A Medley of Potpourri

Friday, September 10, 2021

Social justice

From Wikipedia, the free encyclopedia

https://en.wikipedia.org/wiki/Social_justice

Social justice is justice in terms of the distribution of wealth, opportunities, and privileges within a society. In Western as well as in older Asian cultures, the concept of social justice has often referred to the process of ensuring that individuals fulfill their societal roles and receive what was their due from society. In the current movements for social justice, the emphasis has been on the breaking of barriers for social mobility, the creation of safety nets and economic justice. Social justice assigns rights and duties in the institutions of society, which enables people to receive the basic benefits and burdens of cooperation. The relevant institutions often include taxation, social insurance, public health, public school, public services, labor law and regulation of markets, to ensure fair distribution of wealth, and equal opportunity.

Interpretations that relate justice to a reciprocal relationship to society are mediated by differences in cultural traditions, some of which emphasize the individual responsibility toward society and others the equilibrium between access to power and its responsible use. Hence, social justice is invoked today while reinterpreting historical figures such as Bartolomé de las Casas, in philosophical debates about differences among human beings, in efforts for gender, ethnic, and social equality, for advocating justice for migrants, prisoners, the environment, and the physically and developmentally disabled.

While concepts of social justice can be found in classical and Christian philosophical sources, from Plato and Aristotle to Augustine of Hippo and Thomas Aquinas, the term “social justice” finds its earliest uses in the late 18^th century—albeit with unclear theoretical or practical meanings. Thus the use of the term was early on subject to accusations of redundancy—are not all claims of justice “social”? – and of rhetorical flourish, perhaps, but not necessarily, related to amplifying one view of distributive justice. In the coining and definition of the term in the natural law social scientific treatise of Luigi Taparelli, SJ, in the early 1840s, Taparelli established the natural law principle that corresponded to the evangelical principle of brotherly love—i.e. social justice reflects the duty one has to one’s other self in the interdependent abstract unity of the human person in society. After the Revolutions of 1848 the term was popularized generically through the writings of Antonio Rosmini-Serbati.

In the late industrial revolution, progressive American legal scholars began to use the term more, particularly Louis Brandeis and Roscoe Pound. From the early 20th century it was also embedded in international law and institutions; the preamble to establish the International Labour Organization recalled that "universal and lasting peace can be established only if it is based upon social justice." In the later 20th century, social justice was made central to the philosophy of the social contract, primarily by John Rawls in A Theory of Justice (1971). In 1993, the Vienna Declaration and Programme of Action treats social justice as a purpose of human rights education.

History

An artist's rendering of what Plato might have looked like. From Raphael's early 16th century painting Scuola di Atene.

The different concepts of justice, as discussed in ancient Western philosophy, were typically centered upon the community.

Roman copy in marble of a Greek bronze bust of Aristotle by Lysippos, c. 330 BC. The alabaster mantle is modern.

Plato wrote in The Republic that it would be an ideal state that "every member of the community must be assigned to the class for which he finds himself best fitted." In an article for J.N.V University, author D.R. Bhandari says, "Justice is, for Plato, at once a part of human virtue and the bond, which joins man together in society. It is the identical quality that makes good and social. Justice is an order and duty of the parts of the soul, it is to the soul as health is to the body. Plato says that justice is not mere strength, but it is a harmonious strength. Justice is not the right of the stronger but the effective harmony of the whole. All moral conceptions revolve about the good of the whole-individual as well as social".
Plato believed rights existed only between free people, and the law should take "account in the first instance of relations of inequality in which individuals are treated in proportion to their worth and only secondarily of relations of equality." Reflecting this time when slavery and subjugation of women was typical, ancient views of justice tended to reflect the rigid class systems that still prevailed. On the other hand, for the privileged groups, strong concepts of fairness and the community existed. Distributive justice was said by Aristotle to require that people were distributed goods and assets according to their merit.

Socrates

Socrates (through Plato's dialogue Crito) is credited with developing the idea of a social contract, whereby people ought to follow the rules of a society, and accept its burdens because they have accepted its benefits. During the Middle Ages, religious scholars particularly, such as Thomas Aquinas continued discussion of justice in various ways, but ultimately connected being a good citizen to the purpose of serving God.

After the Renaissance and Reformation, the modern concept of social justice, as developing human potential, began to emerge through the work of a series of authors. Baruch Spinoza in On the Improvement of the Understanding (1677) contended that the one true aim of life should be to acquire "a human character much more stable than [one's] own", and to achieve this "pitch of perfection... The chief good is that he should arrive, together with other individuals if possible, at the possession of the aforesaid character." During the enlightenment and responding to the French and American Revolutions, Thomas Paine similarly wrote in The Rights of Man (1792) society should give "genius a fair and universal chance" and so "the construction of government ought to be such as to bring forward... all that extent of capacity which never fails to appear in revolutions."

Social justice has been traditionally credited to be coined by Jesuit priest Luigi Taparelli in the 1840s, but the expression is older

Although there is no certainty about the first use of the term "social justice", early sources can be found in Europe in the 18th century. Some references to the use of the expression are in articles of journals aligned with the spirit of the Enlightenment, in which social justice is described as an obligation of the monarch; also the term is present in books written by Catholic Italian theologians, notably members of the Society of Jesus. Thus, according to this sources and the context, social justice was another term for "the justice of society", the justice that rules the relations among individuals in society, without any mention to socio-economic equity or human dignity.

The usage of the term started to become more frequent by Catholic thinkers from the 1840s, beginning with the Jesuit Luigi Taparelli in Civiltà Cattolica, and based on the work of St. Thomas Aquinas. Taparelli argued that rival capitalist and socialist theories, based on subjective Cartesian thinking, undermined the unity of society present in Thomistic metaphysics as neither were sufficiently concerned with ethics. Writing in 1861, the influential British philosopher and economist, John Stuart Mill stated in Utilitarianism his view that "Society should treat all equally well who have deserved equally well of it, that is, who have deserved equally well absolutely. This is the highest abstract standard of social and distributive justice; towards which all institutions, and the efforts of all virtuous citizens, should be made in the utmost degree to converge."

In the later 19th and early 20th century, social justice became an important theme in American political and legal philosophy, particularly in the work of John Dewey, Roscoe Pound and Louis Brandeis. One of the prime concerns was the Lochner era decisions of the US Supreme Court to strike down legislation passed by state governments and the Federal government for social and economic improvement, such as the eight-hour day or the right to join a trade union. After the First World War, the founding document of the International Labour Organization took up the same terminology in its preamble, stating that "peace can be established only if it is based on social justice". From this point, the discussion of social justice entered into mainstream legal and academic discourse.

In 1931, the Pope Pius XI explicitly referred to the expression, along with the concept of subsidiarity, for the first time in Catholic social teaching in the encyclical Quadragesimo anno. Then again in Divini Redemptoris, the church pointed out that the realization of social justice relied on the promotion of the dignity of human person. The same year, and because of the documented influence of Divini Redemptoris in its drafters, the Constitution of Ireland was the first one to establish the term as a principle of the economy in the State, and then other countries around the world did the same throughout the 20th century, even in socialist regimes such as the Cuban Constitution in 1976.

In the late 20th century, several liberal and conservative thinkers, notably Friedrich Hayek, rejected the concept by stating that it did not mean anything, or meant too many things. However the concept remained highly influential, particularly with its promotion by philosophers such as John Rawls. Even though the meaning of social justice varies, at least three common elements can be identified in the contemporary theories about it: a duty of the State to distribute certain vital means (such as economic, social, and cultural rights), the protection of human dignity, and affirmative actions to promote equal opportunities for everybody.

Contemporary theory

Philosophical perspectives

Cosmic values

Hunter Lewis' work promoting natural healthcare and sustainable economies advocates for conservation as a key premise in social justice. His manifesto on sustainability ties the continued thriving of human life to real conditions, the environment supporting that life, and associates injustice with the detrimental effects of unintended consequences of human actions. Quoting classical Greek thinkers like Epicurus on the good of pursuing happiness, Hunter also cites ornithologist, naturalist, and philosopher Alexander Skutch in his book Moral Foundations:

The common feature which unites the activities most consistently forbidden by the moral codes of civilized peoples is that by their very nature they cannot be both habitual and enduring, because they tend to destroy the conditions which make them possible.

Pope Benedict XVI cites Teilhard de Chardin in a vision of the cosmos as a 'living host' embracing an understanding of ecology that includes humanity's relationship to others, that pollution affects not just the natural world but interpersonal relations as well. Cosmic harmony, justice and peace are closely interrelated:

If you want to cultivate peace, protect creation.

