Abstract
Wynne Godley started his career as a civil servant at the UK Treasury. In 1970, Nicholas Kaldor convinced him to move to Cambridge and to become the Director of the Department of Applied Economics, a position he held for nearly two decades. Godley founded the Cambridge Economic Policy Group, giving rise to New Cambridge economics, based on an empirical approach that had a large impact on policy matters in the 1970s. This method, associated with the financial balances approach, was further developed in the 1990s when Godley worked as a forecaster at the Levy Economics Institute in the USA, helping him to identify the unsustainable processes that would lead to the 2001 and 2008 crises. In the academic world, Godley is now best known for his advocacy of the stock–flow consistent approach, which some consider as the Holy Grail of macroeconomics, as it integrates the real and the financial sides of the economy.
We wish to thank Alex Izurieta and Gennaro Zezza for their useful comments.
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Notes
- 1.
Mata (2012) provides an account of the process by which Godley formed his basic understanding of ‘how the economy works’.
- 2.
Godley had previously collaborated closely with Kaldor in preparing the implementation of the Selective Employment Tax and Regional Employment Premium.
- 3.
See the account by Maloney (2012) of advice given by Kaldor and Godley to the Treasury in the 1970s.
- 4.
- 5.
Mata (2012: 15–16). Cameron and Llewellyn (2010) wrote that Godley ‘would take a vast spreadsheet of numbers, study them for sometimes hours at a time and then pronounce: “That figure is wrong,” stabbing at it with an elegant oboist’s finger. He was invariably found to be right. How did he know? The explanation, via his econometrician colleague Hashem Pesaran, was that he had what amounted to a full macroeconomic model in his head, which, by some sort of subconscious process, he computed’.
- 6.
For a more complete exposition, see Cripps and Fetherston (1979).
- 7.
As Kaldor often remarked, the evidence could contradict but not confirm. In this sense, the door was always open for improved hypotheses.
- 8.
Mata (2012). The relegation of time series econometrics to a subsidiary role caused the CEPG’s model to be regarded with increasing mistrust by academic econometricians as well as a priori theorists.
- 9.
Later, he used computer software (MODLER) in the same manner.
- 10.
For more comments on Godley’s unsustainable processes, see Bibow (2012).
References
Main Works by Wynne Godley
A full bibliography of Wynne Godley’s writings can be found in Papadimitriou and Zezza (2012) or in Lavoie and Zezza (2012).
Anyadike-Danes, M. and W. Godley (1989). ‘Real Wages and Employment: A Skeptical View of Some Recent Empirical Work’. Manchester School of Economic and Social Studies, 57(2): 172–187.
CEPG (1975). Economic Policy Review No. 1. University of Cambridge: Department of Applied Economics.
Coutts, K.J., W. Godley and G.D. Gudgin (1985). ‘Inflation Accounting of Whole Economic Systems’. Studies in Banking and Finance, 9(2): 93–111.
Coutts, K.J., W. Godley and W. Nordhaus (1978). Industrial Pricing in the United Kingdom. Cambridge: Cambridge University Press.
Cripps, F. and W. Godley (1976). ‘A Formal Analysis of the Cambridge Economic Policy Group Model’. Economica, 43(172): 335–348.
Cripps, F. and W. Godley (1978). ‘Control of Imports as a Means to Full Employment and the Expansion of World Trade: The UK’s Case’. Cambridge Journal of Economics, 2(3): 327–334.
Godley, W. (1983). ‘Keynes and the Management of Real National Income and Expenditure’, in D. Worswick and J. Trevithick (eds) Keynes and the Modern World. Cambridge: Cambridge University Press: 135–157.
Godley, W. (1992). ‘Maastricht and All That’. London Review of Books, 14(19): 3–4.
Godley, W. (1993). ‘Time, Increasing Returns and Institutions in Macroeconomics’. Chapter 4 in S. Biasco, A. Roncaglia and M. Salvati (eds) Market and Institutions in Economic Development: Essays in Honour of Paolo Sylos Labini. New York: St. Martin’s Press: 59–82.
Godley, W. (1996). ‘Money, Finance and National Income Determination: An Integrated Approach’. Working Paper No. 167. Annandale-on-Hudson: The Levy Economics Institute of Bard College.
Godley, W. (1997). ‘Macroeconomics without Equilibrium or Disequilibrium’. Working Paper No. 205. Annandale-on-Hudson: The Levy Economics Institute of Bard College.
Godley, W. (1999a). ‘Money and Credit in a Keynesian Model of Income Determination’. Cambridge Journal of Economics, 23(4): 393–411.
Godley, W. (1999b). ‘Open Economy Macroeconomics using Models of Closed Systems’. Working Paper No. 285. Annandale-on-Hudson: The Levy Economics Institute of Bard College.
