26 September 2022
Professor John Quiggin’s insinuations that profits come at the expense of labour sail close to the Marxist idea that profits are extracted from labour and that labour is entitled to the whole of the profit because it and only it creates value. Labour, like capital goods does not, create value. Labour produces only those things that already have value or are expected to have value. Bishop Whately rightly observed:
It is not because pearls fetch a high price because men have dived for them; but on the contrary, men dive for them because they fetch a high price1.
The title of this little essay might seem a little farfetched but what else is one supposed to think when Professor Quiggin emphatically stated:
For decades, government policy has been designed to weaken unions and push wages down. It’s time to put that process into reverse2.
The significance of John Quiggin’s statement is striking for it is a direct attack on the productivity theory of wages that is found in every standard economics textbook. A theory that no one has been able to refute. But according to Quiggin’s logic wages are
Continue reading Professor Quiggin thinks there is a conspiracy to drive down wages: This is economics at its worst
19 September 2022
During the last several weeks a number of people have been asking me why Australia’s establishment right deliberately ignores historical facts that refute Keynesian thinking. They are completely bewildered by the right’s refusal to acknowledge any lessons from past that counter the left’s relentless push for more and more spending. I think Graham Young, publisher of Online Opinion and executive director of the Australia Institute of Progress, inadvertently gave us a clue as to the right’s motives. When presented with the historical data I had written up he bizarrely asserted that all the quotes I used, which were fully sourced, were not genuine! In effect, he accused me of fabricating them. (I anxiously await his expert opinion on this article.)
Young then attempted to justify his accusation with the patently absurd claim that he was “pretty knowledgeable in these areas”, going on to argue that I know nothing about the “theories” in question. To put it bluntly, Mr Young has never read any classical economists and in addition he is a complete ignoramus when it comes to the nineteenth century. What apparently aroused Young’s ire was my critique of Steve Kates’ treatment of nineteenth century trade cycle theory. It seems that Mr Young firmly believes that only the insiders have valid arguments. Moreover, dissent from those arguments will not be tolerated.
Apart from Mr Young there is also Tim Blair, an editor and columnist at the Daily Telegraph. According to this self-professed libertarian who once declared that I should be blacklisted as well as shut down. I think the opinions of both these characters bring to light the close-mindedness of Australia’s right. A close-mindedness that underpins its refusal to even consider the vitally important economic lessons from the nineteenth century as well as Australia’s experience in the Great Depression. Their destructive stubbornness amounts to a betrayal of history.
I have now written another critique (the quotes are genuine) of Steve Kates’ approach, not because it might irritate Mr Young but because it is necessary to correct Kate’s errors. Because he continually made the point of referring to John Stuart Mill when writing about the classical economists and the trade cycle he also made it necessary to clarify the situation somewhat with respect to Mill’s true position on the issue. What does become clear is that he was not and never was the leading classical theorist on the trade cycle. This is because there were two theories, not one1. The ‘theory’ Mill promoted was not just wrong, it was dangerously wrong. Now Mill made it clear that he agreed with
Continue reading Further thoughts on the ‘trade cycle’ and the Australian right’s betrayal of history
12 September 2022
Those left-wing activists and post-Keynesian who ardently defend the thoroughly discredited myth that unions can raise real wages for everyone do so by deliberately ignoring the lessons of economics and history. When faced by arguments based on economic reasoning and supported with historical facts left-wing activists frequently resort to sneering abuse. Nevertheless, facts are facts.
So why are these people wrong? Let us begin by using the Black Death as a historical case study. There is no disputing the fact that it was largely the ratio of labour to land that determined real wages in pre-industrial times and that by wiping out about 40 per cent of England’s population after 1348 the Black Death caused real wages to leap by raising the land-to-labour ratio. This explained why, without any help from unions and in the face of hostility from the crown, general living standards rose after 1348.
Continue reading Labour, Wages and union myths
12 September 2022
Although these articles are not a direct criticism of Modern Monetary Theory they do show that Australia’s free market economists are just as wrong about the trade cycle as are our MMT theorists which is why they failed to effectively refute MMT teachings.
In last post I finished with the observation Mill was puzzled by the fact that during a boom investments were made in projects that were not justified by the expected return despite the fact that Henry Thornton provided the clue to the solution1. (Ricardo was at one with Thornton on this issue2.) Thornton’s insights, combined with the embarrassing fact that the banking school was forced to admit that a boom required a monetary expansion, left Mill in a quandary. Our logician’s response was to try and shore up his ‘theory’ with a lengthy quote from Tooke’s Considerations3, thereby committing the fallacy of appealing to authority.