In The Quest for Cosmic Justice, Thomas Sowell writes that seeking utopia, while admirable, may have disastrous effects if done without strong consideration of the economic underpinnings that support contemporary society.

John Rawls

Political philosopher John Rawls draws on the utilitarian insights of Bentham and Mill, the social contract ideas of John Locke, and the categorical imperative ideas of Kant. His first statement of principle was made in A Theory of Justice where he proposed that, "Each person possesses an inviolability founded on justice that even the welfare of society as a whole cannot override. For this reason justice denies that the loss of freedom for some is made right by a greater good shared by others." A deontological proposition that echoes Kant in framing the moral good of justice in absolutist terms. His views are definitively restated in Political Liberalism where society is seen "as a fair system of co-operation over time, from one generation to the next".

All societies have a basic structure of social, economic, and political institutions, both formal and informal. In testing how well these elements fit and work together, Rawls based a key test of legitimacy on the theories of social contract. To determine whether any particular system of collectively enforced social arrangements is legitimate, he argued that one must look for agreement by the people who are subject to it, but not necessarily to an objective notion of justice based on coherent ideological grounding. Obviously, not every citizen can be asked to participate in a poll to determine his or her consent to every proposal in which some degree of coercion is involved, so one has to assume that all citizens are reasonable. Rawls constructed an argument for a two-stage process to determine a citizen's hypothetical agreement:

The citizen agrees to be represented by X for certain purposes, and, to that extent, X holds these powers as a trustee for the citizen.
X agrees that enforcement in a particular social context is legitimate. The citizen, therefore, is bound by this decision because it is the function of the trustee to represent the citizen in this way.

This applies to one person who represents a small group (e.g., the organiser of a social event setting a dress code) as equally as it does to national governments, which are ultimate trustees, holding representative powers for the benefit of all citizens within their territorial boundaries. Governments that fail to provide for welfare of their citizens according to the principles of justice are not legitimate. To emphasise the general principle that justice should rise from the people and not be dictated by the law-making powers of governments, Rawls asserted that, "There is ... a general presumption against imposing legal and other restrictions on conduct without sufficient reason. But this presumption creates no special priority for any particular liberty." This is support for an unranked set of liberties that reasonable citizens in all states should respect and uphold — to some extent, the list proposed by Rawls matches the normative human rights that have international recognition and direct enforcement in some nation states where the citizens need encouragement to act in a way that fixes a greater degree of equality of outcome. According to Rawls, the basic liberties that every good society should guarantee are:

Freedom of thought;
Liberty of conscience as it affects social relationships on the grounds of religion, philosophy, and morality;
Political liberties (e.g., representative democratic institutions, freedom of speech and the press, and freedom of assembly);
Freedom of association;
Freedoms necessary for the liberty and integrity of the person (namely: freedom from slavery, freedom of movement and a reasonable degree of freedom to choose one's occupation); and
Rights and liberties covered by the rule of law.

Thomas Pogge

Thomas Pogge's arguments pertain to a standard of social justice that creates human rights deficits. He assigns responsibility to those who actively cooperate in designing or imposing the social institution, that the order is foreseeable as harming the global poor and is reasonably avoidable. Pogge argues that social institutions have a negative duty to not harm the poor.

Pogge speaks of "institutional cosmopolitanism" and assigns responsibility to institutional schemes for deficits of human rights. An example given is slavery and third parties. A third party should not recognize or enforce slavery. The institutional order should be held responsible only for deprivations of human rights that it establishes or authorizes. The current institutional design, he says, systematically harms developing economies by enabling corporate tax evasion, illicit financial flows, corruption, trafficking of people and weapons. Joshua Cohen disputes his claims based on the fact that some poor countries have done well with the current institutional design. Elizabeth Kahn argues that some of these responsibilities should apply globally.

United Nations

The United Nations calls social justice "an underlying principle for peaceful and prosperous coexistence within and among nations.

The United Nations' 2006 document Social Justice in an Open World: The Role of the United Nations, states that "Social justice may be broadly understood as the fair and compassionate distribution of the fruits of economic growth ..."

The term "social justice" was seen by the U.N. "as a substitute for the protection of human rights [and] first appeared in United Nations texts during the second half of the 1960s. At the initiative of the Soviet Union, and with the support of developing countries, the term was used in the Declaration on Social Progress and Development, adopted in 1969."

The same document reports, "From the comprehensive global perspective shaped by the United Nations Charter and the Universal Declaration of Human Rights, neglect of the pursuit of social justice in all its dimensions translates into de facto acceptance of a future marred by violence, repression and chaos." The report concludes, "Social justice is not possible without strong and coherent redistributive policies conceived and implemented by public agencies."

The same UN document offers a concise history: "[T]he notion of social justice is relatively new. None of history’s great philosophers—not Plato or Aristotle, or Confucius or Averroes, or even Rousseau or Kant—saw the need to consider justice or the redress of injustices from a social perspective. The concept first surfaced in Western thought and political language in the wake of the industrial revolution and the parallel development of the socialist doctrine. It emerged as an expression of protest against what was perceived as the capitalist exploitation of labour and as a focal point for the development of measures to improve the human condition. It was born as a revolutionary slogan embodying the ideals of progress and fraternity. Following the revolutions that shook Europe in the mid-1800s, social justice became a rallying cry for progressive thinkers and political activists.... By the mid-twentieth century, the concept of social justice had become central to the ideologies and programmes of virtually all the leftist and centrist political parties around the world ..."

Another key area of human rights and social justice is the United Nations's defense of children rights worldwide. In 1989, the Convention on the Rights of the Child was adopted and available for signature, ratification and accession by General Assembly resolution 44/25. According to OHCHR, this convention entered into force on 2 September 1990. This convention upholds that all states have the obligation to "protect the child from all forms of physical or mental violence, injury or abuse, neglect or negligent treatment, maltreatment or exploitation, including sexual abuse."

Religious perspectives

Abrahamic religions

Christianity

Evangelicalism

Time magazine noted that younger Evangelicals also increasingly engage in social justice. John Stott traced the call for social justice back to the cross, "The cross is a revelation of God's justice as well as of his love. That is why the community of the cross should concern itself with social justice as well as with loving philanthropy."

Methodism

From its founding, Methodism was a Christian social justice movement. Under John Wesley's direction, Methodists became leaders in many social justice issues of the day, including the prison reform and abolition movements. Wesley himself was among the first to preach for slaves rights attracting significant opposition.

Today, social justice plays a major role in the United Methodist Church and the Free Methodist Church. The Book of Discipline of the United Methodist Church says, "We hold governments responsible for the protection of the rights of the people to free and fair elections and to the freedoms of speech, religion, assembly, communications media, and petition for redress of grievances without fear of reprisal; to the right to privacy; and to the guarantee of the rights to adequate food, clothing, shelter, education, and health care." The United Methodist Church also teaches population control as part of its doctrine.

Catholicism

Catholic social teaching consists of those aspects of Roman Catholic doctrine which relate to matters dealing with the respect of the individual human life. A distinctive feature of Catholic social doctrine is its concern for the poorest and most vulnerable members of society. Two of the seven key areas of "Catholic social teaching" are pertinent to social justice:

Life and dignity of the human person: The foundational principle of all Catholic social teaching is the sanctity of all human life and the inherent dignity of every human person, from conception to natural death. Human life must be valued above all material possessions.
Preferential option for the poor and vulnerable: Catholics believe Jesus taught that on the Day of Judgement God will ask what each person did to help the poor and needy: "Amen, I say to you, whatever you did for one of these least brothers of mine, you did for me." The Catholic Church believes that through words, prayers and deeds one must show solidarity with, and compassion for, the poor. The moral test of any society is "how it treats its most vulnerable members. The poor have the most urgent moral claim on the conscience of the nation. People are called to look at public policy decisions in terms of how they affect the poor."

Modern Catholic social teaching is often thought to have begun with the encyclicals of Pope Leo XIII.

