Monthly Archives: January 2022

Roy Harrod On The Balance-Of-Payments Constraint

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I am always interested on how close economists come on a full model of how the world works. And so I found this passage from John McCombie in his article Harrod, Economic Growth And International Trade on Roy Harrod in the book Economic Dynamics, Trade And Growth: Essays On Harrodian Themes interesting:

Harrod, through the development of his open economy model, implicitly saw the fallacy of Keynes’s argument. On the basis of a model with no government sector, Harrod (1948, p. 103) noted that ‘the balance of trade depends upon whether the ratio of the volume of exports to the volume of home investment is greater or less than the ratio of the propensity to import (viz. imports represented as a fraction of income) to the propensity to save’. But there was no reason why, at full employment, these ratios should be equal and why the balance of payments should be in equilibrium. If there was initially a balance-of-payments disequilibrium, and it was impossible to finance perpetually the deficit, there would be a financial crisis and ‘investment would come tumbling down’. It is here that we perhaps have the first reference to the possibility of a balance-of-payments constraint, where conditions in the external markets dictate the level of domestic activity. Harrod also appreciated early on the deflationary bias which the balance-of-payments imposed on the international system, with the burden of adjustment falling on the deficit countries and where there was little to force a surplus country to expand its level of economic activity.

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References

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Harrod, R.F. (1948), Towards a Dynamic Economics, London: Macmillan.

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Marc Lavoie’s New Book — Post-Keynesian Growth Theory: Selected Essays

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Marc Lavoie’s has a new book Post-Keynesian Growth Theory: Selected Essays with a collection of his essays on some of his important papers on growth. The cover features Michal Kalecki, Nicholas Kaldor, Joan Robinson and Luigi Pasinetti. Will be out soon.

In the same series, there’s also a book from 2020 Post-Keynesian Monetary Theory: Selected Essays. You can preview the introduction to this book on Google Books. So even if you’ve read all the papers, don’t miss the detailed introduction which gives an idea of his thoughts through the years. It also has a foreword by Louis-Philippe Rochon. And an interview with him on that book.

There are also two more separate videos you might be interested: Introduction To Post-Keynesian Economics For The Post-COVID Era and The Importance Of Michal Kalecki.

Biographies Of Nicholas Kaldor

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There’s a new short biography of Nicholas Kaldor titled Nicholas Kaldor’s Economics: A Review by Luis Gomes. The author reminds of Kaldor’s proposals for the world as a whole, something which is highly needed today more than ever (and something I regularly refer to):

In 1984 Nicholas Kaldor gave a series of lectures in Italy, which become a posthumous book in 1996. These lectures [“Causes of Growth and Stagnation in the World Economy” … ] presented an integrated set of policies with which to tackle economic problems. In this series of lectures, Nicholas Kaldor commented on the four basic principles for good macroeconomic administration: (i) it is needed a coordinated fiscal action which include a set of targets for a balanced balance of payments and a full employment budget; (ii) the interest rate should be the lowest possible: (iii) it is important to prevent the volatility of international commodity prices (via stocks and via an international currency) (iv) it is necessary to overcome chronic inflation trends under full employment, due to the system of adjusting wages via sectoral collective agreement …

There are many biographies (from short articles to full papers) and I thought I should list them:

  1. A short article titled Portrait: Nicholas Kaldor by Luigi Pasinetti, published in 1981 published in Challenge.
  2. Luigi Pasinetti’s Nicholas Kaldor: A Few Personal Notes, published in 1983.
  3. Anthony Thirlwall’s 1987 book titled Nicholas Kaldor,
  4. Anthony Thirlwall’s 1987 article Nicholas Kaldor 1908–1986. Republished 1991 in the book Nicholas Kaldor And Mainstream Economics Confrontation Or Convergence? and again in 2015 in the book Essays On Keynesian And Kaldorian Economics.
  5. Geoffrey Harcourt’s article Nicholas Kaldor, 12 May 1908–30 September 1986 published in 1988 in Economica and republished in the book Post-Keynesian Essays In Biography by Harcourt himself.
  6. Ferdinando Targetti’s 1992 book Nicholas Kaldor: The Economics And Politics Of Capitalism As A Dynamic System.
  7. Marjorie Shepherd Turner’s book Nicholas Kaldor And The Real World published in 1993.
  8. Anthony Thirwall’s section Nicholas Kaldor, A Biography in Nicholas Kaldor’s book Causes Of Growth And Stagnation In The World Economy published posthumously in 1996.
  9. Adrian Wood‘s entry Kaldor, Nicholas (1908–1986) in The New Palgrave Dictionary Of Economics published in 2008.
  10. John E. King’s book Nicholas Kaldor published in 2008.
  11. Luigi Pasinetti’s chapter Nicholas Kaldor (1908–1986): Growth, Income Distribution, Technical Progress in his book Keynes And The Cambridge Keynesians: A ‘Revolution in Economics’ To Be Accomplished, published in 2009.
  12. John E. King’s chapter Nicholas Kaldor (1908–1986) in the book Handbook On The History Of Economic Analysis Volume I published in 2016.
  13. John E. King’s chapter Nicholas Kaldor (1908–1986) in The Palgrave Companion To Cambridge Economics published in 2017. (h/t Marc Lavoie).

Apart from the above, following are useful to know about Nicholas Kaldor, although can’t be described as biography:

  • Introduction by Ferdinand Targetti and Anthony Thirlwall to the book The Essential Kaldor, a collection of papers of Kaldor, published in 1989.

Have I missed any?

Gunnar Myrdal And Circular, Cumulative Causation

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The practical triumph of the free trade doctrine is the fact that even the severest critics of the general policy line of noninterference usually find it difficult to free themselves from its fascination.

– Gunnar Myrdal

I was reading this book The Dynamics Of Poverty: Circular, Cumulative Causation, Value Judgments, Institutions And Social Engineering In The World Of Gunnar Myrdal by Mats Lundahl, which is a sort of an intellectual biography published in 2021.

Gunnar Myrdal was the first to apply his own idea of circular, cumulative causation to international trade and success and failure of nations. Roughly it means: success breeds further success and failure begets more failure, in the words of Nicholas Kaldor.

Although the idea was original to Myrdal, the detailed mechanism was first formulated by Nicholas Kaldor in 1970 in his paper The Case For Regional Policies.

According to Lundahl’s book Myrdal’s genius can be found in the following works (page 82):

Gunnar Myrdal also spent much of the 1950s working on problems related to poverty and inequality on the international level and on the relation between polarization between regions within a country and polarization between countries. This resulted in a ‘trilogy’: An International Economy, Development and Under-Development: A Note on the Mechanism of National and International Economic Inequality, usually referred to as his Cairo lectures, and Economic Theory and Under-Developed Regions (or Rich Lands and Poor).18

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18Myrdal (1956a, 1956b, 1957a, 1957b).

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References

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  • Myrdal, Gunnar (1956a), An International Economy: Problems and Prospects. New York: Harper & Brothers Publishers
  • Myrdal, Gunnar (1956b), Development and Under-Development: A Note on the Mechanism of National and International Economic Inequality. Cairo: National Bank of Egypt
  • Myrdal, Gunnar (1957a), Economic Theory and Under-Developed Regions. London: Gerald Duckworth & Co
  • Myrdal, Gunnar (1957b), Rich Lands and Poor: The Road to World Prosperity. New York: Harper & Brothers

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You can find the first and the third/fourth book (which are the same but just different names in the UK and the US) at Internet Archive in this link. “Cairo Lectures”, seems difficult to obtain, but the important part Trade As A Mechanism Of International Equality can be found in Gerald M. Meier’s book Leading Issues In Economic Development.