Crotty challenges Samuelson's Keynes

When I type marxists into the URL box in my browser, I get links to the first few chapters of The General Theory, and to the last couple. Not so much to the middle chapters, where one finds the "highly abstract argument" and the "much controversy" that Keynes promised in his Preface.

I don't often go to the middle chapters. I always figured that was because I'm not an economist, and the middle-chapter stuff has a hard time getting thru my thick skull. I still figure that's true. But now I have another reason for preferring the first and last parts of Keynes's book: I found James Crotty's PDF on "the Stages of Development of the Capitalist Economy".

Crotty writes:

The generally accepted interpretation of The General Theory, pioneered and popularized by Paul Samuelson, suggests that the consumption, marginal efficiency of capital, liquidity preference, and labor supply functions constitute the scientific core of the book; the comments, observations and asides that surround this core, it is assumed, have little scientific value.

My favorite parts of the book have "little scientific value". Ouch. But they're still the best parts.

Jim Crotty doesn't accept the generally accepted interpretation. If that interpretation is correct, he says, then

The General Theory must be a model of capitalism-in-general, equally applicable in all times and in all places where the capitalist system dominates economic activity. I argue to the contrary that such a characterization of Keynes's theory is profoundly mistaken.

Furthermore, he says

In The General Theory and elsewhere Keynes made evident his belief that no all-purpose, institutionally abstract macromodel can adequately capture the processes and outcomes of distinct phases or stages of capitalist development ...

Now we're getting to the good stuff: the stages of capitalist development. And indeed, the title of Crotty's PDF should have given me a clue. The thick skull strikes again.

If Keynes's macrotheory is indeed historically contingent, then he should have developed different versions of his theory to describe and analyze institutionally distinct historical stages of capitalism. I argue that Keynes provided the outlines of a theory of the evolution of two distinct stages of capitalist development (and anticipated the transition toward a third) in which each stage is assumed to possess unique institutions and agent practices that differentiate its processes and outcomes from the other.

In other words, if Crotty is right about this, then we would expect to find in Keynes's work a partitioning of capitalism into stages. And, Crotty says, we *do* find this partitioning into stages.

To me, this is exciting stuff. I have always been fascinated by the many brief moments in the General Theory where the evolution of capitalism is brought to light. Both the General Theory and Essays in Persuasion. I wrote of it last year, and five years back.

Crotty continues:

Specifically, Keynes argues that nineteenth-century capitalism differed in institutional and class structure as well as in agent behavior patterns from post World War I capitalism. Because of these institutional differences, nineteenth-century capitalism exhibited impressive economic growth and stability, whereas twentieth-century capitalism was prone to stagnation-depression as well as to bouts of extreme instability.

It becomes important. We're talking about a time when capitalism was good, and a time now when capitalism is not so good. And in this time, when capitalism is not so good, there is a sort of nostalgia for the better times. We see many politicians and economists call for a return to the policies of the nineteenth century in hopes of restoring good to capitalism. Foolhardy, I think. I sympathize with their goal, but not their methods. Not sure yet where Crotty stands on that.

But let me quote him one more time, to wrap up what he has been saying:

Clearly, these sets of profoundly different outcomes cannot be comfortably generated by a single Keynesian theory of something called competitive-capitalism-in-the-abstract. This being the case, the question naturally arises as to precisely what The General Theory is a theory of, and in what sense it is general.

That leaves us at the top of page two in J.R. Crotty's 16-page PDF.