Pope Leo XIII, who studied under Taparelli, published in 1891 the encyclical Rerum novarum (On the Condition of the Working Classes; lit. "On new things"), rejecting both socialism and capitalism, while defending labor unions and private property. He stated that society should be based on cooperation and not class conflict and competition. In this document, Leo set out the Catholic Church's response to the social instability and labor conflict that had arisen in the wake of industrialization and had led to the rise of socialism. The Pope advocated that the role of the state was to promote social justice through the protection of rights, while the church must speak out on social issues to teach correct social principles and ensure class harmony.
The encyclical Quadragesimo anno (On Reconstruction of the Social Order, literally "in the fortieth year") of 1931 by Pope Pius XI, encourages a living wage, subsidiarity, and advocates that social justice is a personal virtue as well as an attribute of the social order, saying that society can be just only if individuals and institutions are just.
Pope John Paul II added much to the corpus of the Catholic social teaching, penning three encyclicals which focus on issues such as economics, politics, geo-political situations, ownership of the means of production, private property and the "social mortgage", and private property. The encyclicals Laborem exercens, Sollicitudo rei socialis, and Centesimus annus are just a small portion of his overall contribution to Catholic social justice. Pope John Paul II was a strong advocate of justice and human rights, and spoke forcefully for the poor. He addresses issues such as the problems that technology can present should it be misused, and admits a fear that the "progress" of the world is not true progress at all, if it should denigrate the value of the human person. He argued in Centesimus annus that private property, markets, and honest labor were the keys to alleviating the miseries of the poor and to enabling a life that can express the fullness of the human person.
Pope Benedict XVI's encyclical Deus caritas est ("God is Love") of 2006 claims that justice is the defining concern of the state and the central concern of politics, and not of the church, which has charity as its central social concern. It said that the laity has the specific responsibility of pursuing social justice in civil society and that the church's active role in social justice should be to inform the debate, using reason and natural law, and also by providing moral and spiritual formation for those involved in politics.
The official Catholic doctrine on social justice can be found in the book Compendium of the Social Doctrine of the Church, published in 2004 and updated in 2006, by the Pontifical Council Iustitia et Pax.

The Catechism of the Catholic Church (§§ 1928–1948) contains more detail of the church's view of social justice.

Islam

In Muslim history, Islamic governance has often been associated with social justice. Establishment of social justice was one of the motivating factors of the Abbasid revolt against the Umayyads. The Shi'a believe that the return of the Mahdi will herald in "the messianic age of justice" and the Mahdi along with the Isa (Jesus) will end plunder, torture, oppression and discrimination.

For the Muslim Brotherhood the implementation of social justice would require the rejection of consumerism and communism. The Brotherhood strongly affirmed the right to private property as well as differences in personal wealth due to factors such as hard work. However, the Brotherhood held Muslims had an obligation to assist those Muslims in need. It held that zakat (alms-giving) was not voluntary charity, but rather the poor had the right to assistance from the more fortunate. Most Islamic governments therefore enforce the zakat through taxes.

Judaism

In To Heal a Fractured World: The Ethics of Responsibility, Rabbi Jonathan Sacks states that social justice has a central place in Judaism. One of Judaism's most distinctive and challenging ideas is its ethics of responsibility reflected in the concepts of simcha ("gladness" or "joy"), tzedakah ("the religious obligation to perform charity and philanthropic acts"), chesed ("deeds of kindness"), and tikkun olam ("repairing the world").

Eastern religions

Hinduism

The present-day Jāti hierarchy is undergoing changes for a variety of reasons including 'social justice', which is a politically popular stance in democratic India. Institutionalized affirmative action has promoted this. The disparity and wide inequalities in social behaviour of the jātis – exclusive, endogamous communities centred on traditional occupations – has led to various reform movements in Hinduism. While legally outlawed, the caste system remains strong in practice.

Traditional Chinese religion

The Chinese concept of Tian Ming has occasionally been perceived as an expression of social justice. Through it, the deposition of unfair rulers is justified in that civic dissatisfaction and economical disasters is perceived as Heaven withdrawing its favor from the Emperor. A successful rebellion is considered definite proof that the Emperor is unfit to rule.

Social justice movements

Social justice is also a concept that is used to describe the movement towards a socially just world, e.g., the Global Justice Movement. In this context, social justice is based on the concepts of human rights and equality, and can be defined as "the way in which human rights are manifested in the everyday lives of people at every level of society".

Several movements are working to achieve social justice in society. These movements are working toward the realization of a world where all members of a society, regardless of background or procedural justice, have basic human rights and equal access to the benefits of their society.

Liberation theology

Liberation theology is a movement in Christian theology which conveys the teachings of Jesus Christ in terms of a liberation from unjust economic, political, or social conditions. It has been described by proponents as "an interpretation of Christian faith through the poor's suffering, their struggle and hope, and a critique of society and the Catholic faith and Christianity through the eyes of the poor", and by detractors as Christianity perverted by Marxism and Communism.

Although liberation theology has grown into an international and inter-denominational movement, it began as a movement within the Catholic Church in Latin America in the 1950s–1960s. It arose principally as a moral reaction to the poverty caused by social injustice in that region. It achieved prominence in the 1970s and 1980s. The term was coined by the Peruvian priest, Gustavo Gutiérrez, who wrote one of the movement's most famous books, A Theology of Liberation (1971). According to Sarah Kleeb, "Marx would surely take issue," she writes, "with the appropriation of his works in a religious context...there is no way to reconcile Marx's views of religion with those of Gutierrez, they are simply incompatible. Despite this, in terms of their understanding of the necessity of a just and righteous world, and the nearly inevitable obstructions along such a path, the two have much in common; and, particularly in the first edition of [A Theology of Liberation], the use of Marxian theory is quite evident."

Other noted exponents are Leonardo Boff of Brazil, Carlos Mugica of Argentina, Jon Sobrino of El Salvador, and Juan Luis Segundo of Uruguay.

Health care

Social justice has more recently made its way into the field of bioethics. Discussion involves topics such as affordable access to health care, especially for low income households and families. The discussion also raises questions such as whether society should bear healthcare costs for low income families, and whether the global marketplace is the best way to distribute healthcare. Ruth Faden of the Johns Hopkins Berman Institute of Bioethics and Madison Powers of Georgetown University focus their analysis of social justice on which inequalities matter the most. They develop a social justice theory that answers some of these questions in concrete settings.

Social injustices occur when there is a preventable difference in health states among a population of people. These social injustices take the form of health inequities when negative health states such as malnourishment, and infectious diseases are more prevalent in impoverished nations. These negative health states can often be prevented by providing social and economic structures such as primary healthcare which ensures the general population has equal access to health care services regardless of income level, gender, education or any other stratifying factors. Integrating social justice with health inherently reflects the social determinants of health model without discounting the role of the bio-medical model.

Health inequalities

The sources of health inequalities are rooted in injustices associated with racism, sex discrimination, and social class. Richard Hofrichter and his colleagues examine the political implications of various perspectives used to explain health inequities and explore alternative strategies for eliminating them.

Human rights education

The Vienna Declaration and Programme of Action affirm that "Human rights education should include peace, democracy, development and social justice, as set forth in international and regional human rights instruments, to achieve common understanding and awareness to strengthen universal commitment to human rights."

Ecology and environment

Social justice principles are embedded in the larger environmental movement. The third principle of the Earth Charter is social and economic justice, which is described as seeking to eradicate poverty as an ethical, social, and environmental imperative, ensure that economic activities and institutions at all levels promote human development in an equitable and sustainable manner, affirm gender equality and equity as prerequisites to sustainable development and ensure universal access to education, health care, and economic opportunity, and uphold the right of all, without discrimination, to a natural and social environment supportive of human dignity, bodily health, and spiritual well-being, with special attention to the rights of indigenous peoples and minorities.

The climate justice and environmental justice movements also incorporate social justice principles, ideas, and practices. Climate justice and environmental justice, as movements within the larger ecological and environmental movement, each incorporate social justice in a particular way. Climate justice includes concern for social justice pertaining to greenhouse gas emissions, climate-induced environmental displacement, as well as climate change mitigation and adaptation. Environmental justice includes concern for social justice pertaining to either environmental benefits or environmental pollution based on their equitable distribution across communities of color, communities of various socio and economic stratification, or any other barriers to justice.

Criticism

Michael Novak argues that social justice has seldom been adequately defined, arguing:

[W]hole books and treatises have been written about social justice without ever defining it. It is allowed to float in the air as if everyone will recognize an instance of it when it appears. This vagueness seems indispensable. The minute one begins to define social justice, one runs into embarrassing intellectual difficulties. It becomes, most often, a term of art whose operational meaning is, "We need a law against that." In other words, it becomes an instrument of ideological intimidation, for the purpose of gaining the power of legal coercion.

Friedrich Hayek of the Austrian School of economics rejected the very idea of social justice as meaningless, self-contradictory, and ideological, believing that to realize any degree of social justice is unfeasible, and that the attempt to do so must destroy all liberty:

There can be no test by which we can discover what is 'socially unjust' because there is no subject by which such an injustice can be committed, and there are no rules of individual conduct the observance of which in the market order would secure to the individuals and groups the position which as such (as distinguished from the procedure by which it is determined) would appear just to us. [Social justice] does not belong to the category of error but to that of nonsense, like the term 'a moral stone'.

