It is a commonplace that the theory of entrepreneurship has its genesis in Richard Cantillon's Essai sur la Nature du Commerce en Général (1755). But in fact, how substantial is the conception of 'entrepreneurship' that is to be found there? This paper reassesses the character and significance of Cantillon's notion of entrepreneurship and concludes that it captures only two quite limited forms of economic function, relative to the meaning of the concept in post-classical economics. The decisive aspect of entrepreneurship in modern economics - innovation - is virtually entirely absent from Cantillon's text.
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The problem of explaining the causes of modern economic growth looms large in the economic history literature. The twelve-fold increase in the material standard of living since the industrial revolution, but that is only enjoyed by a small fraction of the world's population, is the central observation in the field. Since the pioneering work of Colin Clark and Simon Kuznets, empirically and theoretically informed economic historians have attempted to measure, locate and explain the causes of modern economic growth. The results have been mixed. This paper is a survey of the various methods employed. The literature is characterised by the failure of empirical studies grounded in neo-classical theory to explain the mechanism by which growth occurs. This failure has resulted in a shift to searching for the necessary conditions required for growth to occur.
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Veblen was concerned with how and why economies and economic institutions evolve over time. The emphasis was on structural changes rather than on simply quantitative growth. In the paper entitled 'On the Nature of Capital' Veblen traces the changes in technological knowledge that lead economies to embed the 'stock of common knowledge and skills' into capital goods and the subsequent rise of the 'owner-employer' to a dominant position in modern economic societies. Recent developments in the software industry in the form of 'copy-left' software have dramatically challenged the position of very large and dominant firms (such as Microsoft, but there are many others) precisely by allowing individuals to produce products with tools that are equivalent (and often superior) to those used by large capital-intensive organizations. The question of whether this new form of legal institution has proven to be successful enough to become an enduring aspect of modern economic life is examined.
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This paper tries to clarify that the Webbs' national minimum theory was a modernizing strategy for the British Economy at the turn of the twentieth century. The Webbs, contrary to the label of Fabian socialists, were influenced by Alfred Marshall's organic growth theory. However, they could not accept the policy conclusions of his liberalism and tried to formulate the 'applied sociology' to be a guide for institutional co-ordination to make the British economy 'efficient'. For Beatrice Webb, this meant the departure from H. Spencer, her sociology teacher. They proposed a unique theory that trade unions are harmonious to industrial progress, and this formed the basis for the national minimum policy. Moreover, their national minimum was compatible with free trade. On this point, they were against W. Ashley's protectionism and had a framework similar to that of A.C. Pigou.
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In a footnote first inserted in the seventh (1916) edition of his Principles Marshall writes that 'some negative utterances ... by eminent Mendelians seem to lack due reserve'. This judgment, obscure though it might be to the modern reader, should not, I argue, be lightly passed over: it was Marshall's response to a (then) lately controversial matter, and its insertion can be viewed, and is here assessed, in the context of Marshall's desire to be seen as being aware of, and able to incorporate into his economic analysis, developments in evolutionary biology.
This conversation forms one of a number of such interviews undertaken in 1997 as part of my ongoing investigations into the work and impact of George Stigler, a founding father of the Chicago School. The goal was to gain impressions and insights into that work by talking to a variety of people who either worked closely with him or was associated in some important way with this notable economist. Claire Friedland worked as George Stigler's research assistant from February 1959 until his death in December 1991. Many people I talked to mentioned Claire Friedland as the person I ought to talk to because, "Claire would know that sort of thing." The lengthy two hour conversation forms one of the longest and most enjoyable I conducted. Unusually modest herself, Claire Friedland offers some quite unique insights into the conduct and thinking of her long time boss, George Stigler.
