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Katona and Keynes.

1. From Psychology to Economics, and Back to Psychology

George Katona was part of a remarkably talented generation of Hungarian economists born in the early years of the twentieth century that included Thomas Balogh, William Fellner, Nicholas Kaldor, John von Neumann and Tibor Scitovsky. Katona was born into a middle-class family in Budapest on 6 November 1901. As he recalled, seventy years later, he was lucky to have had 'great and powerful benefactors' who steered him toward the right path in life. The first was the Hungarian Communist Bela Kun, whose abortive insurrection in 1919 'chased me out of Hungary. Without him I would have done what I planned, namely, to study law in Budapest and enter the law office of my grandfather' (Katona 1972, 11). Instead, Katona went to Germany, where he studied experimental psychology at the University of Gottingen, worked for a while in a bank and was employed as assistant editor on the weekly paper The German Economist, founded by Gustav Stolper (the father of the better-known Wolfgang Stolper, of Samuelson-Stolper fame).

'My next great benefactor', Katona continued, 'was Adolf Hitler', who 'took over Germany and confiscated our paper' (Katona 1972, 12). The Nazi seizure of power forced Katona and his wife to seek refuge in the United States; he had already spent three years as German correspondent for the Wall Street Journal. 'What does a stranger do in a new country? He tries to make money. I had an office with the prestigious address of 1 Wall Street in New York and gave advice to European investors' (Katona 1972, 13). In 1936 Katona fell ill and spent the next three years grappling with tuberculosis. His former teacher, the eminent Gestalt psychologist Max Wertheimer, helped him to obtain a Carnegie corporation grant, and 'I spent these years on a couch studying the psychology of learning'. The result was a book, Organizing and Memorizing (Katona 1940), which was sufficiently well thought of to go into a third edition in 1967 and to be cited by Solomon Asch in his authoritative survey of Gestalt theory in the following year (Asch 1968, 174).

The outbreak of World War II allowed Katona to integrate his interests in psychology and in economics, writing a book on War without Inflation (Katona 1942). In the year of its publication he was appointed director of a Cowles Commission project on business reactions to price controls. Two years later he moved to Washington to work for the Division of Program Surveys at the Department of Agriculture, under Rensis Likert, and at the end of the war he followed Likert and several other colleagues to work at the Survey Research Center in the Institute for Social Research (ISR) at the University of Michigan (Frantilla 1998; Hyman 1991). Katona was director of the Center from 1946 until his retirement in 1972, making important contributions to the synthesis of psychology and macroeconomics (Curtin 2004). He continued his work on survey research until his death in Berlin on 18 June 1981 (Stolper 1981).

Although the University of Michigan had a strong tradition of research in psychology, there is little reason to suppose that Katona was greatly influenced by it. In the first place, he was already in his mid-forties when he moved to Ann Arbor, and his own approach to the subject was already firmly established in Gestalt psychology. Second, the most important strand of thought in post-war psychology at Michigan was a version of mathematical psychology with which he would have had little sympathy. It drew on the work of von Neumann and Morgenstern in game theory, and of Leonard 'Jimmie' Savage in decision theory (Heukelom 2010, 197-199). These were strands of neoclassical economic theory for which Katona had little sympathy. Third, as Heukelom notes in a section of his paper not included in the later published version, 'although both ISR and the mathematical psychologists and behavioural decision researchers were working on psychology and measurement, in fact the two groups conducted very different projects ...their actual research was only distantly related' (Heukelom 2009, 6).

There is a considerable literature on Katona and his work. In addition to the published sources on the Survey Research Center, cited above, there are two Festschrift volumes dedicated to Katona, one edited by Burkhard Strumpel, James Morgan and Ernest Zahn (Strumpel, Morgan, and Zahn 1972) and the other with no acknowledged editor (Anon 1979). An early appreciation of his work by Warneryd (1982) has recently been supplemented by the work of Dechaux (2015), Edwards (2014), Hosseini (2011), Jefferson (2016) and Pietrykowski (2011), suggesting that there has been a revival of interest in Katona's attempt to integrate the disciplines of economics and psychology.

