Skip to main content
SpringerLink
Log in

On Keynes

  • Chapter
  • First Online:
Alvin Hansen

Part of the book series: Great Thinkers in Economics ((GTE))

  • 82 Accesses

Abstract

Hansen had been interested in consumption as much as investment. Whilst investment ruled the roost for the business cycle, a consumption index had been a goal for a meaningful measure of real income since the mid-1920s. Hansen’s review of Keynes’s General Theory was at best lukewarm. He quarrelled with Keynes’s definitions of income, saving and investment suggesting that Robertson’s schema would have made the exposition clearer especially in regard to hoarding and credit creation. He felt that Keynes was too polemical and not generous enough to Classical theory, but acknowledged the practical import of argument. Hansen’s apparent conversion from sceptic to critical supporter seemed to come around the period of his AEA presidential address in 1938–1939. In the 1940s, Hansen adopted Keynesian tools, the marginal efficiency of capital and the multiplier, in his business cycle analysis. He still favoured the contribution of technological progress, population, and resource growth to an upwards shift in the marginal efficiency of capital schedule rather than the effect of interest rates moving along it. His textbooks popularised both the Keynesian Cross and ISLM graphical representations of Keynesian Economics, whilst his A Guide to Keynes became an undergraduate staple.

This is a preview of subscription content, log in via an institution to check access.

Access this chapter

Log in via an institution
eBook
USD 16.99
Price excludes VAT (USA)
  • Available as EPUB and PDF
  • Read on any device
  • Instant download
  • Own it forever
Hardcover Book
USD 129.99
Price excludes VAT (USA)
  • Durable hardcover edition
  • Dispatched in 3 to 5 business days
  • Free shipping worldwide - see info

Tax calculation will be finalised at checkout

Purchases are for personal use only

Institutional subscriptions

Notes

  1. 1.

    See Samuelson (1976: 30).

  2. 2.

    1936b: 675–6, see also Young (1987: 116).

  3. 3.

    1936b: 680.

  4. 4.

    1937b: 521.

  5. 5.

    1937b: 531 mentioned above, and 1938a: 58, something also noted by Salant (1976: 15n3).

  6. 6.

    See Samuelson (1959, 1976, 2002).

  7. 7.

    Samuelson (1959).

  8. 8.

    Haberler (1976) places it earlier at the time of his arrival in Harvard in 1937. Williams (1976) before that and Tobin (1976) suggested 1938. See Barber (1987), Rosenof (1997), and Brazelton (1993) who further points to the importance of both the consumption function and the multiplier to Hansen’s evolving position. See also the discussion in Desmarais-Tremblay and Johnson (2019).

  9. 9.

    Mehrling (1997: 236n7): “Why did I quickly accept Keynes. / (a) Marx and Henry George / (b) Chapter IV in Business Cycle Theory.” This chapter was entitled “The Capitalistic Process of Production as Cause of the Business Cycle” (Hansen, 1927a: 59ff) and discussed Marx, Tugan-Baranowsky, Spiethoff, Cassel, Schumpeter, Wicksell, Aftalion, and Robertson.

  10. 10.

    1941a: 284, in fact he counted the cost of replacement of capital goods as part of consumption, which is different to Keynes’s approach.

  11. 11.

    ibid: 229, 236, 290.

  12. 12.

    See 1946g, 1947g.

  13. 13.

    see eg Bigg (1990).

  14. 14.

    This asset effect on consumption and investment is also acknowledged in 1946b.

  15. 15.

    Keynes had expressed income as measured in wage units (a price in wage units is its money price divided by the money wage for one person-hour of labour), thus a measure of real income adjusting for both prices and productivity gains as noted in Hansen (1946g).

  16. 16.

    There is a valid argument that whilst formally correct, this over-simplifies Keynes’s understanding of the interest rate, which is nuanced, and related more to the margin between varying degrees of liquidity in a world where the future is fundamentally uncertain. As Hayes (2006: 155) puts it “Liquidity-preference and animal spirits are opposite aspects of the state of confidence, which is a matter of the weight of evidence behind our forecasts of the future. Thus the rate of interest has a life of its own, based on our well-founded distrust of forecasts of the long-term future and on the security offered by money, as the store of value least affected by changes in such forecasts.”