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Agricultural co-operation has long been recognised as an important institution in the development of Western Australia's agricultural sector. Charles Harper (1842-1912) has long been considered the founding father of agricultural co-operation in Western Australia. Harper was instrumental in founding the Western Australian Co-operative Producers' Union in 1902 which, among other things, eventually became Wesfarmers Ltd. Harper was also a long standing member of Parliament, a newspaperman, an explorer, a founder of schools, a philanthropist, and an agricultural experimentalist. He was also able to pass his legacy on to his son Walter who led the co-operative movement after Harper senior's death in 1912 and saw to its integration into the mainstream of Western Australian political and economic systems. In considering Harper's contribution to the economic and social development of Western Australia, it is difficult to determine the extent to which his economic thinking in relation to co-operation or other economic questions conformed to such socialistic ideas represented by Owenite Co-operation or Colonial Socialism. Harper was neither a protectionist nor a free trader. Indeed, in this paper, I will discuss Harper's position in relation to a number of economic questions - tariffs, dumping, fair trade, land alienation - with a view to showing that Harper was a pragmatist focused on economic development and determined to place all resources and apply all leavers, regardless of source and political niceties, toward that end.
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Joseph Shield Nicholson (1850-1927) in 1876 graduated with first class honours in the Moral Sciences at Cambridge, where he was taught economics by Sidgwick and Marshall. He was appointed Professor of Political Economy at Edinburgh University in 1880, a position he continued to hold until 1925. During his life time as an academic he wrote over a dozen books and a substantial number of articles in the emerging economic journals. This paper examines a sample of Nicholson's work: his essay on machinery and labour (1878, 1892), his Treatise of Money and Essays on Monetary Problems (1888, 1895) and his Principles of Political Economy in three volumes (1893, 1897, 1901), for their Marshallian characteristics as indicated by references to Marshall's work. This part of the paper is preceded by an introduction and biographical sketch of Nicholson, and concludes, among other things, that the association between the two deteriorated as they grew older, and virtually disappeared over the final two decades of their lives. The paper forms part of my project on 'minor Marshallians' in progress from the start of the decade.
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Friedrich Hayek denied that the concept of social justice - a general expression widely used in daily face-to-face conversations and the mass media - had any practical meaning in a modern society. The champion of the market economy claimed that it can be justified only in those societies in which there is a strict order of preference. This was not the case in a capitalist society in which the preferences of the players are totally diversified. Thus, the concept itself is a typical example of what Hayek called the animistic way of thinking and is justifiable only in old tribal societies or in families with a limited number of the members. Using Hayek's The Road to Serfdom , Law, Legislation and Liberty [1973-79] and his last book, The Fatal Conceit , I adopt an economist's perspective to investigate his social political theories with special attention to this concept.
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The foundation of the Bank of England in 1694 brought a heated controversy lasting years, mainly between numberless land-bank projectors and the supporters of the Bank. However, this controversy, which has been often regarded as coloured by country-court politics, was indeed on the extended line of the century-long discussion around establishing banks; though in the year of 1694 the vocabulary and the structure of debates certainly began to change. A sequence of John Briscoe's pamphlets published in this year, in which he criticises the Bank of England and proposes his own land-bank project, typically show where these discussions sprang from and where they were headed for, while Hugh Chamberlen, who had already been a prolific bank-projector for more than a decade, still appears to have tried to preside over the venue of debates. Their and the other projectors' awareness of the economically and politically interested groups emerging and the theoretical analysis of the relationship between money supply and 'fund' or 'security' were the unique features of bank-proposals in this period. But, what I here want to insist on is that the emphasis in the bank projects was still on the safety and reliability of the proposed banks just as was so throughout the century. Their sales points were not exclusively about for whose benefit it would be in economical sense but rather on how viable and trustworthy the proposed institutions were.
