Abstract
Allyn Young, a Harvard economist, shot into international fame for his contribution to Paris peace conference after WWI.
This is a preview of subscription content, log in via an institution to check access.
Access this chapter
Tax calculation will be finalised at checkout
Purchases are for personal use only
Notes
- 1.
The use of capital-intensive methods (or roundabout methods) in Young does not depend on the rate of interest but on the size of the market. “[T]he actual industrialists (and bankers) deny that variations in the rate of interest influence the extent of their operations, providing their competitors pay the same. It is the ‘market’ on which they count” (Young 1990, p. 82). This point was also noted by Kaldor (1972, p. 1242) who wrote: “[Young] argued that the extent to which capital is used in relation to labour is predominantly a matter of the scale of operations – the capital/labour ratio in production is a function of the extent of the market rather than of relative factor prices”.
- 2.
Young’s modesty has been noted by several students and colleagues in letters and obituaries written after his death. In a letter of condolence (dated 17 March 1929) to Mrs. Young after Young’s premature death, John M. Keynes wrote: “His was an outstanding personality in the economics world and the most lovable. His influence as a teacher and a critic and as one who would always share with others all his best ideas was far greater than anyone would suppose who only knew his printed words; for it was his own work – unfortunately perhaps – which always came last”. Schumpeter (1954, p. 876, f.n.) also wrote of his habit hiding rather than highlighting his best ideas.
- 3.
The theme of equilibrium rate of growth also appears in his LSE Lectures (See Young 1990, p. 45). Demand curve is not constant, as in Marshall, but shifts as a result of the very forces shifting the supply curve. It was therefore more appropriate to have a theory or equilibrium or optimum rate of progress which would keep the supply curve close up to the demand curve. See also Chandra (2020, p. 165).
- 4.
“Seeking equilibrium conditions under increasing returns is as good as looking for a mare’s nest” (Young 1990, p. 45).
- 5.
Young (ibid., p. 26) felt that Marshall’s supply and demand curves hold ceteris paribus and cannot be integrated to give the whole economic structure or the social picture.
- 6.
For a discussion of the role of pecuniary external economies vis-a-vis economies of scale in the theory of increasing returns, see Chandra and Sandilands (2006).
- 7.
“If consolidation always meant economy, there would be no effective limit to consolidation. That means that competition would inevitably everywhere end in monopoly. But, as we all know, in most fields of economic life competition maintains its health and vigor. This proves that supposed benefits of consolidation are often illusory” (Young 1929d; Mehrling and Sandilands 1999, p. 222). At another place Young (1990, pp. 53–54) writes: “Most of the advantages of increasing returns can be had in an industry not consolidated – such, in fact, is the typical modern industry… The advantages of consolidation are not, generally speaking, those of increasing returns. Rather they are those of increased specialization, those of reorganization, not mere increase of size of operating units”.
- 8.
- 9.
It is interesting to note that Young employed offer curves (or the principle of reciprocal demand) to analyse the growth process though he held money to be central to an economic system. As noted by Blitch (1995, pp. 173–74), perhaps the idea of reciprocal demand (or barter exchange) comes closest to explaining the cumulative process of growth. In offer curves demand and supply are interdependent; along such curves cost of production and marginal utility are released from the pound of ceteris paribus.
- 10.
“Large production, not large-scale production, permits increasing returns” (Young 1990, p. 54).
- 11.
Kaldor (1972, p. 1243) thought that Young’s 1928 paper was “so many years ahead of its time that the progress of economic thought passed it by”.
- 12.
Schumpeter (1937, p. 154), for example, writing after his death, stated: “Rarely if ever has fame such as his been acquired on the basis of so little published work”.
- 13.
Young (1928b), in fact, considered any distinction between theoretical and applied economics as largely artificial. He wrote: “Economic theory, divorced from its functional relations to economic problems, or with those relations obscured, is no better than an interesting intellectual game. It gives endless opportunities for dialectical ingenuity. But it cannot advance knowledge, for it leads up a blind alley” (also in Mehrling and Sandilands 1999, p. 20).
- 14.
Young (1929e) related the concept of equilibrium with time, and was of the opinion that all economic equilibria are unstable. “Market price is the price which will be found in a given market at a given time. It may be regarded as the limiting form of the short-time or temporary equilibrium price” (also in Young 1990, p. 154).
- 15.
