Chapter ǻ: Ļe Keynesian Heritage in Economics ȀȅȀconcern about difficulties more deep-seated than the Clower-Leijonhuf-
vud analysis describes. Ļis analysis interprets Keynes in terms of the
dynamics of income-constrained processes associated with deficiencies of
information, inadequately adjusted prices, and the attendant discoordina-
tion. It seems significant that W.H. Hutt, whose theory of cumulative
deterioration in a depression is remarkably similar to that of Clower and
Leijonhufvud (GlazierȀȈȆǿ), believes he is expounding a doctrine quite
different from what he considers to be the crudities of Keynes.
George Brockway (ȀȈȇȅ, p.ȀȂ) provides an extreme example of crude,
popularised Keynesianism. Possibly Keynes’s greatest contribution was
his demonstration that in a capitalist system (or in any system that is
advanced much beyond bare subsistence), glut is not only possible; it is
always imminent.
Liquidity preference makes the economy unable “to buy and pay for
everything it produces; hence a glut.” Brockway finds “disgusting and
stupid” the attempt being made in the United States nowadays “to ‘bal-
ance’ the budget and thus reduce government expenditures at the very
moment they should be expanded.”
“Was Keynes a ‘Keynesian’?” Contradicting Leijonhufvud’s thesis, Her-
schel Grossman in effect answers “Yes”—and properly, in my view (Yea-
gerȀȈȆȂ): “Keynes’ thinking was both substantially in accord with that of
his popularisers and similarly deficient” (GrossmanȀȈȆȁ, p.ȁȅ). He pro-
vided no adequate microeconomic foundation for his macro-theory. His
treatment of the demand for labour, in particular, is inconsistent with the
Clower-Leijonhufvud interpretation. Instead of focusing on the labour-
market consequences of disequilibrium in the market for current output,
Keynes accepted the classical view that unemployment in a depression
derives from an excessive real wage rate. Keynes had in mind nothing like
Clower’s interpretation of the consumption function and simply offered
anad hocformulation instead. Neither Keynes’s writings nor the ensuing
controversy and popularisation accomplished a shift away from a classical
analytical with such writers as Patinkin and Clower.
Professor Allan Meltzer is another economist who does not accept
the Clower-Leijonhufvud interpretation of theGeneral Ļeoryas empha-
sising the supposedly contagious failure of markets to clear because of
sticky or malcoordinated prices (MeltzerȀȈȇȀ, esp. pp.ȃȈ,ȄȈ; also Meltzer
ȀȈȇȂ). Keynes was indeed concerned whether investment would be ade-
quate to fill the savings gap at full employment. Investment tended to be
inadequate—not always, but on the average over time—because investors’