The more things change…

by on March 5, 2013 at 6:38 am in Economics, History | Permalink

Malthus argued that redemption of the public debt wold be unwise given England’s economic circumstances, which were characterized by an excess of capital relative to aggregate demand and, consequently, a low rate of profit.

That is from Nancy Churchman, her full piece is here.  Referring to the early 19th century, she also writes:

There was broad agreement that the debt had reached a dangerously high level and that action of some sort should be taken to address it.

There is good ‘ol Lord Lauderdale, circa 1803:

He constantly links the welfare of the country with the continuance of a high rate of yield to holders of the public debt.

(Source here, jstor)  How about J.B. Say?  From Wikipedia:

Say himself advocated public works to remedy unemployment, and criticized Ricardo for neglecting the possibility of hoarding if there was a lack of investment opportunities.

And turning to Ricardo:

Ricardo’s theory of public loans then was based on an emphasis of the fact that the primary burden to the community was derived from the wasteful nature of public expenditure itself rather than from the methods adopted to finance such expenditure.

I like this one from Ricardo, in favor of tax rather than debt finance, from his Essay on the Funding System:

When the pressure of war is felt at once, without mitigation, we shall be less disposed wantonly to engage in an expensive contest.

Ho hum, ho hum.  Go back and read the classics, and hang your heads in despair.

As I’ve mentioned, it sometimes feels like we are living in the early 19th century.

Rich Berger March 5, 2013 at 7:15 am

Re Say supposedly recommending public works to remedy unemployment, this is not a direct quote and refers to another work for this statement. Remember that this is Wikipedia.

Tyler Cowen March 5, 2013 at 7:19 am

I know Say’s work well…

Rich Berger March 5, 2013 at 9:36 am

Where can I find this position of Say in his works?

Ryan Langrill March 5, 2013 at 10:50 am

Bk 1, Ch VIII note 73: “Without having recourse to local or temporary restrictions on the use of new methods or machinery, which are invasions of the property of the inventors or fabricators, a benevolent administration can make provision for the employment of supplanted or inactive labour in the construction of works of public utility at the public expense, as of canals, roads, churches, or the like; in extended colonization; in the transfer of population from one spot to another. Employment is the more readily found for the hands thrown out of work by machinery because they are commonly already inured to labour.”

Ryan Langrill March 5, 2013 at 11:01 am

Sorry, from A Treatise on Political Economy
http://www.econlib.org/library/Say/sayT7.html#n73

Rich Berger March 5, 2013 at 11:38 am

Got it. So Say is noting that laborers can be put out of work by machinery and engaging them in public works or colonization is a way of softening the blow.

Brian Donohue March 5, 2013 at 7:28 am

“Go back and read the classics, and hang your heads in despair.”

I know you love to be elliptical, but can you or someone explicate this for me? What are we despairing of?

Tyler Cowen March 5, 2013 at 7:32 am

Relative lack of intellectual progress in our debates…

not in despair...and not here March 5, 2013 at 7:49 am

sigh. economics–the allocation of scare resources–requires negotiation among people with diverse values. it’s not a social problem you solve once and then set to cruise-control forever. I see a lot of progress from the 19th c. on dimensions that matter more than the ones lamented here. also despair is massively wasteful, in my opinion.

Brian Donohue March 5, 2013 at 8:02 am

Oh ah. agreed. Rather than despair, I might end with ‘…and be humble”.

It’s got a good beat, you can dance to it.

Frederic Mari March 5, 2013 at 8:05 am

Hrm. Well, Mr Cowen, I don’t want to be nasty to you (again!) on your own blog but a lot of the stagnation in economics sciences might have something to do with the time spent on marginalism?

Furthermore, like the poster below, I do believe that human affairs being what they are, there might not be radical changes in theories and that doesn’t mean things are not changing. Cue ‘The Art of War’ by Sun Zu (maybe), the first book on warfare and still the best book on warfare, according to specialists.

Finally, not to claim dips or whatever but in 2010, I said “But, consciously or not, these policies returned us to a pre-WWI economic set-up. As a consequence, we have recreated the types of crisis of that time” ( http://theredbanker.blogspot.com/2012/03/what-went-wrong-with-our-capitalism.html#more ).

I know you’re comparing us to early 19C from the technological angle but my p.o.v is that we are institutionally closer to the mid to late 19C…

DocMerlin March 5, 2013 at 12:31 pm

Its expected. Economists *mostly* exist to provide outs and excuse for things that politicians want to do. Keynes was more explicit and obvious about this (His stated purpose in writing General Theory, was to convince unions to lower their wages.), but it happens any time power and academics collide.

This is why no Economic debate will ever be permanently solved. Even things as blatantly obvious as the minimum wage and rent control get brought up by economics every couple generations.

Steven Kopits March 5, 2013 at 8:29 am

Not much has changed in football, either, but it’s still fun to watch.

