Commitment to the behaviorist approach to utility theory, to the usefulness of mathematics in economic analysis, and to equalization of the marginal utility of income as a principle of just taxation brought Irving Fisher and Ragnar Frisch to attempt to measure the marginal utility of income and led them to collaborate in forming the Econometric Society and sponsoring the establishment of the Cowles Commission, institutions advancing economic theory in connection to mathematics and statistics, and led Frisch to pioneer an axiomatic approach to utility and microeconomic theory.
Kenneth Arrow’s Social Choice and Individual Values (Cowles Monograph No. 12, 1951), a work that established the field of social choice and set the limits for what public economic theory could hope to achieve, was formulated at the Cowles Commission at the University of Chicago from 1947 to 1949 (and during the summer of 1948 at the RAND Corporation) in a context in which concern with using economic theory to guide the economy was intense. During the period just before he shared in developing the Arrow-Debreu-McKenzie proof of existence of general equilibrium, Arrow moved through a series of papers to prove the non-existence of a social welfare function. The context of Arrow’s non-existence proof for aggregation of individual preferences into social welfare function and to Arrow’s shift from trying to prove a possibility theorem for social welfare to proving an impossibility theorem has been confused by a reprinted and influential reminiscence in which Arrow mis-remembered when he had spent a summer at RAND and when he had presented his impossibility theorem to the Econometric Society.
In October 1929, the Dutch electronics firm Philips approached John Maynatd Keynes to write confidential reports on the state of the British and world economies, which he did from January 1930 to November 1934, at first monthly and then quarterly. These substantial reports (Keynes’s November 1931 report was twelve typed pages) show Keynes narrating the Great Depression in real time, as the world went through the US slowdown after the Wall Street crash, the Credit-Anstalt collapse in Austria, the German banking crisis (summer 1931), Britain’s departure from the gold exchange standard in August and September 1931, the US banking crisis leading to the Bank Holiday of March 1933, the London Economic Conference of 1933, and the coming of the New Deal. This series of reports has not been discussed in the literature, though the reports and surrounding correspondence are in the Chadwyck-Healey microfilm edition of the Keynes Papers. We examine Keynes’s account of the unfolding events of the early 1930s, his insistence that the crisis would be more severe and long-lasting than most observers predicted, and his changing position on whether monetary policy would be sufficient to promote recovery and relate his reading of contemporary events to his theoretical development.