Expectations, Lags and Particular Parameter Values in Harrod’s Dynamics

J. W. Nevile

University of New South Wales

Two recent books on Harrod’s work and Harrodian themes mentioned my work on Harrod published in the early 1960s. Both the 1960 Economic Record article and the 1962 Economic Journal article were correctly included in that part of the literature of the time which recognised that Harrod’s analysis had implicit assumptions about entrepreneurial behaviour, endeavoured to make these explicit without departing from the spirit of Harrod’s formulation and examined the stability of the equilibrium growth rate in the resulting model.

However, that is not the end of the story. Harrod himself wrote a letter to me commenting on the articles. This letter throws some new light on how Harrod, at least at the beginning of the 1960s, regarded the role of expectations, lags and the need, or lack of it, of specific values of the parameters if his fundamental instability proposition was to be valid.

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The Functionless Investor: Keynes’s Euthanasia of the Rentier Revisited

Tony Aspromourgos

University of Sydney

One of the more remarkable propositions of Keynes’s General Theory is that capitalism without property income is possible. The capacity of Keynes’s theory to render plausible the abolition of ‘unearned’ income seems to have been largely neglected in the subsequent development of Keynesian economics and wider Keynesian ideas. This paper reconstructs Keynes’s notion of extinguishing rentier income, as well as reviving the continuing possibility of its implementation. The key theoretical foundations of that possibility are multiple interest rate equilibria – with zero interest one of those equilibrium rates – and the capacity of monetary policy to select a particular rate, conventionally.

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Keynes, Kalecki and the Japanese Economy

Toshibiro Kanao
Shimonoseki City University, Japan

The economic theories of Keynes and Kalecki continue to make significant contributions to contemporary analysis of modern capitalist economy. As the effective demand theories play a central role in their respective economics, this paper will examine the structure of the effective demand theories and foundational supports. Further, investment and investment finance in short term and long term contexts will be discussed. Finally, where orthodox economics has failed to provide solutions to Japanese contemporary depression, Keynes-Kalecki framework has the potential to elucidate this economic quagmire.

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Deflationary Bias in Currency Boards: A Brief History of An Idea

Malcolm Treadgold
University of New England

A traditional or orthodox currency board is a fixed-exchange rate monetary system in which the issue of domestic currency is backed 100 per cent by foreign exchange reserves. Common in colonies in the first half of the twentieth century, currency boards were largely dismantled and replaced by central banks in the post-war era of decolonisation. In the debates that accompanied this process, the hypothesis that a currency board imparts a deflationary bias to a growing economy attracted considerable attention. The hypothesis was based on the argument that while economic growth leads to an increasing demand for money, the expansion of the money supply in a currency board system is constrained by the balance of payments. 

The hypothesis was first advanced in published form in 1948, although its roots are discernible in earlier literature on the gold standard and gold-exchange standard. As the hypothesis was qualified, refined and subjected to some limited empirical investigation, support for it declined. By the early 1990s, when new currency boards began to emerge, deflationary bias was widely regarded as merely a theoretical possibility with little foundation in reality. Later econometric analysis suggests the need for some revision of this view, although it also suggests that the observed downward bias in inflation rates in modern currency board countries results mainly from a "confidence effect" that played no explicit role in the original deflationary bias hypothesis. Proponents of the original hypothesis may find more justification for their arguments in recent events in Argentina.

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A.G.B. Fisher: Trans-Tasman Economist

Warren Hogan

This paper offers an extensive treatment of the education of, and development of ideas by, Allan George Barnard Fisher during the first four decades of his life which were spent almost entirely in Australia and New Zealand. He was absent only while on military service in Egypt and Palestine and then at the London School of Economics and Political Science when pursuing his Ph.D. The reason for this concentration on the first four decades is because this was the period in which he formed the intellectual insights which were to enlighten his career and reputation.

