Before you read on: Joan Robinson brought a new word into economics for a market with one dominant buyer. Which word?
Robinson introduced monopsony in 1933, crediting a Cambridge classics scholar, B. L. Hallward, with coining it. Oligopoly and duopoly describe markets with a few sellers.
- Lived
- Born 31 October 1903 in Camberley, Surrey; died 5 August 1983 in Cambridge
- Nationality
- British
- Work
- Taught at Cambridge from 1931 (first post, junior assistant lecturer) to 1971; professor from 1965. First woman made an honorary fellow of King's College, Cambridge (1979)
- Key works
- The Economics of Imperfect Competition (1933), Introduction to the Theory of Employment (1937), An Essay on Marxian Economics (1942), The Accumulation of Capital (1956) and Economic Heresies (1971)
- School
- Keynesian; with Nicholas Kaldor, a founding figure of post-Keynesian economics in Britain
What Robinson was reacting to
Robinson trained at Cambridge, where Alfred Marshall's theory of the firm assumed competition. In 1926 Piero Sraffa argued that this theory was inconsistent and hinted that some monopoly power might be the normal case. Robinson took up that hint.
The slump of the early 1930s gave her a second target. Keynes was rethinking why whole economies could stay stuck with high unemployment, and Robinson joined the young economists who tested his ideas with him.
Robinson's key ideas
Can you name Robinson's four key ideas?
Markets that sit between perfect competition and pure monopoly, where each firm has some power over its own price. Robinson set out the theory in 1933, months after Edward Chamberlin published a similar theory of monopolistic competition in America.
Can you think of an example?
A hairdresser raises prices a little. Some customers leave, but loyal regulars stay.
A market with one buyer, or a few powerful ones. In a labour market the buyer is the employer, and with few rivals for staff it can pay less than competition would force it to.
Can you think of an example?
A warehouse is the only big employer in a remote area. With few other jobs nearby, it can set lower wages.
Neoclassical theory explains profit by the amount of capital, the machines and buildings firms use. Robinson argued in 1954 that different machines can only be added into one quantity by valuing them at prices, and those prices already depend on the rate of profit (in these models, the same thing as the interest rate). So the argument runs in a circle. Sraffa later showed reswitching: a method of production can be the cheapest at both high and low interest rates, yet not in between.
Can you think of an example?
A printer can use many cheap presses or a few costly ones. Which counts as more capital depends on the interest rate.
In The Accumulation of Capital (1956) Robinson tried to stretch Keynes's short-run ideas to long-run growth, studying how saving and investment build up capital over the years. She argued that equilibrium models suit this poorly, since the past cannot be undone and the future is unknown.
Can you think of an example?
Factories overbuilt in a boom still stand in the slump, and the economy carries that mistake forward.