In the years following the publication of A Theory of Consumption (1923), Hazel Kyrk's book became the flagship of the field that would later be known as the economics of consumption. It stimulated theoretical and empirical work on consumption. Some of the existing literature on Kyrk (e.g., Kiss & Beller, 2000; Le Tollec, 2020; Tadajewski, 2013) depicted her theory as the starting point of the economics of consumption. Nevertheless, how and why it emerged the way it did remain largely unexplored. This chapter examines Kyrk's intellectual background, which, we argue, can be traced back to two main movements in the United States: the home economics and the institutionalist. Both movements conveyed specific endeavors as responses to the US material and social transformations that occurred at the turn of the 20th century, notably the perceived changing role of consumption and that of women in US society. On the one hand, Kyrk pursued first-generation home economists' efforts to make sense of and put into action the shifting of women's role from domestic producer to consumer. On the other hand, she reinterpreted Veblen's (1899) account of consumption in order to reveal its operational value for a normative agenda focused on "wise" and "rational" consumption. This chapter studies how Kyrk carried on first-generation home economists' progressive agenda and how she adapted Veblen's fin-de-siècle critical account of consumption to the context of the household goods developed in 1900–1920. Our account of Kyrk's intellectual roots offers a novel narrative to better understand the role of gender and epistemological questions in her theory.
Hazel Kyrk's recognised contributions include a shift in analytic focus from production to consumption, pioneering work to measure household production as part of family income, empirical studies of family behaviour, and contributions to policy. But her account of 'wise' consumption and its intersection with 'high' living standards is not well understood. The three aims of this chapter are to explain 'wise' consumption across Kyrk's three major books, to consider its role in Kyrk's empirical studies, and to explain why it fell into oblivion. Tackling what Wesley Mitchell described as the 'most baffling of difficulties', Kyrk explained what constitutes a family's 'good' in a manner that was critical of mere emulation. Her 1923 book required that wise consumption include new and personal elements. Her 1929/1933 book detailed five qualitative criteria (balance between interests, full and varied experiences, originality, rational sources of satisfaction, and the use of scientific information). But her 1953 book weakened this normative language, reflecting Margaret Reid's view that Kyrk's account was too demanding. Although Kyrk felt wise consumption avoided paternalism, her peers disagreed (Hoyt, 1938/1945; Reid, 1938/1945). We close with some problems with Kyrk's account and a brief consideration of its continuing relevance.
This article responds to Daniel Kuehn's critique and expands on the discussion of James Buchanan's later essay, which has received insufficient attention. The focus is on the 1965 revision of the "Virginia Plan for Universal Education" by Buchanan and Warren Nutter. While the revision is acknowledged by all, its significance is debated. The authors argue that Nutter and Buchanan's original contribution lies in contrasting implied majority rule with explicit proportional representation, a distinction not found in Milton Friedman's work. The period between 1959 and 1965 witnessed changes, including the development of an economic approach to constitutions and the attempt to prevent parents from using vouchers for integrated schools. The 1965 addition highlights the importance of alternative democratic decision rules and sets the stage for Buchanan's subsequent work on racially determined policies. Buchanan's involvement with racial issues extended beyond the voucher proposal, including his support for affirmative action. The addition to the 1965 voucher proposal addresses the impact of decision rules on minority well-being. The mischaracterization of minority concerns is addressed, drawing on Lani Guinier's book and quoting Buchanan's principles of fair representation. The essay concludes by emphasizing the importance of the 1965 addition in Buchanan's work on racial fairness and its connection to Lani Guinier's perspectives.
The conflict between institutionalism and neoclassicism in the 20th century has been investigated by scholars over the years. Many of them believe that in the postwar period, neoclassicism triumphed while institutionalism largely disappeared. The present chapter takes a very different view. The late 20th century represents a broad synthesis of neoclassical and institutional themes in a methodology we call pragmatic empiricism. That approach combines the mathematical model building and theoretical formalism of neoclassical economics with the institutional economist's data-driven statistical analysis and concern for developing institutional forms. We use as a case study the history of American locational economics from the 1930s to the present. The mixing of institutional and neoclassical themes is quite evident in the work of three young scholars at Harvard who effectively initiated American locational economics. In the postwar period, we find a series of outstanding, well-published papers that capture the spirit of the "founders." These papers do use more modeling, but they also focus on major institutional developments. A broader review of locational works is consistent with the pragmatic empiricism label. The history of locational economics supports the claim that institutionalism, far from disappearing, continues to provide fundamental questions and techniques for modern pragmatic empiricism.