Hayek argued that proponents of social justice often present it as a moral virtue but most of their descriptions pertain to impersonal states of affairs (e.g. income inequality, poverty), which are cited as "social injustice." Hayek argued that social justice is either a virtue or it is not. If it is, it can only be ascribed to the actions of individuals. However, most who use the term ascribe it to social systems, so "social justice" in fact describes a regulative principle of order; they are interested not in virtue but power. For Hayek, this notion of social justices presupposes that people are guided by specific external directions rather than internal, personal rules of just conduct. It further presupposes that one can never be held accountable for ones own behaviour, as this would be "blaming the victim." According to Hayek, the function of social justice is to blame someone else, often attributed to "the system" or those who are supposed, mythically, to control it. Thus it is based on the appealing idea of "you suffer; your suffering is caused by powerful others; these oppressors must be destroyed."

Ben O'Neill of the University of New South Wales and the Mises Institute argues:

[For advocates of "social justice"] the notion of "rights" is a mere term of entitlement, indicative of a claim for any possible desirable good, no matter how important or trivial, abstract or tangible, recent or ancient. It is merely an assertion of desire, and a declaration of intention to use the language of rights to acquire said desire. In fact, since the program of social justice inevitably involves claims for government provision of goods, paid for through the efforts of others, the term actually refers to an intention to use force to acquire one's desires. Not to earn desirable goods by rational thought and action, production and voluntary exchange, but to go in there and forcibly take goods from those who can supply them!

History

From the Enlightenment to the Industrial Revolution

Immanuel Kant

Immanuel Kant identified progress as being a movement away from barbarism towards civilization. 18th-century philosopher and political scientist Marquis de Condorcet predicted that political progress would involve the disappearance of slavery, the rise of literacy, the lessening of sex inequality, prison reforms which at the time were harsh and the decline of poverty.

Modernity or modernization was a key form of the idea of progress as promoted by classical liberals in the 19th and 20th centuries who called for the rapid modernization of the economy and society to remove the traditional hindrances to free markets and free movements of people.

John Stuart Mill

In the late 19th century, a political view rose in popularity in the Western world that progress was being stifled by vast economic inequality between the rich and the poor, minimally regulated laissez-faire capitalism with out-of-control monopolistic corporations, intense and often violent conflict between capitalists and workers, with a need for measures to address these problems. Progressivism has influenced various political movements. Social liberalism was influenced by British liberal philosopher John Stuart Mill's conception of people being "progressive beings". British Prime Minister Benjamin Disraeli developed progressive conservatism under one-nation Toryism.

In France, the space between social revolution and the socially-conservative laissez-faire centre-right was filled with the emergence of radicalism which thought that social progress required anti-clericalism, humanism and republicanism. Especially anti-clericalism was the dominant influence on the centre-left in many French- and Romance-speaking countries until the mid 20th-century. In Imperial Germany, Chancellor Otto von Bismarck enacted various progressive social welfare measures out of paternalistic conservative motivations to distance workers from the socialist movement of the time and as humane ways to assist in maintaining the Industrial Revolution.

In 1891, the Roman Catholic Church encyclical Rerum novarum issued by Pope Leo XIII condemned the exploitation of labour and urged support for labour unions and government regulation of businesses in the interests of social justice while upholding the right to property and criticizing socialism. A Protestant progressive outlook called the Social Gospel emerged in North America that focused on challenging economic exploitation and poverty and by the mid-1890s was common in many Protestant theological seminaries in the United States.

Contemporary mainstream political conception to the philosophy

Theodore Roosevelt

In the United States, progressivism began as an intellectual rebellion against the political philosophy of Constitutionalism as expressed by John Locke and the founders of the American Republic, whereby the authority of government depends on observing limitations on its just powers. What began as a social movement in the 1890s, grew into a popular political movement referred to as the Progressive era; in the 1912 United States presidential election, all three U.S. presidential candidates claimed to be progressives. While the term progressivism represent a range of diverse political pressure groups, not always united, progressives rejected social Darwinism, believing that the problems society faced such as class warfare, greed, poverty, racism and violence could best be addressed by providing good education, a safe environment and an efficient workplace. Progressives lived mainly in the cities, were college educated and believed that government could be a tool for change. President Theodore Roosevelt of the Republican Party and later the Progressive Party declared that he "always believed that wise progressivism and wise conservatism go hand in hand".

Woodrow Wilson

President Woodrow Wilson was also a member of the American progressive movement within the Democratic Party. Progressive stances have evolved over time. Imperialism was a controversial issue within progressivism in the late 19th and early 20th centuries, particularly in the United States, where some progressives supported American imperialism while others opposed it. In response to World War I, President Woodrow Wilson's Fourteen Points established the concept of national self-determination and criticized imperialist competition and colonial injustices. These views were supported by anti-imperialists in areas of the world that were resisting imperial rule.

During the period of acceptance of economic Keynesianism (1930s–1970s), there was widespread acceptance in many nations of a large role for state intervention in the economy. With the rise of neoliberalism and challenges to state interventionist policies in the 1970s and 1980s, centre-left progressive movements responded by adopting the Third Way that emphasized a major role for the market economy. There have been social democrats who have called for the social-democratic movement to move past Third Way. Prominent progressive conservative elements in the British Conservative Party have criticized neoliberalism.

In the 21st century, progressives continue to favour public policy that reduces or ameliorates the harmful effects of economic inequality as well as systemic discrimination such as institutional racism; to advocate for environmentally conscious policies as well as for social safety nets and workers' rights; and to oppose the negative externalities inflicted on the environment and society by monopolies or corporate influence on the democratic process. The unifying theme is to call attention to the negative impacts of current institutions or ways of doing things and to advocate for social progress, i.e. for positive change as defined by any of several standards such as expansion of democracy, increased egalitarianism in the form of economic and social equality as well as improved well being of a population. Proponents of social democracy have identified themselves as promoting the progressive cause.

The General Theory of Employment, Interest and Money

Author	John Maynard Keynes
Country	United Kingdom
Language	English
Genre	Nonfiction
Publisher	Palgrave Macmillan
Publication date	1936
Media type	Print paperback
Pages	472 (2007 edition)
ISBN	978-0-230-00476-4
OCLC	62532514

Keynes's aims in the General Theory

The central argument of The General Theory is that the level of employment is determined not by the price of labour, as in classical economics, but by the level of aggregate demand. If the total demand for goods at full employment is less than the total output, then the economy has to contract until equality is achieved. Keynes thus denied that full employment was the natural result of competitive markets in equilibrium.

In this he challenged the conventional ('classical') economic wisdom of his day. In a letter to his friend George Bernard Shaw on New Year's Day, 1935, he wrote:

I believe myself to be writing a book on economic theory which will largely revolutionize — not I suppose, at once but in the course of the next ten years — the way the world thinks about its economic problems. I can't expect you, or anyone else, to believe this at the present stage. But for myself I don't merely hope what I say,— in my own mind, I'm quite sure.

The first chapter of the General theory (only half a page long) has a similarly radical tone:

I have called this book the General Theory of Employment, Interest and Money, placing the emphasis on the prefix general. The object of such a title is to contrast the character of my arguments and conclusions with those of the classical theory of the subject, upon which I was brought up and which dominates the economic thought, both practical and theoretical, of the governing and academic classes of this generation, as it has for a hundred years past. I shall argue that the postulates of the classical theory are applicable to a special case only and not to the general case, the situation which it assumes being a limiting point of the possible positions of equilibrium. Moreover, the characteristics of the special case assumed by the classical theory happen not to be those of the economic society in which we actually live, with the result that its teaching is misleading and disastrous if we attempt to apply it to the facts of experience.

Summary of the General Theory

Keynes's main theory (including its dynamic elements) is presented in Chapters 2-15, 18, and 22, which are summarised here. A shorter account will be found in the article on Keynesian economics. The remaining chapters of Keynes's book contain amplifications of various sorts and are described later in this article.

Book I: Introduction

The first book of The General Theory of Employment, Interest and Money is a repudiation of Say's Law. The classical view for which Keynes made Say a mouthpiece held that the value of wages was equal to the value of the goods produced, and that the wages were inevitably put back into the economy sustaining demand at the level of current production. Hence, starting from full employment, there cannot be a glut of industrial output leading to a loss of jobs. As Keynes put it on p. 18, "supply creates its own demand".

