A History of Australian Economic Thought (Routledge Revivals)

Peter Groenewegen, Bruce McFarlane

• Publisher: Taylor & Francis
• Year: 2014
• Print ISBN: 9780415609135
• eBook ISBN: 9781317831679
• Edition: 1
• Topic: Business
• Subtopic: Business General
• Index: Business

First published in 1990, this book presents an original and comprehensive overview of Australian economic thought. The authors stress, by way of introduction, the many important innovative contributions Australian economists have made to thought worldwide. As the argument develops, the work of major figures is discussed in detail in addition to the role of different journals and economic societies.

Chapter one

Is there an Australian economics?

This book presents an outline history of Australian economic thought from the beginnings to the present. It thereby goes considerably beyond the essays in such a history that have appeared (for example, La Nauze, 1949; Copland, 1950; Butlin, Fitzgerald and Scott, 1986) and with respect to time, Goodwin's (1966) massive inquiry into Australian economics which ends with the 1920s. A brief sketch such as this book clearly has limitations. However, such brevity has also some distinct advantages. By providing an overview of the complete development of economics in Australia, it permits construction of broad generalisations on the nature of that development, facilitating an understanding of the precise characteristics of an Australian economics. This aspect of the book arises from the fact that it is part of a series devoted to the history and development of economics in specific countries.

The previous histories

As indicated, there are already some histories of Australian economics, of which La Nauze's Political Economy in Australia and Goodwin's Economic Enquiry in Australia are by far the more important. In addition, there are some monographs and journal articles on specific aspects of the history of Australian economics. These cover the history of economic institutions such as the Australian Economic Association (1887–98), the Economic Society of Australia and New Zealand (founded 1925), and the Economic Record (Butlin, Fitzgerald and Scott, 1986) or, more frequently, the work of specific Australian economists or Australian contributions to specific branches of economics.

La Nauze's work basically comprises three studies of economists with respect to their work in Australia after a broad introduction covering the development of economics in Australia during the nineteenth century. The first of these individual studies covers Jevons's work while in Australia during the 1850s. In it, La Nauze for the first time analysed Jevons's early contributions concerned with the debates on railways and economic development which were then taking place in New South Wales and some of the other Australian colonies (see below, Chapter 3). The second study has far greater Australian content it assesses the significance of Hearn's economics for his contemporaries. Hearn, born in Ireland and educated in classics at Trinity College, Dublin, was appointed in 1854 to one of the four Foundation Chairs at the University of Melbourne, that is, the Chair of Modern History, Modem Literature, Logic and Political Economy. During his period as an academic he published major works — Plutology (1863), The Government of England (1867) and The Aryan Household (1879) — of which the first in particular was an important contribution to economics. All three books secured him international recognition. He is undoubtedly one of the key figures in nineteenth century Australian economics and has attracted the attention of other scholars (see Chapter 3 below). The third figure in Australian economics discussed by La Nauze was David Syme, the Scottish-born newspaper writer and proprietor, often called the father of Australian protectionist views, particularly with respect to his adopted native State of Victoria. Syme's book, Outlines of an Industrial Science (1876), attracted attention in Germany and elsewhere and thereby constitutes a further landmark in Australian nineteenth century economics. La Nauze (1949) is therefore fairly described as a collection of essays on economists in Australia which, apart from its opening essay, presents little of what might be accurately termed a history of Australian economic thought. As he himself hinted (La Nauze, 1949, p. 45) it is really a set of building blocks to assist construction of a more detailed history of Australian political economy.

The broader introductory historical essay (La Nauze, 1949, pp. 13–25) stresses some key features of the development of Australian economics which have to be recognised in any study of the subject. In the first place, La Nauze surveyed in brief some of the contemporary literature. This survey points to its generally unsophisticated and derivative nature in the context of which La Nauze stressed the proclivities of Australian authors to quote from or draw extensively on the works of scholars from other countries. Secondly, La Nauze surveyed the rudimentary beginnings of economics in Australia's four nineteenth century universities — Sydney (founded 1850), Melbourne (1853), Adelaide (1874) and Tasmania (1889) — pointing to the fact that in general (Melbourne being the exception), political economy had no formal place in the university syllabus, but was introduced surreptitiously and outside the formal university structure by some of the early academics appointed to Australia's universities (see Chapter 3 below). Finally, La Nauze emphasised the quality of some of the economic debate in Australia outside of the universities. Particularly noteworthy was the foundation of a regular journal, the Australian Economist, by the Australian Economic Association, the establishment of which preceded that of the British Economic Association (later Royal Economic Society) by three years. The quality of this work (first noted by Butlin, 1947) and the general view of the state of Australian economics at the end of the century which it provides, explains why a separate chapter (Chapter 4) is devoted to this specific aspect of the development of economics in Australia.

