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Robertson, Dennis Holme

Robertson, Dennis Holme

Work on the trade cycle

Early work on monetary theory

Problems of industrialism

Response to Keynes’s work

Later work



Sir Dennis Holme Robertson was born at Lowestoft, England, in 1890 and died at Cambridge in 1963. He made his most important contribution to economics in the fields of monetary theory and industrial fluctuation, but his range was wide, and his writings cover many aspects of economics and the economic and social problems of his time. Like many of his predecessors and contemporaries, he came to economics from another discipine. In 1908 he entered Trinity College, Cambridge, with a major scholarship in classics, and two years later he was placed in the first division of the first class of the classical tripos and won the Craven scholarship. In three successive years he also won the chancellor’s medal for English verse, and he continued to write poetry for most of his life. He had a superb mastery of the language, and his writing is well known for its clarity, conciseness, and elegance. In 1910 he abandoned classics for economics. At this time economics at Cambridge was dominated by the work of Alfred Marshall, which remained the principal influence on Robertson. Robertson became a pupil of J. M. Keynes (his senior by seven years), thus beginning a collaboration that was to last for more than twenty years. He obtained a first class in the economics tripos in 1912 and turned to his first piece of research, which was completed early in 1914 and published in 1915 as A Study of Industrial Fluctuation.

Work on the trade cycle

A Study of Industrial Fluctuation is a remarkable work for so young an economist. Robertson collected a mass of empirical data, and although some of his methods appear amateurish by later standards (he was working singlehandedly and without any statistical aids), he derived conclusions of great importance. In particular, he stressed the role of invention and innovation in determining the course of investment and therefore of general economic activity, thus helping to explain the causation and mechanics of the trade cycle. This new approach also implied that fluctuations are closely associated with economic progress and are to some extent part of the price to be paid for it—a conclusion which is not always now accepted but which Robertson continued to hold. This is not to say that he considered that countercyclical policy need be totally ineffective: this early work contains suggestions which were well in advance of their time, such as “a somewhat saner and more centralized investment policy” ([1915] 1948, p. 246) and an attack on what in the 1930s became known as the “Treasury view” of the ineffectiveness of public expenditure as a means of combating depressions.

Apart from its particular conclusions, three features of the book were to remain characteristic of all his later work. First, there is very little in it about “monetary” problems as such. In a new introduction to the 1948 reprint, he stated that he had “been taught to be constantly trying to dig down below the money surface of things” (p. xii), and even in his later work in monetary theory he constantly turned to the influence of “real” forces. Thus, for example, he continued to emphasize the importance of the classical forces of productivity and thrift as factors determining the rate of interest, unlike economists who regarded it as a purely “monetary” phenomenon determined in the market for bonds. Second, there is an awareness of the complexity of the phenomenon of fluctuation and of all economic phenomena, which left him “with an abiding sense of the difficulty of providing …neat little models of the trade cycle and (a fortiori) neat little packets of therapeutic pills” (p. x). Third, there is emphasis on structural problems. Although the theme is fluctuation in real income as a whole (in itself a new emphasis, which was rediscovered by some writers in the 1930s), the treatment is permeated by recognition of the effects of changes in one sector of the economy, or in one industry, on the other sectors and industries, and therefore on the aggregate.

