Review

Author(s): Joan Robinson

Review by: Joan Robinson
Source: Journal of Political Economy, Vol. 69, No. 5 (Oct., 1961), pp. 504-505
Published by: University of Chicago Press
Stable URL: http://www.jstor.org/stable/1828550
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504 BOOK REVIEWS
variables, not to choices about whether to ana-
lyze "numbers" or "people." It is true that
economists are not especially interested in idio-
syncracies and are generally concerned with
average or typical behavior, but I would have
thought this to be equally true of psychological
economics.
Economists will also be unhappy with what
seem to be some evident confusions-the dis-
cussion of the permanent-income hypothesis in
chapter ix is seriously misleading, the discus-
sion of optimism and saving in chapter vii falls
into the ancient ex ante-ex post misunderstand-
ing, and the discussion of liquid assets and
spending in chapter viii seems to suppose that
consumers, rather than the monetary authori-
ties, determine how much liquid assets will be
in existence.
In discussing the role of psychological varia-
bles in predicting or explaining changes in con-
sumer behavior (especially purchases of dura-
bles) during the postwar period, Katona leaves
the impression that survey measurements of
attitudes, expectations, and intentions would
have provided a practically complete explana-
tion of all important business-cycle movements
during this period. It seems to me that he badly
overstates a fairly good case. The point really
should be that forecastersworking with a variety
of psychological variables would probably have
fared better than those working only with tra-
ditional financial variables, and that the analyti-
cal models typically used by economists may
be seriously misleading in some kinds of situa-
tions. Instead of this rather modest but im-
portant conclusion, the author presents what
is essentially an ex post explanation of business
fluctuations. Not that the data are ex post-
far from it. But the choice of evidence-which
pieces of data to look at-is largely ex post; no
attempt is made to indicate how a purely pre-
dictive model would have fared with and with-
out the psychological variables.
Where the influence of psychological varia-
bles is formally measured net of other variables,
the financial variables are restricted to income
level-and past income level at that! Katona
is surely aware of the fact that the analysis of
consumer spending and saving behavior has
moved a long distance since Keynes discovered
the consumption function. No economist is
going to be convinced that he should worry
about the state of consumer sentiment in pre-
dicting consumer behavior by a demonstration
that the level of income in the recent past is not
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very closely associated with future spending on
durables. The question is what happens if varia-
bles like the rate of change in income and the
size of durable goods stocks relative to desired
stocks are also included in the regression. Do
attitudes still retain net forecasting value?
A related question much discussed in the
literature on anticipations data is whether con-
sumer attitudes-as distinct from plans or in-
tentions-influence behavior. Katona's view is
that, while expressed intentions to buy are (sta-
tistically) very useful in predicting individual
decisions, they are less likely to be useful in
predicting aggregate movements. On the other
hand, attitudes are less likely to be strongly
associated with individual decisions but more
likely to be useful in predicting aggregates. This
view has been vigorously disputed. Katona pro-
vides neither new evidence nor reinterpretation
of existing evidence to support his view. He
does argue that the influence of attitudes on
individual decisions is very hard to isolate, but
the arguments do not seem to apply with special
force to a study of attitudes. The problems aris-
ing from misclassification,the existence of strong
relationships between omitted variables and
some of the independent variables, and the
presence of interactions are all standard prob-
lems of any cross-section analysis of behavior.
But the solution is more refined multivariate
analysis and larger sample sizes.
It remains true that the aggregate test,
rather than the individual test, is ultimately
the best evidence. But if the aggregate results
are due to the fact that attitudes are a proxy for
other variables, it seems clear that one should
worry about the other variables and not about
attitudes. If attitudes are an important variable
in their own right one should be able to show
this empirically, and a test of individual be-
havior is simpler to set up. This reviewer is thus
not convinced by the evidence presented on
either count.
F. THOMAS JUSTER
National Bureau of EconomicResearch
Has Capitalism Changed?An InternationalSym-
posium on the Nature of ContemporaryCap-
italism. Edited by SHIGETO TsuRu. Tokyo:
Iwanami Shota, 1961. Pp. 222. $4.00.
