Nicholas Kaldor, Baron Kaldor (12 May 1908 – 30 September 1986), born Káldor Miklós, was a Cambridge economist in the post-war period. He developed the "compensation" criteria called Kaldor–Hicks efficiency for welfare comparisons (1939), derived the cobweb model, and argued for certain regularities observable in economic growth, which are called Kaldor's growth laws. Kaldor worked alongside Gunnar Myrdal to develop the key concept Circular Cumulative Causation, a multicausal approach where the core variables and their linkages are delineated. Both Myrdal and Kaldor examine circular relationships, where the interdependencies between factors are relatively strong, and where variables interlink in the determination of major processes. Gunnar Myrdal got the concept from Knut Wicksell and developed it alongside Nicholas Kaldor when they worked together at the United Nations Economic Commission for Europe. Myrdal concentrated on the social provisioning aspect of development, while Kaldor concentrated on demand-supply relationships to the manufacturing sector. Kaldor also coined the term "convenience yield" related to commodity markets and the so-called theory of storage, which was initially developed by Holbrook Working.
Biography
Káldor Miklós was born in Budapest, son of Gyula Káldor, lawyer and legal adviser to the German legation in Budapest, and Jamba, an accomplished linguist and "a well-educated, cultured woman". He was educated in Budapest, as well as in Berlin, and at the London School of Economics, where he graduated with a first-class BSc (Econ.) degree in 1930. He subsequently became an assistant lecturer and, by 1938, lecturer and reader in economics at the LSE. Between 1943 and 1945, Kaldor worked for the National Institute of Economic and Social Research and in 1947 he resigned from the LSE to become Director of Research and Planning at the Economic Commission for Europe. He was elected to a Fellowship at King's College, Cambridge and offered a lectureship in the Economics Faculty of the University in 1949. He became a Reader in Economics in 1952, and Professor in 1966.
From 1964, Kaldor was an advisor to the Labour government of the UK and also advised several other countries, producing some of the earliest memoranda regarding the creation of value added tax. Inter alia, Kaldor was considered, with his fellow-Hungarian Thomas Balogh, one of the intellectual authors of the 1964–70 Harold Wilson's government's short-lived Selective Employment Tax (SET) designed to tax employment in service sectors while subsidising employment in manufacturing. In 1966, he became professor of economics at the University of Cambridge. On 9 July 1974, Kaldor was made a life peer as Baron Kaldor, of Newnham in the City of Cambridge.
In 1969-1970, Kaldor was involved in a fierce debate with the so-called U.S. monetarist economist Milton Friedman. While Friedman defended the exogenous money supply theory, according to which money is created by powerful central banks, Kaldor and Post-Keynesian economists claimed that money is created by second-tier banks through the distribution of credits to households and companies. In the Post-Keynesian framework, central banks only refinance second-tier banks on demand, but they are unable to properly create money. Despite insightful contributions, Kaldor could not win the debate. In 1982, he published a book entilted The Scourge of Monetarism, deeply criticizing monetarist-inspired policies.
Kaldor was invited by then Prime Minister of India—Jawaharlal Nehru—to design an expenditure tax system for India in the 1950s. He also went to India's Centre for Development Studies (CDS) in 1985 to inaugurate and deliver the first Joan Robinson Memorial Lecture. Owing to these links, the Kaldor family donated his entire personal collection to the CDS Library. There are 362 books in the collection and they cover a wide range of titles on economic theory, classical political economy, business cycles and history of economic thought.