Nicholas Kaldor and Mainstream Economics: Confrontation or Convergence.

• Author: Rima, Ingrid H.

The collected essay format for examining broad themes relating to the life work of leading economists has become increasingly popular in recent years. The success of such an undertaking depends on the effectiveness with which editors conceive their projects, and communicate their visions to the contributing authors. Their other specific task is to establish relevant linkages via their arrangement of the volumes' parts and chapters and in their editorial introduction. Edward J. Nell is a particularly skillful editor, who, together with his colleague Willi Semmler, has produced a collection of essays, some jointly authored by 34 economists, most of whom are critics of mainstream economics intellectually devoted to the daunting task of trying to articulate alternatives to it. In their totality they are very effective in the further development of Kaldorian themes using post-Keynesian or classical-Marxian approaches. The notable exceptions are Edmund Phelps, Paul A. Samuelson and James Tobin, who, despite their links to neoclassicism, offer enlightened insights into Kaldor's work.

The "Editors' Introduction" is especially well conceived; it performs the dual task of focusing on Kaldor's alternative theories, while literally taking the reader by the hand not only through the maze of criticisms which non-neoclassical thinkers have directed at the mainstream, but also in directing them toward alternative intellectual paths. The editors set out to rebut the oft-heard criticisms that non-neoclassical theories are either wrong, directed at unnecessary or irrelevant questions or "not economics." They thus set the stage for identifying criteria for qualifying analyses as economics. Specifically, Nell and Semmler maintain that neoclassical analysis is a particular way of satisfying a general format [p. 3] which 1) specifies a setting or structure within which (market) behavior takes place; 2) identifies initial conditions as the starting point of the analysis; 3) articulates a model(s) of behavior; 4) establishes the conditions required for solution; and 5) specifics the dynamic paths of the model(s). Thus the possibility of altogether different specifications is the basis for competing explanations to economic questions.

For example, unlike the neoclassical approach, the setting of Kaldorian/post-Keynesian approaches distinguishes between wage and profit receivers as classes of persons; firms are typically conceived to be oligopolistic businesses that produce with given technologies. The operative behavioral assumption is that household and business spending is a matter of tradition, custom and institutional routine instead of being dictated by a maximizing objective. The objective of the analysis is to determine the equilibrium in spending that is consistent with the prevailing wage and profit shares. The resulting equilibrium, which is normally a demand equilibrium, is totally free of the market clearing requirement of traditional models.

Classical and Classical-Marxian approaches also take social classes and technology as their setting and identify the labor force (or its growth) and the stock of capital as initial conditions for specifying the economy's "reproduction" requirement. These approaches also assume that households follow customary spending rules and that there are institutionally specific forms of maximizing behavior. The analytical objective is two fold: to determine what static equilibrium prices and profit and wage rates are possible; it is also to determine what growth rates, relative industry sizes and consumption levels are consistent with the model's "reproduction" conditions. As in the Kaldor/post-Keynesian analyses, supply constraints are not part of the initial conditions and market clearing is not an equilibrium characteristic. Initial factor endowments do play a role in some versions and a form of maximizing behavior may be invoked to generate either a comparative static or steady state dynamic result. Both Kaldorian and Classical/Marxist approaches are capable of generating cyclical outcomes or bounded fluctuations. Though these approaches clearly differ from neoclassicism, both are consistent with the general format the editors specify as requisites for economic analyses. Kaldor's method was thus to develop the theory needed to address particular issues using the "stylized facts" of each case and such rules of the game as are needed to generate an analysis that is representative of the system operating as a dynamically interconnected whole. The analysis does yield "general principles," but these relate to a specific kind of economic system, such as industrial capitalism. The great weakness of the neoclassicists, the editors opine, is that they generally find it necessary to make assumptions that lead to minimally useful or, even worse, false conclusions.

The anthology's introductory essay "Nicholas Kaldor 1908-86," by A. P. Thirlwall, which comprises substantially the whole of Part I, offers an especially appropriate prelude to the selections that follow. The principal concern of these essays is to commemorate and extend Kaldor's rethinking of growth and distribution theory along non-neoclassical lines, which helped to spark the neoclassical-neoKeynesian capital controversies between Cambridge (England) and Cambridge (Massachusetts). Because this is an area of economic theorizing which is not widely studied by American economists, a brief account of the centerpiece of Kaldor's theory of distribution is a useful preliminary to the essays that follow Thirlwall's opening...