Hazel Kyrk's contribution is the most advanced formulation of the economics of consumption as a social phenomenon, an approach to the analysis of consumption that, originated from Veblen's theory, was developed in the US in the early 20th century. This approach was part of a wider stream of empirical analyses of consumption expenditure that had begun more than a century earlier.Along with elements that can be traced back to the neoclassical tradition, in Keynes' analysis of consumption, we find original elements. The dependence of consumption expenditure on the level of income, which is essential for asserting the principle of effective demand, can also be found in a long tradition of empirical studies. In qualifying this relationship, Keynes uses theoretical elements echoing key insights of the economics of consumption as a social phenomenon. There is no documentary evidence that Kyrk or the economics of the social relevance of consumption came to Keynes' attention. It is possible, however, to develop reasonable speculative considerations to argue a link between Keynes' elaboration and both the empirical literature on the determinants of consumption and the economics of consumption as a social phenomenon. Keywords Kyrk History of consumption analysis Keynes' consumption function Institutionalism Consumption as a social phenomenon Citation Trezzini, A. (2024), "Hazel Kyrk, The Economics of the Social Relevance of Consumption and John Maynard Keynes' Consumption Function*", Fiorito, L., Scheall, S. and Suprinyak, C.E. (Ed.) Research in the History of Economic Thought and Methodology: Including a Symposium on Hazel Kyrk's: A Theory of Consumption 100 Years after Publication (Research in the History of Economic Thought and Methodology, Vol. 41D), Emerald Publishing Limited, Leeds, pp. 69-93. https://doi.org/10.1108/S0743-41542024000041D006 Publisher: Emerald Publishing Limited Copyright © 2024 Emerald Publishing Limited 1. Introduction With A Theory of Consumption (1923), Hazel Kyrk achieved the most comprehensive and articulate formulation of an approach to the analysis of consumption which was advanced in the US in the early 20th century. Developed mainly by women economists, this approach consists of theoretical, empirical, and historical contributions that developed principles originally theorized by T. Veblen. In its original versions, the approach is clearly independent and even in opposition to the principles of neoclassical analyses. This approach can be considered as part of a broader stream of analyses that studied household expenditures for different purposes. Mainly based on budget data, these studies offered some important insights into the behavior of consumption expenditure. Being essentially empirical, these works were largely independent of the theoretical principles of neoclassical theory. In the analysis of consumption proposed by Keynes in the General Theory, along with theoretical elements that can be traced back to traditional neoclassical analyses based on rational choice, we find strongly original elements. Our focus will be centered at first on the dependence of the level of consumption expenditure on the level of income, which, essential to the assertion of the principle of effective demand, was one of the main results of a long tradition of empirical analyses of household expenditures. In qualifying this relationship, then, Keynes uses elements that appear to recall the main principles constituting the approach to consumption as a social phenomenon of which Kyrk is the most advanced exponent. It is beyond doubt that Keynes used these elements in an entirely original way not only to construct his analysis of consumption but, more importantly, by making the latter a crucial element of a revolutionary theory of output. This was a purpose completely extraneous to previous theoretical elaborations. However, it is worth wondering whether the original part of the Keynesian elaboration on consumer spending may be considered as the result of an elaboration of elements that Keynes had selected in the theoretical and empirical literature on consumer spending. This chapter is structured as follows: the second section is devoted to summarizing the main principles of the economics of the social relevance of consumption as theorized by Kyrk and the other institutionalist economists. This approach must be conceived as part of a more general stream of analyses which we consider in the third section: that is, the early history of the (empirical) analyses of consumption both in Europe and, in particular, in the US; we shall try to highlight the emphasis that in this literature has always been put on the level of income and on households' social characteristics in determining their consumption expenditure. In particular, in the fourth section, the enunciation and generalization of Engel's law are considered. These analyses slowly reveal the relevance of the level of income in determining the expenditure on some particular categories of consumption goods or aggregates of them. In Section 5, we consider the innovative principles in the analysis of consumption in the General Theory which are introduced by Keynes himself as emerging from "the detailed facts of experience." The idea of the dependence of consumption on the income level recalls – Section 6 – the main result of the empirical literature on household spending. Section 7, on the other hand, highlights theoretical elements that recall the main findings of the economics of consumption as a social phenomenon. Although it is impossible to document that Keynes knew the empirical literature on the determinants of consumption, on the one hand, and the economics of consumption as a social phenomenon, on the other hand, Sections 8–10 consider possible traces of connections between Keynes' intellectual activities and the streams of analyses considered in first sections of this chapter. Although speculative in nature, these considerations seem, however, reasonable. 