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Background of the Employment Act II: Keynesian Economics

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Macroeconomic Policy and a Living Wage

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Abstract

This chapter will consider Keynes’ influence on economic thinking in the USA from the publication of The General Theory of Employment, Interest and Money in 1936 to the end of the 1940s, with a focus on fiscal policy and wages. Its goals are to pinpoint the components of Keynesian economics that formed a background to the Employment Act and to compare Keynesian economics with the political economy of a living wage to examine the feasibility of bundling them together into the hybrid system of redistributive economics, as happened in the USA. To do so, I will first review what Keynes said in that classic book and set forth the initial response his ideas found among economists in the USA during the late 1930s and the 1940s.

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Notes

  1. 1.

    Elliot and Clark, 1987; Lawlor, 2006, p. 80; Pressman, 1991.

  2. 2.

    Chick, 1983; Laidler, 1999; Backhouse and Bateman, 2011.

  3. 3.

    Keynes, 1965 [1936], pp. 27–28. Some of the material on Keynes in this chapter was adapted from Stabile and Kozak, 2012, pp. 214–226.

  4. 4.

    Laidler, 1999, p. 17; Dickman, 1987, pp. 104–108.

  5. 5.

    Foster and Catchings, 1924, 1925 and 1928.

  6. 6.

    Laidler, 1999, p. 207n, also makes this connection.

  7. 7.

    Keynes, 1965 [1936], pp. 113–122, citing Kahn, 1931.

  8. 8.

    Keynes, 1965 [1936], p. 372.

  9. 9.

    Keynes, 1965 [1936], pp. 95 and 262.

  10. 10.

    de Vroey, 2016, p. 22.

  11. 11.

    Keynes, 1965 [1936], pp. 260–262.

  12. 12.

    Keynes, 1965 [1936], pp. 265–266.

  13. 13.

    Slichter, 1934, p. 114.

  14. 14.

    Keynes, 1965 [1936], pp. 269–270.

  15. 15.

    Keynes, 1965 [1936], p. 271.

  16. 16.

    Keynes, 1965 [1936], p. 245.

  17. 17.

    Marglin, 1990, p. 6.

  18. 18.

    Roosevelt, 1933.

  19. 19.

    Quoted in Hartwig, 2017, p. 264.

  20. 20.

    Hartwig, 2017, pp. 259–262.

  21. 21.

    Hartwig, 2017, p. 265.

  22. 22.

    The classic critique of the marginal product theory by an institutional economist is Veblen, 1908, pp. 147–195.

  23. 23.

    Rutherford, 2011.

  24. 24.

    Ryan, 1906, p. 244.

  25. 25.

    Berendt, 2007, p. 462.

  26. 26.

    Berendt, 2007, p. 470.

  27. 27.

    Keynes, 1965 [1936], p. 267. For an explanation of this argument, see Laidler, 1999, pp. 9, 22, 262, 270n, 280, 306–307 and 332.

  28. 28.

    Stabile, 2016, pp. 8–24.

  29. 29.

    Lawlor, 2006, p. 86.

  30. 30.

    Hansen, 1964 [1951], p. 519.

  31. 31.

    Mill, 1969 [1909], p. 937. For a discussion of Mill’s theory of collective bargaining, see Dickman, 1987, pp. 142–148.

  32. 32.

    Clark, 1968 [1907], p. 475.

  33. 33.

    Keynes, 1932, pp. 324 and 343.

  34. 34.

    Klein, 1961 [1947], p. 4.

  35. 35.

    Ryan, 1906, p. 261.

  36. 36.

    Lawlor, 2006, p. 83; Rosen, 2005, pp. 746 and 1610.

  37. 37.

    Crouse, 2018, p. 504. See also Backhouse and Bateman, 2011, p. 15.

  38. 38.

    Keynes, 1965 [1936], p. 95.

  39. 39.

    Keynes, 1965 [1936], p. 98.

  40. 40.

    Keynes, 1965 [1936], p. 106.

  41. 41.

    Keynes, 1965 [1936], p. 128.

  42. 42.

    Keynes, 1965 [1936], pp. 125–128.

  43. 43.

    Klein, 1961 [1947], p. 36, citing Kahn, 1931.

  44. 44.