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In this paper I trace the very chequered pre-history of the current dogma that macroeconomic theory must have rigorous microfoundations (MIFs). I begin (in section I) by citing Keynes's scattered and indirect remarks on this question. Next (section II) I deal with the period from 1939 to the late 1960s, proceeding chronologically and distinguishing three categories of authors: those who asserted the need for MIFs, those who attempted to provide them without saying so, and those who did neither. In section III, I discuss the role of MIFs in the early history of New Classical macroeconomics, in the late 1960s and early 1970s. The 1975 S'Agaro conference of the International Economic Association, which revealed continuing doubt and confusion on the question of MIFs, is the subject of section IV. The paper concludes (section V) by asking why the case for MIFs resonated in the early 1970s without achieving the canonical status that it would subsequently attain.
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This paper deals with discourses regarding the scope and method of political economy as it was being established as a science in its own right in the early nineteenth century; in particular, for comparison, those of Stewart, Say and McCulloch. These men greatly contributed to creating the image of an emerging discipline in the public mind, making use of analogous frameworks in the discussion of scope and method. A detailed scrutiny of their use of these frameworks-distinctions between political economy and politics, between political economy and statistics, and between generalisations and particulars-may render differences among them all the more remarkable, and, thereby, lead us to reconsider the individual place that each of them deserves in the history of economics. This reconsideration will in turn shed a new light upon the process by which the new science was emerging in those days.
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GLS Shackle stressed that people make crucial decisions under circumstances of great uncertainty. Shackle's prose can read like a sermon on faith, hope and choice. His writings on economic life-or-death decisions have clear parallels in religious thought on making eternal life-or-death decisions. This paper raises questions about how historians of ideas should read a text, especially on the weight and significance one should attach to perceived undercurrents and to other plausible conjectures.
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The 'Washington Consensus', was a set of reforms for economic development developed by John Williamson in 1989 that he judged to be desirable for most Latin American countries by 'Washington'. 'Washington', for Williamson, incorporated the International Monetary Fund (IMF), the World Bank, and the US executive branch, the Federal Reserve Board, the Inter-American Development Bank, those members of Congress interested in Latin America, and the think tanks concerned with economic policy; it is an amalgamation of political, administrative and technocratic Washington. The ten policy recommendations of the Washington Consensus were converted into 'the Ten Commandments' for international development policy. However, the Washington Consensus was identified as a 'neo-liberal manifesto' and received a vast amount of criticism. In response, Williamson offered a new set of policies with the title: 'After the Washington Consensus' (2003). The set of policies were also presented as the 'second-generation' of reforms to distinguish them from the original Washington Consensus renamed as the 'first-generation' of reforms. Subsequently, a set of qualifications were offered by Williamson as suggested in his writings after 2003, which I name the 'Amended Washington Consensus'. The aim of this paper is to compare the two set of controversial policies the 'After the Washington Consensus' and 'Amended Washington Consensus' and determine whether the term is still relevant as a strategy for economic development.
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Slavery is one of the most controversial issues in the 18th century England argued by a number of thinkers. This paper aims to consider Joseph Priestley's arguments against slavery in comparison with Erasmus Darwin's and Adam Smith's. Priestley, known as a prolific writer, published a remarkable book on anti-slavery entitled A Sermon of the Slave Trade (hereinafter SST) in 1788. Despite that SST provides detail discussion and consideration on slavery, little attention has been paid to this great book. Priestley's arguments are also found in his Lectures on History and General Policy (hereinafter LH) published in 1788 which is based on lectures on history, language and grammar, law and politics given in Warrington Academy from 1761 through 1767. LH briefly offers Priestley's view on slavery from humanitarian and economical perspectives. Darwin deals with a slavery issue from humanitarian point of view, appealing benevolence implanted in human nature. Although Priestley does not directly refer to Darwin, his arguments are quite similar to Darwin's. Priestley is also greatly influenced by Adam Smith, learning great many things from his Wealth of Nations published in 1776. Priestley's arguments against slavery from economic perspective basically stems from Smith's view. Darwin deals with the slavery issue only from humanitarian viewpoint and Smith only from economic viewpoint. Priestley, on the other hand, enthusiastically tackles this delicate issue form these two perspectives.
