James E. Meade was born on 23 June 1907 in Swanage, Dorset, brought up in Bath, Somerset, and died on 22 December 1995 in Cambridge (UK).
He studied philosophy, politics and economics at Oriel College in Oxford. After his graduation he was immediately appointed to a fellowship in Economics at Hertford College. The college allowed him to go away to learn more about economics.
In 1930 he went to Cambridge on the invitation of by Dennis Robertson, whom he had met in Bath some years before. Robertson introduced Meade to Richard Kahn who was working on his paper on the multiplier - “The relation of home investment to unemployment” - which was published in the Economic Journal in 1931. Working with Kahn, Meade became a member of the “Circus”, a group of young economists who discussed Keynes’s (1930) A Treatise on Money. The other members of the group were Piero Sraffa and Austin and Joan Robinson. In 1931 Meade went back to Oxford and taught economics at Hertford College. From 1938 till 1940 he worked at the Economic Intelligence Service of the League of Nations in Geneva. During the war he was employed in the Economic Section of the War Cabinet Offices, where he prepared, together with Richard Stone, the first estimates of national income accounts. In 1946 Meade followed L. Robbins as director of the Economic Section and a year later he happily accepted Robbins’s offer of the Cassel Professorship of Commerce with special reference to International Trade at the London School of Economics. Ten years later he succeeded his close friend Dennis Robertson as Professor of Political Economy at Cambridge University, the chair once held by Pigou, who himself had succeeded Marshall.The move to Cambridge confronted him with the embittered conflicts within the Economics Faculty, which he very much disliked. Looking back, it is clear that the debates reflected not only the combative personality of some of the key participants - particularly Joan Robinson, Kahn and Kaldor, on the one hand, and Frank Hahn and his followers, on the other - but also fundamental intellectual differences on how Keynes’s original insights should be interpreted and developed.
Tired of the Cambridge Faculty politics, Meade decided in 1968 to resign from his chair and devote more time to research and writing. Christ’s College offered him a position as Senior Research Fellow, which he held until 1974. In 1977, together with Bertil Ohlin, James Meade was awarded the Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel “for their path breaking contribution to the theory of international trade and international capital movements”.One of Meade’s important contributions to economics was in international trade theory and in the field of the theory of the balance of payments, where he clarified under which conditions a country can simultaneously achieve an equilibrium both internally as well as a balance in its international payments. He pointed out the conflict between the goals of ensuring full employment and bringing the balance of payments into equilibrium. To resolve this conflict he proposed a combination of various economic policy instruments leading to the simultaneous attainment of both goals. His analysis of the impacts of the rate of interest and monetary policy on the balance of payments was path breaking, as was his analysis of the importance of exchange-rate systems for the effective operation of stabilization policy. He coined the notions of “internal balance” and “external balance”. To attain “internal balance” price stability and full employment should be obtained. He mentions demand management and wage-fixing as instruments. In his Nobel Lecture (Meade 1977b) he emphasized that many “industrialised countries have failed to find appropriate national institutional ways of combining full employment with price stability”. Also, referring to “external balance” he continued: “with full employment and price stability at home the balance of payments could with much more confidence be left to the mechanism of flexible foreign exchange rates” (ibid.).
Meade’s most important works, The Balance of Payments (1951b) and Trade and Welfare (1955, also 1952), had two most influential sources: Keynes’s General Theory and modern welfare economics, mirroring the two persons - Keynes and Robbins - who both had a strong intellectual influence on him.
A second field of his research was the theory of economic policy, particularly economic policy for an open economy. The Tinbergen-Meade approach is quite simple: suppose government spending is a policy instrument under the control of government. Then one can achieve a particular level of gross national product (GNP) by inputting the target value of the GNP and then inverting the equation for the policy variable. As a result one gets the optimal setting for the instrument. Then, the question arises as to how to achieve this in practice. Starting from the rule that to each macro-goal (external equilibrium, full employment and price stability) there should be a corresponding policy instrument, then you have to look for the institution which will make use of the instrument. Regarding external equilibrium, Meade takes it for granted that there exists a certain separation of power between national governments and international institutions. National governments should be responsible for national monetary, fiscal and wage policy ensuring full employment and a stable price level, while external equilibrium should be maintained by foreign exchange policy under the supervision of international institutions.
