“A perspective on the operation of an economy that has unfortunately entirely disappeared”

Here is a very nice review of my Classical Economic Theory and the Modern Economy in The History of Economics Review, written by Nathan Saunders, linked here. I can only say how grateful I am to find a review of the book written in sympathy with its aims and arguments. Here is his opening para:

The aim of Steven Kates’s latest book – Classical Economic Theory and the Modern Economy – is for readers to appreciate John Stuart Mill’s deep and broad understanding of economics along with the whole of the classical school from around the middle of the nineteenth century through to its final and complete disappearance with the publication of The General Theory in 1936. Moreover, Kates argues, it is our loss that we have primarily ignored the timeless principles embedded within classical theory. Presented between the covers are many arguments as to why Mill and his classical contemporaries should be front and centre within the economics discipline to this day. The following are five arguments from his book, presented in no particular order, with which I strongly agree.

He then goes through the five reasons why classical theory should be at the forefront of our understanding of how economies work. Of course the main reason is that modern economic theory, with its Keynesian demand management ethos embedded at every stage in the process, has never been able to provide a solution to a single economic downturn on even a single occasion since The General Theory was published. As discussed in the review:

Kates presents Mill’s fourth proposition on capital: ‘Demand for commodities is not demand for labour’. This proposition has not been refuted by the Keynesian revolution, nor by anyone else for that matter. Kates states: ‘The level of employment was unrelated to the level of aggregate demand … [and Mill] understood the errors embedded in any such attempt’ for policy-makers (221). Mill emphasized the harm embedded in such policies, an understanding that has disappeared, even as an issue to be debated. Mill kept all four of his propositions on capital pragmatic, commonsensical, and timeless. Moreover, Kates defends this momentous fourth proposition not only by drawing upon his knowledge of the history of economic thought, but also through a discussion of the many failed efforts to short-circuit recessions through increases in public spending.

Dead on. Let me recommend the book to you, but also might I suggest that you ask your local library to order a copy both for yourself to read along with others.

BTW the heading is taken from Nathan’s own text.

2 thoughts on ““A perspective on the operation of an economy that has unfortunately entirely disappeared”

  1. Pingback: “A perspective on the operation of an economy that has unfortunately entirely disappeared” - The Rabbit Hole

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