Continue reading Nineteenth century trade cycle theory 3
5 September 2022
In a futile attempt to defend the billions of dollars that have been squandered on the Greens’ destructive anti-growth1 energy policies a Reserve Bank of Australia official wrote a Keynesian inspired defence of this policy. He began with a fallacious definition of economic growth, calling it
an increase in the size of a country’s economy over a period of time. The size of an economy is typically measured by the total production of goods and services in the economy, which is called gross domestic product (GDP).
Continue reading Reserve Bank of Australia peddles the green lie that billions spent on wind power and solar power spurs economic growth
29 August 2029
The prime motive behind the green movement is not concern for the environment but anti-capitalism. Every green intellectual and leader is driven by a hatred of capitalism. What the greens give us are humbugs peddling claptrap for the ignorant and the gullible. The utter balderdash produced by Marxist lecturers like Christopher Pollard1, Susie Moloney and Lauren Rickards2 are typical of the anti-capitalist nonsense that permeates the left. (As is par for the course, Australia’s blinkered right has failed to take note of the Australian Greens’ naked loathing for capitalism).
Continue reading If solar and wind power really worked then the demand for electricity would rocket as prices fell
22 August 2022
Professor Quiggin rightly notes that “[s]harp tests of economic theories are rare and hard to find.” Fortunately, for both economics and economic history, Australia’s experience during the Great Depression provides such a test. His observation draws attention to the fact that history is the battlefield on which these economic arguments are either won or lost, or should be. According to the economic orthodoxy to which Quiggin dogmatically clings it would have been utter economic and political folly for any government during the Great Depression to have imposed a policy of running surpluses while cutting money wages and government spending. Yet this is precisely what the Australian government successfully did.
Continue reading Professor Quiggin’s Keynesian creed destroyed by Australia in the Great Depression
22 August 2022
In my previous article I stressed that Steve Kates (honorary adjunct associate professor in the College of Business at RMIT University in Melbourne) has erred badly in claiming that there is a classical theory of the trade cycle and that it emerged from the general glut debates of the 1820s. I clearly showed that the first theory of what the much neglected James Pennington aptly called “alternate periods of commercial excitement and depressions”1 was formulated by Henry Thornton and published in 1802 and soon after was adopted by Ricardo2 and the currency school. Moreover, the theory had its roots in eighteenth century financial crises, which reveals that the origins of the trade cycle are not to be found in the Industrial Revolution but in the banking system3. It appears clear from his constant references to John Stuart Mill with respect to recessions that Steve Kates thinks of him as the classical school’s leading exponent of what he erroneously belies is the classical theory of the trade cycle.
Continue reading NINETEENTH CENTURY TRADE CYCLE THEORY: FACT VERSUS MYTH 2
A great deal of nonsense about the 2008 financial crisis has been written, virtually all of it utterly worthless. Apart from the absurd calls that we should learn from Marx’ fallacious trade cycle theory1 there is also Robert Shiller’s opinion that there was
a speculative bubble driven by excessive optimism, driven by public inattention to risks of such an eventuality2.
Completely missing from the commentary on the global financial crisis, at least in the numerous articles I read, was any historical perspective. Although economists, unlike physicists or chemists, cannot perform experiments they do have the next best thing and that is economic history. That so few of them draw on this invaluable source is to be deeply regretted. Equally regrettable is the unfortunate fact that of those few members of the economic commentariat who sometimes try to use this tremendous pool of material virtually all of them fail to apply it effectively.
It is a little known historical fact, particularly among economists, that financial crises originating in the banking system existed in medieval times. Continue reading Financial crises from medieval Italy and Spain to tulip mania, the Mississippi Bubble and eighteenth century England: And economists still haven’t learnt the lesson
Although these articles are not a direct criticism of Modern Monetary Theory they do show that Australia’s free market economists are just as wrong about the trade cycle as are our MMT theorists and as such serve to undermine MMT teachings.
Last week I singled out P. D. Jonson, Peter Smith and Steve Kates, who teaches at RMIT, as being hopelessly wrong in arguing that the boom-bust cycle is a natural feature of a capitalist economy. I chose these three because they have written books in which they clearly state their views on the subject. To my knowledge there is not a single free market economist in Australia who would disagree with them. In this respect there is no fundamental difference between these economists and Bill Mitchell and his fellow MMT theorists. (It also puts them in the Marxist camp.) The striking thing about all of these economists is that not one of them ever provided the slightest indication of being aware of the crucial role the gold standard played in classical thinking when it came to what they called “convulsions” or “revulsions”. Continue reading Nineteenth century trade cycle theory: fact versus myth 1