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This is a preliminary report on the light that documents stored in the Archive Centre at King's College Cambridge shed on A C Pigou's Fellowship theses. The aims of the paper are: to reveal the breadth of Pigou's scholarship in the years prior to obtaining a Fellowship; comment on the mix of support for, and opposition to, Pigou obtaining a Fellowship; and to speculate on the relevance of the breadth of Pigou's early scholarship to his subsequent work on economics. Consideration is given to Walter Raleigh's and Brooke Foss Weskcott's assessments of Pigou's unsuccessful fellowship thesis on Robert Browning as Religious Teacher and Alfred Marshall's and Herbert Foxwell's assessments of Pigou's successful fellowship thesis on 'The Causes and Effects of Change in the Relative Values of Agricultural Produce in the United Kingdom during the last Fifty Years'.
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In this review essay I critically analyze Donald Winch's Wealth and Life (2009) by drawing upon the contextual approach to the history of idea that is associated with the Sussex School to which Winch belongs. In other words, I seek to contextualize the publication and thereby deploy the very contextual approach that is promoted by the members of the Sussex School to examine Winch's own work. A secondary goal of the review essay is to disentangle the various traditions that use the contextual approach to the history of ideas - ranging from the Oxford tradition in the history of philosophical ideas that is associated with R. G. Collingwood to the Cambridge tradition in the history of political ideas that is associated with Andrew Skinner - to determine whether or not there is anything singular about the tradition associated with the Sussex School.
The term 'moral hazard' was initially developed 150 years ago within the insurance-industry literature, to describe a positive relationship between insurance and a claim. It has been asserted that the concept of moral hazard spontaneously evolved with insurance. However, the earliest insurance contracts predate the first recorded use of the term moral hazard by almost 500 years. When interpreted literately, the phrase moral hazard can evoke a strong rhetorical tone, which has readily been used by a variety of stakeholders, most notably insurers, to influence public attitudes to claimers and claiming. In contrast, the discipline of economics has treated moral hazard as an idiom which 'in fact, has little to do with morality' to analyse the role that incentives play in a broad range of principal-agent relationships. This paper seeks to explore the underlying historical reasons for this impasse by reviewing four distinct and disparate literatures: theological, probabilistic, insurance and economic. The theological literature contains a rich discussion of the liceity of insurance that reveals a medieval concept of providence, which had profound implications for the conceptual development of moral hazard. The emergence of a probability literature from the field of mathematics also contributed to the theory of risk, (e.g. Bernoulli's resolution of the St Petersburg paradox) which were precursors for conceptual development of moral hazard. The eventual genesis of moral hazard in The Practice of Fire Underwriting in 1865 was followed by some ambiguity in the interpretation of this term. A careful inspection of the early insurance literature suggests that the term moral hazard was used pejoratively to also describe the related actuarial process of adverse selection, i.e., morally suspect people were observed to purchase insurance with a view to committing fraud. The insurance industry's largely normative conception of moral hazard is contrasted with the comparatively positive interpretation used by economists, who had appropriated this term to analyse an ever-broadening range of principal-agent relationships beyond the markets for private insurance. The implications of these findings are discussed.
John Maurice Clark (1884-1963) and Frank H. Knight (1885-1972), who were representative American economists in the early twentieth century, had an intimate relationship, sharing a similar historical view. Both emphasized the contingent character of the system of 'liberalism', which depended on the tentative historical conditions. But they took different attitudes to the historical situation after the 'New Deal'. Clark was basically positive to such trends in the new era of control. Knight was negative to these trends at the time and pessimistic about the future of European civilization. Their attitudes reflected fundamentally their view on freedom and conditions of liberal society. The main concern of this paper is their respective views on types of freedom and the conditions of liberal society. In scrutinizing their works on these issues, my paper examines what kind of freedom they tried to defend. And through it, I would like to try to shed a new light on their convergences and divergences. In this way the paper aims to contribute to a clarification of social philosophy in American economic thought of the early twentieth century.