Early work on monetary theory

When A Study of Industrial Fluctuation was published in 1915, Robertson was in the army. He had joined up on the first day of World War i and served throughout, mainly in Egypt and Palestine, as a transport officer. After the war he returned to Cambridge, where he stayed until 1938. It was during this period that he turned to intensive work in monetary theory, at first in close collaboration with Keynes but later as one of his foremost critics. His contributions are contained mainly in two small books, Money, published in 1922 (with revised editions in 1924 and 1928 and many subsequent reprints), and Banking Policy and the Price Level, published in 1926. The former is a general textbook in a series edited by Keynes, but it is also an important contribution to the development of ideas. Robertson’s aim was to “try to re-integrate the theory of money into that of the trade cycle” ([1915] 1948, p. xv). The period in which he wrote was one of monetary instability; the inflation of the war and postwar years was followed by collapse. Traditional financial policies were inadequate to deal with instability and even partly contributed to it, and the mechanisms involved were very imperfectly understood. Virtually the only theory was a rather crude form of quantity theory, which attributed rising prices to the effects of increasing note issue. Robertson’s main innovation (and it was fundamental) was to shift the emphasis from the issue of notes to the creation of bank credit and then to break down the process of inflation into a sequence of stages; he also considered the reverse process of deflation (this was in 1922 when the fall in prices had started), giving a warning against too precipitate a return to the gold standard. This analysis was developed in Banking Policy and the Price Level, as well as in the later editions of Money, its central theme being the key importance of saving and investment as the determinants of the level of economic activity, with the banking system as the means whereby savings are translated (or not translated) into investment. The step-by-step method of analysis is carried further here than in the earlier work. The implications for policy were the same as those he explicitly stated later: “…the ideal banking policy might be one which was founded on the principle of price-stabilisation as a norm, but which was ready to see the fruits of a prolonged and general increase in individual productivity shared in the form of lower prices, and perhaps to acquiesce in moderate price-rises in order that advantage might be taken of discontinuous leaps in industrial technique” (“Theories of Banking Policy” in [1924–1940] 1956, p. 59). He consistently maintained this view; it is found, for example, in his last work, Memorandum Submitted to the Canadian Royal Commission on Banking and Finance (1963).

Problems of industrialism

In 1923, immediately after writing Money, Robertson published The Control of Industry, another volume in the series of textbooks edited by Keynes. The theme is the problem of “how, if at all, [we can] ensure that the men and women engaged in industry shall not become mere instruments of production or mere passive receptacles of its fruits, but shall retain, in their relation to the economic circumstances of their life, the character of self-directing human beings?” ([1923] 1960, pp. 1–2).

It was characteristic of Robertson not to offer easy solutions but rather to present a penetrating and balanced discussion of the nature of the problems to be solved. The scope of the book is, indeed, wider than this theme would suggest, for in its short compass it is no less than a critique of the underlying principles and typical organizations of modern capitalism. He identified the following tenet as the main principle of free enterprise: “Where the risk lies, there the control lies also.” He explored its application to a wide range of proposals and attempts to change the methods of control of industry, ranging from revolutionary syndicalism to consumers’ cooperatives and workers’ copartnership. Although he did not claim any originality of thought on the subject, the work was a minor classic and is still widely used.

Response to Keynes’s work

In the introduction to Banking Policy and the Price Level, Robertson stated that his collaboration with Keynes had been so close that “neither of us now knows how much of the ideas ... is his and how much is mine” ([1926] 1949, p. 5). With the publication of Keynes’s General Theory of Employment, Interest and Money in 1936, however, their paths diverged. Robertson’s criticisms of the Keynesian system are contained in a series of articles, most of which were later republished in volumes of collected essays (see 1924–1940; 1952; 1956). Many of his criticisms were regarded in some quarters as carping at minutiae of a fundamental revolution in economic thinking that he had failed to understand. To Robertson, however, much of the Keynesian “revolution” was retrogression rather than advance. So far as the main analysis was concerned, Robertson regarded Keynes’s treatment of the savings-investment complex in terms of static and stable equilibrium as a step backward, leading to confusion and misunderstanding. Although much of the controversy seems to have been about words, especially the definitions of saving and investment, the issue of whether savings and investment are or are not equal in equilibrium was a fundamental one. Similarly crucial was what was meant by equilibrium : for Keynes it was short-period equilibrium; for Robertson it was equilibrium over time, to be analyzed and understood in detail only by his step-by-step method. Further, Robertson’s “equilibrium” also implied (indeed, took for granted) the growth of the economy in terms of measurable real output or income. Keynes, on the other hand, was led to the “stagnation thesis,” which Robertson regarded as unwarranted analytically and also as being a generalization from one severe but atypical depression. Moreover, the implications for policy of Keynes’s system were unambiguously inflationary and thus a departure from Robertson’s ideal of ordered progress and monetary stability.

