Rene Roy, the Separability and Subordination of Needs, and Post Keynesian Consumer Theory
Lavoie, Marc, History of Economics Review
Abstract: This paper introduces readers to the translation of a lesser-known article by Rene Roy (1943). In that paper, Roy constructs a consumer who has all the features of the current Post Keynesian consumer. Goods are ordered in groups, independently of prices; substitution effects only play a role within groups; income effects explain how consumers move from one group to another; changes in the prices of basic necessity goods have an impact on the demand for goods of higher order, but prices of the commodities belonging to these superior groups have no feedback effects on the demand for basic necessity goods.
The text that follows is a translation of an article by Rene Roy that was published in French in 1943, in the journal Econometrica. Roy himself is still well-known to microeconomists--indeed his name was granted an entry by Maurice Allais (1987) in The New Palgrave--mainly because of the so-called Roy Identity. (1) However, his 1943 article has nearly gone into oblivion, and indeed Allais (1988), in his long review of Roy's work on consumer theory, does not consider that article to be among the important papers written by Roy. According to the Social Science Citation Index, since 1970 the 1943 Roy paper has been cited only three times in economics journals, including twice in works of mine, where, despite its poor citation record, I have argued that the paper was well worth reading. Having so titillated the attention of Peter Earl, an author of two wonderful books on the economics of an alternative consumer theory, he has convinced the editor of this Review that the 1943 Roy paper was of enough merit to require a translation, for the sake of all those heterodox economists with some interest in consumer theory who cannot read French.
Why is Roy's article so important for heterodox or Post Keynesian consumer theory? I have argued elsewhere that although Post Keynesians have written little about consumer theory, there is a substantial amount of similarity and coherence in the claims that they have been making more or less independently, as can be read from passages or chapters written by authors such as Philip Arestis, Alfred Eichner, Edward Nell, Luigi Pasinetti, Bertram Schefold and Joan Robinson, as well as in the works of Peter Earl. (2) The great thing about Roy's article is that it anticipates the arguments made by those Post Keynesian authors. Roy's paper is an excellent heuristic introduction to the main principles that constitute an alternative and more realistic view of consumer choice. These main principles, I have argued in various places, are the following:
(i) The principle of procedural rationality;
(ii) The principle of satiable needs;
(iii) The principle of separability of needs;
(iv) The principle of subordination of needs;
(v) The principle of the growth of needs;
(vi) The principle of non-independence.
(vii) The principle of heredity.
All these principles can be found, some more explicitly than others, in Roy's 1943 article. As I said earlier:
In his little-known article, Roy (1943) puts forward several propositions that would seem to constitute the core of a post-Keynesian theory of consumer choice and that are quite compatible with the rest of post-Keynesian theory. For instance, Roy denies that the preferences of consumers (demand) explain the prices of consumer goods, thus rejecting the neoclassical view of value based on scarcity. He rejects the generalized use of indifference curves, for he believes that such a representation is not a realistic representation of human needs. He argues that goods can be, to some extent, separated into groups of goods with common features, substitution effects playing an important role within a group, but not in-between groups. In addition, he believes that these groups can be ordered in a hierarchy, with consumers moving from one group of goods to another, as their most urgent needs get progressively satiated and as their incomes rise. …