As he wrote in the opening sentences of his first major text in economics, his intention was
to cut through the time-honoured boundaries of two scientific
disciplines, economics and psychology. We shall look at economic
processes as manifestations of human behaviour and analyze them from
the point of view of modern psychology. We shall find that the
investigation of spending, saving, investing or determining prices or
the size of output has much in common with the study of such other
human activities as learning, thinking, voting, or getting along with
one's employees or one's wife. (Katona 1951, 3)

Katona argued that the relevance of psychology was often denied by economists, who regarded economics as 'the most advanced of all social sciences', which 'uses the scientific method of abstraction... instead of losing its bearings among the innumerable deviations and aberrations that occur because of human frailty'. Against this, Katona insisted that 'studying the motives, attitudes, and expectations of consumers and businessmen contributes to the understanding of spending, saving, and investing... Modern psychology provides conceptual as well as methodological tools for the investigation of economic behavior' (Katona 1951, 3-4).

Although he was entirely self-taught in economics, Katona had a great deal of relevant experience as a business journalist and consultant. His reading of the General Theory led him to become very critical of its neglect of 'modern psychology', and his writings in the 1940s and beyond are full of adverse comments on what he saw as a major failing of Keynes's macroeconomic analysis. In the remainder of this paper I outline Katona's criticisms of Keynes, with particular reference to the theory of consumption expenditure, and ask what Keynes himself might have made of them. I argue that some of the Katona's strictures are fully justified, but he did not entirely do justice to Keynes. I conclude by suggesting that Katona and Keynes should be regarded as complements, not substitutes.

2. Katona on Keynes on Consumption

Katona's doubts about Keynes's treatment of consumer expenditure were apparent in his first book on economics, the 1942 War without Inflation (Jefferson 2016). His target, however, was less the Keynes of the General Theory than the author of How to Pay for the War, the analysis of which had recently been applied to the United States economy by Leon Henderson, an influential public servant in New Deal America. Katona was sceptical of Henderson's numerical estimate of the inflationary gap, and of the increase in taxation that was therefore necessary to prevent inflation in the early stages of the country's entry into the war. They did not tell the whole story. As he stated in the opening summary of the book, inflation is not the automatic effect of economic factors, but depends on people's expectations and so involves psychology no less than economics (Katona 1942, ix-x).

This is especially true in wartime, he suggested, when 'there is no such thing as "normal savings'", and peacetime estimates of the marginal propensity to consume may be seriously misleading. In particular, what Katona terms 'the velocity of income turnover' may increase if people expect prices to rise. Then, since income tax was (in the early 1940s) collected at the end of the financial year, spending might already have increased and driven up prices. 'In such a case, the taxes may not close the inflationary gap', so that inflation would occur even if taxes had been increased by 'the full amount of the gap indicated in the [macroeconomic] equation' (Katona 1942, 22). However, Katona continued, there was a sense in which Henderson was entirely correct. 'Inflationary expectations will arise if the public knows that the gap exists and that no effective endeavour is made to close it'. It was thus essential to create 'strong anti-inflationary expectations', and to this end Katona advocated the introduction of comprehensive price controls and the rationing of consumer goods (Katona 1942, 22). There was no explicit criticism of Keynes in this opening chapter, in which the only reference to the General Theory was the neutral statement that:
John M. Keynes [sic], in discovering what he called the propensity to
consume, has enumerated several motives which tend to restrain us from
spending our whole income. Avarice, pride, the wish to be independent
and to bequeath money to our children are some of these motives, which
do not play a great role in connection with the process of inflation.
But the desire to provide for a rainy day from foresight or precaution
is a powerful obstacle to the establishment of an inflationary
framework. (Katona 1942, 17; the reference, not provided by Katona, is
to Keynes 1936, 107-108)