Young (1990, pp. 41–43) noted that Marshall’s particular expenses curve should not be confused with the supply curve. It was not a true supply curve, but since not all the producers have the same costs, it was upward sloping. Everyone, including those producing at the lowest costs, sell at the equilibrium price, and the area under the curve gives the producers’ total expenses. See also Chandra (2020, p. 164).
- 16.
For Kaldor’s interpretation of Smith and Young see Chandra (2019).
- 17.
References
Blitch, C. (1995). Allyn Young: The Peripatetic Economist. Basingstoke and London: Macmillan Press Ltd.
Buchanan, James M., and Yong J. Yoon. 1999. Generalised increasing returns, Euler’s theorem, and competitive equilibrium. History of Political Economy 31 (3): 511–523.
Buchanan, James M., and Yong J. Yoon. 2000. A Smithian perspective on increasing returns. Journal of the History of Economic Thought 22 (1): 43–48.
Chamberlin, Edward H. 1933. The Theory of Monopolistic Competition. Cambridge: Harvard University Press.
Chandra, Ramesh. 2004. Adam Smith, Allyn Young and the division of labour. Journal of Economic Issues 38: 787–805.
Chandra, Ramesh. 2019. Nicholas Kaldor on Adam Smith and Allyn Young. Review of Political Economy 31 (3): 445–463.
Chandra, Ramesh. 2020. Allyn Abbott Young. Cham: Palgrave Macmillan.
Chandra, Ramesh, and Roger J. Sandilands. 2006. The role of pecuniary external economies and economies of scale in the theory of increasing returns. Review of Political Economy 18 (2): 193–208.
Chandra, Ramesh, and Roger J. Sandilands. 2020. Nicholas Kaldor, Increasing returns and Verdoorn’s law. Strathclyde Discussion Papers in Economics, No. 20-02. Glasgow: University of Strathclyde.
Chandra, Ramesh, and Roger J. Sandilands. 2021. Nicholas Kaldor, increasing returns and Verdoorn’s law. Journal of Post Keynesian Economics 44 (2): 315–339.
Clapham, J.M. 1922. On empty economic boxes. Economic Journal 32: 305–314.
Colacchio, Georgio. 2005. Reconstructing Allyn A. Young’s theory of increasing returns. Journal of the History of Economic Thought 27 (3): 321–344.
Ely, Richard T., Thomas S. Adams, Max O. Lorenz, and Allyn A. Young. 1908. Outlines of Economics. New York: The Macmillan Company.
Ely, Richard T., Thomas S. Adams, Max O. Lorenz, and Allyn A. Young. 1916. Outlines of Economics. New York: The Macmillan Company.
Ely, Richard T., Thomas S. Adams, Max O. Lorenz, and Allyn A. Young. 1923. Outlines of Economics. New York: The Macmillan Company.
Ely, Richard T., Thomas S. Adams, Max O. Lorenz, and Allyn A. Young. 1930. Outlines of Economics. New York: The Macmillan Company.
Kaldor, Nicholas. 1972. The irrelevance of equilibrium economics. Economic Journal 82: 1237–1255.
Kaldor, Nicholas. 1975. What is wrong with economic theory. Quarterly Journal of Economics 89 (3): 347–357.
Knight, Frank H. 1921. Risk, Uncertainty and Profit. Boston: Houghton Mifflin Co.
Krugman, Paul. 1990. Rethinking International Trade. Cambridge and London: MIT Press.
Krugman, Paul. 1993. Toward a counter-counterrevolution in development theory. Annual Conference on Development Economics 1992, 15–38. Washington, DC: World Bank.
Laidler, David. 1993. Hawtrey, Harvard, and the origins of the Chicago tradition. Journal of Political Economy 101 (6): 1068–1103.
Laidler, David. 1999. Fabricating the Keynesian Revolution. Cambridge: Cambridge University Press.
Machovec, Frank H. 1995. Perfect Competition and the Transformation of Economics. London and New York: Routledge.
Marshall, Alfred. 1890 (1938). Principles of Economics, 8th ed. London: Macmillan.
Mehrling, Perry G. 1996. The monetary thought of Allyn Abbott Young. History of Political Economy 28 (4): 607–632.
Mehrling, Perry G. 1997. The Money Interest and the Public Interest. Cambridge and London: Harvard University Press.