The question posed for discussion by this
symposium can be expanded thus: Has capi-
 BOOK REVIEWS
talism (in the United States) changed for the
better, in the sense that it is now immune from
serious depressions? Professor Tsuru sets out
the argument and asks for comments from the
other contributors. He advances what he
conceives to be the main grounds for an affirma-
tive answer-the rapidity of technical progress
at the present time, which might be expected to
generate investment opportunities at a suffi-
cient rate to keep up effective demand; the
adoption of stabilization policies by successive
governments; and changes in the structure of
the economy which might be expected to make
it more stable. He gives each one a fair hearing
but finally dismisses them all. "The foregoing
discussion, I believe, leads inevitably to the
conclusion that the basic character of capitalism
in America has not changed, implying, there-
fore, that even though a prosperity might be
sustained for some time under certain circum-
stances it is likely to be followed by a depression
in due course" (p. 61).
The other contributors comment upon
Tsuru's thesis, each from his own point of view.
Strachey believes in the mollifying effect of
democracy on capitalism. Galbraith relies on
countervailing power. Baran points to the
mechanisms that latterday capitalism has
evolved for wasteful consumption of the surplus
that it generated. Bettelheim, falling into the
usual confusion between the value of labor
power in terms of labor time and the real wage
in terms of commodities, maintains that capital-
ism cannot permit consumption to rise in step
with productive capacity (p. 95). Dobb judi-
ciously observes that changes have taken place
in capitalism but maintains that they are not
suficiently fundamental to be described as a
"new stage."
A more definite and concrete answer to the
question comes from the Soviet economist,
Yakov A. Kronrod. (His contribution appears
in Russian with an abridged English transla-
tion.) He regards the relative prosperity of the
last fifteen years as a prolonged postwar boom,
making up for the preceding massive destruc-
tion of capital. For him, therefore, there is no
need to alter the old prognosis (though he points
out that the very existence of a socialist sector
of the world is an important change in the situ-
ation for capitalism). The crisis is still to come.
The most cogent discussion of Tsuru's
thesis is offered by Sweezy. He argues that
continuous technical progress, though it makes
continuous accumulation possible, does not nec-
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505
essarily constitute a motive for new invest-
ment. It may exhaust itself through the re-
embodiment of amortization funds in ever more
labor-saving forms of capital equipment. On
this point there seems to be no doubt that
Sweezy's criticism is correct. An "invention"
as a "shock" causing investment to take place
is a conception derived from static analysis.
When technical progress takes the form, not of
an occasional unexpected shock, but of a con-
tinuous built-in propensity of the system, it is
allowed for when investment plans are made
and gross saving is adjusted accordingly, so that
it is deprived of power to boost effective demand.
Indeed, the rapidity of technical progressmakes
it more, not less, necessary to stimulate effec-
tive demand, for the faster output per head is
rising the faster must total output rise if em-
ployment is to be maintained.
This suggests that the question to the sym-
posium should have been posed the other way
round: Has capitalism changed for the worse,
in the sense that it is no longer capable of sus-
taining, over the long run, a rate of growth in
effective demand commensurate with the rate
of growth of potential production?
Tsuru himself, and most of the contributors,
seem to be vaguely aware that the avoidance of
dramatic crisis by no means rules out creeping
stagnation. But by setting his question in terms
of instability he has led the critics of capital-
ism to give too much away. Stability is not
enough.
JOAN ROBINSON
CambridgeUniversity
Trends in the American Economy in the Nine-
teenthCentury.By the CONFERENCEONRE-
SEARCHIN INCOME AND WEALTH. ("Studies
in Income and Wealth," Vol. XXIV.) Prince-
ton, N.J.: Princeton University Press, 1960.
Pp. xii+780. $15.00.
The twenty-fourth volume of the "Studies
in Income and Wealth" is an important con-
tribution to the measurement, description, and
analysis of American economic growth. Of the
eighteen papers in the collection, fifteen focus
on the United States; the others are devoted to
Canadian development.
It is impossible in this brief review to eval-
uate each of the papers separately. As a collec-
tion, they advance the study of American eco-
nomic growth in three ways.