A few pages later there is a hint of criticism when Katona notes that increased income means different things to different individuals, and that this complicates the application of macroeconomic theory to policy problems:
To some persons additional income may mean the possibility of
satisfying long-delayed needs, to others it may mean improving the
standard of living, and to still others saving for the future. These
differences do not imply that statistics cannot be used, but only that
in abnormal times, such as war, they must be used with caution. (Keynes
1936, 21-22)

The book ends with a four-page 'Bibliographic Note' that does include a strong and explicit criticism of Keynes, which is worth quoting at length:
It was J.M. Keynes who in his General Theory of Employment, Interest
and Money (1936) placed the concept of expectation in the center of
economic theory. Yet he studied only the expectations of the
entrepreneur and not of the consumer. The subjective factors that
determine the amount of consumption out of a given income, he held to
be 'though not unalterable [yet] unlikely to undergo a material change
over a short period of time except in abnormal or revolutionary
circumstances'. The fact that Keynes disregards changes in consumer
habits hinders the application of some of his concepts to inflation. He
considers the propensity to consume a fairly stable function,
determined by a 'fundamental psychological law'. This states--among
other things--that 'the behaviour of the public is, in general, of such
a character that they are only willing to widen (or narrow) the gap
between their income and their consumption if their income is being
increased (or diminished)'. Empirical studies of the changes in total
incomes and total savings of a country in certain periods have
confirmed this thesis, and yet it might be questioned whether it
expresses a psychological law. Of course, the mere fact that
psychologists have not heard of such a law need not speak against it,
and the law may be correct as a rule even though it becomes inoperative
when inflation sets in. (Then incomes may rise, but the gap between
income and consumption narrows down). The main point is that research
into the factors conducive to a widening or narrowing of the gap should
not be hindered by the fact that the 'law' states a priori the results
of such research. (Keynes 1936, 204-205; the references, again not
provided by Katona, are to Keynes 1936, 96 and 91)

Katona ends by citing J.W. Angell's Investment and Business Cycles as an example of 'the Keynesian approach' to consumer expenditure (Angell 1941).

Several of the themes that were repeated in Katona's subsequent critique

of Keynes are already present in this passage. First, he registers an understandable objection to the careless way in which Keynes invokes psychology. Second, he complains that Keynes tends to pontificate on the determinants of consumer expenditure without making any attempt to confirm his generalisations with empirical evidence. Third, he objects to Keynes's treatment of changes in current income as the only important determinant of changes in consumer spending, ignoring all the other potentially relevant factors. Finally, Katona cites the work of other 'Keynesian' authors as offering additional evidence of Keynes's own beliefs.

All of these themes can be found in Katona's published work later in the 1940s (see, e.g. Katona 1946, 44-45; Katona 1947, 452-453, 453 n7; Katona 1949, 95-98). Sometimes they were stated very strongly:
If human beings were automatons, if there were a one-to-one
correspondence between economic stimuli and resulting economic actions,
the study of the human factor could be rightly omitted. Such a
correspondence is assumed, for instance, when it is argued that the
propensity to consume is a function of income alone. (Katona 1947, 453)

Katona does not attribute this position directly to Keynes, referring instead to Jacob Mosak and to Joseph Schumpeter (Katona 1947, 453 n7). He continued to make the same points in his later writings, especially in his second major book, the 1951 text on the Psychological Analysis of Economic Behavior (Katona 1951, 77, 132, 139-140, 144-147). This time he cites Arthur Burns: 'In Keynes' scheme investment is a free variable, while consumption is rigidly and passively tied to income' (Burns 1947, 261, cited by Katona 1951, 136; my added stress).