2. The Approach Based on the Social Relevance of Consumption The economics of consumption as a social phenomenon was based on some core ideas asserted in Veblen's The Theory of the Leisure Class (1899), which in the subsequent years were developed by a group of women economists mostly belonging to the institutionalist tradition: Hazel Kyrk, Theresa Schmid McMahon, Elizabeth Waterman Gilboy, and Jessica Blanche Peixotto.1 In synthesis (see Trezzini, 2016, for a more extensive exposition), Veblen argued that the demand for consumption goods derives mainly from their social significance rather than their intrinsic utility. Households tend to consume the amount and the specific goods which they consider as an appropriate standard of respectability for their social class. Failure to do so could entail embarrassment, loss of social repute and self-respect. This is true for practically every rung of the social ladder. In any given period, aggregate consumption is then the sum of individual expenditures determined by the standards adopted by individual households. The social role of consumption implies a continuous tendency of individuals to adjust their consumption standards to emulate the behavior of the immediately superior class, thereby displaying a real or alleged membership of it.2 As income increases, the tendency to emulate makes the expenditure of each household quickly expand. Once income has been at a given level for a sufficiently long period of time, the corresponding level of consumption becomes a new standard. This is true at both the individual and the aggregate levels. On the contrary, when the level of income drops, households seek to maintain the standard of consumption to which they are accustomed in order not to lose social prestige and self-esteem. Consumption expenditure tends to be, within certain limits, irreversible. As soon as the income level rises again, consumption expands from the level previously acquired and maintained during recessions. Through this cyclical behavior, the standard of living and consumption expenditure tend to increase along with the process of growth.3 In 1912, Wesley C. Mitchell, a prominent figure of institutionalism, restated that, far from being the result of rational choices, consumption is determined by the reference to socially determined standards. This is due to the fact that "spending money" is a "backward art" which is much less technologically developed than the art of producing goods. Hazel Kyrk was the leading figure of the group of women economists that developed Veblen's ideas. Her contributions were in two directions. First, she made the conception of saving implied by Veblen's arguments explicit. Both at the individual and the aggregate levels, savings have to be conceived as a residual of income, which emerges once the expenditure for the socially determined standard of consumption has been satisfied. This residual nature of savings is a crucial feature of this approach which, more than others, makes the original versions of the approach inconsistent with the principles determining consumption expenditure in the neoclassical theories.4 The analyses based on the intertemporal maximization of utility, in fact, imply that the determination of saving and consumption are two faces of the same process of intertemporal allocation of resources. Savings cannot be conceived as a residual of the process of determination of consumption any more than consumption can be conceived as a residual of the process of determination of saving. As a second contribution, which must be considered, like the former, as an explication and systematization of suggestions present in Veblen's work, Kyrk stressed the role played by technological progress in the process of consumption expansion.5 Any consumption expansion is only possible when a surplus of income over and above the amount corresponding to the established consumption standard arises. Technological innovation, by reducing the prices of traditional goods relative to monetary wages, may increase real income, facilitate the onset of these surpluses, and make it possible to widen the consumption expenditure. Technological product innovation widens the range of choice for individuals who have surpluses of income over the acquired standard. At first, it makes new goods available generally as luxuries for higher classes. Process innovation, then, may reduce the relative price of luxury goods making their consumption possible for the classes that are next in line. The reduction of prices of traditional goods relative to monetary wages may also fuel this process through the expansion of emulative consumption. In this process, we find the meaning of Kyrk's statement that "invention is the mother of necessity" (Kyrk, 1923, p. 209). It is worth recalling a theoretical issue: two other women economists studied this mechanism in connection with the process of accumulation and growth. Theresa Schmid McMahon (1925), adhering to Say's law, considered the expansion of consumption due to the mechanism of emulation as a factor constantly reducing the growth of the economy. Elizabeth Waterman Gilboy, by contrast, considered Kyrk's analysis of consumption (explicitly recalled in Gilboy, 1932, pp. 626 and 630) and argued that the process of consumption expansion due to its social relevance can be a driving force in the growth process. In particular, she argued that this process was at the basis of the demand expansion that played a crucial role in the British Industrial Revolution.6 The principles of the social relevance of consumption are then theoretically consistent both with Say's law, as in McMahon's analysis, and with a key role of demand in the growth process, as in Gilboy's contribution. This theoretical neutrality with respect to the determinants of output is another sign of their independence from the neoclassical principles, which, on the contrary, are compatible only with the irrelevance of aggregate demand expansion in the determination of output, that is, with the modern reformulation of the Say's law. It is also worth recalling the work of another woman economist, J.B. Peixotto, who developed two studies, based on family budgets, analyzing income and consumption patterns of particular social groups. In an early 1927 paper, she explicitly states that her analyses "verify Veblen's theory of the relation between earning capacity and spending" (Peixotto, 1927, p. 120). Peixotto considers the families of University of California teachers and argues that they tend to spend according to the consumption patterns of the "professional class" to which they culturally and socially belong. Having lower incomes than members of the professional class, however, families of academics tend to adopt higher consumption standards than they can actually afford. Budget data of families of typographers in San Francisco are studied in Peixotto (1929). These workers were particularly highly paid. Their households tend, according to Peixotto, to adjust their habits of consumption to households belonging to classes which are socially considered higher, that is, that of "business and professional men."7 3. Early Empirical Studies on Poverty and Workers' Conditions The emergence of this theoretical approach to the analysis of consumption in the US can be placed in the context of the long, rich history of analyses of household consumption expenditure. The beginning of this history is traced by Stigler (1954)8 (who relies heavily on Higgs, 1899) to the studies of poverty in late 18th-century England. The purposes of these analyses were political; at first, they were meant to identify the conditions of deprivation of the poor in order to intervene to support them and then they were used to determine taxation or to compare wages of industrial workers in different national economies. Since the second half of the 19th century, these data were also treated statistically in order to construct "samples" representative of a population's behavior. In all these analyses, social and class characteristics of households were considered crucial. The clergyman David Davies collected data on the budgets of 127 families in his and other parishes and reported their contents in detail in The Case of Labourers in Husbandry (1795). Davies advocated the establishment of a minimum wage. A second work cited as the origin of consumption analysis is The State of the Poor (1797) by Sir F.M. Eden, a monumental study, containing a history of the poor and Poor Laws, but also a great deal of details on the budgets of families in various counties in England. These works were followed by numerous others in the first half of the 19th century in the UK which were published in the volumes of the Journal of the Royal Statistical Society. In the following years, analyses of household budgets were often developed in connection with the solution of political problems. Arthur Young, an agronomist founder of the Annals of Agricultures and secretary of the Board of Agriculture, was commissioned during the Napoleonic wars to estimate the necessary expenditures of a working man's family to determine possible taxation.9 Moreover, Higgs (1899) argues that William Cobbett, an English intellectual and politician, strongly committed to the defense of the poor and an opponent to the Corn Laws, produced, in addition to historical studies and political pamphlets, surveys of the conditions of peasant families that he published in Rural Rides (1830).10 In these early works, budget data were considered as a special form of historical data and were summarized in the same way as non-quantitative historical data were traditionally summarized. Stigler (1954) argues that, beginning in 1848, two factors stimulated and modified this type of works which spread to many countries throughout Europe. The emergence of the labor movement made workers' conditions a political issue; on the other hand, in the field of quantitative analysis, developments took place both in the methods for collection of social data and, above all, in the theory of probability (by Laplace, Cournot, Poisson, Gauss) and thus in the elaboration of budget data themselves. La Play, the father of scientific family-budget studies, published in 1855 Les Ouvriers Européens, in which he studied in detail the characteristics and expenditures of four English families chosen with the help of public authorities as representative of the typical English family. According to Higgs, several works developed "in the wake of La Play"; in particular W.L. Sargant (1857), while R.D. Baxter (1860)11 developed a study on taxation on the basis of an analysis of family budgets. Finally, Leone Levi (1885) published a study on wages in Britain.12 In 1889, the Board of Trade founded the Labour Statistic Department