Gardiner C. Means: Institutionalist and Post Keynesian.

Darity, William, Jr.

Gardiner Means is the economist whose name always will be linked to that of Adolf Berle. Berle and Means's coauthored work The Modern Corporation and Private Property was first published in 1932--the year before Means was awarded his Ph.D. in economics at Harvard. The Modern Corporation was destined to become the work that popularized the notion that separation between ownership and control of the corporation occurring with the development of the joint stock company has profound implications in altering our understanding of business enterprise and, consequently, both the economic and political character of modern society. The collectivized nature of private property and the associated bureaucraticization of the large-scale corporation led to the emergence of what Means called the phenomenon of "private government", vividly described by the authors of this recent book assessing Means's contributions, Warren Samuels and Steven Medema.

1932 also was the year in which The Holding Company: Its Public Significance and Regulation, which Means coauthored with James C. Bonbright, was published--another product along with The Modern Corporation of a remarkable six-year research project centered at Columbia Law School. Much of Means's work throughout his long career (he lived to be 91 years old), much of it not published in traditional professional outlets for academic economists, was of direct relevance to legal aspects of the regulation of industry; he even argued for the necessity of setting constitutional limitations on corporate entities. But out of all of his work it is his collaborative study with Berle, The Modern Corporation, that has had the most enduring impact.

In the present volume, Warren Samuels and Steven Medema place a sharp spotlight on Means's contributions to economic theory (rather than policy), and they seek to identify Means's ideological place in the discipline. As the title makes transparent they locate Means as one of the important figures in the evolution of institutionalist economics and, more surprisingly, Post Keynesian economics. This is not primarily a general biography of Means's life (there are no photographs of Means, his family, and colleagues at the middle of the book); the bulk of the biographical material is concentrated in a mere two pages. This book is largely an intellectual biography of Means and a social history of the response in the economics profession to Means's work. The authors draw heavily upon the research on Means undertaken by the economist Fred Lee, the foremost biographer of Means, who produced a series of seven unpublished working papers on Means in the late 1980s. Lee presumably eventually will compile the book that constitutes the general biography of Gardiner Means's life. The authors graciously acknowledge Lee's generosity in sharing his archival findings with them at the outset of the volume.

Means's analysis of what he termed "the corporate system" made a decided case for an active role for government in supervision and regulation of the private sector, although Means eschewed a comprehensive takeover of the private sector by the public sector. Such supervision and regulation was essential because of the power that the private corporation could exercise, rivaling that of the state. In Samuels and Medema's words, "For Means . . . necessary, pragmatic, and democratic state action was the preferred alternative to both economic chaos and fascistic or communistic order." Later they comment, "Regarding the view of those who found Berle and Means to have provided a rallying point for those critical of business domination, |Bernard~ Nossiter |wrote in a 1962 New Republic article~ that the insights of Berle and Means 'provided a rationale for the heightened government intervention of the New Deal and freshened the spirit of regulation then in the air'."

Whether state power would be mobilized successfully to serve as a countervailing force against corporate power was a question that Means' own analysis suggested was likely to be answered in the negative. Given the nature of the political influence exercised by corporate leadership, Samuels and Medema point to economists like Daniel Fusfeld and J. R. Munkirs as drawing upon Means's vision of a centrally planned private sector to argue that effective and consistent government action to constrain the socially undesirable features of corporate activity is unlikely.

Means's explicit opposition to the normal premises of laissez faire and his endeavor to construct what Samuels and Medema call a "new microeconomics" of the non-atomistic firm with the capacity to administer prices placed him outside the discipline's mainstream. He viewed the self-adjusting market of orthodox economics as sheer sorcery.

His ideas and his perspective were subjected to withering attacks from members of the Chicago school, in particular from George Stigler and others in a 1983 special issue of the Journal of Law and Economics. Milton Friedman is reported to have "'. . . thought Means's views tended strongly in the direction of government control of prices--a 'fascist' policy, perhaps by analogy with what Hjalmar Schacht was doing in Germany'" despite Means's clear rejection of state central planning of the economy. Samuels and Medema further document the extent to which he was dismissed as a "soft" economist, engaged exclusively in empirical work with no theoretical foundations, by much of the profession, even those who had not bothered to give his work a careful or a careless reading.

Making extensive use of interviews with Means's coauthor and widow, the economist Caroline Ware (they published The Modern Economy in Action in 1936), the authors show that Means was deeply conscious of and hurt by these professional slights. He apparently was pleased finally to be given distinguished recognition by "outcast" economists, when he received the Veblen-Commons Award from the Association for Evolutionary Economics in 1974.

But the attempt to suppress, subvert, or distort Means's message was not limited to economists in the postwar era. Samuels and Medema find that Means had to sanitize portions of his doctoral dissertation to win committee approval at Harvard, being pressured to delete the sections where he was most critical of the antisocial activities of the modern corporation. There is evidence that General Motors took steps to discourage the original publishers of The Modern Corporation and Private Property from reissuing the volume. Ironically, the original publisher, Commerce Clearing House, was persuaded by GM's agents not to reissue the book but then sold the plates to Macmillan who brought out a new edition in 1933 that received wide attention and wide publicity. Clearly this was one instance where corporate power was effective in attaining a near term but not a long term goal; once The Modern Corporation was brought out by Macmillan it was on the road to its status as a modern classic.