By 1960, in his book The Powerful Consumer, Katona was suggesting that this approach had become seriously outmoded:
Keynes's view that habitual practices influence all consumer
expenditures may have been correct fifty or one hundred years ago when
incomes were spent mostly on non-durables and services. But today in
the United States expenditures on durables are important and are
usually not habitual. (Katona 1960, 23)

This was not the only grounds for criticism. 'The second major objection to Keynes's psychological law', he maintained, 'is that adjustments to income increases cannot be considered as merely the reverse of adjustments to income decreases'. This is because the 'effects of reward are usually not just the opposite of the effects of punishment', so that reductions in consumption may be delayed while increases may be instantaneous (Katona 1960, 23). And, there was a third objection:
Keynes disregards expectations in explaining consumer behaviour. He
argues that while some people expect income increases, others expect
decreases, and the two expectations will usually cancel out and
therefore not affect the economy. This again may have been true in the
nineteenth century when most people who were not entrepreneurs were
uninformed about business developments and were not subjected to fairly
uniform news transmitted by mass media. Today, however, changes in
consumer expectations tend to be uniform and to spread rather than to
cancel out. Therefore we cannot accept a theory which explains
fluctuations of durable goods expenditures in terms of past income
changes alone and ignores expectations. (Katona 1960, 23-24)

Katona repeated these criticisms four years later in The Mass Consumption Society, which he described as itself 'a new and unique phenomenon in human history', characterised by 'three major features': affluence, consumer power and the importance of consumer psychology (Katona 1964, 3). He now dismissed Keynes's neglect of consumer income expectations as 'a superficial conclusion drawn from experience in an earlier, very different, time' (Katona 1964, 320).

3. Keynes on Consumption

There is a strong version and a weak version of Katona's critique of Keynes's treatment of consumption expenditure. The strong version has Keynes maintaining that current income is the only determinant of consumption; this is plainly wrong, and it is significant that Katona can only find secondary sources to cite in support of it. The weak version accuses Keynes of exaggerating the importance of current income as a determinant of consumption at the expense of the other relevant factors, whose significance is thereby neglected. There is somewhat more to be said in favour of this criticism, but it rather misses the point.

Keynes's master work was entitled the General Theory of Employment, Interest and Money, not The General Theory of Consumption. Its cornerstone is the principle of effective demand: output, income and employment depend on the level of aggregate expenditure. In a closed economy, aggregate expenditure is given by the sum of consumption (C), investment (I) and government spending (G), so that Y=C + I+G. Keynes's argument, in a nutshell, is that fluctuations in I (and to a lesser extent in G) are by far the most important factor causing fluctuations in Y, and hence in output and employment; movements in what would later be termed autonomous consumption (that is, changes in consumption that are not caused by changes in current income) are much less important. He quoted Simon Kuznets's estimates for the United States, where net investment had fallen from $19 billion in 1930 to $1.2 billion in 1932 (Keynes 1936, 103). Keynes quite rightly saw this as crucial for policy purposes. Changes in I and G have multiplier effects on Y, as Richard Kahn had already established. However, Kahn had been less than entirely clear on what it was that kept the value of the multiplier finite (Kahn 1931). A large part of Keynes's discussion of consumption expenditure in the General Theory is directed to this question, and he did not need a general theory of consumption in order to do so.

Book III of the General Theory, entitled 'The Propensity to Consume', takes up 42 pages out of 384; this can be compared with the 120 pages of Book IV on 'The Inducement to Invest' (Keynes 1936, 89-131, 135-254). There are three chapters in Book III. In chapter 8 Keynes deals with the 'objective factors' (other than current income) that he believes to affect consumption spending. All but two of them, he suggests, are unimportant, so that the propensity to consume--and here he makes the statement repeatedly cited by Katona--'may be considered a fairly stable function' of current income (Keynes 1936, 95). One of the two remaining determinants involves changes in fiscal policy (Keynes 1936, 94-95), and the other is described by Keynes as 'windfall changes in capital-values', or unexpected changes in wealth, which 'should be classified amongst the major factors capable of causing short-period changes in the propensity to consume' (Keynes 1936, 92-93). This alone is sufficient to refute the strong version of Katona's critique. Keynes continues by defining the afore-mentioned 'fundamental psychological law', that the marginal propensity to consume is positive but less than unity. He will demonstrate in chapter 10 that 'the stability of the economic system essentially depends on this rule prevailing in practice' (Keynes 1936, 97).