Fisher was born in Christchurch on 26th October, 1895 though by early 1897 he was in Melbourne where his parents had been transferred. His initial education was at home, his mother being a certificated teacher. Then he attended small private schools. His secondary education started at Camberwell Grammar School with his final three years prior to entering the University of Melbourne, being at Scotch College. He was Dux of that college in 1912. He graduated from the University of Melbourne with first class honours in the School of History and Economics, winning the Dwight’s honours prize as well as sharing the Wyselaskie Scholarship in Political Economy. Subsequent to completion of his war service Fisher undertook further studies in the University of Melbourne graduating with first class honours in the School of Philosophy. Immediately on completion of these studies he went to London to work on a Ph.D. degree. The topic of his work was directed to wages, employment and related conditions.

Soon after successful completion of his doctorate Fisher was offered and accepted the Chair of Economics in the University of Otago which he took up in 1925. This post he held for eleven years before resigning to take up a Chair of Economics in the University of Western Australia probably enticed to do so by friends from his days in the University of Melbourne. After two years he ended his antipodean career by accepting the Price Research Professorship at the Royal Institute of International Affairs, familiarly known as Chatham House, in London.

What is most challenging and interesting in Fisher’s career is the ways his two major intellectual contributions were brought to maturity during his years in Australia and New Zealand. This refers to his development of understanding of the role of the service industries, the tertiary sector, in the growth and development of an economy and the specification of a model of growth and development – a process which he refers to as "change" – to explain links between short-term phenomena and longer-term prospects for an economy.

While these two features lie at the core of this paper, attention is also directed to the ways in which Fisher participated in broader economic and social issues in New Zealand. This reflected his dual appointment as Professor of Economics and Director of the Workers’ Educational Association in Dunedin. Ties developed with Walter Nash, a leading member of the Labour Party and subsequently Minister of Finance and Prime Minister in Labour Governments from 1935 onwards. Nash was best man at Fisher’s wedding in January, 1930. These same connections help explain Fisher’s activities during World War II when he acted as counsellor to the New Zealand Delegation to the Bretton Woods Conference and related negotiations. Those same broad interests were revealed when Fisher travelled in China and the Soviet Union as part of his programme while holding a Rockefeller Fellowship in 1930-31.

Nevertheless the harsh experiences during the worst years of the economic malaise in the early ‘thirties, enlightened his interest in the growth and development processes and brought to fruition his book entitled "The Clash of Progress and Security". In this he was aided by the generous support of Sir Alfred Davidson, then General Manager of the Bank of New South Wales, during 1934 who appointed him as Economic Adviser on a temporary basis that year. In the latter part of that year Fisher was able to devote most of his time to his writing.

Fisher’s contributions are linked to the work of others sharing similar interests especially Colin Clark because of their mutual interests in the structure of economic progress. In this way the contributions made by Fisher are placed in a broad perspective. His efforts deserve a recognition not freely advanced in this country to a most distinguished graduate of the University of Melbourne.

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The Shaping of Economic Thought in International Economic Organisations:

 Illustrations from the IMF, OECD and World Bank

Tony Endres 

University of Auckland 

and
Grant Fleming

ANU

We investigate the determinants, development, character and distinctiveness of research programmes in international economic organisations (IEOs). In the twentieth century , IEOs emerged as another domain - in addition to government, business and academia - in which economists demonstrated the value of their intellectual constructs. What were the forces shaping economic thought in IEOs ? How does the incorporation of new ideas in IEO research affect policy prescriptions emanating from IEOs ? We offer illustrations from the IMF, OECD, and World Bank drawn from work in the late 1960s to the early 1980s. We view the subject matter as a variant of Schumpeterian 'political economy' rather than pure analytical economics. Economic research in IEOs enabled economists to assume positions as critical intellectual actors in IEO policy formation. Key determinants of economic thought in IEOs included the rationale for the existence of a particular organisation as expressed in formal charters or constitutions; contemporary ideas disseminated from academic economic analysis, and pressures applied by member governments to research and advise on specific policy questions either as events or operational functions demanded. We consider the World Bank as a purveyor of development strategies, in particular the concept of "structural adjustment " in the 1980s; the self-styled monetary approach to the balance of payments prosecuted at the IMF from the 1960s to the 1980s ; and the OECD policy line on economic policy reform in developed industrialised countries in the late 1970s. IEO research agendas were predominantly aimed at problems resulting from international economic interdependencies. We conclude that , for an IEO, international political economy was more likely to sway national policymakers if it employed a discourse--together with carefully chosen metaphors- turning on operational imperatives and articulating ruling policy concepts framed as part of eclectic, applicable models. We find little support for the public choice view of IEO research ( and researchers) as involving bureaucratic and research budget maximisation and strict research independence. Economic thought in IEOs is demand -driven though not completely demand-determined.

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Pareto, Parsons and the boundary between Economics and Sociology

Paul Dalziel

 Lincoln University, NZ

Recent discussions of the separation between economics and sociology in the United States highlight the way Talcott Parsons used Vilfredo Pareto’s Trattato di Sociologia Generale to propose that economics study logical actions and sociology study non-logical actions. This paper argues instead that in Pareto’s treatise: (1) sociology is a synthetic discipline concerned with the study of human society in general; (2) human behavior is nearly always logical from a subjective point of view; and (3) sociology studies both logical and non-logical behavior judged from an objective viewpoint. Thus, Pareto is an important intellectual ancestor for economic sociology.

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Dualistic Distinctions and Pareto’s Relativistic Approach to Science

Michael McLure

Institute for Research Into International Competitiveness
Curtin Business School

This study examines the role of dualisms in facilitating Pareto’s shift in the treatment of broad social phenomena as an aspect of applied economics to the subject of general social theory. In particular, it is suggested that dualisms associated with Pareto’s recognition of ongoing interaction between subjective and objective social phenomena (or endogenous preferences in modern parlance) enabled the inductive-deductive-inductive sequence, first developed in the 1900 "Sunto di alcuni capitoli di un nuovo trattato di economia pura del Prof. Pareto", to provide the foundation for sound general social theory when theory derived from a more conventional deductive-inductive sequence fails to derive results that accord with observed fact. One consequence of this new approach is an explicit acknowledgement and endorsement by Pareto of a relativistic approach to science.

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Just like Oscar Wilde? The Pathology of the Irish Famine Giffen Good

Michael V White

Economics Department

Monash University

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Evolution and the Nature of Man in Greek Thought

Geoffrey Fishburn

UNSW

gnôthi sauton –‘know thyself’ -- was inscribed over the temple at Delphi, but what was this ‘self’ which was to be known, and from where was its existence derived?

Albeit remote and of seemingly tangential interest to the history of economic thought, the history of Greek thought on evolution and the nature of man from earliest to Hellenistic times offers us a ready parallel with the development of economic thought, most notably in the truncation of development in promising directions by the triumph of static dogmatism. The ‘nature of man’ – an increasingly covert assumption in economic discourse – was also dealt with largely tangentially by the Greeks, but began to emerge as a more explicit enquiry in late antiquity, and played a role in the thinking of the Epicureans who, it is argued, can be characterized as the forerunners of the advocates of ‘rational economic man’.

