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 →