In retrospect, much of the controversy over the General Theory seems to have been unduly labored, in part perhaps as a result of the defects of the book and of the extreme positions taken by some of the participants. The Keynesian system was considerably modified and developed under criticism, not least that of Robertson, and the accepted view on some matters became as much Robertsonian as Keynesian. For example, Robertson was right in pointing out that the equality of savings and investment was treated by many of Keynes’s followers both as an identity and as an equality achieved by movement of income to an equilibrium level, and many of his further criticisms flowed from this. The controversy over the determinants of the rate of interest showed that a modified Keynesian “liquidity preference” theory and the Robertsonian “loanable funds” approach could in certain circumstances give much the same results, and some economists regard the Robertsonian formulation as the more fruitful in interpreting dynamic situations. And although Robertson remained out of sympathy with the Keynesian system, his own views underwent modification as he reconsidered his earlier ideas, many of which had originally been worked out in collaboration with Keynes: for example, his discussions after 1945 of problems of inflation would have been very different had it not been for the General Theory and its aftermath.

Later work

In 1938 Robertson left Cambridge to take up a professorship at the London School of Economics and at the outbreak of World War n joined the Treasury, where his main concern was with the balance of payments and overseas finance. In 1944 he was one of the team accompanying Keynes to the Bretton Woods conference, and he played an important part in the negotiations leading to the final agreement. At the end of the year he returned to Cambridge to succeed A. C. Pigou in the chair of political economy. In that capacity he lectured on economic principles until his retirement in 1957. His lectures, published in three volumes from 1957 to 1959, were in the main an exposition of the problems of value and distribution (although Volume 3, covering only a dozen lectures given in the short third term at Cambridge, is concerned with money and fluctuations). Almost inevitably he based himself on Marshall, but he had kept up with the flood of literature before and after the war, and the lectures constitute an important statement of the present state of some of the central and traditional problems of economics, with much penetrating comment, presented in his own inimitable style. In these years he also wrote a large number of papers on current problems of domestic and international economic policy, as well as some on more theoretical issues; most of these were collected into published volumes of essays (e.g., 1956; 1957–1959). It was at this time that formal worldwide recognition came; he had received an honorary degree from Harvard University at the tercentenary celebration in 1936 and from the University of Louvain, Belgium, in 1947; then, in quick succession, he was honored by the universities of Durham, Manchester, Sheffield, Amsterdam, London, and Columbia. He was knighted in 1953, in recognition of his standing as an economist rather than as a public servant (he had first received public honors on leaving the Treasury in 1944).

Robertson did take some part in public affairs, although usually with some reluctance and out of a strong sense of duty. In particular, from 1944 to 1946 he was a member of the Royal Commission on Equal Pay, exerting a powerful influence on its report. In 1957–1958 he was a member of the three-man Council on Prices, Productivity and Incomes set up by the chancellor of the Exchequer “to keep under review changes in prices, productivity and the level of incomes (including wages, salaries and profits) and to report thereon from time to time.” He was the only economist member and undertook the task with particular reluctance; he had serious doubts about the whole matter of “incomes policy” with which the council was linked, and he knew that his own ideas, which he would be bound to put forward, would be generally unwelcome in the current climate of political and economic opinion. He proved to be right: the trade unions refused to have anything to do with the council, and its first and principal report, in February 1958, had a mixed reception. Although some commentators regarded it as an important contribution to thinking about the current situation (and it contains a good deal of hard analysis behind its apparent simplicity), it was attacked mostly for the very reasons that Robertson had expected, such as its emphasis on the high level of demand, supported by a plentiful supply of money and the pursuit by governments of “full employment policies,” rather than on the wage claims of unions, as the main cause of inflation; certain comments on incomes policy and wage restraint; and a Robertsonian preference for monetary stability and falling prices as a result of increasing productivity, rather than for rising prices as a continuous stimulus to activity. After publication of a second report in August 1958, which brought the statistics up-to-date and suggested further investigations, Robertson resigned. His two colleagues resigned in 1960, and a reconstituted council produced one further report before falling into desuetude.