  17. 17.

    The first appearance of some sort of 45° diagram appears to be Hansen 1941a it was made popular by Samuelson’s presentation in his Economics of 1948.

  18. 18.

    See Hayes (2006).

  19. 19.

    “Outlets” in Hansen’s terms provided by growth and technological progress.

  20. 20.

    1953a: 46, 48–53, 58–62, 86, 108–114.

  21. 21.

    ibid: 48–9, 60–4, 141–3, 152.

  22. 22.

    ibid: 75–81, 101–3, 138–9, 167–9, 207–14, 217.

  23. 23.

    See Keynes (1936: 25–9).

  24. 24.

    See Hayes (2006: 54–7).

  25. 25.

    See Hayes (2006: 54).

  26. 26.

    1953a: 42.

  27. 27.

    ibid: 43–4.

  28. 28.

    ibid: 57, a further quibble over depreciation is given on p. 82 n. 3.

  29. 29.

    ibid: 86–98, 108–114.

  30. 30.

    This is amply explored, for example, by Hayes (2006), see also Keynes (1973b: 183).

  31. 31.

    See Keynes (1973b: 183).

  32. 32.

    ibid: 140–53.

  33. 33.

    Keynes (1936: 143).

  34. 34.

    The others concerned some lack of clarity over the questions of the equality or otherwise of the real wage and the marginal disutility of labour; Keynes’s rejection of Say’s Law; the relation of consumption to national income or GNP and the effect of depreciation allowances; and whether at the level of a single firm or industry a money wage cut would benefit employment. However, Tarshis suggested that any fault on the part of Hansen lay only in a “looseness of exposition.” (ibid: 147).

  35. 35.

    ibid: 32.

  36. 36.

    ibid: 134.

  37. 37.

    1953a: 140, 147–8, 1951d: 429, 432, 1955c: 643.

  38. 38.

    1953a: 148, 165–6.

  39. 39.

    See Young and Fuller (2022: 141–55).

  40. 40.

    ibid: 147–8, 151, 152–3, 154–5.

  41. 41.

    See also Hayes (2006: 184–5), Young (1987: 115–121).

  42. 42.

    1953a: 7, 14–5.

  43. 43.

    1953a: 28, 77.

  44. 44.

    ibid: 152–3.

  45. 45.

    ibid: 27, 117, 154, see also (1951a: 323–8).

  46. 46.

    1953a: 117–8, see also (1951a: 329–334).

  47. 47.

    1951a: 157.

  48. 48.

    Duesenberry (1948: 61) in turn credited Hansen and Samuelson who “have maintained for some time that the relation between income and consumption varies through the trade cycle.” See also the comments in Brazelton (1989: 432).

  49. 49.

    1941a: 237.

  50. 50.

    ibid p. 235.

  51. 51.

    See also ibid: 485–8.

  52. 52.

    ibid: 169–70.

  53. 53.

    ibid: 171.

  54. 54.

    ibid: 435n3.

  55. 55.

    1978: 162.

  56. 56.

    ibid: 164.

  57. 57.

    ibid: 168–9177.

  58. 58.

    Hansen (1953a: 148), see also p. 166, 216.

  59. 59.

    p. 34n “the functional relation can equally well be stated as.

  60. 60.

    Hayes (2006: 107, 185), see also the discussion in Ambrosi (1981).

  61. 61.

    Hayes (2006: 113).

  62. 62.

    1957a: 152–75.

  63. 63.

    ibid: 160–1.

  64. 64.

    ibid: 168.

  65. 65.

    See eg Salant in Colander and Landreth (1996: 123), Galbraith (1965: 34).

  66. 66.

    See also (1966c).

  67. 67.

    eg 1960a p. 24, 1957c, 1959c.

Bibliography

  • Hansen, A.H. (1921) Cycles of prosperity and depression in the United States, Great Britain and Germany: a study of monthly data 1902–1908, Madison: University of Wisconsin Press.