which issued a Blue Book, Labour Statistics (1889), entitled Returns of Expenditure by Working Men. In 1893, Charles Booth, president of the Royal Statistical Society, devoted his Opening Address of the annual meeting to an investigation of family budgets of the people of London based on data from the Census of 1891 (Booth, 1893). The Economic Club in 1896 published a collection of studies in Family Budgets probably developed under the influence of a French statistician, M.R. Lavollée, a colleague of La Play who, in 1896, had published a study on the consumption expenditure of working classes in 11 European countries. After a review of studies on Family Budgets, Higgs (1899) develops a study of the spending of English workers in which he tends to argue that poverty is the result of waste. In his argument, there is a reference to display motives for wasteful consumption; he argues that in English parks, on holidays, servants dressed as ladies could be encountered and that poor families held sophisticated funerals for their relatives. The work on consumption expenditure was a vast field of analysis. In a review work, widely cited in historical reconstructions of empirical analysis on consumption, Williams and Zimmerman (1935) examined and summarized over 1,500 family-budget studies carried out between 1875 and 1935, developed all over the world. The number of works reviewed is surprisingly high, especially in view of the development of techniques of data gathering and statistical processing. Within this large body of works, moreover, those made in the US seem to be fairly significant. It is important to stress that these studies were originated to analyze the consumption expenditure of specific social groups such as the poor and workers. All the later extensions maintained a link between consumer spending and the class, group, or category to which it belonged. This was particularly true in the US, where the differences between rural or urban people and white and black communities became a crucial issue. 4. Engel's Law: The Emergence of a Connection Between Income and Consumption Expenditure Within this stream of analyses, the identification of Engel's law and its possible extensions led to the identification of the level of income as the main determinant of the expenditure on some – increasingly large – aggregates of consumer goods. Ernst Engel was one of the first to apply the idea that regularities could emerge from a study of budget data and that these regularities indicated laws of consumer behavior. In his 1857 work, Engel aimed to estimate the composition of Saxony household expenditures. He argued that in order to have a stable economy, the proportions of the labor force in different productive sectors should be the same as those of household expenditures. On the basis of data for 153 Belgian households, divided into three socio-economic groups, Engel estimated rather roughly the consumption expenditures of the corresponding three classes of families in Saxony and, from those, the aggregate consumption of Saxony and its composition. In this context, Engel proposed a law of consumption: "the poorer a family is, the greater the proportion of its total expenditure that must be devoted to food" Engel (1857, pp. 28–29). He also asserted that the richer a nation, the lower the proportion of food expenditure to its total expenditure. A large number of subsequent empirical analyses focused on generalizations or deepening of this "Engel's law" in order to study the evolution of the proportions of spending on other necessities, or other kind of expenditures, as income changes. In 1875, Carrol Wright, a commissioner of labor statistics in Massachusetts, put forward a contribution that, for the time, was a model of statistically advanced and comprehensive analysis. On the basis of budget data of 397 working families in Massachusetts, he generalized Engel's law by studying not only the relative proportion of expenditure on subsistence but also considering its components and concluding that as income increases, the proportion spent on "secondary expenditures" becomes greater. Wright also analyzed the proportion of child-rearing expenditures in relation to income and the number of children. From our point of view, it is important to note that Wright (1875) also reached conclusions regarding the relationship between income and the saved share of it, stating that: "the higher the income, generally speaking, the greater the saving, actually and proportionately."13 Moreover, he interpreted negative savings as evidence of poverty. This extension of Engel's law to saving attracted almost no attention while other generalizations, argued much less soundly, had far greater resonance. Wright's work opened up a strand of empirical research on consumer spending in the US, where, in the second half of the 19th century, the cultural ground was very fertile. In that period, the widespread expansion of investment in knowledge and education, also due to the westward movement of population, led to the founding of universities which were to become world leaders in economic research, and the growing empirical orientation of economic research also led to the founding of important research institutions.14 In the US, social, cultural, and religious differences were more relevant than in Europe, and thus, these factors were more explicitly considered in empirical analyses. F.L. McVey published "An exercise in Expenditure" in the Journal of Political Economy (McVey 1897). He reported an experiment performed on a class of 36 young people taking an economics