Stickiness of wages in money terms

Say's Law depends on the operation of a market economy. If there is unemployment (and if there are no distortions preventing the employment market from adjusting to it) then there will be workers willing to offer their labour at less than the current wage levels, leading to downward pressure on wages and increased offers of jobs.

The classics held that full employment was the equilibrium condition of an undistorted labour market, but they and Keynes agreed in the existence of distortions impeding transition to equilibrium. The classical position had generally been to view the distortions as the culprit and to argue that their removal was the main tool for eliminating unemployment. Keynes on the other hand viewed the market distortions as part of the economic fabric and advocated different policy measures which (as a separate consideration) had social consequences which he personally found congenial and which he expected his readers to see in the same light.

The distortions which have prevented wage levels from adapting downwards have lain in employment contracts being expressed in monetary terms; in various forms of legislation such as the minimum wage and in state-supplied benefits; in the unwillingness of workers to accept reductions in their income; and in their ability through unionisation to resist the market forces exerting downward pressure on them.

Keynes accepted the classical relation between wages and the marginal productivity of labour, referring to it on page 5 as the "first postulate of classical economics" and summarising it as saying that "The wage is equal to the marginal product of labour".

The first postulate can be expressed in the equation y'(N) = W/p, where y(N) is the real output when employment is N, and W and p are the wage rate and price rate in money terms (and hence W/p is the wage rate in real terms). A system can be analysed on the assumption that W is fixed (i.e. that wages are fixed in money terms) or that W/p is fixed (i.e. that they are fixed in real terms) or that N is fixed (e.g. if wages adapt to ensure full employment). All three assumptions had at times been made by classical economists, but under the assumption of wages fixed in money terms the 'first postulate' becomes an equation in two variables (N and p), and the consequences of this had not been taken into account by the classical school.

Keynes proposed a 'second postulate of classical economics' asserting that the wage is equal to the marginal disutility of labour. This is an instance of wages being fixed in real terms. He attributes the second postulate to the classics subject to the qualification that unemployment may result from wages being fixed by legislation, collective bargaining, or 'mere human obstinacy' (p6), all of which are likely to fix wages in money terms.

Outline of Keynes's theory

Keynes's economic theory is based on the interaction between demands for saving, investment, and liquidity (i.e. money). Saving and investment are necessarily equal, but different factors influence decisions concerning them. The desire to save, in Keynes's analysis, is mostly a function of income: the wealthier people are, the more wealth they will seek to put aside. The profitability of investment, on the other hand, is determined by the relation between the return available to capital and the interest rate. The economy needs to find its way to an equilibrium in which no more money is being saved than will be invested, and this can be accomplished by contraction of income and a consequent reduction in the level of employment.

In the classical scheme it is the interest rate rather than income which adjusts to maintain equilibrium between saving and investment; but Keynes asserts that the rate of interest already performs another function in the economy, that of equating demand and supply of money, and that it cannot adjust to maintain two separate equilibria. In his view it is the monetary role which wins out. This is why Keynes's theory is a theory of money as much as of employment: the monetary economy of interest and liquidity interacts with the real economy of production, investment and consumption.

Book II: Definitions and ideas

The choice of units

Keynes sought to allow for the lack of downwards flexibility of wages by constructing an economic model in which the money supply and wage rates were externally determined (the latter in money terms), and in which the main variables were fixed by the equilibrium conditions of various markets in the presence of these facts.

Many of the quantities of interest, such as income and consumption, are monetary. Keynes often expresses such quantities in wage units (Chapter 4): to be precise, a value in wage units is equal to its price in money terms divided by W, the wage (in money units) per man-hour of labour. Keynes generally writes a subscript w on quantities expressed in wage units, but in this account we omit the w. When, occasionally, we use real terms for a value which Keynes expresses in wage units we write it in lower case (e.g. y rather than Y).

As a result of Keynes's choice of units, the assumption of sticky wages, though important to the argument, is largely invisible in the reasoning. If we want to know how a change in the wage rate would influence the economy, Keynes tells us on p. 266 that the effect is the same as that of an opposite change in the money supply.

The identity of saving and investment

The relationship between saving and investment, and the factors influencing their demands, play an important role in Keynes's model. Saving and investment are considered to be necessarily equal for reasons set out in Chapter 6 which looks at economic aggregates from the viewpoint of manufacturers. The discussion is intricate, considering matters such as the depreciation of machinery, but is summarised on p. 63:

Provided it is agreed that income is equal to the value of current output, that current investment is equal to the value of that part of current output which is not consumed, and that saving is equal to the excess of income over consumption... the equality of saving and investment necessarily follows.

This statement incorporates Keynes's definition of saving, which is the normal one.

Book III: The propensity to consume

Keynes's propensities to consume and to save as functions of income Y.

Book III of the General Theory is given over to the propensity to consume, which is introduced in Chapter 8 as the desired level of expenditure on consumption (for an individual or aggregated over an economy). The demand for consumer goods depends chiefly on the income Y and may be written functionally as C(Y). Saving is that part of income which is not consumed, so the propensity to save S(Y) is equal to Y–C(Y). Keynes discusses the possible influence of the interest rate r on the relative attractiveness of saving and consumption, but regards it as 'complex and uncertain' and leaves it out as a parameter.

His seemingly innocent definitions embody an assumption whose consequences will be considered later. Since Y is measured in wage units, the proportion of income saved is considered to be unaffected by the change in real income resulting from a change in the price level while wages stay fixed. Keynes acknowledges that this is undesirable in Point (1) of Section II.

In Chapter 9 he provides a homiletic enumeration of the motives to consume or not to do so, finding them to lie in social and psychological considerations which can be expected to be relatively stable, but which may be influenced by objective factors such as 'changes in expectations of the relation between the present and the future level of income' (p95).

The marginal propensity to consume and the multiplier

The marginal propensity to consume, C'(Y), is the gradient of the purple curve, and the marginal propensity to save S'(Y) is equal to 1–C'(Y). Keynes states as a 'fundamental psychological law' (p96) that the marginal propensity to consume will be positive and less than unity.

Chapter 10 introduces the famous 'multiplier' through an example: if the marginal propensity to consume is 90%, then 'the multiplier k is 10; and the total employment caused by (e.g.) increased public works will be ten times the employment caused by the public works themselves' (pp116f). Formally Keynes writes the multiplier as k=1/S'(Y). It follows from his 'fundamental psychological law' that k will be greater than 1.

Keynes's account is not clear until his economic system has been fully set out (see below). In Chapter 10 he describes his multiplier as being related to the one introduced by R. F. Kahn in 1931. The mechanism of Kahn's multiplier lies in an infinite series of transactions, each conceived of as creating employment: if you spend a certain amount of money, then the recipient will spend a proportion of what he or she receives, the second recipient will spend a further proportion again, and so forth. Keynes's account of his own mechanism (in the second para of p. 117) makes no reference to infinite series. By the end of the chapter on the multiplier, he uses his much quoted "digging holes" metaphor, against laissez-faire. In his provocation Keynes argues that "If the Treasury were to fill old bottles with banknotes, bury them at suitable depths in disused coalmines which are then filled up to the surface with town rubbish, and leave it to private enterprise on well-tried principles of laissez-faire to dig the banknotes up again" (...), there need be no more unemployment and, with the help of the repercussions, the real income of the community, and its capital wealth also, would probably become a good deal greater than it actually is. It would, indeed, be more sensible to build houses and the like; but if there are political and practical difficulties in the way of this, the above would be better than nothing".

Book IV: The inducement to invest

The rate of investment

Keynes's schedule of the marginal efficiency of capital

Book IV discusses the inducement to invest, with the key ideas being presented in Chapter 11. The 'marginal efficiency of capital' is defined as the annual revenue which will be yielded by an extra increment of capital as a proportion of its cost. The 'schedule of the marginal efficiency of capital' is the function which, for any rate of interest r, gives us the level of investment which will take place if all opportunities are accepted whose return is at least r. By construction this depends on r alone and is a decreasing function of its argument; it is illustrated in the diagram, and we shall write it as I (r).

This schedule is a characteristic of the current industrial process which Irving Fisher described as representing the 'investment opportunity side of interest theory'; and in fact the condition that it should equal S(Y,r) is the equation which determines the interest rate from income in classical theory. Keynes is seeking to reverse the direction of causality (and omitting r as an argument to S()).

He interprets the schedule as expressing the demand for investment at any given value of r, giving it an alternative name: "We shall call this the investment demand-schedule..." (p136). He also refers to it as the 'demand curve for capital' (p178). For fixed industrial conditions, we conclude that 'the amount of investment... depends on the rate of interest' as John Hicks put it in 'Mr. Keynes and the "Classics"'.

