My missing reply to Roy Grieve

Getting an anti-Keynesian article published is very difficult. The following is an interesting parable of our times. There are lots of additional details left out here, but this captures the essence of the story. This short note will be published in the forthcoming issue of the History of Economics Review along with the article by Roy Grieve which I had been asked to reply to.

A Note on My Missing Reply to Roy Grieve
Steve Kates

It is quite a shame the article I had written in reply to Roy Grieve’s will not be published along with his. When his paper was submitted in 2018, I was asked by the editor to write a reply which I quite happily did. Thereafter, I heard nothing for two years until I was told what I had written was not suitable, would not be published, and was offered a truncated version of my paper that I could include instead.

The problem with my paper I was told was that I did not address the core issue Roy had raised which was the wages fund. Since Roy was replying to a paper I had written, the probability that I might have a better idea of what the issues are ought to be seen as extremely high. The editor nevertheless continues to believe the central issue is the wages fund. Since the paper Roy was replying to is titled, ‘Mill’s Fourth Fundamental Proposition on Capital: A Paradox Explained’ (Kates 2015), that ought to be recognized as the issue we were debating. In my reply to the editor, I made it clear the wages fund had nothing to do with Mill’s argument, nor did I wish to contribute further. Mill’s proposition by the way, if true, completely undermines Keynesian economics and modern macro. In Mill’s words, ‘demand for commodities is not demand for labour’ – increases in aggregate demand do not lead to increases in employment.

Roy understood that leaving out my paper diminished the impact that having his paper and my reply together would have had. He therefore wrote to the editor to suggest I add something on the wages fund. And I agreed. I wrote to the editor and said that I was prepared to write an article along these lines:

1. The wages fund has nothing of significance to do with Mill’s Fourth Proposition on Capital.
2. The ‘wages fund’, if understood properly, makes perfect sense.
3. The wages fund, if understood properly, is even an integral part of modern economic theory.
4. Much of the difficulty in understanding the classical view on the wages fund is due to the shifts in terminology since the middle of the nineteenth century.

The final point is the theme of my latest book, Classical Economic Theory and the Modern Economy (Kates 2020a), where all this is discussed more generally. In the end, I have been offered these 600 words. You cannot therefore see within the pages of the journal either my response to Roy or my explanation of the wages fund in modern terms.

Let me therefore add this. I admire Roy’s paper which does something almost never seen. He explains my argument in defending Mill, not only understanding exactly what I had written but also understanding Mill’s argument to near perfection. He nevertheless argues in his paper Mill’s Fourth Proposition depended on the wages fund, so that when Mill abandoned the wages fund in 1869, he had pulled the rug out from under his own Fourth Proposition. If you read my reply to Roy, you will see that I do not agree.

You can read my original reply to Roy at SSRN (Kates 2020b). My explanation of why the wages fund is even to this day embodied within modern economic theory will have to remain a mystery.

Steve Kates
steve.kates@gmail.com
Submitted 11 June 2020

References

Kates, S. 2015. ‘Mill’s Fourth Fundamental Proposition on Capital: A Paradox Explained.’ Journal of the History of Economic Thought 37 (1): 39–56.

Kates, S. 2020a. Classical Economic Theory and the Modern Economy. Cheltenham, UK: Edward Elgar.

Kates, S. 2020b. ‘The Single Most Important Issue in Economics Today: A Reply to Roy Grieve on Mill’s Fourth Proposition on Capital’. SSRN.

Have I ever mentioned before that the level of unemployment is unrelated to the level of aggregate demand?

In the news today.

RECOVERY SUMMER! Record jobs gain of 4.8 million in June smashes expectations; unemployment rate falls to 11.1%. Democrats, media hardest hit.

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By the way, my latest book has just been released: Classical Economic Theory and the Modern Economy. The two references on the back cover:

‘In Classical Economic Theory and the Modern Economy, Kates seeks to correct this dangerous intellectual detour economists took due to Keynes and finally get modern economists to practice economics beyond the shadow of Keynes. It is a Herculean task, but armed with J.B. Say and especially J.S. Mill, Steven Kates makes as strong an effort for resurrection of classical economy theory as can be marshaled. This will be a must read for all students of economics, and a compelling contribution to the history of economic doctrine.’
– Peter Boettke, George Mason University, US

‘This book delivers hard blows to the tenets of modern economics, retells its history and evolution, and pokes holes at our misperceptions of classical economic theory. The result is as much a burial of the macroeconomics of Keynes as it is a resuscitation of the classical economics of J.S. Mill.’
– Per Bylund, Oklahoma State University, US

For a change, we have two people commenting on a book who actually seem to have read it and know what it says.

“If we don’t act now…”

Watch this first. You won’t be sorry if you do.

This is an article by Gen. Michael Flynn: If We Don’t Act, 2% of the People Are About To Control the Other 98%. And this is someone who knows whereof he speaks.