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Work in Progress Session

The Relativity Theory of Economic Behaviour: 

Its Incidence in the History of Economic Thought and its Significance

Michael Schneider

Fundamental to neoclassical economics is the assumption that individuals aim to maximise the values of absolute variables, notably consumption and leisure. A recent challenge to this assumption has come from Robert Frank (author of Choosing the Right Pond), who argues that of comparable importance to individuals are relative variables, many preferring to be a big fish in a small pond than a small fish in a big pond. What we may call the relativity theory of economic behaviour, while playing a smallish part in the history of economic thought, does have a long and interesting pedigree. Substantial expositions of it are to be found in the writings of John Rae, Thorstein Veblen, James Duesenberry, Harvey Leibenstein, W.G.Runciman, Staffan B.Linder, Fred Hirsch and Robert Frank. Reference is made to it by Adam Smith, Nassau Senior, Karl Marx, John Stuart Mill, Henry Cunynghame, Caroline A.Foley, Philip Wicksteed, A.C.Pigou, James Meade and Roy Harrod. The relativity theory of human behaviour has a dual significance. It implies, first, that even if an infinite quantity of consumer goods could be produced in an infinitesimally short period of time, human beings would not be happy with their economic lot. It implies, second, that even if the rate of growth of the world’s population were zero the world’s non-renewable resources would ultimately be exhausted, due to human beings’ indefinite pursuit of status. This paper lays the foundations for a more extensive study of the history of the relativity theory of economic behaviour in economic thought.

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Equilibrium and Evolution: Complements or Substitutes?

John Nightingale
University of New England, Australia

Economics has long been marked by a division between an orthodoxy practising a form of analysis based on theory originating in the Marginalist theories of Jevons, Walras, Menger and so on, from the late 19^th C, and a heterodoxy practising various forms of historically based theories, from the German Historical School and the American institutionalists, to various realist theories including post Keynesians and neo-Schumpeterian evolutionary economics. This division became entrenched in the 1960s as the neoclassical school’s victory in dominating US university departments and the emergence of ‘cookbook’ style textbooks marginalised the alternatives. I would like to suggest that there may be reason to shift the argument toward one in which the relationship between the orthodoxy of neoclassical economics can be seen as a complement to heterodox theory, which is, by and large, based on a critical realist, or naturalist, epistemology. In other words, neoclassical theory is in a different space to the rest. It isn’t appropriately asking the same sort of questions. This is not to say that neoclassical theory, with its ontology of the field, is itself an appropriate vehicle for its own kind of question, but that it is not a direct substitute for heterodox realist theories.

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Wicksteed and the Origins of Neo-classical Distribution Theory

Paul Flatau
Economics, Murdoch University

Wicksteed’s An essay on the co-ordination of the laws of distribution (1894) and The common sense of political economy (1910) assume a prominent place in the development of neo-classical distribution theory. However, the analysis of the origins of these works and of Wicksteed’s contributions to economics more generally remains undeveloped with only Steedman’s recent explorations providing any light on the subject. This paper examines the development of Wicksteed’s statement of distribution theory in light of his contributions to fields of scholarship other than economics, to the broad range of influences that appear to surround Wicksteed’s statement of the marginalist theory of distribution, to elements of biography and what we learn from archival sources.

The paper seeks to answer two questions: (1) By what route did Wicksteed arrive at his influential statements of distribution theory in An essay on the co-ordination of the laws of distribution (1894) and The common sense of political economy (1910)?; and (2) How important was Wicksteed’s theory of distribution in the overall development of neo-classical distribution theory?

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The Foundations Of Growth Theory

Peter Kriesler

 UNSW

Neoclassical theory has trouble acknowledging its processors, and any antecedence in general, but it seems to be a particular problem with respect to the analysis of economic growth. Edward Elgar has commissioned a number of collections related to growth theory. For these, the starting point for any serious discussion of growth theory was, at the earliest, the Swan/Solow model (though Von Neuman does get look in).

I am editing a volume on the Foundations of Growth Theory, which will try to alleviate this ahistorical practise. This paper will air some of the choices of authors who have made fundamental contributions to growth theory, starting with Adam Smith, and continuing until the 1950s, as well as considering the question of why growth theory was relegated from its initial key position as part of the definition of Political Economy, to its present status of an optional field of study.