Interest and liquidity preference

Keynes proposes two theories of liquidity preference (i.e. the demand for money): the first as a theory of interest in Chapter 13 and the second as a correction in Chapter 15. His arguments offer ample scope for criticism, but his final conclusion is that liquidity preference is a function mainly of income and the interest rate. The influence of income (which really represents a composite of income and wealth) is common ground with the classical tradition and is embodied in the Quantity Theory; the influence of interest had also been noted earlier, in particular by Frederick Lavington (see Hicks's Mr Keynes and the "Classics"). Thus Keynes's final conclusion may be acceptable to readers who question the arguments along the way. However he shows a persistent tendency to think in terms of the Chapter 13 theory while nominally accepting the Chapter 15 correction.

Chapter 13 presents the first theory in rather metaphysical terms. Keynes argues that:

It should be obvious that the rate of interest cannot be a return to saving or waiting as such. For if a man hoards his savings in cash, he earns no interest, though he saves just as much as before. On the contrary, the mere definition of the rate of interest tells us in so many words that the rate of interest is the reward for parting with liquidity for a specified period.

To which Jacob Viner retorted that:

By analogous reasoning he could deny that wages are the reward for labor, or that profit is the reward for risk-taking, because labor is sometimes done without anticipation or realization of a return, and men who assume financial risks have been known to incur losses as a result instead of profits.

Keynes goes on to claim that the demand for money is a function of the interest rate alone on the grounds that:

The rate of interest is... the "price" which equilibrates the desire to hold wealth in the form of cash with the available quantity of cash.

Frank Knight commented that this seems to assume that demand is simply an inverse function of price. The upshot from these reasonings is that:

Liquidity-preference is a potentiality or functional tendency, which fixes the quantity of money which the public will hold when the rate of interest is given; so that if r is the rate of interest, M the quantity of money and L the function of liquidity-preference, we have M = L(r). This is where, and how, the quantity of money enters into the economic scheme.

And specifically it determines the rate of interest, which therefore cannot be determined by the traditional factors of 'productivity and thrift'.

Chapter 15 looks in more detail at the three motives Keynes ascribes for the holding of money: the 'transactions motive', the 'precautionary motive', and the 'speculative motive'. He considers that demand arising from the first two motives 'mainly depends on the level of income' (p199), while the interest rate is 'likely to be a minor factor' (p196).

Keynes treats the speculative demand for money as a function of r alone without justifying its independence of income. He says that...

what matters is not the absolute level of r but the degree of its divergence from what is considered a fairly safe level...

but gives reasons to suppose that demand will nonetheless tend to decrease as r increases. He thus writes liquidity preference in the form L₁(Y)+L₂(r) where L₁ is the sum of transaction and precautionary demands and L₂ measures speculative demand. The structure of Keynes's expression plays no part in his subsequent theory, so it does no harm to follow Hicks by writing liquidity preference simply as L(Y,r).

'The quantity of money as determined by the action of the central bank' is taken as given (i.e. exogenous - p. 247) and constant (because hoarding is ruled out on page 174 by the fact that the necessary expansion of the money supply cannot be 'determined by the public').

Keynes does not put a subscript 'w' on L or M, implying that we should think of them in money terms. This suggestion is reinforced by his wording on page 172 where he says "Unless we measure liquidity-preference in terms of wage-units (which is convenient in some contexts)... ". But seventy pages later there is a fairly clear statement that liquidity preference and the quantity of money are indeed "measured in terms of wage-units" (p246).

The Keynesian economic system

Keynes's economic model

In Chapter 14 Keynes contrasts the classical theory of interest with his own, and in making the comparison he shows how his system can be applied to explain all the principal economic unknowns from the facts he takes as given. The two topics can be treated together because they are different ways of analysing the same equation.

Keynes's presentation is informal. To make it more precise we will identify a set of 4 variables – saving, investment, the rate of interest, and the national income – and a parallel set of 4 equations which jointly determine them. The graph illustrates the reasoning. The red S lines are shown as increasing functions of r in obedience to classical theory; for Keynes they should be horizontal.

Graphical representation of Keynes's economic model, based on his own diagram at page 180 of the General Theory.

The first equation asserts that the reigning rate of interest r̂ is determined from the amount of money in circulation M̂ through the liquidity preference function and the assumption that L(r̂)=M̂.

The second equation fixes the level of investment Î given the rate of interest through the schedule of the marginal efficiency of capital as I(r̂).

The third equation tells us that saving is equal to investment: S(Y)=Î. The final equation tells us that the income Ŷ is the value of Y corresponding to the implied level of saving.

All this makes a satisfying theoretical system.

Three comments can be made concerning the argument. Firstly, no use is made of the 'first postulate of classical economics', which can be called on later to set the price level. Secondly, Hicks (in 'Mr Keynes and the "Classics"') presents his version of Keynes's system with a single variable representing both saving and investment; so his exposition has three equations in three unknowns.

And finally, since Keynes's discussion takes place in Chapter 14, it precedes the modification which makes liquidity preference depend on income as well as on the rate of interest. Once this modification has been made the unknowns can no longer be recovered sequentially.

Keynesian economic intervention

The state of the economy, according to Keynes, is determined by four parameters: the money supply, the demand functions for consumption (or equivalently for saving) and for liquidity, and the schedule of the marginal efficiency of capital determined by 'the existing quantity of equipment' and 'the state of long-term expectation' (p246).Adjusting the money supply is the domain of monetary policy. The effect of a change in the quantity of money is considered at p. 298. The change is effected in the first place in money units. According to Keynes's account on p. 295, wages will not change if there is any unemployment, with the result that the money supply will change to the same extent in wage units.

We can then analyse its effect from the diagram, in which we see that an increase in M̂ shifts r̂ to the left, pushing Î upwards and leading to an increase in total income (and employment) whose size depends on the gradients of all 3 demand functions. If we look at the change in income as a function of the upwards shift of the schedule of the marginal efficiency of capital (blue curve), we see that as the level of investment is increased by one unit, the income must adjust so that the level of saving (red curve) is one unit greater, and hence the increase in income must be 1/S'(Y) units, i.e. k units. This is the explanation of Keynes's multiplier.

It does not necessarily follow that individual decisions to invest will have a similar effect, since decisions to invest above the level suggested by the schedule of the marginal efficiency of capital are not the same thing as an increase in the schedule.

The equations of Keynesian and classical economics

Keynes's initial statement of his economic model (in Chapter 14) is based on his Chapter 13 theory of liquidity preference. His restatement in Chapter 18 doesn't take full account of his Chapter 15 revision, treating it as a source of 'repercussions' rather than as an integral component. It was left to John Hicks to give a satisfactory presentation. Equilibrium between supply and demand of money depends on two variables – interest rate and income – and these are the same two variables as are related by the equation between the propensity to save and the schedule of the marginal efficiency of capital. It follows that neither equation can be solved in isolation and that they need to be considered simultaneously.

The 'first postulate' of classical economics was also accepted as valid by Keynes, though not used in the first four books of the General Theory. The Keynesian system can thus be represented by three equations in three variables as shown below, roughly following Hicks. Three analogous equations can be given for classical economics. As presented below they are in forms given by Keynes himself (the practice of writing r as an argument to V derives from his Treatise on money).

Classical		Keynesian
y'(N) = W/p	The 'first postulate'	d(W·Y/p)/dN = W/p
i (r) = s(y(N),r)	Determination of the interest rate	I (r) = S(Y)	Determination of income
M̂ = p·y(N) /V(r)	Quantity theory of money	M̂ = L(Y,r)	Liquidity preference
y, i, s in real terms; M̂ in money terms		Y, I, S, M̂, L in wage units

Here y is written as a function of N, the number of workers employed; p is the price (in money terms) of a unit of real output; V(r) is the velocity of money; and W is the wage rate in money terms. N, p and r are the 3 variables we need to recover. In the Keynesian system income is measured in wage units and is therefore not a function of the level of employment alone since it will also vary with prices. The first postulate assumes that prices can be represented by a single variable. Strictly it should be modified to take account of the distinction between marginal wage cost and marginal prime cost.

The classics took the second equation as determining the rate of interest, the third as determining the price level, and the first as determining employment. Keynes believed that the last two equations could be solved together for Y and r, which is not possible in the classical system. He accordingly concentrated on these two equations, treating income as 'almost the same thing' as employment on p. 247. Here we see the benefit he has gained by simplifying the form of the consumption function. If he had written it (slightly more accurately) as C(Y,p/W), then he would have needed to bring in the first equation to get a solution.