A more substantial investigation of economic inquiry in Australia was produced by Craufurd Goodwin,¹ who, in considerable detail, particularly bibliographical, portrayed the nature of economic debate and discussion in Australia from the early nineteenth century to the 1920s. The terminating point of Goodwin's study (1966) arose from his agreement with a widely held view (see below) that Australian economics came of age during that decade with the establishment of its own professional organisation (the Economic Society of Australia and New Zealand), the publication of its own professional journal (The Economic Record) and the firm foundation of economic teaching by an influential group of academic economists at the universities (by then established in all six States of the Commonwealth). At over six hundred pages, Goodwin's contribution dwarfs that of La Nauze in size and coverage.

Goodwin's book is divided into two distinct parts. The first provides a detailed account of theory and policy in Australian economics by subject matter. The opening two chapters on international commerce are respectively devoted to arguments in favour of protection and free trade views; two subsequent chapters on land disposal and taxation deal with the Wakefield scheme and homestead settlement, as well as with the debates inspired by single taxing and land nationalisation. Two chapters on banking and currency then deal with the role of the state in monetary matters, discussing price levels and banking policy, and proposals for loans backed by real estate as suitable activities for Australian banking. Then follow six separate chapters dealing respectively with economic fluctuations, transport developments with emphasis on railway economics, the state's role in fostering economic growth, the impact of evolution theory on social and economic thought, studies on labour questions and finally, but by no means least, population studies and other demographic work for which its authors gained some international recognition by the end of the nineteenth century. Much of the economic writings on which these discussions are based was of a fragmentary nature, it was often in article form and only rarely noted abroad.

The final four chapters, which are nearly a third of the contents of the book, deal with the more “scientific” aspects of Australian economic inquiry. The first analyses the substantial achievements of Australia's official statisticians at the end of the nineteenth and early in the twentieth centuries. This concentrates on contributions by Johnston, the Tasmanian statistician; those by Archer and Hayter in Victoria and, undoubtedly the most famous of them, Timothy Coghlan. The second of these chapters records in detail two individual contributions to what Goodwin describes as pioneering efforts in macro-economics: De Lissa's development of a multiplier analysis and Musgrave's Studies in Political Economy (1875a) with their heavy emphasis on the crucial importance of money for understanding the real workings of an economic system. The third of these final chapters provides a very detailed and fascinating account of the development of economic studies at Australia's major universities (and in extra-mural studies) by Australia's early academics, many of whom had a decided interest in the subject in addition to their particular specialisations. The last chapter highlights the main features of the growth of a discipline in Australia and summarises the thrust of the wide-ranging argument over the previous six hundred pages.

In this final chapter, Goodwin links the ebbs and flows of Australian economics to major events in the country's economic history: the gold rushes of the 1850s, the period of prosperity and depression of the 1880s and 1890s, and the revival of economics in the 1920s, when it developed into a stronger academic and seriously respected professional discipline. Goodwin suggests that substantial progress of the subject was often hindered by the difficulties Australian writers had in distinguishing science from policy (positive from normative economics?) and that in periods when this was particularly important, for example, during the debates over free trade and protection surrounding federation, Australian economics was in a particularly poor state. Goodwin, however, did not evolve a general theory of the development of economics in a colonial society like Australia. His concluding chapter only draws together the various strands of his inquiry in summary form. If there is a thesis in the book, however, it resembles the thesis of his earlier study on Canada (1961, pp. 199–204). Much of the economic work was borrowed from abroad and adapted to the requirements of local debate with varying degrees of skill. A similar experience seems to have applied to Australian economics.

The influence on Australian economics from abroad is also a major theme of this study, since almost invariably this aspect of the history of the national development of a science in a peripheral country must be a major factor in explaining that development. In fact it can be said that the importation of ideas from abroad explains a great deal of Australian economics over the two centuries of its existence and that, on those few occasions when such borrowing from abroad was less important, what are significant and Australian contributions can be highlighted. Examples include Giblin's multiplier analysis in the 1920s and Australian contributions to the tariff debate. What has, however, changed during the period not covered by Goodwin (1966) is the major source of economic wisdom imported into the Antipodes. Prior to the second world war it had come largely, but not exclusively, from British economics. After the second world war, and especially from the end of the 1950s, Australian economics has become dominated by the economics of the United States (see Chapter 8). This helps to explain the demise of the brief interlude of what has been called a genuine Australian economics which occurred between the two world wars in the 1920s and 1930s.