In 1960 Robertson was invited to give the Marshall lectures at Cambridge and chose as his theme Growth, Wages, Money (1961)—a complex of subjects that were highly topical but that also took him back to his first work on industrial fluctuation. In his opening statement, he remarked “... I have sometimes hoped that I could be useful by taking some theme which was really too difficult for me and over which the giants were in conflict …and giving, for the benefit of those I called my fellow-idiots, my impression of the state of the debate” (p. 4). He not only recorded the state of the debate but made many penetrating comments; he quietly pricked some of the more pretentious bubbles of economic theory and policy, and displayed a salutary skepticism about the value of growth “models,” of “neat little models of the trade cycle,” and of incomes policy as means of dealing with inflation and of ensuring growth. Although he cast doubt on many of the economic shibboleths of the time, he would have hoped not to “be debarred from being classed among those who genuinely desire to find means to limit the turbulence, without destroying the vitality, of the ’procreant urge of the world’” ([1915] 1948, p. xvii).

S. R. Dennison

[For the historical context of Robertson’s work, see the biographies ofKeynes, John Maynard, andMarshall. For discussion of the subsequent development of his ideas, seeBanking, Central; Business Cycles; Income And Employment Theory; Monetary Policy; Money. Also related is the biography ofPigou.]


(1915) 1948 A Study of Industrial Fluctuation. London School of Economics and Political Science, Series of Reprints of Scarce Works on Political Economy, No. 8. London: Aldwych.

(1922) 1959 Money. Rev. ed Univ. of Chicago Press.

(1923) 1960 Robertson, Dennis Holme; and Dennison, Stanley R. The Control of Industry. New ed. Cambridge Economic Handbooks, No. 4. London: Nisbet. → Robertson was the sole author until the 1960 edition.

(1924–1940) 1956 Essays in Monetary Theory. London: Staples.

(1926) 1949 Banking Policy and the Price Level. Rev. ed. New York: Kelley.

1931 Economic Fragments. London: King.

1931 Pigou, A. C; and Robertson, Dennis HolmeEconomic Essays and Addresses. London: King.

1952 Utility and All That. London: Allen & Unwin.

1954 Britain in the World Economy. London: Allen & Unwin.

1956 Economic Commentaries. London: Staples.

1957–1959 Lectures on Economic Principles. 3 vols. London: Staples. → A paperback edition was published in 1963 by Collins.

1961 Growth, Wages, Money. Cambridge Univ. Press.

1963 Memorandum Submitted to the Canadian Royal Commission on Banking and Finance. Essays in International Finance, No. 42. Princeton Univ., Department of Economics, International Finance Section.


Ashton, T. S. 1951 Industrial Fluctuation. Economica New Series 18:298–302.

Fellner, William J. 1952 The Robertsonian Evolution. American Economic Review 42:265–282.

Hicks, J. R. 1965 Dennis Holme Robertson: 1890–1963. British Academy, London, Proceedings 50:305–316.

Marget, A. W. 1941 D. H. Robertson: Essays in Monetary Theory. Review of Economic Statistics 23:147–151.

Samuelson, P. A. 1963 D. H. Robertson (1890–1963). Quarterly Journal of Economics 77:517–536.

Wilson, T. 1953 Professor Robertson on Effective Demand and the Trade Cycle. Economic Journal 63: 553–578.

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