JOHN MAYNARD KEYNES AND THE AMERICAN TRADITION OF EMPIRICAL COLLECTIVISM Item Type text; Dissertation-Reproduction (electronic) Authors Wrinkle, Robert D. Publisher The University of Arizona. Rights Copyright © is held by the author. Digital access to this material is made possible by the University Libraries, University of Arizona. Further transmission, reproduction or presentation (such as public display or performance) of protected items is prohibited except with permission of the author. Download date 05/10/2021 11:17:29 Link to Item http://hdl.handle.net/10150/284897 This dissertation has been microfilmed exactly as received 67-16,510 WRINKLE, Robert D., 1941- JOHN MAYNARD KEYNES AND THE AMERICAN TRADI­ TION OF EMPIRICAL COLLECTIVISM. University of Arizona, Ph. D., 1967 Political Science, general University Microfilms, Inc., Ann Arbor, Michigan JOHN MAYMRD KEYNES AMD THE AMERICAN TRADITION OF EMPIRICAL COLLECTIVISM by Robert D. Wrinkle A Dissertation Submitted to the Faculty of the DEPARTMENT OF GOVERNMENT In Partial Fulfillment of the Requirements For the Degree of DOCTOR OF PHILOSOPHY In the Graduate College THE UNIVERSITY OF ARIZONA 1967 THE UNIVERSITY OF ARIZONA GRADUATE COLLEGE I hereby recommend that this dissertation prepared under my direction by Robert D. Wrinkle entitled John Maynard Keynes and the American Tradition of Empirical Collectivism be accepted as fulfilling the dissertation requirement of the degree of Doctor of Philosophy (q VJ 1— 4-<—«—>—•— t °c to'7 Dissertation Director Date After inspection of the dissertation, the following members of the Final Examination Committee concur in its approval and recommend its acceptance:* < • — ^— n f)j) Hi-iu *!•-</(• V '—r 7^— J. >'•!> -i——t 1 L~7 6 7 *This approval and acceptance is contingent on the candidate's adequate performance and defense of this dissertation at the final oral examination. The inclusion of this sheet bound into the library copy of the dissertation is evidence of satisfactory performance at the final examination. STATEMENT BY AUTHOR This dissertation has been submitted in partial fulfillment of requirements for an advanced degree at The University of Arizona and is deposited in the University Library to be made available to bor­ rowers under rules of the Library. Brief quotations from this dissertation are allowable without special permission, provided that accurate acknowledgment of source is made. Requests for permission for extended quotation from or re­ production of this manuscript in whole or in part may be granted by the head of the major department or the Dean of the Graduate College when in his judgment the proposed use of the material is in the interests of scholarship. In all other instances, however, permission must be obtained from the author. PREFACE A serious student of the American political tradition cannot avoid an attempt to understand the nature of the American conception of the proper role of the government in economic affairs. This research project grew out of an attempt to understand that traditional conception as well as an attempt to understand John Maynard Keynes' theory of governmental intervention in economic affairs. The purpose of this study is two fold: first, the author wants to determine if Keynes' theory of governmental intervention in economic affairs represents a "radical deviation" from the American tradition; and second, he wants to determine if Keynes1 theory has been widely advocated in the United States. The methods utilized in this study are analytical and historical. The author attempts to understand Keynes in historical context and to appraise the extent to which Keynes' ideas have been advocated in the United States. Keynes' theory of governmental intervention in economic affairs is then compared with the model of empirical collectivism as developed by Professors Coker and Shields. This study is not intended to represent a definitive interpre­ tation of American thought. The study is based on an empirical collectivist interpretation of the American tradition. The scope of this study is limited to an examination of John Maynard Keynes1 theory iii of governmental intervention in economic affairs, and an analysis of the advocacy of one facet of that theory by three Presidents of the United States. I must acknowledge the general debt I owe to my professors at the University of Arizona. However, I owe a special debt to my major advisor, Professor Currin V. Shields. Without his guidance and criticism this work would not have been possible. I also must acknowledge the patient forebearance of my wife, Dorothy. Robert D. Wrinkle TABLE OF CONTENTS Page PREFACE iii LIST OF ILLUSTRATIONS vii ABSTRACT viii Chapter I. THE AMERICAN TRADITION OF EMPIRICAL COLLECTIVISM ... 1 The American Tradition 9 American Individualism 12 American Collectivism 15 Conclusions 21 II. JOHN MAYNARD KEYNES: THE MAN AND HIS TIMES 22 Background 23 Education 25 Experience 28 Character 32 Conclusions 35 III. THE BASIS OF JOHN MAYNARD KEYNES' THOUGHT 36 Method of Thought 36 Influences in the Development of Keynes' Thought . kl Keynes' Works ^ Indian Currency and Finance ^5 The Economic Consequences of the Peace b6 A Treatise on Probability 50 Tract on Monetary Reform 52 The Economic Consequences of Sterling Parity .... 