vol. 57, no. 2 (January), 1991, pp. 868-870           

 

Macroeconomic Problems and Policies of Income Distribution:
Functional, Personal, and International 
edited by Paul Davidson and Jan A. Kregel 
Aldershot, England and Brookfield, VT: Edward Elgar Publishing Co., 1989, pp. x, 292 

Articles in this collection are loosely tied to one another by themes that have come to be associated with the Post Keynesian tradition. The book is an outgrowth of a conference on income distribution sponsored by the College of Business Administration of the University of Tennessee and the Journal of Post Keynesian Economics and organized by the book's editors. Of the nearly forty papers presented in June 1988 in Gatlinburg, TN, eighteen representing the work of twenty-one authors from eight countries are included in the conference volume. 
       As in earlier collections of papers with similar themes, Post Keynesianism comes across as an odd mix of ideas: Marxist class conflict, classical production relationships, a dual market structure consisting of competition and oligopoly, mark-up pricing as a means of financing investment, and Keynesian demand failures. And as the title suggests, concern about the distribution of income is what gives relevance to these ideas. 
       In their introduction the editors note that interest in the issues of income distribution waxes and wanes with beliefs about whether or not price theory leaves any scope for distribution theory. Walras's system of general equilibrium, oróas the editors preferóGustav Cassel's similar system, accounts comprehensively for prices and quantities. For those who adopt this analytical framework, there is simply no basis for a separate theory of income distribution and no justification for policies aimed at redistributing income. Alternatives to general equilibrium theory, provided piecemeal by Sraffa, Robinson, Kalecki and Keynes, allow social and economic forces that have direct and first-order effects on the distribution of income to override the competitive forces that characterize a Walrasian or Casselian general equilibrium. The mix of ideas listed above represents alternative and sometimes complementary ways of dealing with the issues of income distribution. 
       But Post Keynesian ideas do not, by themselves, add up to an alternative theoretical framework. They are put forth, in effect, as amendments to Keynesian and Pre-Keynesian theory. Following Kalecki, several authors (Basil J.Moore is the most explicit) maintain that the prices of final output are simply "marked up" so as to finance planned investment. The reader is on his own, though, to guess whether the market power of oligopolists is determining or merely enabling and to wonder how investment expenditures get planned and how they might (or might not) be related to planned consumption expenditures. Textbook Keynesianism appears to be in play here: Aggregate supply is based on investment plans of unspecified origins; aggregate demand that does not measure up is taken to be demand failure. 
       Moore [p. 24] anchors his own views in an aphorism he attributes to Kalecki: "Workers spend what they get; Capitalists get what they spend." Allusions to this notion by several others, e.g. Andrea Szeg [p. 182], Fernando J.Cardim de Carvalho [p. 202], and A. Asimakopulos [p. 256], confirm its centrality in the Post Keynesian vision. The equality of income to expenditures is applied separately to workers, who passively spend all their wages on consumption goods, and to capitalists, who spend part of their profits on investment goods. The Post Keynesians pay little attention to the distinction between accounting identities and equilibrium conditions and leave to the reader's imagination the underlying behavioral relationships which might suggest how market participants are reacting to one another. Moving directly from the income-expenditure equality to the causal connections and taking their cue from Kalecki, they pose the key question about the direction of causation: For the capitalists, is it income that determines expenditures on consumption and investment, or is it the other way around? According to Moore and the others and with some amendments to accommodate time lags and to allow for different assumptions about workers, corporate managers, and government policymakers, it is the other way around. By making their investment and consumption decisions, capitalists, in effect, determine their own income. 
       Some readers may be willing to suspend disbelief in order to better understand those who subscribe to the Post Keynesian vision and to see where their thinking leads them. But those readers will also have to suppress the notions of consumption as an end in itself and of capital as a means that helps to achieve that end. In the lead essay, Kenneth Boulding provides aid to the sympathetic reader by putting consumption in its place. Perceiving economists as having an "obsession with consumption as a measure of economic well-being" [p. 10], Boulding shifts attention away from the flow concepts of consumption and income and towards the stock concepts of real capital and net worth. He admits, in passing, that there is some difference between consumption in the sense of eating dinner and consumption in the sense of capital depreciation but then remarks that "For the most part, however, consumption is undesirable" [Ibid.]. 
       While most of the theorizing throughout the book is in terms of functional distribution of income, most of the concern is about personal distribution of income. Several of the articles contain the characteristic sing-song recitation of the points along a Lorenz curve: "The top (or bottom) X percent of the population receives Y percent of the income." None of the authors actually suggests that X should equal Y, but none identifies any other optimal or benchmark distribution by which actual Lorenz curves might be judged. 
       Brian Nolan provides a refreshingly candid discussion of the "increasingly complex" linkage between changes in macroeconomic conditions and changes in the personal distribution of income. Influences through factor shares, the unemployment rate, and the inflation rate are all intertwined. With so many forces at work, the alternative techniques using time series or panel data leave the researcher with the challenge of teasing out the meaning of small annual changes in the personal distribution. 
       Difficulties in interpreting the data translate almost imperceptibly into scope for misinterpreting. In his study of income and family size, Timothy M. Smeeding reports cross-section data as if they implied cause-and-effect relationships: "[T]he decision to have two or more children exactly doubles the chances of poverty..." [p. 108]. This and similar statements are based on his Table 6.3 showing the "Income position of persons in various types of families ranked by adjusted income." Data of this sort, however, cannot justify such statements. Analogous data may show that there are three times as many horseshoe pitchers below the poverty line as there are tennis players below the poverty line. But it does not follow that, say, George Bush's decision to pitch horseshoes rather than play tennis exactly triples his chances of poverty. 
       If it is fair to say, as Boulding does, that economists are obsessed with consumption as a measure of economic well-being, then it is fair to say that Post Keynesians are obsessed with income distribution as a basis for comparing economies and as justification for economic policy and political reform. Readers who share this obsession may find these articles helpful in planning their own research agenda. Others may find the book a convenient way of keeping abreast of developments within the Post Keynesian tradition.

                                                                                 Roger W. Garrison
                                                                                  Auburn University