If the United States wants to survive the onslaught of socialism, if we are to continue to enjoy self-government and the liberty of our hard-fought freedoms, we have to understand there are two opposing forces: One is the “children of light” and the other is the “children of darkness.”

As I recently wrote, the art and exercise of self-governance require active participation by every American. I wasn’t kidding! And voting is only part of that active participation. Time and again, the silent majority have been overwhelmed by the “audacity and resolve” of small, well-organized, passionate groups. It’s now time for us, the silent majority (the indifferent), to demonstrate both.

A long article which you should read. He continues:

I believe the attacks being presented to us today are part of a well-orchestrated and well-funded effort that uses racism as its sword to aggravate our battlefield dispositions. This weapon is used to leverage and legitimize violence and crime, not to seek or serve the truth.

The dark forces’ weapons formed against us serve one purpose: to promote radical social change through power and control. Socialism and the creation of a socialist society are their ultimate goals.

He ends with this:

To the silent and currently indifferent majority: Wake up. America [Western Civilisation] is at risk of being lost in the dustbin of history to socialism. The very heart and soul of [our Western way of life] is at stake.

In war, as in life, most failure comes from inaction. We face a pivotal moment that can change the course of history.

We the people must challenge every politician at every level….

Now is the time to act.

No one can believe it. Mr DeBlasio is such a nice man. Daniel Andrews too. But there are barbarians at every turn and in every generation. How much did Lenin really care about anyone else? Same for Castro? Same for Mao (and Xi if it comes to that). Same for them all.

Did you watch it? They tried to warn us.

Democrat ignorance knows no bounds

This March 22, 2019, file photo shows Mount Rushmore in Keystone, S.D. Organizers have scrapped plans to mandate social distancing during President Donald Trump's appearance at a July 3, 2020, Mount Rushmore fireworks display and won't limit the crowd due to coronavirus concerns, South Dakota Gov. Kristi Noem said Thursday, June 4, 2020. The Republican governor said the National Park Service is dolling out 7,500 tickets via lottery for the event, which marks the first time in a decade that fireworks will be set off at the memorial in recognition of Independence Day. (AP Photo/David Zalubowski, File)

I searched for as many of these as I could find since I refused to believe it the first time I came across the story.

Trump ‘glorifying white supremacy’ with July 4 fireworks at Mount Rushmore, Democrats say

Democratic Party: Mount Rushmore Glorifies White Supremacy

Rubicon Crossed – DNC Official 2020 Position: Celebrating July 4th Equals White Supremacy….

These lice will do anything to win the election, but what will be left of America if they do?

Thomas Sowell turns ninety

Happy 90th birthday (June 30) to Thomas Sowell, one of the greatest living economists, which begins:

One of my two all-time most favorite economists — Thomas Sowell — turns 90 tomorrow, he was born on June 30, 1930. Here is Thomas Sowell’s webpage and here is his Wikipedia entry. Milton Friedman (my other all-time favorite economist) once said, “The word ‘genius’ is thrown around so much that it’s becoming meaningless, but nevertheless I think Tom Sowell is close to being one.”

In my opinion, there is no economist alive today who has done more to eloquently, articulately, and persuasively advance the principles of economic freedom, limited government, individual liberty, and a free society than Thomas Sowell. In terms of both his quantity of work (49 books and several thousand newspaper columns) and the consistently excellent and crystal-clear quality of his writing, I don’t think any living free-market economist even comes close to matching Sowell’s prolific record of writing about economics.

And while no one else unfortunately understands how he was able to become the economist he became, let me point out that his PhD was on Say’s Law and two of his earliest books were on Say’s Law and Classical Economic Theory. Nor was that just an early part of his career, but he came back to Classical Theory again in 2006.

Sowell, Thomas (1972), Say’s Law: A Historical Analysis, Princeton University Press, ISBN 978-0-691-04166-7.

——— (1974). Classical Economics Reconsidered. Princeton University Press. ISBN 978-0691003580.

——— (2006). On Classical Economics. New Haven, CT: Yale University Press. ISBN 978-0-300-12606-8.

And on this, let me add to what Currency Lad has already written on it’s always our money, via Adam Creighton. Money is a metaphor – probably actually a synecdoche – for the word resources. If you use the word “money” you can be deceived by government spending since a government can always print more of the stuff. Resources, actual labour and capital, are much harder to come by. Here is the point made by Adam Smith in 1776:

Great nations are never impoverished by private, though they sometimes are by public prodigality and misconduct. The whole, or almost the whole public revenue, is in most countries employed in maintaining unproductive hands.

That, by the way, is from the chapter “On the Accumulation of Capital, or of Productive and Unproductive Labour”. There is more sense in that chapter than in the whole of a modern economics text. It is Thomas Sowell amongst a very few others who is keeping that tradition alive.

If you are looking for a modern discussion of classical economic theory, and amongst other things a discussion of productive and unproductive labour, might I recommend my own Classical Economic Theory and the Modern Economy which has just been published.