The classical theory of employment for wages fixed in money terms. (The three curves have different vertical scales.)

If we wish to examine the classical system our task is made easier if we assume that the effect of the interest rate on the velocity of circulation is small enough to be ignored. This allows us to treat V as constant and solve the first and third equations (the 'first postulate' and the quantity theory) together, leaving the second equation to determine the interest rate from the result. We then find that the level of employment is given by the formula

${\frac {y'(N)}{y(N)}}={\frac {W}{{\hat {M}}V}}$ .

The graph shows the numerator and denominator of the left-hand side as blue and green curves; their ratio – the pink curve – will be a decreasing function of N even if we don't assume diminishing marginal returns. The level of employment N̂ is given by the horizontal position at which the pink curve has a value of $W/({\hat {M}}V)$ , and this is evidently a decreasing function of W.

Chapter 3: The principle of effective demand

The theoretical system we have described is developed over chapters 4–18, and is anticipated by a chapter which interprets Keynesian unemployment in terms of 'aggregate demand'.

The aggregate supply Z is the total value of output when N workers are employed, written functionally as φ(N). The aggregate demand D is manufacturers' expected proceeds, written as f(N). In equilibrium Z=D. D can be decomposed as D₁+D₂ where D₁ is the propensity to consume, which may be written C(Y) or χ(N). D₂ is explained as 'the volume of investment', and the equilibrium condition determining the level of employment is that D₁+D₂ should equal Z as functions of N. D₂ can be identified with I (r).

The meaning of this is that in equilibrium the total demand for goods must equal total income. Total demand for goods is the sum of demand for consumption goods and demand for investment goods. Hence Y = C(Y) + S(Y) = C(Y) + I (r); and this equation determines a unique value of Y given r.

Samuelson's Keynesian cross is a graphical representation of the Chapter 3 argument.

Dynamic aspects of Keynes's theory

Chapter 5: Expectation as determining output and employment

Chapter 5 makes some common-sense observations on the role of expectation in economics. Short-term expectations govern the level of production chosen by an entrepreneur while long-term expectations govern decisions to adjust the level of capitalisation. Keynes describes the process by which the level of employment adapts to a change in long-term expectations and remarks that:

The level of employment at any time depends... not merely on the existing state of expectation but on the states of expectation which have existed over a certain past period. Nevertheless past expectations, which have not yet worked themselves out, are embodied in to-day's capital equipment... and only influence [the entrepreneur's] decisions in so far as they are so embodied.

Chapter 11: Expectation as influencing the schedule of the marginal efficiency of capital

The main role of expectation in Keynes's theory lies in the schedule of the marginal efficiency of capital which, as we have seen, is defined in Chapter 11 in terms of expected returns. Keynes differs here from Fisher whom he largely follows, but who defined the 'rate of return over cost' in terms of an actual revenue stream rather than its expectation. The step Keynes took here has a particular significance in his theory.

Chapters 14, 18: The schedule of the marginal efficiency of capital as influencing employment

Keynes differed from his classical predecessors in assigning a role to the schedule of the marginal efficiency of capital in determining the level of employment. Its effect is mentioned in his presentations of his theory in Chapters 14 and 18 (see above).

Chapter 12: Animal spirits

Chapter 12 discusses the psychology of speculation and enterprise.

Most, probably, of our decisions to do something positive, the full consequences of which will be drawn out over days to come, can only be taken as a result of animal spirits – of a spontaneous urge to action rather than inaction, and not as the outcome of a weighted average of quantified benefits... Thus if the animal spirits are dimmed and spontaneous optimism falters, leaving us to depend on nothing but a mathematical expectation, enterprise will fade and die.

Keynes's picture of the psychology of speculators is less indulgent.

In point of fact, all sorts of considerations enter into the market valuation which are in no way relevant to the prospective yield... The recurrence of a bank-holiday may raise the market valuation of the British railway system by several million pounds.

(Work in behavioural economics has since empirically supported Keynes' assertion; businesses which are extremely seasonal do indeed see notably higher valuations in the season in question, even if their results are consistent in that quarter from year to year.)

Keynes considers speculators to be concerned...

...not with what an investment is really worth to a man who buys it 'for keeps', but with what the market will value it at, under the influence of mass psychology, three months or a year hence...
This battle of wits to anticipate the basis of conventional valuation a few months hence, rather than the prospective yield of an investment over a long term of years, does not even require gulls amongst the public to feed the maws of the professional;– it can be played by professionals amongst themselves. Nor is it necessary that anyone should keep his simple faith in the conventional basis of valuation having any genuine long-term validity. For it is, so to speak, a game of Snap, of Old Maid, of Musical Chairs – a pastime in which he is victor who says Snap neither too soon nor too late, who passed the Old Maid to his neighbour before the game is over, who secures a chair for himself when the music stops. These games can be played with zest and enjoyment, though all the players know that it is the Old Maid which is circulating, or that when the music stops some of the players will find themselves unseated.
Or, to change the metaphor slightly, professional investment may be likened to those newspaper competitions in which the competitors have to pick out the six prettiest faces from a hundred photographs, the prize being awarded to the competitor whose choice most nearly corresponds to the average preferences of the competitors as a whole; so that each competitor has to pick, not those faces which he himself finds prettiest, but those which he thinks likeliest to catch the fancy of the other competitors, all of whom are looking at the problem from the same point of view. It is not a case of choosing those which, to the best of one's judgment, are really the prettiest, nor even those which average opinion genuinely thinks the prettiest. We have reached the third degree where we devote our intelligences to anticipating what average opinion expects the average opinion to be. And there are some, I believe, who practise the fourth, fifth and higher degrees.

Chapter 21: Wage behaviour

Keynes's theory of the trade cycle is a theory of the slow oscillation of money income which requires it to be possible for income to move upwards or downwards. If he had assumed that wages were constant, then upward motion of income would have been impossible at full employment, and he would have needed some mechanism to frustrate upward pressure if it arose in such circumstances.

His task is made easier by a less restrictive (but nonetheless crude) assumption concerning wage behaviour:

let us simplify our assumptions still further, and assume... that the factors of production... are content with the same money-wage so long as there is a surplus of them unemployed... ; whilst as soon as full employment is reached, it will thenceforward be the wage-unit and prices which will increase in exact proportion to the increase in effective demand.

Chapter 22: The trade cycle

Keynes's theory of the trade cycle is based on 'a cyclical change in the marginal efficiency of capital' induced by 'the uncontrollable and disobedient psychology of the business world' (pp313, 317).

The marginal efficiency of capital depends... on current expectations... But, as we have seen, the basis for such expectations is very precarious. Being based on shifting and unreliable evidence, they are subject to sudden and violent changes.

Optimism leads to a rise in the marginal efficiency of capital and increased investment, reflected – through the multiplier – in an even greater increase in income until 'disillusion falls upon an over-optimistic and over-bought market' which consequently falls with 'sudden and even catastrophic force' (p316).

There are reasons, given firstly by the length of life of durable assets... and secondly by the carrying-costs of surplus stocks, why the duration of the downward movement should have an order of magnitude... between, let us say, three and five years.

And a half cycle of 5 years tallies with Jevons's sunspot cycle length of 11 years.

Income fluctuates cyclically in Keynes's theory, with the effect being borne by prices if income increases during a period of full employment, and by employment in other circumstances.

Wage behaviour and the Phillips curve

Keynes's assumption about wage behaviour has been the subject of much criticism. It is likely that wage rates adapt partially to depression conditions, with the consequence that effects on employment are weaker than his model implies, but not that they disappear.

Lerner pointed out in the 40s that it was optimistic to hope that the workforce would be content with fixed wages in the presence of rising prices, and proposed a modification to Keynes's model. After this a succession of more elaborate models were constructed, many associated with the Phillips curve.

Keynes's optimistic prediction that an increase in money supply would be taken up by an increase in employment led to Jacob Viner's pessimistic prediction that "in a world organized in accordance with Keynes' specifications there would be a constant race between the printing press and the business agents of the trade unions".

Models of wage pressure on the economy needed frequent correction and the standing of Keynesian theory suffered. Geoff Tily wrote ruefully:

Finally, the most destructive step of all was Samuelson's and [Robert] Solow's incorporation of the Phillips curve into 'Keynesian' theory in a manner which traduced not only Phillips but also Keynes's careful work in the General Theory, Chapter 21, substituting for its subtlety an immutable relationship between inflation and employment. The 1970s combination of inflation and stagnating economic activity was at odds with this relationship, and therefore 'Keynesianism', and by association Keynes were rejected. Monetarism was merely waiting in the wings for this to happen.