First, though in the brief (six-page) chapter 9, he discusses the 'subjective factors' affecting consumption and saving, summarising the latter-- another passage that attracted Katona's repeated attention--'Precaution, Foresight, Calculation, Improvement, Independence, Enterprise, Pride and Avarice' (Keynes 1936, 108). These eight factors tend to change only slowly, he suggests, so that 'short-period changes in consumption largely depend on changes in the rate at which income... is being earned, and not on changes in the propensity to consume out of a given income' (Keynes 1936, 110). It was especially important to avoid a common fallacy of composition that had deceived the 'classical economists': changes in the rate of interest affect consumption and saving only through their effect on investment expenditure, and hence on the level of income (Keynes 1936, 111-112).

The much longer (19-page) chapter 10 is devoted to the marginal propensity to consume, the marginal propensity to save and the size of the multiplier. Keynes insists that the marginal propensity to consume is 'much nearer to unity than to zero' (Keynes 1936, 118). He offers a number of possible values for the multiplier, all consistent with this principle. In the initial verbal exposition he suggests a value of 4, 5 or (allowing for expenditure on imports) between 2 and 3 (Keynes 1936, 118-121), while in the subsequent numerical example it is set between 2.5 and 3, with a marginal propensity to consume of approximately 60% (Keynes 1936, 128). If the multiplier were much larger than this, he notes, sharp changes in investment spending would lead to huge fluctuations in income and employment, much larger than had been experienced even in the early 1930s. Interestingly, in this final chapter Keynes acknowledges that the marginal propensity to consume is not constant, even in the short period, but is likely to fall in the upswing as full employment is approached and income distribution shifts away from wages and towards profits; this point is repeated later in the book (Keynes 1936, 120-121, 262). Katona seems to have missed this part of the argument altogether.

To sum up: the discussion of consumption and saving in the General Theory is rather complex and nuanced, lending some support to Katona's apparent belief that Keynes was indeed attempting to formulate a 'general theory of consumption'. Katona was not the only critic to see this attempt as having failed, and to regard the failure as a significant weakness. The 'permanent income' theory of Milton Friedman, to take the best-known example, was interpreted by its author as being fundamentally anti-Keynesian in its implications. As I have suggested, however, both Katona and Friedman were mistaken. Keynes was not claiming that current income was the only determinant of current consumption, and he did not need to make such an implausible claim, either to establish the principle of effective demand or to provide realistic estimates of the size of the multiplier.

In fact Katona was also highly critical of the permanent income hypothesis, since:
The emphasis on long-range planning and on definite expectations rules
out flexibility and learning as well as uncertainty. It not only
relegates current income to a minor position in explaining current
saving and consumption but also disregards the probable impact of
changes in motives, attitudes, and expectations on expenditures.
(Katona 1960, 151)

Seven years later he repeated this objection:
Normal or permanent income may represent a meaningful and appropriate
concept for the understanding of consumer behaviour in certain cultures
and at certain times. In a nonfluid society, in which the status of
most people is determined by birth and class, people may have an idea
of what is normal for them. The assumption that they disregard
occasional deviations from the normal may then represent a useful
starting point. But this approach is hardly applicable to a dynamic
society. It is not applicable to present-day America, where far-
reaching changes occur during the lifetime of many people and where
generally people believe that it is in their power to induce changes in
their environment... The alternative theoretical model of consumer
behavior here proposed assumes a purposive adaptation to changing
circumstances in contrast to the assumption that specific rules of
behaviour are set up and followed over long periods of time. (Katona
1968, 20)

In effect Katona is here arguing that Friedman's approach to consumer expenditure was as outmoded as that of Keynes (though in this passage he names neither author).