    Google Scholar 

  • Hansen, A.H. (1925a) ‘Factors affecting the trend of real wages.’ American Economic Review, Mar vol.15, p.27. https://www.jstor.org/stable/1808477

  • Hansen, A.H. (1926) ‘The best measure of real wages.’ American Economic Review, vol.16, no.1, pp.5–16. https://www.jstor.org/stable/1814837

  • Hansen, A.H. (1927a) Business cycle theory, its development and present status, Boston: Ginn and Company

    Google Scholar 

  • Hansen, A.H. (1932f) ‘A fundamental error in Keynes’s “Treatise on money.”‘ American Economic Review, vol.22, no.3, p.462. https://www.jstor.org/stable/1806259

  • Hansen, A.H. (1936b) ‘The sterling area and the stabilization problem.’ Proceedings of the Academy of Political Science, vol.17, no.1, pp.62–71. https://doi.org/10.2307/1172416

  • Hansen, A.H., Boddy, F.M. & Langum, J.K. (1936) ‘Recent trends in business-cycle literature.’ Review of Economics and Statistics, vol.18, no.2, pp.53–61. https://doi.org/10.2307/1927583

  • Hansen, A.H. (1937b) ‘Harrod on the trade cycle.’ Quarterly Journal of Economics, vol.51, no.3, pp.509–531. https://doi.org/10.2307/1884839

  • Hansen, A.H. (1938a) Full recovery or stagnation?, (with a Forward to the English Edition By Arthur D. Gayer) London: Adam & Charles Black, New York: W.W. Norton.

    Google Scholar 

  • Hansen, A.H. (1938b) ‘The consequences of reducing expenditures.’ Proceedings of the Academy of Political Science, vol.17, no.4, pp.60–72. https://doi.org/10.2307/1172352

  • Hansen, A.H. (1940d) ‘Price flexibility and full employment of resources’ in Means, G., Montgomery, D.E., Clark, J.M., Hansen, A.H., & Ezekiel, M. (1940) The structure of the American economy: Part II. Toward full use of resources National Resources Planning Board, Washington DC: US Government Printing Office. Reprinted in Fiscal policy and business cycles (1941a) Chapter XV pp.313–38.

    Google Scholar 

  • Hansen, A.H. (1941a) Fiscal policy and business cycles, New York: W.W. Norton & Company Inc.

    Google Scholar 

  • Hansen, A.H. (1945c) ‘Stability and expansion’ in Paul T. Homan, P.T & Machlup, F. eds., Financing American Prosperity: A Symposium of Economists New York: The Twentieth Century Fund. p.199–245.

    Google Scholar 

  • Hansen, A.H. (1945e) ‘Three methods of expansion through fiscal policy’, American Economic Review, Jun, Vol.35 No.3 pp.382–387. https://www.jstor.org/stable/1812604

  • Hansen, A.H. (1946b) “Inflation”, Yale Review, June vol.35 no.4, pp.692–711, reprinted in Economic policy and full employment (1947a) pp.313–330.

    Google Scholar 

  • Hansen, A.H. (1946g) ‘Keynes and the general theory.’ Review of Economics and Statistics, vol.28, no.4, pp.182–187. https://doi.org/10.2307/1925412 Reprinted as ‘The general theory (2)’ in in Harris, S.E.(ed) The new economics, Keynes’ influence on theory and public policy 1947 New York: Alfred A Knopf Inc, 1948 London: Dennis Dobson pp.133–44, reprinted (in shortened form) as ‘Why is the consumption function a great contribution to economic theory?’ in Lekachman, R.(ed) 1964 Keynes and the classics, Boston: DC Heath & Company, pp.30–33

  • Hansen, A.H. (1947a) Economic policy and full employment, New York, London: Whittlesey House, McGraw-Hill Book Company Inc.

    Google Scholar 

  • Hansen, A.H. (1947g) ‘Dr. Burns on Keynesian economics.’ Review of Economics and Statistics, vol.29, no.4, pp.247–252. https://doi.org/10.2307/1927823

  • Hansen, A.H. (1947i) ‘Keynes on economic policy’ in Harris, S.E.(ed) The new economics, Keynes’ influence on theory and public policy 1947 New York: Alfred A Knopf Inc, 1948 London: Dennis Dobson pp.197–207.

    Google Scholar 

  • Hansen, A.H. (1948a) ‘A note on savings and investment.’ Review of Economics and Statistics, vol.30, no.1, pp.30–33. Reprinted as Appendix B in 1949a pp.219–225. https://doi.org/10.2307/1927623

  • Hansen, A.H. (1949a) Monetary theory and fiscal policy, New York: McGraw-Hill Book Company.