55 Laissez-Faire and Communism 57 Can Lloyd George Do It? 58 A Treatise on Money 59 The Means to Prosperity 6l How to Pay for the War 62 Collections 63 Basic Assumptions 6k Social Philosophy 70 Conclusions 77 v vi TABLE OF CONTENTS—Continued. Page IV. THE GENERAL THEORY 78 Introduction 78 Say1 s Law 80 The Theory of Employment 82 The Aggregate Demand Function 88 Conclusions 99 V. KEYNES1 THEORY OF GOVERNMENTAL INTERVENTION IN ECONOMIC AFFAIRS 102 Questions Involved lOU The Doctrine 108 Assumptions 115 Conclusions 118 VI. KEYEESIANISM IN AMERICA 119 The New Deal 122 The Employment Act of 19^-6 128 Keynes and the Presidents 132 Truman 132 Eisenhower 1^6 Kennedy 157 Conclusions l6l VII. CONCLUSIONS 163 SELECTED BIBLIOGRAPHY 171!- LIST OF ILLUSTRATIONS Page Figure 1. A HYPOTHETICAL ECONOMY 87 •ii ABSTRACT This study concerns one of the most significant of all political questions: What is the proper role of government in economy? One extreme ideological response to this question is that of laissez- faire: the government should be minimally involved in a nation's economic affairs. Another extreme, but contrary, response to this question is that of socialism: the government should own and operate the means of producing and distributing wealth. A middle position is that of the "mixed economy": the government should intervene in economic affairs, but it need not own or operate the means of producing and distributing wealth. Government should take whatever action is deemed appropriate to satisfy its role as a public problem solver. The doctrines of laissez-faire and socialism have both been advocated in the United States, particularly since the Civil War, but they are not now and never have been the traditional American response to the question. The United States has a long and venerable heritage of using collective action to solve public problems. A significant aspect of that heritage is its pronounced empirical nature. The American tradition of collectivism is not doctrinaire, as are both laissez-faire and socialism. The traditional American response to the issue of the proper role of government in economic affairs has been that of the middle position—the "mixed economy." viii ix The famed British economist John Maynard Keynes advanced a theory of governmental intervention in economic affairs which is, basically, an empirical collectivist theory. Keynes argued for governmental intervention in economic affairs as a means of stimulating the economy to full employment. Such stimulation is necessary, Keynes argued, because the economy is not self-sustaining. Many persons have contended that the implementation of Keynes' theory in the United States represents a "radical deviation" from the basic American tradition. It does not. Keynes' theory of governmental intervention in economic affairs agrees with the American tradition of empirical collectivism. Keynes' fiscal policy concepts are the most important aspect of his theory of governmental intervention in economic affairs. Since the end of the Second World War, Keynesian fiscal policy concepts have been advocated by the Presidents of the United States. The Presidents' advocacy of such concepts represents further institutionalization of the idea of the "mixed economy" in America. CHAPTER I THE AMERICAN TRADITION OF EMPIRICAL COLLECTIVISM1 One of the most significant of all political questions involves the determination of the proper role of the government in the economic affairs of a nation. The very existence of government, means, of course, that it has an impact upon a nation's economy. The question of the "proper role" of government in economic affairs, then, is one of degree. Should the government's intervention be minimal or should it control entirely the nation's economic affairs? Or should it assume some middle position? How a political community answers this question, and why, reflects, in large measure, the nature of that political community. An extreme ideological position concerning the proper role of government in economic affairs has traditionally been defined as "laissez-faire." This position views the government in a passive role. Advocates of laissez-faire contend that distribution of goods and services "best" for the functioning of the economic system will naturally result if governmental involvement in economic affairs is held to a minimum. 1. The name and much of what is included in this chapter is taken from Currin V. Shields, "The American Tradition of Empirical Collectivism," American Political Science Review, XLVI (March, 1952), pp. 10^-121. The very large debt which this chapter owes to the above article as well as Professor Francis W. Coker's, Recent Political Thought (New York: Appleton-Century, Inc., 193*0 must be acknowledged. 1 2 Laissez-faire doctrine is generally associated with the physiocrats of eighteenth century France and the later English Q "classical" political economists.