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Economics, Power, and History: 

Some Controversies Revisited - Through the Eyes of John Ralston Saul

Liam O'Hara
College of Law and Business
School of Economics and Finance
University of Western Sydney

The paper outlines some old and new controversies in economics. Economics, and its history, is discussed relative to its more latent meaning, while its use (or misuse) through history is also discussed. Many arguments and viewpoints presented in this paper are influenced by the Canadian historian, writer, and thinker, John Ralston Saul. Saul critically assesses some old and new controversies, and economics’ role in history and its meaning today. The paper presents Saul’s critical judgements on economics that are of continuing relevance to political economy.

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Research in the History of Economic Thought as a Vehicle for the Defence 

and Criticism of Orthodox Economics

John Lodewijks
University of New South Wales

One could tell a story of how research in the history of economics has been coloured by the stance that various scholars have taken towards orthodox economics. The history of economics can be used as defensive, critical or neutral with reference to orthodoxy. What are the implications for the craft if these various positions are taken? Is there a systematic bias in the way a number of historians of economics pursue their craft? Would narrowing participation in the field enhance the ‘quality’ of the history of economic thought produced?

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Anti-Economics: A Guide

William Coleman
University of Tasmania

The paper defines "anti-economics" and then provides a synoptic taxonomy: Right, Left, Stalinist, Nationalist, Irrationalist, Moralist, Altruistic, Idealist, and Materialist.

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Lament for Economics, or How Barbara Wootton 

Gave it All Away and Became a Sociologist

J.E. King
La Trobe University

In 1938 Barbara Wootton published LAMENT FOR ECONOMICS, an indictment of the state of contemporary economic theory. She complained that economics was no use to anyone, and unintelligible to all except a small minority of specialists. Economists were unable to agree; they ignored reality; and they often served as apologists for capitalism. Thus economics was not a science, and could contribute little or nothing to either the understanding of capitalism or the organisation of a future socialist society. Wootton’s criticisms made no impact at the time, and she soon abandoned economics and became an eminent criminologist and social theorist. However, many of her arguments were repeated, 62 years later, in the French students’ manifesto that led to the formation of the Post Autistic Economics movement.

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History of Wage Fixation in Australia: 

The Employer Perspective

Dr Steven Kates
Chief Economist, Australian Chamber of Commerce and Industry

In 2004 it will be the hundredth anniversary of the formation of the Conciliation and Arbitration Commission, the forerunner of the present Australian Industrial Relations Commission. Looking back over the century, it will be seen that there has been a fractious relationship between industrial tribunals and Australian employers especially in the area of wage fixation. This paper looks at the history of this relationship and at the different approaches that have been taken by businesses and their representatives over the period, with a particularly focus on the economic considerations that have been part of employer submissions in the National Wage Case. This paper is work-in-progress and will be published as part of a commemorative volume which will be published in 2004 to mark the centenary of conciliation and arbitration in Australia.

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Economic Paradigms and Australian Wage-Setting,1975-1995:From Macroeconomic Distribution to an Enterprise Productivity Focus

Gregory Owen Smith
UNE, Armidale

The discussion in successive national wage cases forms the core material of this paper. The period, of course, covers the Fraser era when wage indexation was deployed unsatisfactorily, the early Accord when it played a crucial role along with other elements, and the later Accord period (from around 1985) when a different direction was taken. An attempt is made to evaluate the role of prevailing economic paradigms, which helped to shape the changing bargaining environment in which employers and employees operated. National wage cases were also subject to changes in their role and significance; the commentary they provide reflects the influence of economic paradigms and provides a window on the whole sequence of events.