A further inference of importance for chronicling the development of Australian economics (and one implicit in Goodwin's study) should be noted. With the relatively late beginning of academic economics in Australia, contributions to the subject during the nineteenth century, but also subsequently, were often made outside academe. As David Clark (1987, p. 502) forcefully indicates, many ideas in economics everywhere have been developed by persons whose views, both contemporaneously and subsequently, were described as“cranky”. Nowhere does this apply with greater force than to the subject of money and business fluctuations (see Chapters 2 and 7). Australia, as a “new country”, had more than its fair share of the “funny money” tradition and also experienced wide ranging eccentricities in economic work on other topics. This is explicable by a continuing conflict between dependence on overseas views (particularly potent as authority symbols if derived from countries greatly admired) and a desire to be different by adapting foreign views to the highly specific national situation. Goodwin's early chapters are filled by examples of this conflict. An illustration can be found in the work of David Syme on protection (see Chapter 2) or, perhaps less apt, that of Henry George. Though often reviled in his native United States as in the United Kingdom and Australia, George's views fell on fertile ground in Australia, particularly in political labour circles. He left a lasting imprint on Australian society in the form of land taxation based on unimproved capital value (see Chapter 4) and the land ownership system of Canberra.

Apart from contributions by cranks and gifted economic amateurs, Australia saw also many economic contributions by public servants and, less frequently, private institutions (especially in the financial — banking and insurance — sector). Examples from Australia's official statisticians (federal and State) have already been mentioned. Their contribution to national income accounting in particular is highlighted in this book (Chapter 5). During the twentieth century this tradition continued. For example, at least one permanent head of the Australian Treasury made an important contribution to economic literature, widely recognised internationally (Chapter 9). Others shifted easily between public service and the halls of academe, particularly in Canberra (the national capital) where such transitions face no geographical (and sometimes no institutional) barriers. This aspect of the development of Australian economics is seen as so important that a chapter on its twentieth century manifestations is devoted to it (Chapter 9).

Academics, cranks, professionals, amateurs, bureaucrats, advisers, bankers, financiers, rural lobbyists and even political demagogues are therefore major actors in the drama of the development of Australian economics. A narrower casting would distort the picture of the development and is therefore avoided in this outline of the subject. As Goodwin demonstrates throughout his history, and as has already been noted by others (Groenewegen, 1979a; McFarlane, 1966), the non-academic input into Australian economics is far too great to be simply ignored. This study therefore merges contributions from the universities with contributions from public service economists and what can be simply described as the underworld of economics. In some ways this blend in economics, with its occasional rich and heady outcome, is as characteristically Australian as the imprimatur on a title page of Sydney, Hobart, Melbourne, Adelaide, Brisbane, Perth, Canberra or Wollongong.

Is there an Australian economics?

It may reasonably be asked whether there is in fact an Australian economics. That there have been, and in many respects still are, national schools of economics cannot of course be doubted. The Austrian school, the Swedish school, the French school (cf. Jevons, 1879, p. xlv), the Italian school, the German historical school, all provide well-known examples. The original Palgrave Dictionary devoted articles to such schools (for example, Loria on the Italian school, von Wieser on the Austrian school) while Roscher (1874) and Seligman (1925) pioneered the historical treatment of national systems of economic thought. There is a general consensus that the existence of an Australian school of economics likewise can be postulated. From the 1920s this blossomed with particular exuberance (La Nauze, 1949, pp. 5, 9–11; Heaton, 1926, esp. pp. 235–40; Copland, 1950; and Goodwin, 1966, pp. 638–9).

There are at least three standpoints by which a national political economy can be identified. It can, first of all, be done by nationality of authors; secondly, by residence of authors or place of publication of their major work; and, perhaps most importantly, given the views on the coming of age of Australian economics referred to in the previous paragraph, by the nature of the problems selected for discussion and the mode of their analysis. Identification of national problems and na...

Table of contents

• Cover
• Half Title
• Title Page
• Copyright Page
• Original Title Page
• Original Copyright Page
• Dedication
• Table of Contents
• List of illustrations
• Preface and acknowledgements
• 1 Is there an Australian economics?
• 2 Rude beginnings: nineteenth century popular political economy
• 3 Early developments at the university: academics and economics 1850–1925
• 4 The Australian Economist 1888–98
• 5 A nation of statisticians
• 6 Economists in the 1920s and 1930s: the Golden Age of Australian economics?
• 7 An old tradition: heretics, cranks and “gifted amateurs”
• 8 Professionalisation and Americanisation: Australian university economics, 1950 and beyond
• 9 Non-academic Australian economics: the influence of economist-advisers
• 10 Conclusions: can Australian economics survive the twentieth century?
• Bibliography
• Index