Godley, W. (1999c). Seven Unsustainable Processes: Medium-Term Prospects and Policies for the United States and the World. Annandale-on-Hudson: The Levy Economics Institute of Bard College.
Godley, W. (2000). ‘Wynne Godley’. In P. Arestis and M. Sawyer (eds) A Biographical Dictionary of Dissenting Economists. Cheltenham: Edward Elgar: 232–240.
Godley, W. and F. Cripps (1983). Macroeconomics. London: Fontana and Oxford University Press.
Godley, W. and A. Izurieta (2004). ‘The US Economy: Weaknesses of the “Strong” Recovery’. Banca Nazionale del Lavoro Quarterly Review, 57(229): 131–139. Reproduced in the PSL Quarterly Review, 2009, 62(248–51): 97–105.
Godley, W. and M. Lavoie (2007a). Monetary Economics: An Integrated Approach to Credit, Money, Income, Production and Wealth. Basingstoke: Palgrave Macmillan.
Godley, W. and M. Lavoie (2007b). ‘A Simple Model of Three Economies with Two Currencies: The Eurozone and the USA’. Cambridge Journal of Economics, 31(1): 1–23.
Godley, W. and R.M. May (1977). ‘The Macroeconomic Implications of Devaluation and Import Restriction’. Economic Policy Review, 3 (March): 32–42.
Godley, W. and J.R. Shepherd (1964). ‘Long-Term Growth and Short-Term Policy’. National Institute Economic Review, 29(1): 26–38.
Godley, W. and J.R. Shepherd (1965). ‘Forecasting Imports’. National Institute Economic Review, 33(1): 35–42.
Other Works Referred To
Backus, D., W.C. Brainard, G. Smith and J. Tobin (1980). ‘A Model of U.S. Financial and Nonfinancial Economic Behavior’. Journal of Money, Credit and Banking, 12(2): 259–293.
Bibow, J. (2012). ‘Of Unsustainable Processes and the US Dollar’. Chapter 14 in D.B. Papadimitriou and G. Zezza (eds) (2012) Contributions in Stock-flow Modeling: Essays in Honor of Wynne Godley. Basingstoke: Palgrave Macmillan: 321–348.
Cameron, S. and J. Llewellyn (2010). ‘Maverick who Endured with Ideas Undimmed’. Financial Times, 14 May. Available at: http://www.ft.com/cms/s/0/97374a08-5eef-11df-af86-00144feab49a.html#axzz3Z5vaRPAr.
Cripps, F. and M. Fetherston (1979). ‘Cambridge Economic Policy Group Methodology’. Chapter 2 in P. Ormerod (ed.) Economic Modelling: Current Issues and Problems in Macroeconomic Modelling in the UK and the US. London: Heinemann Educational Books: 40–52.
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Lavoie, M. and G. Zezza (eds) (2012). The Stock-Flow Consistent Approach: Selected Writings of Wynne Godley. Basingstoke: Palgrave Macmillan.
Macfarlane, A. (2011). ‘Interview of Wynne Godley on 16 September 2008, edited by S. Harrison’. Cambridge Rivers Project. Available at: http://www.sms.cam.ac.uk/media/1117847.
Maloney J. (2012). ‘The Treasury and the New Cambridge School in the 1970s’. Cambridge Journal of Economics, 36(4): 997–1,017.
Mata T. (2012). ‘Godley Moves in Mysterious Ways: The Craft of Economic Judgment in Post-war Britain’. Chapter 2 in D. Papadimitriou and G. Zezza (eds) (2012) Contributions in Stock-flow Modeling: Essays in Honor of Wynne Godley. Basingstoke: Palgrave Macmillan: 12–35.
McCombie, J.S.L. and A.P. Thirlwall (1994). Economic Growth and the Balance-of-Payments Constraint. Basingstoke: Macmillan.
Papadimitriou, D. and G. Zezza (eds) (2012). Contributions in Stock-flow Modeling: Essays in Honor of Wynne Godley. Basingstoke: Palgrave Macmillan.
Taylor, L. (2008). ‘A Foxy Hedgehog: Wynne Godley and Macroeconomic Modelling’. Cambridge Journal of Economics, 32(4): 639–663.
Thurow L. (1983). ‘Keynesianism in One Country: Macroeconomics by Wynne Godley and Francis Cripps’. London Review of Books, 5(16): 13–14.
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Cripps, F., Lavoie, M. (2017). Wynne Godley (1926–2010). In: Cord, R. (eds) The Palgrave Companion to Cambridge Economics. Palgrave Macmillan, London. https://doi.org/10.1057/978-1-137-41233-1_42
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