A substantial part of Gardiner C. Means is devoted to reports of both the immediate and the later reaction of economists to the Berle-Means hypotheses. We get to learn about the treatment (and mistreatment) of his hypotheses in textbooks, both general introductory texts and specially texts in the specific areas of industrial organization, the theory of the firm, and microeconomic theory. In a sense, Chapter 5, entitled "The Reception of Means' Work and the Relation of His Work to That of Others" could be aptly retitled "How Berle-Means Came to America."

What is most interesting to the doctrinal historian--and this arena is, of course, Warren Samuels' forte--is the attempt to situate Means in the panoply of schools of thought in economics. For Samuels and Medema, Means's location in the institutionalist galaxy of giants is due more to the content of his work rather than the apparent influences on his intellectual development. For instance, Samuels and Medema deny that Means drew in any direct fashion from the work of either Thorstein Veblen or John R. Commons although the themes that concerned them were similar: "|Means's~ ideas were not mere echoes of Thorstein Veblen, but he was concerned with the analytical problems as were Veblen and other institutionalists, such as John R. Commons: the organization and control of the economy; the structural features of the economy; the working out by the firm of its identity, organization, goals, and operation; the macroeconomic consequences of microeconomic institutional arrangements; and, inter alia, the genesis and development of fundamental economic institutions, especially the corporation, private property, and the economic role of the government."

Means himself sought to separate his perspective from Veblen's. Drawing upon Fred Lee's archival research, Samuels and Medema report that Means wrote the following to Jerome Frank in a June 27, 1938 letter: "'It is my impression that in discussing absentee ownership Veblen talks about separation of ownership and management and not the separation of ownership and control. The two conceptions are fundamentally different and have different implications'." But in the text of Gardiner C. Means, the authors do not attempt to compare Means's analysis of the corporate system to Veblen's remarkable study of the financial and productive structure of industrial capitalism in The Theory of Business Enterprise |3~, a work that belies Means's claim that Veblen was interested in management rather than control of the corporation. Indeed, The Theory of Business Enterprise possesses a historical context that treats the emergence of the modern joint stock company and the volatile stock exchange as events with vast social and political repercussions, as well as an analytical framework that fully anticipates the Tobin q approach to aggregate investment. It would be interesting to determine whether Robert Brady's intensely energetic study Business As a System of Power |1~ owes more to Veblen or to Means.

If one strips away Means's interest in the role of corporate power and the prospects for government to constrain the actions of the corporate system and if one then focuses exclusively on the narrower structure of Means's systematic economics, one is left with the sense that Means was more of a New Keynesian than a Post Keynesian. If Post Keynesianism is taken to refer to those economists who seek to extend and employ faithfully the analytical structure Keynes developed in The General Theory, then it is not clear that Means had much of a connection to that tradition aside from a sympathy for the policy implications of Keynesian economics. The authors intriguingly observe that, while "Keynes argued that people live their lives in a series of short runs rather than in the long run |,~ Means argued that people live their lives in a world largely organized into corporations."

But this observation refers to Means as a grand social theorist. Means as economist--the Means who introduced concentration ratios to the industrial organization literature, who argued for the generality of monopoly power in the economy, who developed the view that for a substantial number of industrial sectors prices were administered (hence anticipating the late Hicksian view that there is a fixprice and flexprice sector to the typical modern economy)--is an economist whose signature is imperfect competition. In that sense, his work is much closer in spirit to the New England New Keynesians than the Old England Post Keynesians.

Gardiner C. Means is a provocative book, especially in its altogether credible and fascinating analysis of the sociology of the profession's treatment of Means and his ideas. If there is any grand omission, it is the neglect of Means's views on monetary policy. Ronnie Phillips |2~ has uncovered archival materials at the Roosevelt Library that demonstrate that Means endorsed the Chicago Plan (100 percent reserve requirements for deposit-taking institutions) for banking reform in 1933. Phillips concludes without explanation that this reinforces the validity of classifying Means as an institutionalist. It would have been interesting if Samuels and Medema had taken on this aspect of Means's thinking. But this shortcoming aside, Gardiner C. Means is a first rate introduction to an important New Deal economist--who long outlived the New Deal. And since the authors opt for controversy in the positions and interpretations they advance, hopefully their book will stimulate additional research about the major New Deal era economists, including Means himself.

References

1. Brady, Robert. Business As A System of Power. New York: Columbia University Press 1943.

2. Philips, Ronnie. "The 'Chicago Plan' and New Deal Banking Reform." Working Paper No. 76, Jerome Levy Economics Institute of Bard College, June 1992.

3. Veblen, Thorstein. The Theory of Business Enterprise. New York: Charles Scribners Sons, 1904.