course at the University of Minnesota. They were asked how they would spend $10,000. He reports the divisions of the total amount among various items proposed in the questionnaire. What is most relevant is the meticulousness with which the composition of the group by gender, "race," age, size of hometown, and social class is specified: all factors that were evidently viewed as affecting the composition of consumption expenditure. William Ogburn was a key figure in the empirical research on family spending: according to Stigler (1954, p. 101), the analysis in Ogburn (1919) constitutes an early example of "application to budget data of correlation and curve fitting techniques." On the basis of 200 household budgets collected in the District of Columbia in 1916, Ogburn calculated the relationship between the proportion of each expenditure category to total expenditure and household income and household size. These two variables were reduced to a single number through the use of an "adult equivalent" scale. Through this analysis, Ogburn formulated and tested the hypothesis that individual household savings were an increasing function of the level of disposable income. Such "Ogburn hypothesis" prompted Thomas (1989, p. 133) to note that this work was extremely relevant to the history of macroeconomics in that it has to be considered, together with the work by Wright, as the origin of the statistical analyses on consumption of the 1930s, apparently generated by the General Theory. The estimate by Ogburn represents an empirical estimate of a "Keynesian" saving function developed 16 years before the General Theory. Thomas' reconstruction overlooks, however, a precedent that seems worth mentioning: the Italian economist Gustavo Del Vecchio as early as 1912 had studied a function which is very similar to what is called the Keynesian consumption function. Del Vecchio (1912a, b, c) aimed to criticize a work by another Italian economist, Gini (1911a, b), who estimated the demand for subsistence goods as an inverse function of their prices. By taking up the tradition of studies that extend Engels' law, Del Vecchio proposed a function which expresses the relationship between food expenditure and income: c = a + b log10 Y where c is food expenditure and Y is income (or total expenditure). Del Vecchio refers to consumption for food and housing and not total consumption; moreover, he uses either total expenditure or income depending on the data available for the different countries, thus generating an ambiguity. However, the similarity with Keynes' consumption function is striking. In this function, the marginal propensity to consume decreases as income increases.15 Del Vecchio fits this function to budget data and calculates a "consumption elasticity index" to income. We may thus point out that the US empirical works aiming at extending Engel's law lead to identify a dependence, estimated even quantitatively, of saving (and consumption) on disposable income. All of the works developed in the US, however, have also a significant peculiarity: they place particular emphasis on the social characteristics determining the composition of consumer spending. In this way, they constitute the context in which the analyses of Kyrk and the other institutionalist economists developed. Ogburn's analysis (1919) is particularly significant in this respect, as it takes up the principles put forward by Veblen that will be further developed by Kyrk and other institutionalist women economists. Indeed, Ogburn assumes that consumption is socially determined, stating that the average composition of consumption baskets changes with changes in the relative position of the consumption unit on the social scale. While some components of these baskets, such as housing and clothing expenditures, increase proportionally with income, others, less visible in nature, change less than proportionally. Later, in a 1923 study on the effect of current living standards on wage determination, Ogburn writes: "there is much evidence to show that workers' families will go without the necessary food, clothing, and warmth in order to get recreation or purchase services or goods that have to do with social standing" (Ogburn, 1923, p. 121). We have already mentioned the work of Jessica B. Peixotto who studied the consumption expenditure of households of particular social groups – academics and typographers – assuming in their behavior both the emulation of consumption of higher classes and the irreversibility of consumption. We may thus reach a first conclusion: before the General Theory, household consumption analysis was a wide field of research both in Europe and in the US In this early stage of the empirical analysis, both the level and composition of consumption expenditure were related to the level of income. Initially, this happened because the focus of the analyses was the study of poverty and, later, because Engel's law emerged and attempts were made to generalize or modify it. Also, in the American studies, the relationship between consumption and income was assumed to be different for different areas (rural and metropolitan) or community characteristics (whites and blacks). In this environment, institutionalist women economists developed the approach to the analysis of consumption of which Kyrk was the leading figure and which was based on the social relevance of consumption. 