Mehrling, Perry G., and Roger J. Sandilands. 1999. Money and Growth: Selected Papers of Allyn Abbott Young. London and New York: Routledge.
Perala, Maiju. 2006. Looking at the other side of the coin: Allyn Young and the early development theory. Journal of the History of Economic Thought 28 (4): 461–488.
Raffaelli, Tiziano. 2003. Marshall’s Evolutionary Economics. Abingdon and New York: Routledge.
Robbins, Lionel. 1932. An Essay on the Nature and Significance of Economic Science. London: Macmillan.
Romer, Paul M. 1986. Increasing returns and long-run growth. Journal of Political Economy 94: 1002–1038.
Romer, Paul M. 1989. Capital accumulation in the theory of long-run growth. In Modern Business Cycle Theory, ed. Robert J. Barro. Cambridge: Harvard University Press.
Rosenstein-Rodan, Paul. 1943. Problems of industrialisation in eastern and south-eastern Europe. Economic Journal 53: 202–211.
Rosenstein-Rodan, Paul. 1961. Notes on the theory of the big push. In Economic Development of Latin America, ed. H.S. Ellis and H.C. Wallaich. London: Macmillan.
Sandilands, Roger J. 1990. The Life and Political Economy of Lauchlin Currie. Durham and London: Duke University Press.
Sandilands, Roger J. 2000. Perspectives on Allyn Young in theories of endogenous growth. Journal of the History of Economic Thought 22 (3): 309–328.
Schumpeter, Joseph A. 1937. Allyn A. Young. In Encyclopedia of Social Sciences, 514–515.New York: Macmillan.
Schumpeter, Joseph A. 1954 (1982). History of Economic Analysis. London: Allen and Unwin.
Scitovsky, Tibor. 1954. Two concepts of external economies. Journal of Political Economy 62: 143–151.
Sraffa, Piero. 1926. The laws of return under competitive conditions. Economic Journal 6: 535–550.
Young, Allyn. 1913. Pigou’s wealth and welfare. Quarterly Journal of Economics 27 (4): 672–686. Reprinted in Mehrling and Sandilands (1999, pp. 86–96).
Young, Allyn. 1928a. Increasing returns and economic progress. Economic Journal 38 (152): 527–542. Reprinted in Mehrling and Sandilands (1999, pp. 49–61).
Young, Allyn. 1928b. English political economy. Economica 8 (22): 1–15. Reprinted in Mehrling and Sandilands (1999, pp. 15–28).
Young, Allyn. 1929a. The creator of wealth. In The Book of Popular Science, 110–116. New York: The Grolier Society. Reprinted in Mehrling and Sandilands (1999, pp. 149–152).
Young, Allyn. 1929b. Supply and demand. In Encyclopaedia Britannica 1928, 579–580. London: The Encyclopaedia Britannica Company. Reprinted in Mehrling and Sandilands (1999, pp. 143–146).
Young, Allyn. 1929c. Big business: How the economic system grows and evolves like a living organism. In The Book of Popular Science, 5387–5394. New York: The Grolier Society. Reprinted in Mehrling and Sandilands (1999, pp. 411–420).
Young, Allyn. 1929d. The making of wealth. In The Book of Popular Science, 3377–3385. New York: The Grolier Society. Reprinted in Mehrling and Sandilands (1999, pp. 220–230).
Young, Allyn. 1929e. Price. In Encyclopedia Britannica 1928. London: The Encyclopedia Britannica Company.
Young, Allyn. 1990. Nicholas Kaldor’s notes on Allyn Young’s LSE lectures 1927–29. Journal of Economic Studies 17 (3/4): 18–114.
Author information
Authors and Affiliations
Rights and permissions
Copyright information
© 2022 The Author(s), under exclusive license to Springer Nature Switzerland AG
About this chapter
Cite this chapter
Chandra, R. (2022). Allyn Young on Increasing Returns. In: Endogenous Growth in Historical Perspective. Palgrave Studies in Economic History. Palgrave Macmillan, Cham. https://doi.org/10.1007/978-3-030-83761-7_4
Download citation
DOI: https://doi.org/10.1007/978-3-030-83761-7_4
Published:
Publisher Name: Palgrave Macmillan, Cham
Print ISBN: 978-3-030-83760-0
Online ISBN: 978-3-030-83761-7
eBook Packages: Economics and FinanceEconomics and Finance (R0)