4. Katona and the Keynesians

On other important issues in macroeconomic theory and policy, Katona was much less critical of Keynes and the Keynesians. Thus he endorsed Lerner's (1943) principle of 'functional finance', according to which government debt was no longer to be 'considered in the same light as private debt', and it was no longer necessarily the case that budget deficits were 'unsound and dangerous' (Katona 1944, 344-347). And he acknowledged the need for a distinct and relatively autonomous discipline of macroeconomics, insisting that the Keynesian equations Y=C + I and S = I, hold good 'only on the macroeconomic level. They express aggregate relations which cannot be deduced from relations prevailing among individual households or firms'. It follows that 'what is said about the equality of past savings and past investments, and the effect of differences between intended savings and investments, applies to the entire economy only and not to individual consumers and firms' (Katona 1951, 132, citing Keynes 1936, 84-85).

Katona's work was certainly appreciated by several prominent (Old) Keynesians. He was a long-term colleague of Lawrence Klein's at Michigan, and in the second edition of his book on The Keynesian Revolution Klein commended Katona for challenging the 'implicit assumption in Keynesian economics... that capital investment is volatile (impulsive, dynamic, variable), while consumption is passive 'regular, stable, steady'. On the contrary, Klein argued, the history of the postwar world economy would be 'grossly misunderstood if one fails to appreciate the autonomous role of consumption'. Credit was due to Katona and his colleagues for having 'strongly emphasized this activist role of the consumer', while 'old-line Keynesians' like Joan Robinson continued instead to stress the role of instability in investment (Klein 1966, 202-203).

No less enthusiastic was another of Katona's Michigan colleagues. Little remembered in 2015, Gardner Ackley had a consistently high profile in the third quarter of the previous century as Chairman of the Council of Economic Advisers in the Johnson administration and as the author of a best-selling textbook on macroeconomics in which he made several favourable references to Katona's work. These all came in chapter XII, entitled 'Other Influences on Consumption Spending', which dealt at some length with all the factors affecting consumption other than current income (Ackley 1961, 268n, 272n, 287n, 290n, 291n, 292, 295). Ackley believed that Katona had rightly challenged 'the necessity to base conclusions about economic behaviour upon a priori premises', instead taking pains 'to observe and describe actual behavior' (Ackley 1979, 41). Katona's research into consumers' 'perceptions, expectations, and emotive and affective state' was both correct and important, Ackley concluded, 'and I never fail to acknowledge his influence on what I say and write' (Ackley 1979, 43).

James Tobin was equally supportive, contributing to both the Festschrift volumes. 'We need George Katona', he concluded in the first tribute. 'He is right that once consumption is not liquidity-constrained it is a highly psychological variable... When Katona measures confidence, he is also measuring an important dimension of wealth' (Tobin 1972, 55). Seven years later, Tobin expressed regret that 'the positive study of business behavior' that had been stimulated by Katona's work 'has waned in fashion' (Tobin 1979, 45). But Katona had indeed made 'great strides' towards building 'an empirically based theory of economic behavior' (Tobin 1979, 55).

Strangely, Katona and the Post Keynesians seem for the most part to have ignored each altogether, though their insistence on the virtues of realism in macroeconomic theorising and the need for empirical evidence to support theoretical conjectures should have been enough to bring them together. There a few exceptions. Twenty years after Katona's death, Geoff Harcourt recalled how his Master's thesis at Melbourne University, supervised by Richard Downing and financed by the Reserve Bank of Australia, had involved the design and implementation of 'a pilot survey of income and saving in Melbourne, to see whether an annual Australia-wide survey along the lines of Harold Lydall's work in Oxford and George Katona's at Ann Arbor was a practical possibility' (Harcourt 2001, 6). This resulted in Harcourt's first publication (Harcourt and Ironmonger 1956), but the annual survey did not eventuate and I have been unable to find any further reference to Katona in any of Harcourt's published work. Sheila Dow and Peter Earl also reacted favourably to Katona's work. There are three brief references to him in their co-authored book Money Matters (Dow and Earl 1982, 101, 115, 125), and a rather longer discussion in Earl's Economic Imagination (Earl 1983, 54). These references were not taken up by other British Post Keynesians, and this neglect was even more total among the first generation of American Post Keynesians, though whether it was due to ignorance or to dislike of Katona's Old Keynesian allegiances is difficult to say. It was reciprocated: Katona seems never to have referred to the work of Paul Davison, Hyman Minsky or Sidney Weintraub.

