Reply to Ahiakpor

James Ahiakpor has made a number of important contributions to the revisionist view of John Maynard Keynes and his economics. And, although some may agree with his interpretations, on the following we must disagree with him entirely. First, with regard to the relationship between Richard Kahn’s employment multiplier and Keynes’s expenditure multiplier: here Ahiakpor has restored the blurring of the distinction we have made between the two (see Darity and Young 1995, 2–3). In our 1995 paper, we suggested that Keynes was more influenced by Ralph Hawtrey than by Kahn in his development of the multiplier. However, Ahiakpor simply ignores this point altogether in his continued attempt—in paper after paper—to preserve what he sees as the validity of classical economics and its superiority over Keynes’s economics (Ahiakpor 1990, 1995, 1997). Indeed, Ahiakpor keeps trying to reconcile anomalies in the work of the classical economists with some ostensibly sound logic of their system. In this context it must be recalled that there are two central propositions of the classical system that Keynes correctly attacked: (1) the classical belief that the economic system will adjust itself to full employment and (2) the classical belief that money is neutral in some run (whether short or long). In our view, no matter how much Ahiakpor stretches it, Hawtrey’s construction of the multiplier is simply inconsistent with these two beliefs.

Second, with regard to the history of Hawtrey’s approaches to economic analysis we must also disagree with him. As he has focused upon our contention that Hawtrey exhibited “cognitive dissonance,” our detailed reply will be limited to this aspect of his comment only. For, as we will briefly show, cognitive dissonance characterized Hawtrey’s approach not only to the multiplier, but also his approach to factor price equalization.

Before going on to illustrate these points by reference to correspondence found in Hawtrey’s papers at Churchill College, Cambridge, however, one thing must be made clear. Since its introduction by Leon Festinger in his book A Theory of Cognitive Dissonance (1957) over four decades ago, cognitive dissonance, most observers have come to accept, not only means the screening out of discordant information but is based upon the principle that dissonant (unbalanced or incongruous) cognitions tend to become more congruous and better balanced through a change in the cognitions of the individual that bring this about.

The test of cognitive dissonance in Hawtrey’s approach to the multiplier, then, is not how much he agreed with its efficacy. Rather, the test is whether he himself utilized the multiplier concept in his critique of Keynes—on the theoretical and policy levels—and whether the nature of this critique changed over time based upon Hawtrey’s own utilization of the investment multiplier in his critique. In this regard, we would think that since Ahiakpor has read the 1951 Hawtrey-Harrod correspondence relating to these points, he would also have recognized that Hawtrey utilized the multiplier in his exchange with Harrod on at least two occasions: on 30 May 1951 (cited in Young 1987, 132) and again on 15 June 1951 (Hawtrey Papers, file 10/49), where he said regarding the rate of interest, “the market rate might be above the conventional rate, and M2 consequently zero, yet the market rate might be too high for full employment. If M1 is so restricted that Y cannot expand to the extent necessary to give full employment at the existing wage level, r must be high enough to maintain the relation KI = Y,” where, in Hawtrey’s own definition, K is the multiplier and I is investment (see his letter of 30 May 1951 in Young 1987).

Ahiakpor’s insistence that Hawtrey’s attitude toward the multiplier became more negative, based in the main upon the passages he cited from the 1950 edition of Currency and Credit, is easily refuted by the change in Hawtrey’s view regarding the efficacy of fiscal and monetary...