    Veblen, 1935 [1904], p. 198.

  45. 45.

    Mitchell, 1970 [1913], p. 588.

  46. 46.

    Mitchell, 1922, pp. 26–27.

  47. 47.

    Hansen, 1964 [1951], pp. 510 and 520.

  48. 48.

    Backhouse and Bateman, 2011, p. 158.

  49. 49.

    Keynes, 1965 [1936], p. 378.

  50. 50.

    Keynes, 1965 [1936], pp. 378–379.

  51. 51.

    Lindert and Williamson, 2016, pp. 213.

  52. 52.

    Horwitz, 2016, p. 111.

  53. 53.

    Keynes, 1965 [1936], p. 383.

  54. 54.

    Slichter, 1934, p. 187.

  55. 55.

    Kaufman, 2018, pp. 143–145.

  56. 56.

    Kim, 2009, pp. 229–231.

  57. 57.

    Mann, 2017, pp. 331 and 5527. For other examples of Keynes’ hopeful expectations for this technocracy, see also pp. 1154, 4114, 4189, 4377, 5479 and 5593.

  58. 58.

    Crouse, 2018, pp. 495–496.

  59. 59.

    Simpson, 2016, p. 201.

  60. 60.

    The material on Slichter and Clark in the next two sections was adapted from Stabile and Kozak, 2012, pp. 223–224 and 225–231.

  61. 61.

    Slichter, 1936, p. 196.

  62. 62.

    Slichter, 1936, pp. 196–198.

  63. 63.

    Slichter, 1936, p. 207.

  64. 64.

    Slichter, 1936, p. 208.

  65. 65.

    Slichter, 1936, p. 208. Slichter had previously (Slichter, 1934, p. 150) argued for an unemployment reserve before the passage of the SSA and adjusted his argument once unemployment insurance had been legislated.

  66. 66.

    Stabile, 2016, pp. 69–73 and 145.

  67. 67.

    Clark, 1939, p. 194.

  68. 68.

    Clark, 1939, p. 196.

  69. 69.

    Stabile, 2016, pp. 173–176 and 181–184.

  70. 70.

    Klein, 1961 [1947], p. 169.

  71. 71.

    Gordon, 2016, pp. 10257–10851.

  72. 72.

    Hansen, 1936. At this time, Hansen was greatly influenced by Joseph Schumpeter. See Laidler, 1999, p. 20.

  73. 73.

    Hansen, 1947, pp. 4–5.

  74. 74.

    Hansen, 1947, p. 13.

  75. 75.

    Hansen, 1947, p. 14.

  76. 76.

    Hansen, 1947, p. 16.

  77. 77.

    Hansen, 1947, pp. 46–48.

  78. 78.

    Hansen, 1947, p. 50.

  79. 79.

    Hansen, 1947, p. 154.

  80. 80.

    Hansen, 1947, pp. 157–158.

  81. 81.

    Samuelson, 1948, p. 15.

  82. 82.

    Samuelson, 1948, p. 64.

  83. 83.

    Samuelson, 1948, p. 70.

  84. 84.

    Samuelson, 1948, p. 87.

  85. 85.

    Samuelson, 1948, pp. 409–410.

  86. 86.

    Samuelson, 1948, pp. 410–434.

  87. 87.

    Samuelson, 1948, p. 435.

  88. 88.

    Samuelson, 1948, p. 88.

  89. 89.

    Samuelson, 1948, p. 531.

  90. 90.

    Phelps, 1948, p. 584.

  91. 91.

    Phelps, 1948, p. 585.

  92. 92.

    Phelps, 1948, pp. 585–590.

  93. 93.

    Phelps, 1948, pp. 590–592.

  94. 94.

    Phelps, 1948, pp. 592–593

  95. 95.

    Phelps, 1948, p. 595.

  96. 96.

    Green, 1946, p. 3.

  97. 97.

    CIO News, 1945, p. 3.

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  1. Department of Economics, St. Mary’s College of Maryland, St. Mary’s City, MD, USA

    Donald R. Stabile

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Stabile, D.R. (2018). Background of the Employment Act II: Keynesian Economics. In: Macroeconomic Policy and a Living Wage. Palgrave Macmillan, Cham. https://doi.org/10.1007/978-3-030-01998-3_3

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