The Accumulation of Capital Joan Robinson 1956
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The Accumulation of Capital Joan Robinson 1956 Contents Introduction vii Geoff Harcourt and Prue Kerr Preface xxxi Acknowledgements xxxii Author’s Note to the Second Edition xxxvii Book I Introduction 1 The Classes of Income 3 2 The Meaning of Wealth 15 3 The Meaning of Money 25 4 Capital and Income 33 5 Consumption and Investment 41 6 The Meaning of Equilibrium 57 Book II Accumulation in the Long Run 7 A Simple Model 63 Section I — Accumulation with One Technique 8 Accumulation with Constant Technique 73 9 Technical Progress 85 Section II — The Technical Frontier 10 The Spectrum of Techniques 101 11 The Evaluation of Capital 114 12 The Technical Frontier in a Golden Age 124 13 Productivity and the Real Capital Ratio 132 14 Accumulation without Inventions 139 15 A Surplus of Labour 153 Section III — Accumulation and Technical Progress 16 Accumulation with Neutral Technical Progress 159 17 Accumulation with Biased Progress 164 18 Synopsis of the Theory of Accumulation in the Long Run 173 v vi Contents Book III The Short Period 19 Prices and Profits 179 20 Wages and Prices 193 21 Fluctuations in the Rate of Investment 198 22 Cycles and Trends 213 Book IV Finance 23 Money and Finance 225 24 The Rates of Interest 237 Book V The Rentier 25 Consumption of Profits 247 26 Consumption and Accumulation in the Long Run 255 27 Rentiers and the Trade Cycle 264 28 Rentiers and Finance 274 Book VI Land 29 Land and Labour 283 30 Factor Ratios and Techniques. A Digression 298 31 Land and Accumulation 313 32 Land, Labour and Accumulation 329 33 Increasing and Diminishing Returns 336 Book VII Relative Prices 34 Supply and Demand 351 Book VIII International Trade 35 External Investment 367 36 International Investment 372 Conclusion 386 Notes on various topics 389 Diagrams 411 Postscript 426 The value of invested capital 433 441 Introduction Geoff Harcourt and Prue Kerr1 The Accumulation of Capital, Joan Robinson (1956), is Joan Robinson’s magnum opus. It grew out of the advances she was making on many fronts in the years of World War II and afterwards. The major influ- ences on her were John Maynard Keynes; her work on Karl Marx placed within a fruitful setting and approach by Michał Kalecki (Piero Sraffa teased her that she seemed to regard ‘Marx as a little-known forerunner of Kalecki’, see Joan Robinson 1942; 1966, vi); her Introduction (1951) to the English translation of Rosa Luxemburg’s Accumulation of Capital; Roy Harrod’s seminal work on dynamic theory just before (1939) and soon after the end of the war (1948); pressing real-world problems asso- ciated with the postwar reconstruction of Europe; and the emergence of consciousness about development in underdeveloped societies in the economics profession of developed societies. Keynes’s revolution was increasingly being accepted in both academia and government. Attention was turning from the employment-creating effects of accumulation to its capacity-creating effects. In the view of his immediate colleagues and disciples in Cambridge, he had conquered the short period in a macroeconomic sense so that they, taking into account these other influences, turned their attention to the generalisa- tion of The General Theory to the long period (see Robinson [1952a and 1956: vi]). From the 1920s on, Sraffa was developing his own revolutionary new path in economic theory, criticising the conceptual and logical bases of the supply and demand theories in all their forms while simulta- neously rehabilitating classical and Marxian political economy. His findings were not fully in the public domain until the publication of Production of Commodities in 1960. Hints were in the Introduction in 1951 to the Sraffa with Dobb edition of The Works and Correspondence of David Ricardo. The Introduction brought a great flash of illumination 1 This Introduction arises from our volume Joan Robinson (2009) which we wrote for Tony Thirlwall’s series ‘Great Thinkers in Economics’, published by Palgrave Macmillan. All references containing only page numbers refer to Joan Robinson (1956) or, when indicated, later editions thereof. vii viii Introduction to Robinson about the nature and role of profits in advanced capitalist economies. When reprinting her ‘Essays 1953’ in her Collected Economic Papers, vol IV, 1973, she wrote: These essays were written in a hilarious mood after reading Piero Sraffa’s Introduction …, which caused me to see that the concept of the rate of profit on capital is essentially the same in Ricardo, Marx, Marshall and Keynes; … the essential difference between them … and Walras, Pigou and the latter-day textbook writers is that the Ricardians are describing an historical process of accumulation in a changing world while the Walrasians dwell in a timeless equi- librium where there is no distinction between the future and the past. (247) There was also considerable attention given to methodological