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The Seligman-Edgeworth Debate about the Analysis of Tax Incidence: 

The Advent of Mathematical Economics 1892 - 1910

Laurence S. Moss

Babson College

My paper reviews a controversy in economics involving F. Y. Edgeworth of Oxford University and the distinguished Columbia University economist and taxation specialist, Edwin Robert Anderson Seligman.  The issue at stake was whether a specific tax on the gross receipts of a monopolist would be shifted to the cuistomers by a rise in the selling price.  Edgeworth claimed that Cournot had proved with mathematics that the price had to rise.  Seligman explained that the selling price need not change at all and demonstrated that this was the case with a "real world" numerical example.  Edgeworth railed against Seligman's methods of argument, claiming that they made the application of the calculus "helpless." It fell to Edgeworth to demonstrate why Seligman's common-sense methods of reasoning were illegitimate.  Edgeworth invoked his principle of "unverified probability" from his earlier work in mathematical statistics to explain why it was rational for a n economist to use (twice) differentiable functions when ignorant of the true shape of the functions involved.  According to Edgeworth, models based on differentiable functions are privileged and at the heart of any sustained effort to arrive at the fundamental principles of economic science, including the modern principles of tax incidence theory.

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The 1920s Cost Controversies: Did anybody read Marshall’s Principles?

Neil Hart

University of Western Sydney

The 1920s cost controversies have been depicted as being chiefly concerned with problems associated with deriving supply functions to be used in the partial equilibrium analysis of prices. The problems were seen to arise in particular when increasing returns to scale were encountered. A particular target of the criticism was Marshall’s theory constructed from the representative firm concept. However, a closer reading and understanding of Marshall’s Principles, and other writings, should have demonstrated to the participants in these controversies the futility of the exercise being attempted and the emptiness of the proposed solutions. Clearly emerging form Marshall’s writing is that industrial organisiation cannot be analysed in terms of competitive conditions, and supply functions cannot be derived from firms in ‘equilibrium’ positions. Moreover, ‘equilibrium’ is the source of the difficulties in Marshall’s Principles, not a concept to be preserved. If Pigou, Sraffa and others had shared Allyn Young’s (and to some extent Shove’s) understanding of these issues, the cost controversies may had been avoided and debate instead concentrated on the more critical issue of the role and purpose of the equilibrium metaphor in economic analysis.

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Teaching HET at the University of Sydney

Peter Groenewegen
University of Sydney

My retirement as Professor at the University of Sydney earlier this year is a nice vantage point from which to review my forty years of teaching the History of Economics Thought at the University. This had started in 1961 with three lectures on Turgot at the invitation of Ted Wheelwright, it ended in 2001 when I took the whole of the third year pass course in that subject. Given the fact that I have also embarked on a history of the Faculty of Economics at the University of Sydney, my reflections on the teaching of HET will be broader than personal reminiscences. Section I of the paper examines the teaching of HET at Sydney from before 1920 (the year the Faculty of Economics started at Sydney) the 1965 (the year I was appointed as lecturer in economics); Section II reflects on my own experiences as teacher of HET (from 1965 to 2001) in the pass survey course offered at third year level, the honours subject Economics Classics (from 1973) and earlier features of the special role of the subject for Faculty honours students; and postgraduate supervision. A final section presents some conclusions dealing with the rationale for HET teaching to economics students, the role of compulsion in such teaching, the various ways the subject can be taught, and the creation of reprints of economic classics as a by-product of the teaching process. It is hoped that these reflections will have some value for teachers of History of Economic Thought at this Conference.

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The Development of Price-formation Theory and 

Subjectivism about Ultimate Values

Adrian Walsh and Tony Lynch
School of Social Sciences, UNE

No development in economics has any bearing on questions of the status of ultimate value, or so we suggest. Yet if one examines the history of the development of price-formation theory, many lines of thought see a natural slide from causal and methodological issues to meta-ethical ones. This is particularly true with respect to the reception of the marginalist and ordinalist ‘revolutions’ which naturally, but erroneously, might lead one to ethical subjectivism. Further, this is of some historical significance since many economists have made this very slide from causal or methodological subjectivism to full-blown ethical subjectivism. Such natural errors are compounded by the imprecise use of the term ‘value’ that is symptomatic of much economic writing. Although Stiglitz claims in Economics that economists are very careful about how they define both price and value, there is amongst the discipline an imprecision that often gives rise to a conflation of exclusive accounts of ‘value’ with exhaustive ones.