Keynes's assumption of wage behaviour was not an integral part of his theory – very little in his book depends on it – and was avowedly a simplification: in fact it was the simplest assumption he could make without imposing an unnatural cap on money income.

The writing of the General Theory

Keynes drew a lot of help from his students in his progress from the Treatise on Money  (1930) to the General Theory  (1936). The Cambridge Circus, a discussion group founded immediately after the publication of the earlier work, reported to Keynes through Richard Kahn, and drew his attention to a supposed fallacy in the Treatise  where Keynes had written:

Thus profits, as a source of capital increment for entrepreneurs, are a widow's cruse which remains undepleted however much of them may be devoted to riotous living.

The Circus  disbanded in May 1931, but three of its member - Kahn, Austin and Joan Robinson – continued to meet in the Robinsons' house in Trumpington St. (Cambridge), forwarding comments to Keynes. This led to a 'Manifesto' of 1932 whose ideas were taken up by Keynes in his lectures. Kahn and Joan Robinson were well versed in marginalist theory which Keynes did not fully understand at the time (or possibly ever), pushing him towards adopting elements of it in the General Theory. During 1934 and 1935 Keynes submitted drafts to Kahn, Robinson and Roy Harrod for comment.

There has been uncertainty ever since over the extent of the collaboration, Schumpeter describing Kahn's "share in the historic achievement" as not having "fallen very far short of co-authorship" while Kahn denied the attribution.

Keynes's method of writing was unusual:

Keynes drafted rapidly in pencil, reclining in an armchair. The pencil draft he sent straight to the printers. They supplied him with a considerable number of galley proofs, which he would then distribute to his advisers and critics for comment and amendment. As he published on his own account, Macmillan & Co., the 'publishers' (in reality they were distributors), could not object to the expense of Keynes' method of operating. They came out of Keynes' profit (Macmillan & Co. merely received a commission). Keynes' object was to simplify the process of circulating drafts; and eventually to secure good sales by fixing the retail price lower than would Macmillan & Co.

The advantages of self-publication can be seen from Étienne Mantoux's review:

When he published The General Theory of Employment, Interest and Money last year at the sensational price of 5 shillings, J. M. Keynes perhaps meant to express a wish for the broadest and earliest possible dissemination of his new ideas.

Chronology

Keynes's work on the General Theory began as soon as his Treatise on Money had been published in 1930. He was already dissatisfied with what he had written and wanted to extend the scope of his theory to output and employment. By September 1932 he was able to write to his mother: 'I have written nearly a third of my new book on monetary theory'.

In autumn 1932 he delivered lectures at Cambridge under the title 'the monetary theory of production' whose content was close to the Treatise except in giving prominence to a liquidity preference theory of interest. There was no consumption function and no theory of effective demand. Wage rates were discussed in a criticism of Pigou.

In autumn 1933 Keynes's lectures were much closer to the General Theory, including the consumption function, effective demand, and a statement of 'the inability of workers to bargain for a market-clearing real wage in a monetary economy'. All that was missing was a theory of investment.

By spring 1934 Chapter 12 was in its final form.

His lectures in autumn of that year bore the title 'the general theory of employment'. In these lectures Keynes presented the marginal efficiency of capital in much the same form as it took in Chapter 11, his 'basic chapter' as Kahn called it. He gave a talk on the same subject to economists at Oxford in February 1935.

This was the final building block of the General Theory. The book was finished in December 1935 and published in February 1936.

Observations on its readability

Many economists found General Theory difficult to read, with Étienne Mantoux calling it obscure, Frank Knight calling it difficult to follow, Michel DeVroey commenting that "many passages of his book were almost indecipherable", and Paul Samuelson calling the analysis "unpalatable" and incomprehensible. Raúl Rojas dissents, saying that "obscure neo-classical reinterpretations" are "completely pointless since Keynes' book is so readable".

Reception

Keynes did not set out a detailed policy program in The General Theory, but he went on in practice to place great emphasis on the reduction of long-term interest rates and the reform of the international monetary system as structural measures needed to encourage both investment and consumption by the private sector. Paul Samuelson said that the General Theory "caught most economists under the age of 35 with the unexpected virulence of a disease first attacking and decimating an isolated tribe of South Sea islanders."

Praise

Many of the innovations introduced by The General Theory continue to be central to modern macroeconomics. For instance, the idea that recessions reflect inadequate aggregate demand and that Say's Law (in Keynes's formulation, that "supply creates its own demand") does not hold in a monetary economy. President Richard Nixon famously said in 1971 (ironically, shortly before Keynesian economics fell out of fashion) that "We are all Keynesians now", a phrase often repeated by Nobel laureate Paul Krugman (but originating with anti-Keynesian economist Milton Friedman, said in a way different from Krugman's interpretation). Nevertheless, starting with Axel Leijonhufvud, this view of Keynesian economics came under increasing challenge and scrutiny and has now divided into two main camps.

The majority new consensus view, found in most current text-books and taught in all universities, is New Keynesian economics, which accepts the neoclassical concept of long-run equilibrium but allows a role for aggregate demand in the short run. New Keynesian economists pride themselves on providing microeconomic foundations for the sticky prices and wages assumed by Old Keynesian economics. They do not regard The General Theory itself as helpful to further research. The minority view is represented by post-Keynesian economists, all of whom accept Keynes's fundamental critique of the neoclassical concept of long-run equilibrium, and some of whom think The General Theory has yet to be properly understood and repays further study.

In 2011, the book was placed on Time's top 100 non-fiction books written in English since 1923.

Criticisms

From the outset there has been controversy over what Keynes really meant. Many early reviews were highly critical. The success of what came to be known as "neoclassical synthesis" Keynesian economics owed a great deal to the Harvard economist Alvin Hansen and MIT economist Paul Samuelson as well as to the Oxford economist John Hicks. Hansen and Samuelson offered a lucid explanation of Keynes's theory of aggregate demand with their elegant 45° Keynesian cross diagram while Hicks created the IS-LM diagram. Both of these diagrams can still be found in textbooks. Post-Keynesians argue that the neoclassical Keynesian model is completely distorting and misinterpreting Keynes' original meaning.

Just as the reception of The General Theory was encouraged by the 1930s experience of mass unemployment, its fall from favour was associated with the 'stagflation' of the 1970s. Although few modern economists would disagree with the need for at least some intervention, policies such as labour market flexibility are underpinned by the neoclassical notion of equilibrium in the long run. Although Keynes explicitly addresses inflation, The General Theory does not treat it as an essentially monetary phenomenon or suggest that control of the money supply or interest rates is the key remedy for inflation, unlike neoclassical theory.

Lastly, Keynes' economic theory was criticized by Marxian economists, who said that Keynes ideas, while good intentioned, cannot work in the long run due to the contradictions in capitalism. A couple of these, that Marxians point to are the idea of full employment, which is seen as impossible under private capitalism; and the idea that government can encourage capital investment through government spending, when in reality government spending could be a net loss on profits.

Search This Blog

Friday, September 10, 2021

Social justice

History

Contemporary theory

Philosophical perspectives

Cosmic values

John Rawls

Thomas Pogge

United Nations

Religious perspectives

Abrahamic religions

Christianity

Evangelicalism

Methodism

Catholicism

Islam

Judaism

Eastern religions

Hinduism

Traditional Chinese religion

Social justice movements

Liberation theology

Health care

Health inequalities

Human rights education

Ecology and environment

Criticism

See also

Progressivism

History

From the Enlightenment to the Industrial Revolution

Contemporary mainstream political conception to the philosophy

See also

The General Theory of Employment, Interest and Money

Keynes's aims in the General Theory

Summary of the General Theory

Book I: Introduction

Stickiness of wages in money terms

Outline of Keynes's theory

Book II: Definitions and ideas

The choice of units

The identity of saving and investment

Book III: The propensity to consume

The marginal propensity to consume and the multiplier

Book IV: The inducement to invest

The rate of investment

Interest and liquidity preference

The Keynesian economic system

Keynes's economic model

Keynesian economic intervention

The equations of Keynesian and classical economics

Chapter 3: The principle of effective demand

Dynamic aspects of Keynes's theory

Chapter 5: Expectation as determining output and employment

Chapter 11: Expectation as influencing the schedule of the marginal efficiency of capital

Chapters 14, 18: The schedule of the marginal efficiency of capital as influencing employment

Chapter 12: Animal spirits

Chapter 21: Wage behaviour

Chapter 22: The trade cycle

Wage behaviour and the Phillips curve

The writing of the General Theory

Chronology

Observations on its readability

Reception

Praise

Criticisms

Cryogenics