The influence of Joan Robinson on Economic thinking

 

The influence of Joan Robinson on Economic thinking

From Adam Smith to nowadays, most contributors to economic theory were men. Now that gender equality is an important issue in society, diversity is more present. For instance, Elinor Ostrom was the first female economist who received the Nobel Memorial Prize in economics in 2009 for her work in economic governance. Despite a lack of women in the history of economic thought – at least independently from their husbands, it is possible to find some strong female figures who participated in the shape of today’s economics. Joan Robinson is one of them. She was one of the leading figures of the Post-Keynesian economists and one of the members of the Keynes’ advisor group.

She became famous when she published her book The Economics of Imperfect competition in 1933. With Edward Chamberlin, she is part of an economist generation who criticised the widespread view of perfect competition and developed an imperfect competition model. Robinson’s work, together with Chamberlin’s, shifted the traditional Smith’s perspective that monopoly is in opposition with competition, to a model in which each firm in an industry behaves like a monopolist. This way, it was possible to reconcile an idea of competition with increasing returns to scale in an industry.

Robinson and Chamberlin did not work together – Robinson was based in Cambridge
England, while Chamberlin was based in America, mainly in Harvard where he did his PhD – but their ideas were very similar. They both considered an individual firm as a monopolist for the good they produce in competition with firms producing close substitutes. Then, they thought that free entry in a market implied a decrease in prices until profits were equal to zero. Thus, they concluded that the equilibrium meant marginal revenue equals marginal cost, and average revenue equals average cost. However, Robinson made some original contributions compared to Chamberlin; she is particularly remembered for her concept of monopsony, which is a market with only one buyer. In this framework, she showed that a worker was earning a wage lower than the value of his marginal product. Furthermore, she studied the case where a monopolist sell the same good in two different markets. She demonstrated that when setting prices, the firm would put a higher price in the market with the most inelastic demand.

 

TheInfluenceOfJoanRobinson_2A monopsony is a market with only one buyer. For example, there may be only one firm offering employment in an area. In this case, the wage will be below the marginal cost for the supplier, i.e the worker.

 

Her work on imperfect competition is a major contribution to the history of economic thought. Moreover, in the 1930s, Robinson was part of the Keynes’ advisory group on the General Theory. It was a gathering of prominent economists – such as James Meade, who won the Nobel Memorial Prize in economics in 1977 – who criticised Keynes’ previous theories and discussed new ideas for the constitution of the General Theory. In addition to her participation in this group, Robinson published a lot of academic papers to explain ideas that she thought were not clear, despite the publication of her book. As such, she became one of the main figures of Post-Keynesian economists. Even in the 1940s when she started exploring Marx theories, she interpreted his work along the lines of Keynes’ ideas.

Nevertheless, at the end of her life, she developed controversial views, supporting Maoist
China and North Korea. It appears that these ideas are the main reason why she did not
receive a Nobel Memorial Prize in economics in 1975. Indeed, this year, she was considered by the selection committee of the Prize and several economists thought she would be chosen. It is interesting to notice that, in the case of Joan Robinson, the obtention of the Prize was not directly related to the fact that she was a woman, even though there was much speculation on why exactly she did not receive it.

Her controversial ideas are often highlighted, as well as her strong character; for instance, when she thought someone was wasting her time with useless ideas, she stopped listening and it was then really hard to convince her. Concerning the latter, there are two hypothetical consequences related to it. According to Assar Lindbeck, a member of the selection committee for the Prize in 1975, the committee was afraid that either she would reject the Prize, or she would accept it to use this legitimization as a tool to attack mainstream economics. A friend of Joan Robinson, Geoff Harcourt – an Australian economist – gave another point of view: he thought it was more a matter of “international” relationships. Indeed, for him, Sweden and Great Britain did not treat well their respective economists – he thought British academia did not receive very well the ideas of Wicksell, a Sweden economist from the end of XIXth century and beginning of XXth century – so the Nobel committee was not so prone to award a British economist. According to Harcourt, when analysing the typical profile of British economists honoured by the Economic Prize, discrimination became almost obvious. Awarded British had to be more widely recognised, praised and with easy-going personalities than required from others nationalities; Joan Robinson, with her strong ideas, did not fit these requirements. Another reason proposed to explain why Robinson did not won the Prize was that the committee wanted to reward her for her work on imperfect competition. However, she published her book in 1933, and in 1975 – the year her candidature was discussed – she had repudiated these ideas. As it was the main corpus on which the committee wanted to reward her for, they removed her from the list of potential candidates. Once again, this shows that her work on imperfect competition was one of the most recognised economic contributions.

This lack of Nobel Prize in her curriculum vitae does not seem to be a problem for her
recognition among her peers. Her work, especially on imperfect competition, is part of
today’s economics, as well as her contributions to Keynes ideas. Then, one can say that she was a great economist, and one of the most powerful female economists of her century.

 

by Louise Damade

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