5. Keynes' Analysis of Consumption Bearing in mind this reconstruction, we may now consider Keynes' analysis of consumption. In Book III, Chapters 8–10, of the General Theory, Keynes presents a theoretically heterogeneous treatment of the determinants of consumption expenditure. As is known, Keynes assumes that the level of consumption expenditure depends on the level of current income, based on a functional relationship which he defines as "propensity to consume." Then, Keynes considers other objective16 and subjective factors that affect consumption. A discussion of the objective factors affecting consumption, different from the level of income, although meaningful of Keynes' attempt to consider structural and institutional factors, appears relatively superabundant with respect to the purposes of this chapter. Among these factors, however, it is worth stressing the reference to the possible effect on consumption of changes in income distribution (determined by changes in monetary wages which do not correspond to proportional changes in prices). With respect to subjective factors, Keynes states that they are essentially those considered by traditional theory: "the analysis of these factors raises no point of novelty" (Keynes, 1936, p. 107). He also specifies that they evolve very slowly and are therefore relevant to a historical investigation or comparison between one social system and another, but they can be considered as given in his short-period analysis of the determination of the level of activity: "though not unalterable, are unlikely to undergo a material change over a short period of time except in abnormal and revolutionary circumstances" (Keynes, 1936, p. 91). The link between these subjective factors and traditional theory leads Keynes to discuss, at several points, the possible dependence of consumption on the level of the interest rate. As is known, in traditional theories, such dependence affects the allocation of income between consumption and saving
Hazel Kyrk, one of the first women economists at the Economic Department of the University of Chicago and author of A Theory of Consumption (1923), conducted groundbreaking research for the Bureau of Home Economics of the US Department of Agriculture and the Bureau of Labor Statistics. Kyrk made a considerable contribution to the development of standards for a "decent living," the Consumer Price Index, and the conceptualization of what would later turn into the definition of the poverty line. This chapter evaluates Kyrk's use of eugenic notions of gender and race that were widely used in Kyrk's day. This chapter shows that eugenic reasoning impacts Kyrk's theoretical work only superficially but does structure her research on consumption standards through her focus on the white middle-class family as the unit of analysis for consumer behavior. This chapter also makes clear that the American Institutionalist approach to consumer behavior, rather than marginalized and side-tracked due to a lack of theoretical progress, was relegated to the margins of economics science together with the research of women economists into Home Economics departments and policy research at government institutions.
This chapter tells the story of how the concept of Pareto efficiency was shipped from Lausanne to the modern US theory of competitive general equilibrium, focusing on the specific role of Maurice Allais. It identifies similarities in both epistemological approach and theoretical achievements realized first by Pareto, then by Allais, and finally by Debreu and Arrow and Hahn. It also shows that these similarities are not casual, since historical circumstances account for the influence of Pareto on Allais and later of Allais on Arrow and Debreu.
The goal of this chapter is to reexamine the nature and structure of the military–industrial complex (MIC) through the works of John Kenneth Galbraith. MIC, or military power as he prefers, is a coalition of vested interests within the state and industry that promoted the military power in the name of "national security" for their interests. Galbraith's theory of giant corporations helps us understand the role of military corporations in the MIC. Moreover, he is a critical scholar in examining this topic because he was a political insider in the Roosevelt, Kennedy, and Johnson administrations and a prominent public intellectual against the Vietnam War. Against this background, this chapter has three parts. After explaining the development of military Keynesianism with respect to the main economic thoughts, it examines the history of the MIC and its impact on economic priorities during and after the Cold War through Galbraith's works. Finally, this chapter discusses MIC's relevancy today and evaluates Galbraith's prophecies.
In 1979, Galbraith wrote a manuscript titled "The Social Consequences of Inflation and Unemployment and Their Remedies." The manuscript was found in the John Kenneth Galbraith Personal Papers at the John F. Kennedy Library. The reasons for Galbraith to write the article might appear at first glance to be purely contextual. At the macroeconomic level, the United States was experiencing stagflation, a situation unseen since 1945, resulting in double-digit inflation rates and high unemployment. A policy debate was going on about the Phillips curve and whether there is a trade-off between inflation and unemployment. Milton Friedman challenged the Keynesian analyses of the Phillips curve in the mid-1960s (Friedman, 1977). Galbraith's 16-page draft manuscript provides us an incisive summary of Galbraith's views about the causes of stagflation and what can be done about it. He provides us with an alternative to the neoclassical synthesis of Samuelson and Solow and the neoliberal thinking of Milton Friedman and F.A. Hayek.
