Category Archives: Law of Markets

Ori Siegel

Posted on by
Reply

Ori Siegel Death, Obituary – When we learned that Ori Siegel, a member for their entire lives, had passed away, we were almost immediately overcome with a profound sense of grief. Ori Siegel was a member of the group during their entire lives. Everyone in our community liked and respected him, and he had a lot of fans there.

Ori was able to rapidly put people at ease and make them feel important by using his infectious laugh and bear hugs as his major ways of communication. This allowed Ori to instantly put people at ease and make them feel important. Because of this, he was able to do the task in a significantly shorter length of time. Because of this, he had the ability to rapidly put people at ease and give them the idea that they play an important role in the circumstance.

This is from a posting from where he used to work. For me he was my oldest first cousin and I am mostly sorry that our lives have lived thousands of miles apart.

My reply to a request for the title of my latest book

Posted on by
1

I received an email with the following heading: “Can you please advise me of the title of Steve Kates’ latest book?” After almost a week I wrote the following in answer to the original query.

This was passed on to me and am grateful for the request which would have been extremely simple to reply to, as follows:
`

Thank you for your request: this is the tile: Classical Economic Theory and the Modern Economy and this is the link to the publisher’s website: https://www.e-elgar.com/shop/gbp/classical-economic-theory-and-the-modern-economy-9781786433565.html

However, what then almost immediately came to mind was how best to get the points I am trying to make across, assuming that is actually why you were interested in the title. So what follows is the evolved reply that immediately came into my head which you will hopefully be able to read below which I will eventually be able to put up on the blog.
`
My latest book is Classical Economic Theory and the Modern Economy and this was the summary at the publisher’s website [ https://www.e-elgar.com/shop/gbp/classical-economic-theory-and-the-modern-economy-9781786433565.html ]
`
Economic theory reached its highest level of analytical power and depth in the middle of the nineteenth century among John Stuart Mill and his contemporaries. This book explains classical economics when it was at its height, followed by an analysis of what took place as a result of the ensuing Marginal and Keynesian Revolutions that have left economists less able to understand how economies operate.

The chapters explore the false mythology that has obscured the arguments of classical economists, clouding to the point of near invisibility the theories they had developed. Steven Kates offers a thorough understanding of the operation of an economy within a classical framework, providing a new perspective for viewing modern economic theory from the outside. This provocative book not only explains the meaning of Say’s Law in an accessible way, but also the origins of the Keynesian revolution and Keynes’s pathway in writing The General Theory. It provides a new look at the classical theory of value at its height that was not based, as so many now wrongly believe, on the labour theory of value.

A crucial read for economic policy makers seeking to understand the operation of a market economy, this book should also be of keen interest to economists generally as well as scholars in the history of economic thought.

`

This is, of course, the history of economics which has a fairly heavy dose of political philosophy mixed in with the economics. It is also historic and explains how economic theory ended up in the mess it is now in. It is not really for someone who has not previously studied economic theory (which, for all I know, you may well have done) and I imagine requires quite some background in the way that economic theory became what it has become. Therefore, on the assumption that your interest is in economic theory in relation to policy, then the book I would recommend, which is not my most recent, is the third edition of my classroom text: Free Market Economics: An Introduction for the General Reader. This is the publisher’s summary:

`

In this thoroughly updated third edition of Free Market Economics, Steven Kates assesses economic principles based on classical economic theory. Rejecting mainstream Keynesian and neoclassical approaches even though they are thoroughly covered in the text, Kates instead looks at economics from the perspective of an entrepreneur making decisions in a world where the future is unknown, innovation is a continuous process and the future is being created before it can be understood….

The aim of this book is to redirect the attention of economists and policy makers towards the economic theories that prevailed in earlier times. Their problems were little different from ours but their way of understanding the operation of an economy and dealing with those problems was completely different.

`
There is then, in relation to economic theory, my Economics for Infants which is discussed at the publisher’s website [ https://www.connorcourtpublishing.com.au/Economics-for-Infants_p_65.html ]. It is not really for infants, of course, but is done in the form of a children’s book. This is the summary put up by the publisher:
`

A perfect book to read to your children and grandchildren!

How do you explain the complexities of the economic order to a child? In this retro-inspired illustrated book, Associate Professor Steven Kates attempts this task in a storybook form. A basic primer on economics for the youngest of readers.

