John R. Commons and John Maynard Keynes on Economic History and Policy: The 1920s and Today
Whalen, Charles J., Journal of Economic Issues
In August 1925, John Maynard Keynes addressed the Liberal Party's Summer School. His presentation divided the pressing questions of the day into five categories--peace, government, sex, drugs, and economics--and each was discussed in turn. When Keynes reached the last category, containing the questions "on which I am most qualified to speak," he probably surprised those assembled by structuring the commentary around an analysis he attributed to John R. Commons (Keynes 1972, 303-306). (1)
Keynes presented a lecture the following month in Moscow on "The Economic Transition in England," and again the core of the talk came from Commons's analysis (Keynes 1981, 438-442). What did Commons offer that Keynes found of vital importance to the major economic questions of the day? How can a familiarity with Commons's writings help inform readers of Keynes's two lectures? And, how did Keynes learn of Commons's analysis? Exploring the first question spotlights lesser-known aspects of Commons's scholarship and has relevance for the contemporary development of "evolutionary Keynesianism;" addressing the second clarifies ambiguities in Keynes's lectures; and providing an answer to the third resolves an intriguing puzzle in the history of economic thought.
Scarcity, Abundance and Stabilization
Keynes's August 1925 address--entitled "Am I a Liberal?"--identified Commons as "an eminent American economist" and among the first to recognize "we are now living" in the early days of a worldwide transition in economic eras. In particular, Keynes reported that Commons divides economic history into three epochs (Keynes 1972, 303-306).
The era of scarcity extended from the earliest days of human civilization until about the late eighteenth century. Its phases included tribal communalism, feudalism, and mercantilism. The period was characterized by shortages of the material means of life--"whether due to inefficiency or to violence, war, custom, or superstition"--and minimal individual liberty (Keynes 1972, 304).
The era of abundance followed and lasted until the late nineteenth century. Its abundance was the product of the industrial revolution and the emergence of factory production. The period was also characterized by the rise of individualism and laissez faire.
The era of stabilization, the latest epoch, emerged because individual liberty was now constrained through collective action, initiated by either the public or private sectors. Such constraints emerged as a way to control economic booms and busts at the national level and to address labor-management disputes and other conflicts at the enterprise and industry levels. Stabilization took various forms across the globe, including Italian fascism and Russian communism; in the United States and England, it appeared via business combinations, industry-wide collective bargaining, and government regulation.
The shift to an era of stabilization in the Anglo-American world was far from a settled matter, Keynes stressed. "The transition from economic anarchy to a regime which deliberately aims at controlling and directing economic forces in the interests of social justice and social stability, will present enormous difficulties both technical and political," he warned. Addressing such challenges was Keynes's preoccupation, and he told his audience that this should also be the aim of the Liberal Party: "We have to invent new wisdom for a new age" (Keynes 1972, 305-306).
Saving Capitalism by Making It Good
In John R. Commons's autobiography, he writes that his goal was to "save capitalism by making it good" (Commons 1934a, 143); a similar sentiment runs through Keynes's "Am I a Liberal?" and "The Economic Transition in England." While Keynes's two essays--which are devoid of endnotes and bibliographical references are critical of "individualistic capitalism," they also contain his belief that socialism offers no constructive alternative to reformed capitalism. …