John Kenneth Galbraith's social balance theory is an important theme in many of his books, particularly The Affluent Society, The New Industrial State, and Economics and the Public Purpose. Galbraith's social balance theory states that forces driving private consumption in an industrial society will outpace the development and provision of public goods and services with consequences on the well-being of society (Stanfield, 1996, p. 49). The theory leads to several questions: (1) What is the specific relationship between private and public goods and consumption? (2) What is optimized with social balancing? (3) Does the relationship between private and public goods change over time? and (4) How do we evaluate the types of public goods we need? This chapter explores these questions and examines the type of public goods we need today to serve our communities better. For example, police presence and activities in many minority communities are now viewed negatively, as evidenced by the "defund the police" movement. Conversely, some have advocated for greater public spending on community mental health programs and new initiatives to deal with racism in communities.
Economists usually shy away from talking about power. They assume an economy comprised of many small and medium-sized firms, each competing for consumer dollars. This circumvents the problem of economic power. John Kenneth Galbraith, however, refused to ignore power. It stood at the center of his economics, and he saw it as a key reason the US economy thrived in the years following World War II (WWII). This chapter examines Galbraith's changing views regarding economic power. American Capitalism explains how countervailing power, or power on the other side of the market, solves the problem of economic power. In The New Industrial State, scientists and educated managers within the firm (the technostructure) mitigate the negative consequences of economic power wielded by large firms. The Affluent Society and Economics and the Public Purpose look to the government as the main check on corporate power. It does this through labor legislation or programs such as the New Deal and Fair Deal. This chapter then evaluates the different solutions Galbraith proffered to the problem of economic power. It contends that Galbraith got three things right when analyzing economic power. First, we no longer live in a world of scarcity due to oligopolistic firms. Second, capitalism was different in the post-WWII era because the US economy thrived and gains were shared widely. Third, Galbraith understood that power was unequally distributed – both between the public and private sectors and within the private sector itself. On the other hand, Galbraith was overly optimistic in believing the market economy or the public sector could counter corporate power.
Do digital technologies of early 21st century capitalism promote or reduce consumer sovereignty? This chapter addresses this question by examining John Kenneth Galbraith's critique of consumer sovereignty during the post-war period of industrial society and looks at the insights he provides to understand the impact of platform capitalism on consumer sovereignty today. This chapter has the following sections: (1) I review the main postulates of Galbraith's theory; (2) I highlight the main differences between traditional advertising and online behavioral advertising; (3) I explain how online behavioral advertisement strengthens Galbraith's dependence effect and revised sequence theories; (4) I then discuss normative challenges raised by digital platform corporations to individual sovereignty; and (5) finally, I argue that platform capitalism is a mature form of Galbraith's "new industrial state."
Warren Nutter and James M. Buchanan did not revise "Universal Education" to turn against providing tuition grants to segregated schools in 1965. Their revised text contains no call to expel segregation academies from the tuition grant program and does not even express disapproval of the goals or the work of segregation academies. Recent claims to that effect by Fleury (2023) and Levy and Peart (2023) cannot be sustained by either textual or contextual evidence.
The rise of the regulatory state during the Gilded Age was closely associated with the development of Institutionalist ideas in American academia. In their analysis of the emergent regulatory environment, Institutionalists like John Commons opera-ted with a fundamentally marginalist theory of value and distribution. This engagement is a central explanation for the ul-timate ascendancy of neoclassical economics, and the limitations of the regulatory environment that emerged in the Progres-sive Era. The eventual rise of the Chicago School and its deregulatory ambitions did constitute a rupture, but one achieved without rejecting preceding conceptions of competition and value. The substantial compatibility of the view of markets underlying both the regulatory and deregulatory periods is stressed, casting doubt about the transformative potential of the resurgent regulatory impulse in the New Gilded Age.
The paper discusses conceptual links among Hazel Kyrk’s A Theory of Consumption (1923); the overall work of Thorstein Veblen, and Wesley C. Mitchell’s essays on spending and money. The three authors are concerned with transformations in production, related changes in the organization of consumption, and the effects on people. The approach is based on reading Kyrk’s book in light of an integrated view of Veblen’s overall work. The paper explains how Mitchell’s essays on money and spending built on Veblen’s work and discusses their relevance for understanding Kyrk’s book as conceptually linked to institutional economics. The paper delineates the following commonalities: conception of living humans and money as an institution; distinction between business and industrial concerns; connection between distribution, waste, and consumption; and Veblen’s “machine process” of standardization in production and its relation to consumption. The paper brings more detail to the conceptual and theoretical discussion of Veblen’s influence on Kyrk’s book.
