The Economic Advisory Council and Keynes

Two of Clark's mentors, G.D.H. Cole and Hugh Dalton, recommended him to work as a secretary to the Economic Advisory Council, which was created in 1930 and reported to the Cabinet on economic matters.

Recognising his promise, Keynes stepped in and arranged for Clark to become a Lecturer in Economic Statistics at Cambridge. This appointment would fortify Clark's standing as an applied economist. While he was not part of the Cambridge “Circus”, Clark had ‘frequent conversations' with Keynes and saw how he was moving from A Treatise on Money to The General Theory (Clark 1983: 37). Clark summed up the process this way:

In the Treatise the real issue was the difference between savings and investment and after 1930 it was just the opposite—to prove that savings were brought down to the level of investment. It took Keynes a long time and much effort to make that change. I was able to watch his mind at work while it was going on; this was between 1930 and 1932 (Clark in Higgins 1989: 298).

Despite the age difference, Keynes and Clark got on splendidly with the former encouraging Daniel Macmillan to publish Clark's first manuscript, The National Income, 1924-31. He told Macmillan in December 1931 that:

Clark's work, on this and other allied subjects, is quite outstanding, and that he is likely to become the recognised authority, in the course of time... Clark is, I think, a bit of a genius—almost the only economic statistician I have ever met who seems to me quite first class (Keynes to Macmillan, 2 December 1931, in Keynes 1979: 57, fn. 11).

When Keynes ‘carefully’ read the book, he told Clark:

I think it is excellent. An enormous step forward. I hope it is selling all right. You have quite convinced me that gross output, gross investment, gross savings, etc. is the natural way to work and not the net, and I have been re-writing my definitions and equations on these lines. I am sure it is an improvement (Keynes to Clark, 2 January 1933, in ibid.: 58; italics in original).

Clark replied: ‘Dear Maynard, this is really rather fascinating. It certainly beats physics’ (Clark to Keynes, 16 January 1933, in ibid.: 59).

Others shared in the enthusiasm. Henry Phelps Brown described The National Income, 1924-31 as ‘brave’ and ‘remarkable’ (Phelps Brown 1933: 416). G.D.H. Cole praised the book, especially the last section, where Clark attempted ‘to make the Keynes’s formulae flesh and blood’ (Cole to Clark, c.1932, CCP, BC, UO). In this respect, Philip Sargant Florence said Clark’s empirics would be a proud achievement for the Cambridge School of Economics if it gave Keynes’s theory added force (see Florence 1932: 114).

As noted, Clark used empirical data to support the Keynesian identities like saving and investment, aggregate costs of production compared with the gen­eral price level of output and even attempted an estimation of the multiplier. In his exposition, Clark showed that in 1931 the level of saving in the UK vastly exceeded the level of investment with the imbalance due to the depres­sion and the preference of the saving classes to leave these balances idle.

While most economists welcomed Clark’s book on national income, it met with a hostile reception from those associated with the Royal Statistical Society and two economic statisticians, Arthur Bowley and Josiah Stamp, who had earlier attempted to estimate national income. Moreover, economic official­dom at the Treasury felt that Clark’s estimates were unreliable. In the preface to his book, Clark complained about ‘the disgraceful condition of British official statistics’ (Clark 1932: vi) and the fact that he had been denied any funding assistance in his sole quest to determine the level of national income. Without such assistance, economics could not become a true science. He would repeat this complaint when he totally revised his book in 1937 with a new title, National Income and Outlay (Clark 1937a). Again, economists hailed its arrival but it failed to gain traction within policy-making circles. Clark bemoaned that he was still the only British scholar working in the field of national income measurement. However, if he was disappointed by the reception of his latest book, as suggested by Lepenies (2016: 34), Clark did not show it. On a related note, Patinkin (1976: 1113) has argued that despite his effusive praise for Clark, Keynes had ‘reservations' about Clark's aggregate estimates and did not use any of his estimates of national income nor of the multiplier in The General Theory. Nevertheless, Markwell (2000: 41-42) pours doubt on Patinkin's view, arguing that Keynes had a great deal of respect for Clark, publicly complimenting him again in How to Pay for the War (Keynes 1940 [1972]: 381) for ‘his brilliant private efforts'. Moreover, Keynes told Stamp that Clark ‘deserved the V.C. for statistical courage' (Keynes quoted in Patinkin 1976: 1113).

For his part, Clark always regarded Keynes with almost filial devotion and wrote a moving tribute when Keynes died (see Clark 1947).

Meanwhile, Clark was part of an ensemble of Oxford economists who con­tributed a chapter to a volume edited by Cole entitled What Everybody Wants to Know About Money. In an avowedly Keynesian account, Clark (1933) argued the case for public works on slum clearance and a forward wage policy to underpin a monetary recovery. Interestingly, he argued that a deficit budget might have a harmful impact on business confidence. Robert Dimand (1988: 79) has argued that, of all those who had contributed to the volume, it was Clark who demonstrated an acute awareness of the income expenditure mul­tiplier, though he gave no quantitative estimate of its power.

In five contributions that appeared in the Economic Journal over the period 1931-1937 Clark presented first, quarterly estimates of national income, and also estimations of the multiplier. In his 1937 article, he used an economic model to forecast the business future (see Clark 1937b). He predicted that Britain was heading for an economic slump because investment spending had reached a peak by the end of 1936. Clark wrote about how the ‘incentive to invest' (ibid.: 312) was governed by expectations of profit. In his model, he argued that a slump was likely in Britain unless the government took action with extra public spending.

Finally, within the Labour movement, Clark, together with Evan Durbin, Hugh Gaitskell and Douglas Jay, became members of a committee in June 1936 which laid down the intellectual foundations for Labour's socialist plat­form using Keynes's new theory. They emphasised especially the link between investment and employment in Labour's redesigned spending programmes to assist the unemployed (see Durbin 1985: 251). However, their policy recom­mendations were quite conservative and Clark compiled a statistical appendix to the report identifying a continuing high rate of structural and frictional unemployment. On this point, Clark agreed with Keynes's view that one could not press too much to achieve full employment and that a ‘rightly dis­tributed demand than of a greater aggregate demand' (Keynes 1982: 385) was appropriate as Britain recovered from the slump.

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