Hobson, Keynes, "Infinite Wants," & the break with classicism

["Gregoire de Nowell (ci-devant)" <GN842@xxxxxxxxxxxxxxxxx>]

Reflecting, in spite of myself, on this thread, I realized
that the "decreasing marginal propensity to consume" which
threads its way into the GT is a *fundamental* difference
between Hobson and Keynes, and indicates that Keynes'
break with classical theory is cleaner than Hobson's.

For Hobson posits explicitly that "human wants are unlimited" and that
demand insufficiency must, as a result, be the product of
maldistribution of income.  Thus he targets, as a reformer,
excess concentrations of wealth, arguing for A) free trade
and anti-monopoly legislation to control excess "rents"
as we would now say; and B) income redistribution through
social welfare policy.  By enabling the satisfaction of
"unlimited desire" to be realized, the generation of wealth
is maximized.

But even though in many ways the *tenor* of Keynes' arguments
sounds less "radical" than Hobson's the assumption, *as
a feasture of the economic system*, of a "decreasing
marginal propensity to consume" as a generator of crisis
in the creastion of aggregate income clearly points to
the *ultimate non-feasibility of the classical model*,
and wold indicate that the Hobsonian prescriptions are
misguided though they may have at least partially the
desired effects.   Free trade and anti-monopoly
legislation will not necessarily increase the tendency
to consume--they might, especially if there are
major deciles of unsatisfied demand in the population--
but it is not a theoretical necessity.  The "theoretical
necessity" of the "decreasing marginal propensity to
consume" points, as we know, either to socialization
of investment or to demand stimulus.  It is of course
in the latter path--especially military consumption--
that the "demon Keynes" makes his appearance.

Nonetheless a difference between Keynes and Hobson (
and probably other underconsumptionists) on this point
is quite clear, and it is also obvious that the extent
to which Hobson buys the "unlimited consumption thesis"
he is able to reconcile (through a very active reform
program) with the classical model; whereas with Keynes
no such reconciliation is possible.

But the story does not end there.  For in spite of the
profoundly different implications of this single
assumption--whether the desire to consume is unlimited or
not--it is Hobson who developes the critique of
"military Keynesianism" (Imperialism) as a dysfunctional
form of demand stimulus, one that threatens world peace,
whereas Keynes seems blind to the possible deformations
or negative implications of demand stimulus, a blindness
that seems almost perverse given that Hobson's
Imperialism was a bestseller and Keynes had read
Hobson's earlier Physiology of Industry; and also
perverse in light of the "demand stimulus" that was
actively pursued by Hitler and friends.

For this point of clarification in my thinking
I find I am indebted, however unexpectedly, to
Hyman Blumenstock.

Greg Nowell