Dealing with mainstream cults

Although the article starts with these two charts, it is not about the Chinese Flu but about why people believe things in spite of all the evidence to show they are utterly untrue. The title is Why Facts Don’t Matter to People. That is, why it is near impossible to get those who seem able to believe ten impossible things before breakfast to change their minds. It is like dealing with members of a cult, except they are now the mainstream.

Here’s his point. “Engage them in conversation”, he suggests, meaning getting others – you know, like people who want to blow up power stations and defund the police – to explain their views while listening sympathetically to yours.

If you’re wondering why so many people don’t see the world the way you do, engage them in conversation. You will find they are as well-intentioned as you are, but they are looking in a different direction. Beneath their opinions and fears, beliefs are shaping how they see the world.

Because of different beliefs, your villains may be their heroes. They may look at the world of effects while you are looking at causes. They’re hoping a better leader comes to power, while you’re considering how the presidency became so powerful and destructive.

Until their beliefs change, they will never consider how politicians and experts with too much power turned a pandemic into a catastrophe. As Einstein put it, “Whether you can observe a thing or not depends on the theory which you use. It is theory which decides what can be observed.”

The “clear guidance” politicians claim to dispense and “the truth” my friend wants to learn are not rooted in the principles of human flourishing. My friend is waiting for a government official to blow the all-clear whistle. My friend doesn’t want to believe experts are as fallible as he is, and that the prevailing scientific consensus may be false. For me to explain to him why “defining risk is an exercise in power” would bring a blank stare of disbelief.

I don’t think the author has an answer. He adds this at the end which only emphasises how deep the problem is.

Read Hayek’s famous observation about order, replacing the words “that in complex conditions” with the words “during a pandemic:” “To the naive mind that conceives of order only as the product of deliberate arrangement, it may seem absurd that in complex conditions [during a pandemic], order and adaptation to the unknown can be achieved more effectively by decentralizing decisions.”

With that simple substitution, we expose a core belief shared by many Americans. They believe centralizing decision-making is effective in unknown, complex conditions and they want their politicians to do something.

Well, that’s the problem right there. No one any longer wants governments to do nothing, even if that really would be the best thing to do. We are therefore falling towards a totalitarian state. One day no one may even notice our freedoms have gone, since those who grow up in this new world may never have known what freedom is.

And there is this comment I really liked:

People like that exist because reality doesn’t kick them in the teeth hard enough.

Imagine how life has been through most of human history. Life was hard. Being wrong could get you dead, and in a hurry. People who were prone to believing nonsense got that tendency beaten out of them.

Today the consequences for being wrong are extraordinarily mild, if they ever arrive at all. People can believe all sorts of false and ridiculous things without ever having to worry that they’ll pay a price for doing so, or that they will suffer as a result.

That’s where leftists come from.

And this is where they end up.

Defund the riots

From Watch Antifa Run When Portland Police Rush Them, It Doesn’t End Well for Them.

Early Friday morning, hundreds of Antifa attacked police and the North Precinct in Portland. They tried to set up another autonomous zone around the precinct with fencing and dumpsters, tried to lock police in the precinct and light it on fire, and pelted the police outside with objects like glass bottles.

See what happened then.

She, bless her, is our modern Madame Defarge (and if you are the subject of our modern system of miseducation, this is who Madame Defarge is).

There is more at the link and more videos too.

Parler liberté

There is now an alternative to Twitter: Liberal Media Sure Are Obsessed With Villifying #Parler As Alternative To Twitter. I’ve joined up and we shall see how many others do as well.

“A whopping 500,000 users [including Legal Insurrection] signed up for social-media platform Parler after Twitter shut down two conservative accounts this week”

And from the post:

There have been many attempts to create a Twitter alternative, but in the wake of Twitter’s decision to censor a tweet by President Trump and its permanent bans on prominent right-leaning accounts like that of meme master CarpeDonktum, Parler is attracting users at a startling rate.

So startling is the growth of Parler, a free speech-friendly Twitter alternative, that the leftstream and #NeverTrump media are attempting to vilify it as the refuge of racists and white supremacists and fascists. Oh my!

The headlines are hilarious:

  • Newsweek: “Who Owns Parler? Social Media Platform Offers Safe Space for the Far Right”
  • The Bulwark: “The Far Right Establishes Autonomous Zone Safe Space App Parler: ‘Free Speech!’ cry the snowflakes seeking a place to vent about their triggered feelings.”
  • Hollywood Reporter: “‘I’m Done’: Right-Wing Personalities Ditching Twitter for Parler Over Claims of Censorship”
  • Fast Company: “I joined Parler, the right-wing echo chamber’s new favorite alt-Twitter”
  • Forbes: “As Twitter Labels Trump Tweets, Some Republicans Flock To New Social Media Site”
  • Yahoo News: “Parler, a right-wing social media site, lures conservatives, but Trump sticks with Twitter — so far”

And why shouldn’t the President use both, at least for now?