James Meade Quotes

We assume...that the banking system must be prepared to expand (or contract) the total supply of money to the extent necessary to prevent any scarcity (or plenty) of funds in the capital market which may be induced by any other disturbing factor, from causing a rise (or fall) in interest rates

He was lucky enough to rub shoulders with a fellow student, Mr. W T. Newlyn, now lecturing on money at the University of Leeds, who was less of an engineer but more of a monetary theorist than himself. Together they discussed how monetary theory could be represented by an hydraulic model.

It is a special privilege for me on this occasion to have my name associated with that of Professor Bertil Ohlin. By the younger generation of economists we are no doubt both regarded as what in my country are now known as 'senior citizens'; but I am just that much younger than Professor Ohlin to have regarded him as one of the already established figures when I was first trying to understand international economics. His great work on International and Interregional Trade opened up new insights into the complex of relationships between factor supplies, costs of movement of products and factors, price relationships, and the actual international trade in products, migration of persons, and flows of capital. Of the two volumes which I later wrote on International Economic Policy - namely, The Balance of Payments and Trade and Welfare - it is in the latter that the influence of this work by Professor Ohlin is most clearly marked.

The great majority of politicians and other interested persons tend to....concentrate on....measures such as education and training of labour and investment in modern efficient capital equipment....These reforms are of extreme importance but they are concerned basically with raising the output per head of those who are in employment rather than about the number of heads that will find suitable employment.

Any one country can be in any of four possible disequilibrium situations. It can be (1) a surplus country with a domestic slump, (2) a surplus country with a domestic boom, (3) a deficit country with a domestic slump, or (4) a deficit country with a domestic boom.

Now there are two ways in which the authorities of a particular country may combine the use of financial policy and of price adjustment. (i) First, financial policy may be used for the preservation of internal balance and price adjustment for the preservation of external balance. (ii) Second, financial policy may be used for the preservation of external balance and price adjustment for the preservation of internal balance. On either of these principles the authorities of any one country can set about the simultaneous preservation of internal and external balance.

[Central banks might have to intervene to counter "perverse" or "grossly excessive" speculation.] By such means, the monetary authorities can attempt to make the market for foreign exchange approximate toward what it would have been if there had been free competitive speculation with correct foresight of future movements. In this case all that the authorities have to do is to anticipate more correctly than private speculators the future course of exchange rates. And in so far as they do so they will make a profit at the expense of the private speculator.

By a ‘spontaneous disturbance’ we shall mean any change in the underlying conditions, the cause of which we are prepared to take for granted and do not wish to examine, but the effect of which on the domestic and external position of our two countries we wish to examine. By a ‘policy’ change we shall mean a change which the State or some public authority brings about as a result of a definite decision of State policy in order to achieve some given end of general economic policy and in particular to offset some of the effects of a ‘spontaneous disturbance’. Finally, by an ‘induced’ change is meant a change in some quantity which occurs on purely commercial principles because of the repercussions of some previous ‘spontaneous’ or ‘policy’ change.

On principle i relative prices will be lowered in the interests of external balance and domestic expenditure will be inflated in the interests of internal balance. Internal balance will be very quickly restored although there is no net change in external balance. Relative prices must, therefore, continue to be lowered, which will tend now to produce a boom at home. The inflationary financial policy must, therefore, be replaced by a deflationary policy. In the end relative prices will be substantially lowered, while there may be a small net inflation or deflation of domestic expenditure by financial policy.

We shall talk as if the objective of internal balance were simply that of maintaining a level of total demand for all the country’s products sufficiently high to maintain full employment, but not so high as to lead to a continuing inflation of money prices and costs.

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.

Professor Ohlin also made an important contribution to what now might be called the macro-economic aspects of a country's balance of payments. In 1929 in the Economic Journal he engaged in a famous controversy with Keynes on the problem of transferring payments from one country to another across the foreign exchanges. In this he laid stress upon the income-expenditure effects of the reduced spending power in the paying country and of the increased spending power in the recipient country. In doing so he made use of the usual distinction between a country's imports and exports; but in addition he emphasised the importance of the less usual distinction between a country's domestic non-tradeable goods and services and its tradeable, exportable and importable, goods. I made some use of this latter distinction in my Balance of Payments; but looking back I regret that I did not let it play a much more central role in that book

A good book on the subject of the customs union has for long been wanted; and now it is provided by Professor Viner's study, which it is difficult to praise too highly.... Professor Viner's study on the economic aspects of customs unions will be of central interest to economists. Indeed for many years this is likely to remain the locus classicus for the economic analysis of customs-union problems.

[The same transactions are not always] entered in the same category for receiving and paying country.

My interest in economics had the following roots. Like many of my generation I considered the heavy unemployment in the United Kingdom in the inter-war period as both stupid and wicked. Moreover, I knew the cure for this evil, because I had become a disciple of the monetary crank, Major , to whose works I had been introduced by a much loved but somewhat eccentric maiden aunt. But my shift to the serious study of economics gradually weakened my belief in Major Douglas's A+B theorem, which was replaced in my thought by the expression MV = PT.