Ricardo March 5, 2013 at 5:35 pm

This is actually insightful, because you can argue it both ways. Football still looks like football, and yet from an insider’s viewpoint, the game has changed completely in the last, say, 50 years.

Brian Donohue March 5, 2013 at 6:03 pm

plus ça change, plus c’est la même chose

JoeDog March 5, 2013 at 7:20 pm

Well it’s still played on a grid iron but the game constantly evolves. Players who miss a year due to injury talk about how much it’s changed in just one season. Fifty years ago, game film was, well, film. Coaches were lucky if they got the previous week’s game by Friday. Today they have it before the crowd has left the stadium….

Steve Sailer March 5, 2013 at 9:14 am

Today’s dominant ideology of Cheap Labor Is Good for the Economy is a dumbed down version of the Iron Law of Wages from 200 years ago:

http://www.vdare.com/articles/the-axis-of-amnestys-ideology-of-cheap-labor

Daniel Klein March 5, 2013 at 10:25 am

The point from Ricardo about tax financing (rather than debt) discouraging war is in Smith.

Frederic Mari March 5, 2013 at 11:21 am

Even more efficient – National conscription. That puts a stop to this kind of non sense fast…

DocMerlin March 5, 2013 at 12:34 pm

No, it doesn’t.
Many, many wars have been fought by conscripts. (even by democracies.)
The state exists to provide resources and structure to some small number of well organized individuals so they can coerce others.
Ability to conscript soldiers just makes it easier.
Taxing on the other hand makes it harder (as they can just spend money regardless, if they have their own fiat currency), but the pain is not internalized.

Frederic Mari March 6, 2013 at 12:13 am

I disagree. To stay within the 19C theme of the piece, the fact that Napoleon III (for example) had a professional army was recognised as a factor in him engaging in colonial adventures (Mexico…). More recently, compare and contrast the resistance to Vietnam and the general apathy to the Iraq war in the USA.

I mean, I don’t mind doing both – Conscription and taxation. Or taxation as a substitute for conscription. But I don’t think you can argue that conscription is irrelevant to military adventurism. Which doesn’t mean it’ll stop all wars. In the case of WWI, a significant % of the French (notably) were hell bent on going to war…

BigEd March 5, 2013 at 10:42 am

Have we made no progress in economic theory and knowledge in the past 150+ years??

DocMerlin March 5, 2013 at 1:08 pm

The problematic word in that sentence is “we.”

uffy March 5, 2013 at 3:52 pm

We are not “living in the [early] nineteenth century” as if by some immutable law of the universe though. We’ve spent roughly four decades obsessed with ensuring that wages did not increase and now, finally, we are reaping what we’ve sown. Of course the labor-saving innovations that may be causing employment problems and TGS were bound to come along sooner or later, but a much richer country where wages had dispersed these increases in wealth would be significantly better able to adjust.

Debt was an instrument to help limit wage increases and it worked a bit too well. We also seem to be reaching the limits of this strategy with no other viable alternative as the wage-channel is probably no longer available. Sad.

mulp March 5, 2013 at 8:10 pm

“As I’ve mentioned, it sometimes feels like we are living in the early 19th century.”

Will we need to wait until 2060 before Republicans restore their sanity and:
1. impose income taxes like Republicans did circa 1862
2. promote educate and science by Federal policy with land grant colleges and funds
3. embark on massive infrastructure investment as a Federal responsibility (railroads)
4. Diminish States Rights and concentrate power in Washington (13th, 14th, 15th) after Lincoln used Federal militia power to force States to agree to Republican dictates
5. Regulate public utilities (ICC)
6. Limit business power by Federal regulation (anti-trust)
7. Lots of land redistribution to promote economic growth (Oklahoma land rush)

I’ll mention the Federal dictates of marriage law in violation of religious faith, upheld by SCOTUS as well within the power of Congress to dictate limits on religious practice as long as the law applied to all religious faiths, only in passing.

Earlier in the 19th century, the Democrats reversed the Federal power grab of Hamilton and Jefferson (once in power, Jefferson was attracted to the power). The nation underwent austerity, paid off debt, and Andrew Jackson ran just to devolve power to the States, killing the national bank. New England tried to get highways built by the private sector – toll roads, but all went bankrupt.

allan March 6, 2013 at 6:11 pm

Early 19th century indeed. As in just before the 1848 revolutions and the publication of the Communist Manifesto, by a certain Karl Marx. Old Karl must be grinning as he watches 21st century capitalism self-destruct.

Ronald Calitri March 8, 2013 at 12:11 pm

I’d stretch it back into the 18th century, with Smith’s “Justice, Police, Revenue and Arms” (retitled “Jurisprudence” in online library of liberty). Where we have monopolistic competition stifling the plenty and cheapness of commodities.

But, by the early 19th., conversation too when the ‘bullionists’ in parliament mandated BOE hold monetary reserves. At least in the few histories I’ve read, the BOE never paid these the least mind. So, even then, economics too important to leave to the politicians.

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