In this paper we (i) explore the ethical subjectivism of much post-Classical economics and (ii) expose the natural errors we believe to be partially responsible for this substantive normativity. We begin by distinguishing between causal subjectivism, methodological subjectivism and ethical subjectivism. We then show how various historical developments in price-formation theory might lead one quite naturally to conflate these different subjectivisms. These natural errors provide a partial explanation for the ethical subjectivism of much of the economics discipline and for which economics qua economics provides no warrant.

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The Cambridge Millites and the Early Economic 

Writings of Leslie Stephen

G. C. G. Moore

Australian Catholic University

Leslie Stephen is now chiefly remembered as the founder of the Cambridge school of literary criticism; a champion of agnosticism during a period in which such beliefs drew condemnation; a pioneer of the art of mountaineering and the author of numerous mountaineering classics; the first editor of one of the great literary projects of the Victorian age, The Dictionary of National Biograph; the historian of ideas who single handedly rehabilitated the rationalists of the enlightenment with the publication of his magnum opus, English Thought in the Eighteenth Century; and, as the demented father of Virginia Woolf, the model for Mr Ramsey in To the Lighthouse. Less is known about Stephen's contribution to the discipline of political economy, which included numerous reviews of the leading economic tracts of the 1860s, the highly successful biography of Henry Fawcett in 1885, and nearly all of the biographies of economists for The Dictionary of National Biography in the 1880s. In this paper I reconstruct the social circles to which Stephen belonged while at Trinity Hall, Cambridge, and examine the extent to which the ideas exchanged in these social settings shaped his economic beliefs. I demonstrate that he was a leading member of a brilliant set of mathematicians at Cambridge in the 1850s and early 1860s which was preoccupied with the finer points John Stuart Mill's vision of political economy, and that it was the earnest conversations which he held with these contemporaries which induced him to write a number of pieces relating to political economy in the 1860s. These included an unpublished manuscript on political economy in 1862, in which, quite surprisingly, he employed diagrammatic forms.

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Adam Smith On Colonial Policy And Conflict

Melvin L. Cross

Economics, University of Sydney (visitor) and Economics

Dalhousie University, Halifax, Canada

Adam Smith wove a careful analysis of colonial affairs into his attack on mercantile monopolies. Britain’s colonies in North America progressed rapidly, but her Indian colonies remained mired in poverty. Smith explained the contrast by arguing that the liberal institutions of the British constitution prevailed in North America, while in India an exclusive company governed. Thus the Indian colonies were lumbered with illiberal, mercantile institutions that prevented economic progress.

Britain’s trade with North America represented another case where illiberal, mercantile institutions prevailed. As a result, argued Smith, the benefits of trade with the American colonies were far below potential; further, mercantilism would make it difficult for America to develop beyond providing raw materials for the mother country. Mercantilism also was conducive to violent conflict. In the Wealth of Nations, Smith offered a plan the to defuse the conflict in North America. However, he feared there would be a long, destructive war in North America, followed by a peace dangerous to the British Empire. This paper argues that Smith’s work on colonies remains instructive about the links between institutions and economic progress and between vested interests and violent conflict. His work on colonies also is indicative of Smith’s theorizing about how governmental decisions are formed.

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On the gestation of Piero Sraffa’s edition of the 

Works and Correspondence of David Ricardo

Christian Gehrke

University of Graz

The paper provides an account of the gestation of Piero Sraffa’s edition of The Works and Correspondence of David Ricardo. It is based on material in Sraffa’s unpublished papers at Trinity College, Cambridge, and on material from various other archival sources, including the Dobb, Keynes, Kahn, Robinson, and Shove papers, the archives of the Royal Economic Society and those of the Cambridge University Press. It focuses on Sraffa’s collaboration with Maurice H. Dobb and on the making of the Ricardo Index.