5. Katona and Keynes: Complements or Substitutes?

In a previous paper I criticised Keynes's rather careless use of the terms 'psychology', 'psychological' and 'psychologically' in the General Theory. They are employed frequently (in 16, 45 and one cases respectively, or 62 in all), but without any reference to academic sources other than a handful of throwaway allusions to Freud. I concluded that they added nothing of any value to the argument of the book, and could have been dispensed with altogether without any obvious loss to Keynes's analysis (King 2010). Only recently did I discover that similar criticisms had been made half a century ago by three German authors, and endorsed by George Katona himself in his review of their book (Schmolders, Schroder, and Seindenfus 1956; Katona 1957).

Recently Vincent Barnett has reminded us that Keynes had studied psychology in 1906 for his Civil Service examinations, and had done well enough to be placed first in the subject (Barnett 2013, 232, 274-276; Barnett 2015). He did less well in economics and mathematics, though he claimed that this was a failing of the examiners, not the candidate (Moggridge 1992, 108-109). Three points might be made in this context. First, this was a brief and intense period of self-education in psychology, which was never repeated. Second, the two sources that Keynes relied on, GF. Stout (1860-1944) and James Sully (1843-1923), were nineteenth-century and early twentieth-century authorities, who seem not to have left a significant impact on the discipline later in the twentieth century. Third, Keynes's study of psychology was undertaken a full 30 years before the publication of the General Theory. Just how much of a mark it left on him can only be guessed at, but it is striking that he made no attempt to draw on contemporary (that is, post-1906) academic psychology to support any of his analysis in 1936. Contrary to Barnett, I conclude that Katona's strictures on Keynes's references to 'psychology' are entirely justified.

Whether Keynes's economic theory was seriously damaged by all this is another matter. Pierrick Dechaux suggests that Katona's criticism of Keynes's analysis of expectations was defective, greatly exaggerating their differences and minimising the significant similarities in their treatment of the subject (Dechaux 2015, 23-24). On the important question of consumption expenditure, too, Katona's reading of Keynes seems to have been highly selective, relying on the General Theory and How to Pay for the War and neglecting other parts of the Keynes ouevre in which his concern for psychology was more evident. In his citations Katona returned over and over again to a few specific passages, ignoring Keynes's reservations, qualifications and positive suggestions aimed at disarming the criticism that he had placed excessive emphasis on the role of current income as the principal determinant of consumption and saving. There is no reason to suppose that Keynes would have objected to a more elaborate and empirically supported account of consumption behaviour than he had provided in the General Theory. I suspect that he would have welcomed Katona's survey work, and would have regarded it as complementing chapters 8-10 of his own book, not as a substitute for them.


I am grateful for comments from Therese Jefferson, Margaret Schabas and other participants at the July 2015 conference of the History of Economic Thought Society of Australia in Parramatta, and from Peter Earl and Ron Smith. The usual disclaimer applies.

Disclosure statement

The author reports no conflicts of interest. The author alone is responsible for the content and writing of this article.

Notes on contributors

John King specialises in the history of economic thought, with particular interests in post-Keynesian theory, Marxian economics and the economics of socialism. He was elected to the Academy of the Social Sciences in Australia in 2005.


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John E. King

Business School, Federation University Australia, Greensborough, VIC, Australia

CONTACT John E. King * * Emeritus Professor, La Trobe University and Honorary Professor, Federation University Australia, 36 Amiet Street, Greensborough, Victoria 3088, Australia


Received 3 November 2015

Accepted 14 April 2016
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Title Annotation:George Katona, John Maynard Keynes and theory of consumption expenditure
Author:King, John E.
Publication:History of Economics Review
Article Type:Critical essay
Geographic Code:4EUUK
Date:Jun 1, 2016
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