.

John Law. 1705. Money and Trade Considered with a Proposal for Supplying the Nation with Money. Edinburgh: Andrew Anderson. Reprinted New York: A. M. Kelley, 1966.

D.P. O’Brien, 1993. Thomas Joplin and Classical Macroeconomics: A Reappraisal of Classical Monetary Thought. Aldershot, UK: Edward Elgar.

D.P. O’Brien, 1994. Methodology, Money and the Firm, 2 volumes. Aldershot, UK: Edward Elgar.

Robert W. Dimand is Professor of Economics, Brock University, St. Catharines, Ontario, Canada. Email: He recently published on “Macroeconomics, Origins and History of” and “Monetary Economics, History of,” in The New Palgrave Dictionary of Economics, second edition (2008).

Subject(s):History of Economic Thought; Methodology
Geographic Area(s):Europe
Time Period(s):19th Century

Pioneers of Financial Economics: Volume 2, Twentieth-Century Contributions

Author(s):Poitras, Geoffrey
Reviewer(s):DeGennaro, Ramon P.

Published by EH.NET (October 2007)

Geoffrey Poitras, editor, Pioneers of Financial Economics: Volume 2, Twentieth-Century Contributions. Edward Elgar: Cheltenham, UK, 2007. x + 244 pp. $130 (cloth), ISBN: 978-1-84542-382-7.

Reviewed for EH.NET by Ramon P. DeGennaro, Department of Finance, University of Tennessee, Knoxville.

Pioneers of Financial Economics: Volume 2 is arranged in three parts. Part I is titled “Early Contributions.” My favorite chapter in this section is Robert W. Dimand’s discussion of Irving Fisher and his students. This is partly because the chapter is so well done, partly because Fisher did so much, and partly because Fisher could be so audacious at times. Part II is titled “The Modern Finance Revolution: The Inside Perspective.” If forced to choose among the five fine articles in this section, Hal Varian’s article about Harry Markowitz, Merton Miller and William Sharpe would be a narrow winner. Varian is simply a gifted writer who successfully translates these Nobel laureates’ work into concise, clear language, using a graph and only a few equations. Part III is titled “Alternative Perspectives on the Revolution.” Here, my favorite is Donald MacKenzie’s contribution, “The Emergence of Option Pricing Theory.” This is entertaining because it conveys the process of discovery and the intellectual struggles that Black, Scholes and Merton endured. Getting from the idea to the famous Black-Scholes and Merton formula wasn’t easy, even for them.

I enjoyed the articles and recommend the book particularly to economic historians and sociologists interested in the evolution of ideas. Prospective readers should be aware that this book has an agenda, though. This agenda becomes clear as early as the introduction, which throws down the gauntlet between what it calls “traditional finance” (it sometimes uses “old finance”) and “new finance.” The dividing line is approximately Markowitz’s work or the Modigliani and Miller papers. There is no doubt which side the book favors and to its credit it makes no bones about it. It absolutely favors traditional finance. Part II, which in the context of this book champions new finance, contains four reprints and only one original contribution. The articles in the other parts of the book are new. This cannot be due to chance, especially given a revealing sentence about the reprints in the introduction: “Each of these chapters is an excellent example of the narrow interpretations of the intellectual history of financial economics and inflated claims for scientific significance common in modern financial economics” (12). Or this: “A key objective of Part II is to explore the process of prestige creation and reinforcement in modern financial economics” (8).

In short, a key reason for including the five chapters dedicated to new finance is to assert that those who write tributes to Nobel laureates within the field are making inflated claims, and to show that the prestige which the new finance enjoys is allegedly built on a house of cards. Readers will ask why, from among the tens of thousands of articles from which to choose, the book includes articles that it believes are deeply flawed, if not to grind the axe in a particular way?

If an attempt to frame Pioneers of Financial Economics as a contest between traditional finance and new finance must be made, and if a winner must be chosen between them, readers would find the result to be more credible if the playing field were not so obviously tilted. For example, the book makes no effort to conceal its distaste for modern portfolio theory. By way of support it correctly notes that many market professionals still perform security analysis, which the book treats as the purview of traditional finance. But it rarely if ever mentions mutual funds, which are a trillion-dollar counterexample highlighting the success of portfolio theory. The many studies showing that indexing beats active management, far more often than not, are apparently too trivial to mention. The book claims that, “One of the oddities of modern financial economics has been the success of this movement in securing the academic high ground in the finance curriculum of business schools despite proving relatively sterile in practical implications.” Such statements likely will persuade very few readers. They see that options and futures trading are booming, along with sophisticated risk management techniques. Banks and corporations routinely hedge using tools built on modern finance. Businesses design executive compensation contracts to include securities to align their incentives with other investors. Regulators invoke capital structure theory to require banks to issue securities designed to provide early-warning signals of financial distress. Investors hold mutual funds. Exchange-traded funds are growing rapidly. If the book wants to make a convincing case in a battle between old and new, it would do better to show that these innovations have their roots in traditional finance rather than simply to ignore them.

The choice of a post-Keynesian economist to write the final chapter is consistent with the book’s slant. I do not believe that I am alone in thinking it strange to select a post-Keynesian economist to write the final chapter of a book on the pioneers of financial economics. This in no way minimizes or denigrates Keynes’s contributions to the field of economics. They speak for themselves. The choice merely seems … strange.

Given the agenda, a different title would work better. In Defense of Traditional Finance would be just fine. Search engines would find the book for readers seeking such material, and casual library or bookstore browsers would know immediately what to expect when they pick up the book.

While I would have preferred that Pioneers of Financial Economics had chosen a more balanced approach to the perceived battle between old and new, readers would have been still better served not to cast it as a contest at all. This battle is over and everyone knows who won. The proponents of old finance are sure that they won, the proponents of new finance are sure that they won, and just about everyone is satisfied with this outcome. In truth, most of us have no time to take sides in battles outside of our specialty. Perhaps we would all benefit by borrowing from Kian-Guan Lim, who ends his fine chapter on the evidence in support of and against the Efficient Market Hypothesis by writing, “… we could also move on.”

Ramon P. DeGennaro is the SunTrust Professor of Finance at the University of Tennessee. He also conducts research as a Visiting Scholar at the Federal Reserve Bank of Atlanta. He has published more than thirty-five refereed articles on financial market volatility, the term structure of interest rates, financial institutions, and investments. His other publications include research reports, book chapters and book reviews. The opinions in this article are his own and not necessarily those of the Federal Reserve Bank of Atlanta or the Federal Reserve System.

Subject(s):History of Economic Thought; Methodology
Geographic Area(s):General, International, or Comparative
Time Period(s):20th Century: WWII and post-WWII