In the 1960s Meade wrote extensively on growth economics assuming a neoclassical position, which was one reason why he came into conflict with Keynesians such as Kaldor, Robinson and Champernowne. However, Meade belonged to a group of economists, like Harrod or Hicks, who were not hostile to Keynesian economics. Instead of regarding Keynes’s theory as a dissenting approach, they reconciled it with the mainstream and contributed to the neoclassical synthesis.
With the appearance of the stagflation phenomenon in the 1970s, Meade became interested in this issue and in 1978 started a major research project on “stagflation” with younger economists in the Department of Applied Economics at Cambridge University. According to him the main cause for stagflation was a reduction of the rate of profit brought about by the growth of wage costs and “imported costs”.
He identified the three driving forces behind this as the over-extended use of traditional Keynesian policies to stimulate aggregate demand, the policy of the trade unions to increase the money wages, and monopolistic markets with inflexible prices.Given these conditions Meade concludes that traditional Keynesian policies became severely limited particularly to fight inflation. According to Meade’s “new Keynesianism” countries have to create “appropriate institutions” for a social regulation of wage rates, that is, independent salary commissions and arbitration proceedings.
James Meade contributed to many areas of macroeconomics, to international trade, and to the theory of economic policy. Meade was a broad-minded social scientist and not a narrow specialist. Besides economics, his interests spanned social policy, history and politics. He was convinced that specialization would not lead to an understanding of the working of the economic system as a whole. In his autobiography he wrote:
The frontiers of knowledge in the various fields of our subject are expanding at such a rate that, work as hard as one can, one finds oneself further and further away from an understanding of the whole. I believe this experience to illustrate the basic problem of our subject. Sane economic policy must take into account simultaneously all aspects of the economy; but a soundly based understanding of the whole and of the relationship between its parts becomes more and more difficult, if not impossible, to attain. (Meade 1977a)
VθLKER CASPARI
See also:
Balance of payments and exchange rates (III); Cambridge School of economics (II); Richard Ferdinand Kahn (I); John Maynard Keynes (I); Keynesianism (II); Macroeconomics (III).
References and further reading
Howson, S. (2000), ‘James Meade’, Economic Journal, 110 (461), Features, F122-F145.
Johnson, H.G. (1978), ‘James Meade’s contribution to economics’, Scandinavian Journal of Economics, 80 (1), 64-85.
Kahn, R.F.
(1931), ‘The relation of home investment to unemployment’, Economic Journal, 41 (162), 173-98. Keynes, J.M. (1930), A Treatise on Money, London: Macmillan.Meade, J.E. (1944), National Income and Expenditure, London: Oxford University Press.
Meade, J.E. (1951a), The Theory of International Economic Policy, London: Oxford University Press.
Meade, J.E. (1951b), The Balance of Payments, London: Oxford University Press.
Meade, J.E. (1952), Geometry of International Trade, London: George Allen & Unwin.
Meade, J.E. (1955), Trade and Welfare, London: Oxford University Press.
Meade, J.E. (1958), The Control of Inflation, Cambridge: Cambridge University Press.
Meade, J.E. (1964), Efficiency, Equality and the Ownership of Property, London: George Allen & Unwin.
Meade, J.E. (1977a), ‘Autobiography’, accessed 7 December 2015 at http://www.nobelprize.org/nobel_prizes/ economic-sciences/laureates/1977/meade-bio.html.
Meade, J.E. (1977b), ‘The meaning of “internal balance”’, accessed 7 December 2015 at http://www.nobelprize. org/nobel_prizes/economic-sciences/laureates/1977/meade-lecture.html.
Meade, J.E. (1982), Wage-fixing, London: Unwin Hyman.
Meade, J.E. (1984), ‘Structural changes in the rate of interest and the rate of foreign exchange to preserve equilibrium in the balance of payments and the budget balance’, Oxford Economic Papers, 36 (1), 52-66.
Meade, J.E. (1986), Alternative Systems of Business Organization and of Workers’ Remuneration, London: Unwin Hyman.