    Google Scholar 

  • Hansen, A.H. (1951a) Business cycles and national income. New York: W.W. Norton & Company Inc.

    Google Scholar 

  • Hansen, A.H. (1951d) ‘Classical, loanable-fund, and Keynesian interest theories.’ Quarterly Journal of Economics, vol.65, no.3, pp.429–432. https://doi.org/10.2307/1882223

  • Hansen, A.H. (1951e) ‘A note on the secular consumption function’ American Economic Review, vol.41, p.662–4. https://www.jstor.org/stable/1813594

  • Hansen, A.H. (1951f) ‘The Pigouvian effect.’ Journal of Political Economy, vol.59, no.6, pp.535–536. https://doi.org/10.1086/257125

  • Hansen, A.H. (1953a) A guide to Keynes., New York: McGraw-Hill Book Company.

    Google Scholar 

  • Hansen, A.H. & Clemence, R.V. (eds) (1953) Readings in business cycles and national income, New York: W.W. Norton & Company, London: George Allen & Unwin Ltd.

    Google Scholar 

  • Hansen, A.H. (1955b) ‘Post-Keynesian economics.’ American Economic Review, vol.45, no.3, pp.360–372. https://www.jstor.org/stable/782

  • Hansen, A.H. (1955c) ‘Comment.’ Quarterly Journal of Economics, vol.69, no.4, p.641. https://doi.org/10.2307/1882002

  • Hansen, A.H. (1955d) ‘Brief note on the role of consumption in the 1954–55 recovery.’ Review of Economics and Statistics, vol.37, no.4, pp.424–425. https://doi.org/10.2307/1925857

  • Hansen, A.H. (1957a) The American economy. New York; London: McGraw-Hill Book Company.

    Google Scholar 

  • Hansen, A.H. (1957c) ‘A high and rising rate of interest.’ Review of Economics and Statistics, vol.39, no.3, p.345. https://doi.org/10.2307/1926051

  • Hansen, A.H. (1958b) ‘The contraction of 1953–1954: comment.’ Review of Economics and Statistics, vol.40, no.1, p.49. https://doi.org/10.2307/1926479

  • Hansen, A.H. (1959f) ‘Letters – Movement of prices.’ New York Times 23 Jan, p.24.

    Google Scholar 

  • Hansen, A.H. (1960a) Economic issues of the 1960s. New York: McGraw-Hill Book Company.

    Google Scholar 

  • Hansen, A.H. (1966c) ‘Stagnation and underemployment equilibrium’ Rostra Economica Amstelodamensia 15 Nov. pp.7–9

    Google Scholar 

References

  • Ambrosi, G.M. (1981) ‘Keynes and the 45° cross’ Journal of Post Keynesian Economics, Summer, Vol.3 No.4, pp.503–9 https://doi.org/10.1080/01603477.1981.11489241

  • American Economic Association (1967) ‘The Francis A. Walker Award: citation on the occasion of the presentation of the medal to Alvin H. Hansen, December 29, 1967’ American Economic Review Vol.58 No.2 p.683. https://www.jstor.org/stable/1831854

  • Barber, W.J. (1987) ‘The career of Alvin H. Hansen in the 1920s and 1930s: a study in intellectual transformation’ History of Political Economy Vol.19 No.2 pp.191–205. https://doi.org/10.1215/00182702-19-2-191

  • Bigg, R.J. (1990) Cambridge and the monetary theory of production. Basingstoke & London: Macmillan Press. https://doi.org/10.1057/9780230371217

  • Brazelton, W.R. (1989) ‘Alvin Harvey Hansen: economic growth and a more perfect society: the economist’s role in defining the stagnation thesis and in popularizing Keynesianism’ American Journal of Economics and Sociology Oct Vol.48 No.4 pp.427–40 https://doi.org/10.1111/j.1536-7150.1989.tb02131.x

  • Brazelton, W.R. (1993) ‘Alvin Harvey Hansen: a note on his analysis of Keynes, Hayek, and Commons’ Journal of Economic Issues Sep Vol.27 No.3 pp.940–48 https://doi.org/10.1080/00213624.1993.11505464

  • Colander, D.C. & Landreth, H. (eds.) (1996) The coming of Keynesianism to America, Cheltenham: Edward Elgar.

