Cambridge School

The Cambridge School denotes the line of economists working at the University of Cambridge, England, from Alfred Marshall's founding of the economics tripos in the 1880s-1900s through Arthur Cecil Pigou and John Maynard Keynes to the postwar generation of Joan Robinson, Piero Sraffa, Nicholas Kaldor and Richard Kahn. Marshall's own synthesis of supply-and-demand marginalism defined the school's early character; Keynes's General Theory grew directly out of it. In the 1950s-60s the postwar Cambridge (England) economists became the central protagonists of the Cambridge capital controversy against Cambridge, Massachusetts economists (Paul Samuelson, Robert Solow, Franco Modigliani at MIT), disputing how capital itself can be meaningfully measured and aggregated in neoclassical growth theory. The English side, concentrating on how the division of income between wages and profits itself adjusts, argued that valuing a stock of capital goods cannot be done without already knowing the rate of profit those goods are expected to generate, a circularity Piero Sraffa formalized as reswitching: the same technique can be the most profitable choice at both high and low rates of profit, undermining the simple story that a lower interest rate always induces more capital-intensive production.