The L.S.E. in the 1930s was an interesting place for economics. Hayek and Robbins shared a broad perspective involving capital theory, a distinctive reading of the character of the depression, and also an approach which was critical of non-intervention, and a view of the impossibility of economic calculation under socialism (something that Robertson, in his review of Robbins' The Great Depression, suggested was presented as if it formed a single set-meal 'menu'). Hayek and Robbins were also in agreement about methodology: while Susan Howson has argued that Robbins' Nature and Significance was British in its inspiration, Hayek was happy to see it as presenting an 'Austrian' approach to methodology. In this paper, I will look at the critique of this approach that was offered by Beveridge, the Director of the L.S.E., and also by Hogben, who had been appointed by Beveridge to a Research Chair in 'Social Biology'. I will consider the character of this criticism, which extended also to both Hicks and Keynes (and how it is that it resembles, for example, Milton Friedman's methodological criticism of Lange's Price Flexibility and Employment of 1946), and will also discuss Hogben's criticisms of the liberalism which Robbins and Hayek shared.
This paper consists of two related sections for a book on Thomas Tooke. They concern Tooke's (and William Newmarch's) position on the determination of the gold (or silver) standard for the British monetary system effectively existing prior to 1797 and then officially resuming from 1821 onwards. Section 3.5 shows that Tooke adopted Ricardo's theory of value of a scarce natural resource, aspects of which were further developed by Senior, proposing that the natural price of gold or silver was determined by its cost of production at the least productive mine. Based on this theory, it is shown that Tooke well appreciated the conditions underlying the stability of the gold standard and, therefore, the long-run money price level fixed to gold. In section 5.5 the paper considers Tooke and Newmarch's position on the effect of the mid-nineteenth gold discoveries in California and Eastern Australia on the value of gold and the general price level. It shows that their position is not plausible from the standpoint of the Ricardian theory adhered to by Tooke.
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This paper empirically challenges the conventional wisdom (frequently repeated in the mainstream press and economic textbooks) that "stagflation" was caused by the 1973 oil price shock. Instead, this paper suggests that a synthesis of the Georgeist, Austrian (Hayek, Schumpeter) and post-Keynesian theory (Minsky, Sweezy) provide a more viable explanation for the 1973-75 recession. Section I demonstrates the empirical short-comings of the oil price shock. This section examines the "direct" and "indirect" channels in which an oil shock can cause a recession as well as inflation. It finds these accounts of stagflation sorely inadequate. Section II reveals the role the 1973-75 property bubble had in over construction and manufacturing industries. Section III examines the role of government expenditure and lender of last resort had in stabilising output and employment. Finally, Section IV concludes the history of economic thought provides a more insightful understanding of the dynamics of stagflation than conventional economic theory: the 'stag' in stagflation can be accounted by the collapse of a world-wide investment boom in real estate (and movement in assets prices and debt) while the 'flation' can primarily be attributed to the dramatic increase in transfer payments since the early 70s. Reference is made to the Japanese, the UK, Australian and U.S economy.