    Google Scholar 

  • Davidson, P. (1978) Money and the real world, 2nd Edition, London: Macmillan Press – 1st edition 1972.

    Google Scholar 

  • Davidson, P. (2017) Who’s afraid of John Maynard Keynes?, London: Palgrave Macmillan https://doi.org/10.1007/978-3-319-64504-9

  • Desmarais-Tremblay, M. and Johnson, M. (2019), ““The fiscal policy seminar: its early stages” by Richard A. Musgrave”, Including a symposium on Robert Heilbroner at 100: Research in the History of Economic Thought and Methodology, 15 Oct., Vol. 37C pp. 147–179. https://doi.org/10.1108/S0743-41542019000037C007

    Article  Google Scholar 

  • Dillard, D. (1955) ‘Reviews of books’ Journal of Economic History, Sept., Vol.15 No.3, pp.327–8.

    Google Scholar 

  • Duesenberry, J.S. (1948) ‘Income-consumption relations and their implications’ in Metzler, L.A. et al (1948) Income, employment and public policy pp.54–81.

    Google Scholar 

  • Galbraith, J.K. (1965) ‘Came the revolution’ New York Times 16 May, pp. BR 1,34,35,36,38,39 (124,157,158,159,161,162).

    Google Scholar 

  • Haberler, G. (1976) ‘Some reminiscences’ Quarterly Journal of Economics, Feb Vo.90 No.1 pp.9–13 https://doi.org/10.2307/1886081

  • Harvard University (1938) ‘Report of the president of Harvard College and reports of departments for 1936–37’, Official Register of Harvard University Vol.XXXV No.4, Feb 18

    Google Scholar 

  • Hayes, M.G. (2006) The economics of Keynes Cheltenham: Edward Elgar

    Book  Google Scholar 

  • Hayes, M.G. (2020) John Maynard Keynes the art of choosing the right model Cambridge: Polity Press

    Google Scholar 

  • Hicks, J.R. (1937) ‘Mr Keynes and “classics”: a suggested interpretation’ Econometrica April, Vol.5 No.2, pp.147–59 https://doi.org/10.2307/1907242

  • Hicks, J.R. (1981) ‘“IS-LM”: an explanation”, Journal of Post Keynesian Economics, Winter 1980–81, Vol.3 No.2, pp.139–154 https://doi.org/10.1080/01603477.1980.11489209

  • Keynes, J.M. (1924) “Does employment need a drastic remedy” Nation and Athenaeum May 24, 1924 reprinted Collected writings XIX p.219–23.

    Google Scholar 

  • Keynes, J.M. (1936) The general theory of employment interest and money London: Macmillan and Co., reprinted as JMK CW VII.

    Google Scholar 

  • Keynes, J.M. (1973b) The general theory and after: Part II, defence and development edited by D.E. Moggridge, JMK CW XIV London: Macmillan.

    Google Scholar 

  • Laidler, D (1999) Fabricating the Keynesian revolution Cambridge: Cambridge University Press.

    Google Scholar 

  • Leijonhufvud, A. (1968) On Keynesian economics and the economics of Keynes New York: Oxford University Press.

    Google Scholar 

  • Machlup, F. (1939) ‘Reviewed work(s): full recovery or stagnation? By Alvin H. Hansen’ Journal of the American Statistical Association March, Vol.34 no.205 pp.186–8. https://doi.org/10.2307/2279175

  • Mehrling, P.G (1997) The money interest and the public interest: American monetary thought 1920–1970 Harvard Economic Studies, Vo.162, Cambridge, Mass. & London: Harvard University Press. https://doi.org/10.2307/j.ctv23dxd61

  • O’Donnell, R. & Rogers, C. (2015) ‘ILYM: a general theory-compatible replacement for ISLM’ Cambridge Journal of Economics Feb https://doi.org/10.1093/cje/beu082

  • Reddaway, W.B. (1936) ‘The general theory of employment, interest, and money’Economic Record June Vol.12 p.28–36 https://doi.org/10.1111/j.1475-4932.1937.tb02999.x

  • Rosenof, T (1997) Economics in the long run, Chapel Hill: University of North Carolina Press.

