Robert Solow, eclectic American Keynesianism, and the Review of Keynesian Economics
Matías Vernengo Bucknell University, Lewisburg, Pennsylvania, USA

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Robert Solow, who was a member of the editorial board of the Review of Keynesian Economics (ROKE), died in December 2023. Solow holds a special place in the history of macroeconomics, and he was a strong supporter of the ROKE project. In this brief note I want to honor Solow’s contribution to economics and to place on record his contribution to ROKE.

Histories of macroeconomics tend to emphasize the disputes between Keynesians and Monetarists, at least up to the 1970s. Those disputes very often pitted Milton Friedman against either Paul Samuelson, with whom he alternated in a famous Newsweek column, or James Tobin who was, perhaps, the most prominent of Friedman’s opponents when the Journal of Political Economy edited a debate with Friedman’s critics.1 In the broader cultural wars, Friedman was often pitted against John Kenneth Galbraith, and his Free to Choose series was seen as a response to the latter’s BBC series The Age of Uncertainty. Solow appears, if at all, as Samuelson’s co-author of a paper on anti-inflation policy (Samuelson and Solow 1960), which is widely viewed as introducing the Phillips curve to the American economics profession.

Yet Solow is, in many ways, the central figure of ‘American’ Keynesianism, and he was awarded the 1987 Nobel Prize in Economics. His work was central to the building of what Samuelson referred to as the Neoclassical Synthesis, which was dominant during the post-war era up to the 1970s. This synthesis combined microeconomic competitive general equilibrium theory, Keynesian macroeconomics, and Solow’s (1956) Neoclassical growth theory. It gave short-run space for Keynesian policy effectiveness but asserted a long-run belief in market forces and Say’s Law, which Solow defended in his growth model and in the Cambridge debates with more heterodox Keynesians. Additionally, Solow contributed decisively to the development of what eventually would be called New Keynesian Economics, with the development of the efficiency wage model in the late 1970s. He lived long enough to see fiscal policy rehabilitated after the Great Recession of 2007–2009, and to see what many view as the return of Keynesian Economics.

In some ways the 2008 financial crisis was the catalyst that led to the development of the Review of Keynesian Economics. The journal’s origins have been discussed by Palley (2022). Louis-Philippe Rochon and I had discussed the possibility of a journal for more than a decade. In 2011 Louis-Philippe obtained a contract to publish a journal with Edward Elgar and asked me to co-edit it. I accepted on two conditions. One was that the new journal should not be limited to Post-Keynesian monetary issues, as he originally suggested, but cover a broader macroeconomic topic. The other was that Thomas Palley, who had been our teacher and used the somewhat idiosyncratic term Structural Keynesianism to define his brand of macroeconomics, should be a co-editor.2

Tom accepted and argued that the journal should be explicitly about Keynesian macroeconomics, with an encompassing definition of the term with no hyphens, and that the board should represent that outlook and include a broad number of mainstream Keynesians. The journal would be Keynesian and not one of the various forms of Keynesianism, post, neo, new, and other hyphenated versions.3 Given the evident failures of Neoliberal policies, we all felt the moment was ripe for a cultural change and a return of something more akin to the Old Keynesian Consensus of the post-war period.

Solow always had an open disposition, a sense of pluralism and willingness to engage and genuinely understand those who disagreed with him. He had visited the New School in 2000 to give a talk about the Clinton Boom, when I was the Assistant Director of the Center for Economic Policy Analysis, and I maintained sporadic contact with him thereafter. He seemed the obvious choice for the new journal’s editorial board. When I invited him, he accepted and offered the following advice:

As my very first act, I want to remind you of some of the pitfalls you will have to avoid. Your intention is obviously counter-cultural, and god knows the current culture needs to be countered. Nevertheless it is very important to insist on being part of an only somewhat broader mainstream, and to demonstrate that commitment. Otherwise you will end up being seen as essentially a cult journal, preaching to the converted. (And articles in it will be discounted in tenure decisions!) I fear that that is what happened to the Journal of Post-Keynesian Economics, for example. How can you do this? I wish I was sure. One possibility is to welcome explicitly anti-Keynesian articles, not manifestoes (and not pro-Keynesian manifestos either) but articles opposing some particular common-Keynesian finding or assumption, and of course articles defending those same propositions. Maybe, if you can think of a good topic, you can organize the occasional symposium, the more specific the better, with all sides represented.4

Solow was immediately understanding of and sympathetic to the ROKE project, and the journal has followed his sage advice. As we wrote in the inaugural issue, we envisioned that ‘Keynesian theory should hold a similar place in economics to that held by the theory of evolution in biology’ (Palley, Rochon and Vernengo 2012). In other words, there could be some debates about how it worked, but the general idea of effective demand should be established and beyond controversy.
ROKE’s founding intellectual impulse, with which Solow agreed, was counter-cultural. That impulse has been validated by developments in macroeconomics. Over the past 15 years, many leading mainstream macroeconomists like Olivier Blanchard, Brad DeLong, Paul Krugman, and Larry Summers, to name a few, have led an effort within the profession to rethink the New Consensus that had prevailed since the 1970s. They have emphasized the need for fiscal policy in the face of a lower zero bound, and the risk of secular stagnation, with confidence in the sustainability of public debt dynamics. If anything, the concerns are with private debt and the instability it generates. In fact, Larry Summers suggests that:

This formulation of the secular stagnation view is closely related to the economist Thomas Palley’s recent critique of ‘zero lower bound economics’: negative interest rates may not remedy Keynesian unemployment. More generally, in moving toward the secular stagnation view, we have come to agree with the point long stressed by writers in the post-Keynesian (or, perhaps more accurately, original Keynesian) tradition: the role of particular frictions and rigidities in underpinning economic fluctuations should be de-emphasized relative to a more fundamental lack of aggregate demand… Instead of more old New Keynesian economics, we hope, but do not expect, that this year’s gathering in Jackson Hole will bring forth a new Old Keynesian economics. (Summers and Stansbury 2019)

In other words, a substantial return to the Old Keynesian Consensus’s ideas which prevailed before Milton Friedman’s natural rate hypothesis and the rise of the Neoliberal agenda. In that respect, Solow was on the same page, and he saw Friedman’s work as insidious. In subsequent correspondence for a ROKE symposium on the fiftieth anniversary of Friedman’s AEA Presidential Address, to which Solow contributed, he wrote:

I have always–for 50 years now–thought Friedman’s article as a masterpiece of misdirection. (That’s not a bad title for an article.) That means: it is intended to make, and it makes, statements about the way the economy works that are in fact wrong; but it covers itself with throwaway lines casual qualifications that the reader tends to ignore. So the full effect is deceptive. I think the profession did not cover itself in glory by passively swallowing all this. But I have no taste for writing a negative piece to which Milton cannot reply.5

The last sentence of the above quote captures Solow’s graciousness. He also had a tremendous wit, as reflected in the Wikiquote page dedicated to him.6 The one that makes me laugh the most is one on Friedman’s Monetarism: ‘Everything reminds Milton of money. Well, everything reminds me of sex, but I keep it out of the paper’. Another that is enduringly insightful is about engaging Robert Lucas and Thomas Sargent in technical discussions about rational expectations, which he compared to accepting to engage someone who claims to be Napoleon about cavalry tactics at the Battle of Austerlitz. The trap is by taking the claim seriously, one legitimizes it and jumps to technique and misses the bigger more important issue. That is advice economists would be well-advised to heed.
Solow’s support for ROKE was reflected in his willingness to write a paper for ROKE’s 2018 symposium on Friedman’s natural rate hypothesis. To the best of my knowledge, that paper is the last he wrote for an academic journal. What he ended up writing was a ‘reconstruction and defense of eclectic American Keynesianism’.7 In his paper he concluded with some speculations on the reasons for the long retreat of Keynesian economics:

So why did those thousand ships sail for so long, why did those ideas float for so long, without much resistance? I don’t have a settled answer. One can speculate. Maybe a patchwork of ideas like eclectic American Keynesianism, held together partly by duct tape, is always at a disadvantage compared with a monolithic doctrine that has an answer for everything, and the same answer for everything. Maybe that same monolithic doctrine reinforced and was reinforced by the general shift of political and social preferences to the right that was taking place at about the same time. Maybe this bit of intellectual history was mainly an accidental concatenation of events, personalities, and dispositions. (Solow 2018, p. 424)

Those speculations should be a warning about what might happen if the recent inflationary acceleration leads to a revival of Monetarist ideas, as it has done in some quarters: the persistence of Monetarist ideas was a cultural phenomenon, not necessarily backed by logic or evidence. A counter-cultural project was and still is needed to bring back eclectic Keynesianism, and pluralistic economics more broadly.
  • 1

    See Gordon (1974). The list of debaters included, besides Tobin, Karl Brunner, Paul Davidson, Allan H. Meltzer, and Don Patinkin. Somewhat surprisingly, Solow and Samuelson are absent.

  • 2

    See Palley’s (1998) book Plenty of Nothing: The Downsizing of the American Dream and the Case for Structural Keynesianism, in which the term might be used for the first time.

  • 3

    In fact, the idea of non-hyphenated Keynesianism came from a talk James Tobin, Palley’s teacher, had given at the New School in the late 1990s, in which he suggested that he had many things in common with the more heterodox Keynesians. I told Wynne Godley, with whom I was working at the time, and he also suggested that he felt he was a non-hyphenated Keynesian. In that spirit, later, we decided to start a lecture in honor of Godley and Tobin, which has been delivered by both mainstream and heterodox Keynesians.

  • 4

    Personal letter to the author, 12 April 2012.

  • 5

    Personal letter to the author, 14 March 2017.

  • 7

    Personal letter to the author, 15 November 2017.

REFERENCES

  • Gordon R.J. , Milton Friedman’s Monetary Framework: A Debate with His Critics , (Chicago University Press, Chicago 1974 ).

  • Palley T.I. , Plenty of Nothing: The Downsizing of the American Dream and the Case for Structural Keynesianism , (Princeton University Press, Princeton, NJ 1998 ).

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  • Palley, T.I. (2022), ‘Comments on the history of the Review of Keynesian Economics on its tenth anniversary’, available at: http://thomaspalley.com/?p=2284.

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  • Palley T.I., Rochon L-P. & Vernengo M. , '‘Economics and the economic crisis: the case for change’ ' (2012 ) 1 Review of Keynesian Economics : 1 -4.

  • Solow R.M. , '‘A contribution to the theory of economic growth,’ ' (1956 ) 70 Quarterly Journal of Economics : 65 -94.

  • Solow R.M. , '‘A theory is a sometime thing’ ' (2018 ) 6 (4 ) Review of Keynesian Economics : 421 -424.

  • Samuelson P.A. & Solow R.M. , '‘Analytical aspects of anti-inflation policy’ ' (1960 ) 50 American Economic Review : 177 -194.

  • Summers, L.H. and A. Stansbury (2019), ‘Whither central banking’, Project Syndicate, August 23, available at: https://www.project-syndicate.org/commentary/central-bankers-in-jackson-hole-should-admit-impotence-by-lawrence-h-summers-and-anna-stansbury-2-2019-08.

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