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There were two different views on market in the history of economics. One remained dominant until the end of the 19th century since Adam Smith. The concept "normal price" by Alfred Marshall as well as that "necessary price" by John Stuart Mill shared the same philosophy of market as Adam Smith's natural price did. This came from the Analogy of natural sciences, which regarded free competition as the gravity of market. It is clearly demonstrated by the expression "the natural price, or price of free competition" by Adam Smith, who had studied the history of astronomy. Also J. S. Mill read Whewell's History of inductive Sciences, and Marshall learned Newton's natural philosophy for the examination of Mathematical Tripos at Cambridge in 1865. Before Adam Smith there was another concept of market without such a natural philosophical assumption of free competition as a force like gravity. It was James Steuart who explained competition more intrinsically and empirically. In Chapter 7 "Double Competition" in his Inquiry into the Principles of Political Economy, competition is understood as taking place not as a phenomenon of market itself, but as that of each side of participants in market: sellers and buyers. The expression "double" in the title of that Chapter means "in both sides", so competitions separately take place among sellers and buyers. The vibration of competition from one side to the other, which Steuart underlined, must have been an illustration of what he observed in some actual markets. For Steuart, competition itself has no power to adjust the market price to any natural, necessary or normal level, because it can take place only on one side. It is "equal competition" in both sides that prevents market prices from being excessive. This paper tries to show, by interpreting Steuart's conception of double competition as a pioneering illustration of the double auction, which is now dominant in the transaction method for continuous trading, installed in our competitive markets, like the exchanges of stocks, future commodities, and foreign currencies, the reason why Steuart had been forgotten in the history of economics. The answer would be found in the fact that he could not present the condition for equal competition for the stability of price movement, which could replace the Smithian analogy of competition as gravity.
This paper sketches an investigation into the role of Irving Fisher's 'Separation Theorem' in the post-classical impatience theory of interest, as presented in the Rate of Interest: Its Determination and Relation to Economic Phenomena, published in 1907. The paper's purpose is to answer the following three questions. First, which were the received doctrines Fisher dismissed in favour of the impatience theory of interest? Second, what aspects of received doctrines did Fisher expect to improve on? Third, why did the impatience theory of interest initially fail to convince some of Fisher's contemporaries? A survey, antecedents, origins, motivations and intentions, traces the impatience theory of interest's line of descent from doctrine to conception and publication. Along the way the theorem's role is considered, especially in the context of the second approximation. Lastly, the essential features of published criticisms by some of Fisher's peers are outlined.
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This paper examines the explanation for a long-period or natural wage given by W.F. Lloyd, the third Drummond professor of political economy at Oxford University (1832-37). In the aftermath of the Captain Swing disturbances and continuing debates over the Poor Law, Lloyd argued that the natural wage would settle at a subsistence level because of the high population growth rate. The behaviour of the 'labouring classes' in having more children was, however, a reasoned response, in conditions of ignorance and uncertainty, to the perceptions and incentives generated by the contemporary institutional setting. This underpinned his references to the importance of property rights for understanding poverty and the role of the Poor Law. While Lloyd owed a good deal to Malthus, his analysis was quite different in the type of reasoning attributed to the mass of the population. Lloyd's position was also markedly different from that of his predecessors in the Drummond chair, Nassau Senior and Richard Whately. The historical significance of Lloyd's innovative explanation of behaviour has since been obscured by reading his lectures in the terms of later notions of rational behaviour.
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The first foreign-language publication of the General Theory was published in German in the same year as the English original in 1936. It was in Germany that "A Monetary Theory of Production", the outline of his research programme, had been published as his contribution to the Spiethoff Festschrift in 1933, when Keynes was half-way from his Treatise to the General Theory. However, with the Nazis' rise to power this year also marked a deep political watershed. The dismissal, expulsion and emigration of economists had the consequence that many of the earlier reviewers and commentators of the Treatise on Money were not living in the German language area anymore when the General Theory was published. Nevertheless, the extent and intensity of the early reaction to Keynes's book was remarkable. Keynes had been a central point of reference in economic debates in Weimar Germany ever since his publication of The Economic Consequences of the Peace. Furthermore, there had been many parallels in the debates on the wage-employment nexus between Germany and Britain in the years 1929-32. This topic also matters for some controversies which center on an important paragraph at the end of Keynes's Preface to the German edition of the General Theory. The paper deals with this issue also in connection with some striking differences between the English version and the German version of Keynes's 1933 article on "National Self-Sufficiency". Main emphasis then is on some important reactions by German-speaking economists from outside Germany/Austria (Schumpeter, Lederer, Mandelbaum, Neisser) and those published in Germany (Amonn, F'hl, J'hr, Lautenbach, Peter, Stackelberg, Adolf Weber).