    Google Scholar 

  • Salant, W.S. (1976) ‘Alvin Hansen and the fiscal policy seminar’ Quarterly Journal of Economics Feb., Vol.90 No.1 p.14–23 https://doi.org/10.2307/1886082

  • Samuelson, P.A. (1939) ‘Interactions between the multiplier analysis and the principle of acceleration’. Review of Economic[s and] Statistics May Vol.21 p.75–8. https://doi.org/10.2307/1927758

  • Samuelson, P.A. (1959) ‘Alvin Hansen and the interactions between the multiplier analysis and the principle of acceleration’ Review of Economics and Statistics May Vol.41 No.2 p.183–4 https://doi.org/10.2307/1927801

  • Samuelson, P.A. (1975b) ‘In search of the elusive elite’ New York Times 26 June, p.39.

    Google Scholar 

  • Samuelson, P.A. (1976) ‘Alvin Hansen as a creative economic theorist’ Quarterly Journal of Economics Feb Vol.90 No.1 pp.24–31. https://doi.org/10.2307/1886083

  • Samuelson, P.A. (1988) ‘In the beginning’ Challenge July/August Vol.31 no.4 pp.32–34. https://doi.org/10.1080/05775132.1988.11471263

  • Samuelson, P.A. (2002) ‘Reply: complementary innovations by Roy Harrod and Alvin Hansen’ History of Political Economy Spring, Vol.34 No.1 pp.219–23. https://doi.org/10.1215/00182702-34-1-219

  • Sasakura, K (2016) ‘The role of the wage-unit in the general theory’ Waseda Journal of Political Science and Economics No.391 pp.22–47.

    Google Scholar 

  • Simons, H.C. (1942) ‘Hansen on fiscal policy’ Journal of Political Economy Apr Vol.50 No.2 pp.161–96 https://doi.org/10.1086/255852

  • Stein, H. (1969) The fiscal revolution in America. Chicago and London: The University of Chicago Press.

    Google Scholar 

  • Sweezy, A. (1972) ‘The Keynesians and government policy, 1933–1939’ American Economic Review March, Vol.62 No.1/2, pp.116–124. https://www.jstor.org/stable/1821531

  • Tarshis, L. (1954) ‘Reviewed work(s): a guide to Keynes by Alvin H. Hansen’ American Economic Review March, Vol.44 No.1, pp.146–7. https://www.jstor.org/stable/1803075

  • Tobin, J. (1976) ‘Hansen and public policy’ Quarterly Journal of Economics Feb Vol.90 No.1 pp.32–37 https://doi.org/10.2307/1886084

  • Williams, J.H. (1976) ‘Tribute’ Quarterly Journal of Economics Feb, Vol.90 No.1, p.8 https://doi.org/10.2307/1886080

  • Young, W.L. (1987) Interpreting Mr Keynes: the IS-LM enigma. Cambridge: Polity Press.

    Google Scholar 

  • Young, W.L. & Fuller, E.W. (2022) Reinterpreting Mr. Keynes. Cham: Springer. https://doi.org/10.1007/978-3-030-91342-7

    Book  Google Scholar 

Download references

Author information

Authors and Affiliations

  1. Newbury, UK

    Robert J. Bigg

Authors
  1. Robert J. Bigg
    View author publications

    You can also search for this author in PubMed Google Scholar

Rights and permissions

Reprints and permissions

Copyright information

© 2023 The Author(s), under exclusive license to Springer Nature Switzerland AG

About this chapter

Check for updates. Verify currency and authenticity via CrossMark

Cite this chapter

Bigg, R.J. (2023). On Keynes. In: Alvin Hansen. Great Thinkers in Economics. Palgrave Macmillan, Cham. https://doi.org/10.1007/978-3-031-42216-4_11

Download citation

  • DOI: https://doi.org/10.1007/978-3-031-42216-4_11

  • Published:

  • Publisher Name: Palgrave Macmillan, Cham

  • Print ISBN: 978-3-031-42215-7

  • Online ISBN: 978-3-031-42216-4

  • eBook Packages: Economics and FinanceEconomics and Finance (R0)

Publish with us

Policies and ethics

Search

Navigation