1905-1989
British economist Richard Ferdinand Kahn, fellow of King’s College Cambridge (from 1930) and professor of economics at the University of Cambridge (from 1951), was John Maynard Keynes’s (1883-1946) favorite pupil and closest collaborator during the writing of Keynes’s General Theory (1936). Kahn became Keynes’s literary executor and remained the torchbearer of Keynesian theory and policy throughout his life (Pasinetti 1987). Kahn first graduated in 1927 in natural sciences, then switched to economics and was awarded first-class honors in the 1928 Economics Tripos (courses and examinations leading to the Cambridge B.A.). In the following year and a half, he wrote a dissertation on The Economics of the Short Period (1989), which secured him a fellowship at King’s College. Kahn’s dissertation remained unpublished for fifty years, but it contained the essentials of the economics of imperfect competition, which would be refined and extended by Joan Robinson (1903-1983) in her 1933 book, The Economics of Imperfect Competition, as well as the short-period method, which came to form the mold in which the General Theory was cast (Marcuzzo 1994).
Kahn is best known for his discovery of one of the ingredients of the Keynesian revolution, namely, the principle of the multiplier. By this is meant the relation between the increase in any component part of the exogenous aggregate expenditure and the increase in income and employment whenever there are idle resources in the economy, such as undercapacity utilization of plant and machinery and unemployment of labor. In its simple form, it can be stated as follows: if c is the fraction of any increase in income that individuals decide to consume, an increase of, say, $1 in expenditure will generate an increase in income equal to $1/ (1-c).
Kahn presented his result in the midst of the controversy over public investment as a means to fight unemployment; the idea was to show that an increase in public expenditure would be effective in increasing total employment, contrary to the view held at the time that it would simply "crowd out" private employment (Kahn 1931). Its main implication, which is central to Keynesian macroeconomics, is that it is the level of investment that determines savings and not the other way around, as pre-Keynesian economic theories had it.
Besides playing a leading role in the discussions that paved the way to the General Theory, Kahn contributed to extending and clarifying some of its concepts and tools of analysis. His evidence to the Radcliffe Committee on the Working of the Monetary System (Kahn 1959a, 1959b) and his work on the liquidity preference (Kahn 1954) are landmarks in the Keynesian view of monetary theory and policy (Dardi 1994). He also contributed to the understanding of the so-called wage-spiral, built into the process of wage negotiation, in causing inflation (Kahn 1976), and, last but not least, left his mark on the post-Keynesian theory of growth and income distribution (Kahn 1959c).
