Roger J. Sandilands

Implications of an Endogenous Theory of Growth in Allyn Young's Macroeconomic Concept of Increasing Returns

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The Life and Political Economy of Lauchlin Currie: New Dealer, Presidential Adviser and Development Economist

Lauchlin Currie’s contribution to monetary theory and policies during the New Deal and in the postwar period when he became one of the most important economic advisors to several presidents of Colombia is the subject of this biography. Currie was a major economic advisor to president Franklin D. Roosevelt, and as his administrative assistant from 1939 until the president’s death in 1945 helped shape Roosevelt’s thinking on economic issues. His involvement in U.S. policymaking in China, where he directed Lend-Lease operations from 1941-1943, was one of the factors leading to his confrontation with Senator Joseph McCarthy. In 1949 he directed the first World Bank mission to Colombia. Roger Sandilands had access to Currie’s own papers and to previously unpublished material. In this biography he provides the reader with a critical evaluation of Currie’s contribution to the literature on the theory and practice of economic development in general, together with an analysis of how his concepts were shaped during the New Deal and in post-World War II Colombia.

Perspectives on Allyn Young in Theories of Endogenous Growth

A central message of Allyn Abbott Youngs (1928) seminal paper on increasing returns and economic progress was the seeming tautology that “the division of labor depends in large part upon the division of labor.†From this he deduced that a major source of growth is growth itself. In this fundamental sense growth is endogenous and cumulative. He spoke of the “togetherness†of economic phenomena and doubted that the apparatus of supply and demand and marginal productivity theory could be integrated to give the social picture or explain why growth tends to be self-sustaining rather than self-exhausting.

Nicholas Kaldor’s Notes on Allyn Young’s LSE Lectures 1927‐29

Allyn Youngs lectures, as recorded by the young Nicholas Kaldor, survey the historical roots of the subject from Aristotle through to the modern neo-classical writers. The focus throughout is on the conditions making for economic progress, with stress on the institutional developments that extend and are extended by the size of the market. Organisational changes that promote the division of labour and specialisation within and between firms and industries, and which promote competition and mobility, are seen as the vital factors in growth. In the absence of new markets, inventions as such play only a minor role. The economic system is an inter-related whole, or a living “organon”. It is from this perspective that micro-economic relations are analysed, and this helps expose certain fallacies of composition associated with the marginal productivity theory of production and distribution. Factors are paid not because they are productive but because they are scarce. Likewise he shows why Marshallian supply and demand schedules, based on the “one thing at a time” approach, cannot adequately describe the dynamic growth properties of the system. Supply and demand cannot be simply integrated to arrive at a picture of the whole economy. These notes are complemented by eleven articles in the Encyclopaedia Britannica which were published shortly after Youngs sudden death in 1929.e from trade has been of greater importance for the former category.

The role of pecuniary external economies and economies of scale in the theory of increasing returns

Abstract This paper investigates some issues relating to the phenomenon of increasing returns: (1) What is the role of economies of scale in the theory of increasing returns? (2) Do pecuniary external economies lead to market failure and justify intervention in the market mechanism? (3) Are increasing returns sector-specific or generalised, and if they are sector specific, is it possible to identify and promote these sectors from a policy point of view? We argue that economies of scale are incidental to the broader phenomenon of increasing returns and therefore cannot adequately explain their existence. On the second question, we argue that the presence of pecuniary external economies is characteristic of a well-functioning market system rather than an indication of its failure. Finally, increasing returns are generalised, so that policies intended to identify and promote specific sectors will tend to distort intersectoral relationships. Sector-specific polices should not be based on the logic of increasing returns, but should aim to correct sector-specific handicaps.

Guilt by Association? Lauchlin Currie's Alleged Involvement with Washington Economists in Soviet Espionage

The attorney general’s list of proscribed organizations, which had been drawn up by the FBI, was above challenge. The groups on it were not allowed to argue their innocence. If a civil servant had held membership in one of them—or, in many cases, if he merely knew someone who belonged—he was given notice. Guilt was, quite literally, by association. —William Manchester, The Glory and the Dream: A Narrative History of America, 1932–72

Solovian and new growth theory from the perspective of Allyn Young on macroeconomic increasing returns

This paper evaluates, from an Allyn Youngian perspective, the neoclassical Solow model of growth and the associated empirical estimates of the sources of growth based on it. It attempts to clarify Young’s particular concept of generalised or macroeconomic “increasing returns†to show the limitations of a model of growth based on an assumption that the aggregate production function is characterised by constant returns to scale but “augmented†by exogenous technical progress. Young’s concept of endogenous, self-sustaining growth is also shown to differ in important respects (including in its policy implications) from modern endogenous growth theory.

Hawtreyan Credit Deadlock or Keynesian Liquidity Trap? Lessons for Japan from the Great Depression

This paper outlines the ideas of Ralph Hawtrey and Lauchlin Currie on the need for monetised fiscal deficit spending in 1930s USA to combat the deep depression into which the economy had been allowed to sink. In such exceptional circumstances of A¢â‚¬A“credit deadlockA¢â‚¬Â in which banks were afraid to lend and households and business afraid to borrow, the deadlock could best be broken through the spending of new money into circulation via large fiscal deficits. This complementarity of fiscal and monetary policy was shown to be essential, and as such indicates the potential power of monetary policy A¢â‚¬â€œ in contrast to the Keynesian A¢â‚¬A“liquidity trapA¢â‚¬Â view that it is powerless This lesson was not learned by the Japanese authorities in their response to the asset price collapse of 1991-92, resulting in a lost decade as ballooning fiscal deficits were neutralised throughout the 1990s by unhelpfully tight monetary policy with the Bank of Japan refusing to monetise the deficits.

Politics and the attack on FDR's economists: from the grand alliance to the Cold War

US government economists in the later years of the administration of Franklin Roosevelt were urged to treat the Soviet Union as an ally, in the interests of winning World War II and establishing the basis for peaceful cooperation after the war. The onset of the Cold War and the subsequent rise of McCarthyism sullied the reputations of many of them, especially the two most prominent: Lauchlin Currie (chief economist in the White House) and Harry Dexter White (chief economist in the Treasury). Close examination of the parallels between these two seemingly disparate cases reveals that recent attempts to revive the charges are no more firmly based than those of the early 1950s.

Memorandum Prepared by L. B. Currie, P. T. Ellsworth, and H. D. White (Cambridge, Mass., January 1932)

The depression has been in progress more than two years. During this period the index of business activity has declined over a third; unemployment has assumed very grave proportions; partial employment has seriously reduced the weekly earnings of a large proportion of those listed as gainfully employed. In terms of real income the depression has already cost the American people more than the Great War.1 Nor can the loss be measured in terms of real income alone. The widespread and long drawn out period of unemployment and greatly reduced incomes has been accompanied by increasing physical suffering and anxiety. It has, further, engendered a loss of confidence in American leadership and American institutions which is becoming more marked as the depression lengthens. The end is not yet in sight, nor can any precedent be used as a forecast of duration; the significant factors of the present crisis have no parallel in modern economic history. The situation has passed the bounds of a business depression and has assumed the aspect of an international calamity.