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The Year 1922: A watershed of Mises and Hayek

Shigeki Tomo, PhD
Professor of Economics
Kyoto-Sangyo University in Japan

This paper tries to show one of the most striking differences between thoughts of Mises and those of Hayek in the 1920s. Surely Mises is well known as an initiator of the economic calculation debate and Hayek as an editor of that book which collected papers in this matter . Both shared a negative answer towards the possibility of the socialist system. But they did not have common ideas as to the relation between individuals and the social order. This can be made prominent in their attitudes towards universalism asserted by Othmar Spann, one of full professors for economics and sociology at Viennese University since May 1919. This paper constitutes a essay subsequent to my presentation at the HETSA Conference in the previous year, entitled "A sealed influence of Othmar Spann on Hayek’s dissertation (1923)". The new points are: (1) the discussions on Mises’s thoughts (2) presenting an interpretation of Spann’s Universalism.

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On Interest and Profit: Thomas Tooke’s Major Legacy to Economics

Matthew Smith
University of Sydney

Thomas Tooke (1774-1858) is best known for his notion that the quantity of money is endogenously determined by the needs of trade and prices. This paper argues that a more important legacy to economics stems from Tooke’s conception of the rate of interest is an autonomous variable, which systematically governs the normal rate of profit, a conception that opens up the possibility of overcoming the long-run neutrality of monetary forces that characterizes traditional economic theory. The paper examines Tooke’s position on the relationship between interest and profit and, then, traces the considerable influence of his position on the subsequent development of the conception of an autonomously determined rate of interest in the classical tradition by J.S. Mill and Marx. Finally, the paper shows that Tooke’s position can be logically sustained in a Sraffian theoretical framework, from which it is possible to suppose that through the determination of the rate of interest, monetary forces can exert a permanent influence on distribution and, thereby, on output and employment.

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Relevance and Robustness of Sweezy's 1949 Paper 
in Explaining Price Rigidity

Partha Gangopadhyay

Professor and Chair of Empirical Economics and Social Research

 European University of Viadrina
Frankfurt (O), Germany & University of Western Sydney, NSW 2560

In macro models, output fluctuations are primarily associated with shocks that have no contemporaneous effect on the price level. New Keynesian sticky price models received increasing attention in recent years and assumed importance in policy evaluation. These models fit the U.S. data very well. The theoretical foundation of price rigidity, that is hinged on to menu costs, is recognized as the main weakness of New-Keynesian models. In sharp contrast to these New-Keynesian models, Sweezy (1949) had offered an elegant model to explain price rigidity in oligopolistic markets. The theoretical robustness and the philosophical backdrop of Sweezy (1949) are far more advanced than New-Keynesian models that highlight convex costs associated with price changes (e.g. menu costs). The philosophical backdrop of Sweezy is a challenge to the tenability of the ceteris paribus assumption of the oligopoly when an oligopolist changes his price. Sweezy argues that the assumption that everything else would remain unchanged if an oligopolist changes his price is patently unrealistic. His major theoretical contribution is to offer a chimerical/imagined demand curve at the firm level when competitors react to price changes of an oligopolist. The chimerical demand curve has come to be known as kinked (originally kinky) demand curve. The upshot is that asymmetrical responses of oligopolists to price increases and decreases by one of their competitors would make a firm’s demand function kinked. The kink in demand function is then strained to explain significant price rigidity. The philosophical and the teleological foundation of our paper roots in the model of Sweezy. However, we make a departure by focussing on the impact of price changes on the reservation prices of buyers and, hence, on the dynamics of buyer behaviour – as opposed to the impact of price changes on the behaviour of sellers. By focussing on the dynamics of buyer behaviour, we are able to explain price rigidity without relying on asymmetrical responses of oligopolists, or menu costs of sellers. We argue Sweezy’s insights can still offer a robust foundation to price rigidity.

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