issues, stimulated by Harrod’s desire to replace static by dynamic analysis, a natural complement to the revived interest in distribution and growth over time, reinterpreted in the light of Keynes’s and, in Robinson’s case, Kalecki’s new theories. For Harrod this new, exciting way of doing economics made ‘the old static formulation of problems [seem] stale, flat and unprofitable’ (Harrod 1939: 15). These concerns, the original prov- ince of classical political economy and Marx, were suppressed by the rise of neoclassical economics with its concentration on price formation and resource allocation in mostly competitive, static settings. Robinson was typically forthright about this. In the Preface to her 1956 volume, she writes: Economic analysis, serving for two centuries to win an understanding of the Nature and Causes of the Wealth of Nations, has been fobbed off with another bride — a Theory of Value … deep seated political reasons for the substitution … also a purely technical reason … exces- sively difficult to conduct an analysis of over-all movements of an economy through time, involving changes in population, capital accumulation and technical change, at the same time as an anal- ysis of the detailed relations between output and price of particular commodities … Economists for the last hundred years have sacrificed dynamic theory in order to discuss relative prices … unfortunate [because] such a drastic departure from reality [makes verification of results impossible and rules out] discussion of most of the prob- lems that are actually interesting [, condemning] economics to … arid formalism. (1956: v) Introduction ix This led her to reappraise what equilibrium meant in the short period and the long period in a macroeconomic setting. She coupled this with her increasing dissatisfaction with both neoclassical concepts and methods, as she saw them, especially in the theory of distribu- tion and its accompanying relevance for a discussion of the choice of technique in the economy as a whole in analysing the process of growth. The outcome was both a sustained attack on neoclassical and neo-neoclassical procedures and results and the development of distri- bution and growth theory in a classical Marxian-Kaleckian-Keynesian setting. With this background it is not surprising that The Accumulation of Capital was published when its author was the same age as Keynes when he published The General Theory. Just as she wrote Introduction to the Theory of Employment (1937), her ‘told-to-the-children’ book (Keynes 1973: 148), to help to explain his new theory, she wrote her Essays in the Theory of Economic Growth (1962a) to explain The Accumulation of Capital to those who were mystified, or irritated, or both by the 1956 volume. The 1962 volume was a great help in extracting messages that were over- laid or not brought out clearly in her ‘big book’. The above themes may be found in articles and chapters in books preceding the publication of The Accumulation of Capital. In The Rate of Interest and Other Essays (1952a) we are told that the theme of these essays is the analysis of a dynamic economic system [ — dynamic analysis in the sense] that it cannot explain how an economy behaves in given conditions, without reference to past history; … static analysis purports to describe a position of equilib- rium which the system will reach … if the given conditions remain unchanged for long enough no matter where it started from. (Ibid.: v) She adds: Short-period analysis is concerned with the equilibrium of a system with a given stock of capital and … given expectations about the future. Past history is thus put into the initial conditions, so the anal- ysis is static in itself … yet part of a dynamic theory. [Thus] Keynes’ General Theory, [though] strictly static in form, … opened the way for a great outburst of analysis of dynamic problems. The collection was preceded by her long introduction to the English translation of Luxemburg’s The Accumulation of Capital in 1951. x Introduction Following it were her 1953 essays On Re-reading Marx, which contain her Cambridge economist visit to Oxford essay, in which some of her methodological critiques about time and space in economic analysis are presented in a stark and compelling manner, and her 1953–1954 Review of Economic Studies paper, which brought the Cambridge–Cambridge debates in capital theory into the public domain. There are in addition an Economic Journal article, ‘The Model of an Expanding Economy’ (1952b), and her Delhi School of Economics lecture on ‘Marx, Marshall and Keynes’, reprinted in Collected Economic Papers, volume II (1960), the Preface of which is dated December 1959. Significantly the author writes that the essays belong ‘to the field of what is sometimes called post-Keynesian economics’ (Robinson 1960: v). To these we add her difficult but profound essays ‘The Philosophy of Prices’, ‘Notes on the Theory of Economic Development’ and ‘Population and Development’.