The text is to the point but what makes the book so valuable are the drawings by Liam Capello who has a phenomenal gift for representing text pictorially, who is now pursuing another career direction. But I have to say, especially with the drawings accompanying the text, that it explains some very complicated things in a very simple way. 
 
Finally, let me just mention this, which you can just download from the CIS in Sydney at this web address: https://www.cis.org.au/wp-content/uploads/2019/02/pp14.pdf  – This discusses the operation of the price mechinism which is dealt with in the first two books discussed above but this goes into it much more deeply. It explains precisely why no socialist system has ever worked or can ever be expected to work by showing how pricing and entrepreneurial decision-making is the key to understanding how things actually operate.
`
Anyway, I hope this has been of some help to you. Your request has certainly been of some help to me.
`
And if you have any further questions, feel free to drop me a note.
`
With kindest best wishes.
`

Say’s Law its history and meaning

Posted on by
2

And if you are interested in the print version:

Kates, Steven. 2010. “Why Your Grandfather’s Economics was Better than Yours.” Quarterly Journal of Austrian Economics, Vol 13, No. 4.

There just seem to be some ideas that make sense to people who have never been instructed to understand why they are wrong. That was the point of Say’s Law among the classical economists, to teach economists that demand deficiency and underconsumption had nothing to do with the business cycle or unemployment. And now, we have gone the next step into Modern Monetary Theory where it is no longer even pretended that the money spent by governments has to be related to incomes earned in producing some good or service for others to buy. The lack of terror even amongst economists over the “Build Back Better” potential explosion in wasteful, non-value adding public spending in the United States is what we now find ourselves in the midst of. 

Classical Economic Theory and the Modern Economy reviewed at the QJAE

Posted on by
4

This is the most positive review of any book I have ever written. And aside from much else, it is the first time a review of one of my books taught me something about a book I had written that I did not know myself and was pleased to find out. I just hope the attachment will open for you so that you can read it for yourself. It is, as you might imagine, a very positive review and by someone whose judgement I trust and value.

Book Review: Classical Economic Theory and the Modern Economy which has been written by a true scholar himself, Per Bylund who is at the University of Oklahoma. Not sure how long that link will last but hopefully long enough for anyone who is interested to read it for themselves.

If you cannot open the link, the review can be found in the Quarterly Journal of Austrian Economics, Volume 24, Number 2, pages 374-378, Summer 2021. 
 
I realise, alas, that this goes well off into and beyond the hinterland of virtually everyone else’s interest, even among economists, but what you would find between the covers of the book has been the central perspective of my academic life, my professional life, and family aside, the centre of much of my adult life as well.
 
As a reader of second-hand books and a second-hand bookshop troll since the age of eleven, I am all too sadly aware how rapidly books disappear into the past where perhaps, very occasionally, someone with a similar interest will pick the book up and perhaps even read it. There are many books on my shelves which I may have been near-on one of only a handful of others to have read in possibly a century, and even where they might have been more widely read, it is only ever so often.
 
All is vanity, but even so, there are moments like this, when I read an astonishingly accurate review of something I have put together that brings that moment of satisfaction that will last until the next time I am caught up in traffic (very likely tomorrow) or something equally annoying and distracting. But it is very rare to find that someone else has understood what you had hoped to say, and this is one of those times, for which I could not be more grateful.
 
I commend the review to you. And for those with the right kind of spirit of adventure, my suggestion is that you perhaps go out and ask your local library to buy a copy so that you, and perhaps others, can read it. 
 
A wonderful moment for me which I am pleased to be able to share with you. 
 
I will add that having read the review I have gone back to read it for myself, and even for me it is full of surprises. Highly recommended, even if I do say so myself.
 

Noticing the death of the History of Economic Thought

Posted on by
2

The History of Economic Thought, as with all forms of history at the present time, is on its last legs. This is a post I put up on the Societies for the History of Economics (SHOE) list last week (July 23).

I am actually replying to two different postings, the first one from quite a while ago now, which was the death notice of one of HET’s greatest names, Donald Moggridge. I had assumed that after the two-line notice something more substantial would appear but it seems not. There must have been some notice taken somewhere else, but I just wish to say how much I appreciated the phenomenal effort that must have been required to edit Keynes’s Collected Writings. I will merely tell my own small story which was that there was some part of the thirty volumes that I came across that worried me enough not to pursue some line of inquiry until I had been to the Library at Kings to see what the original had actually looked like. And I was pleased in one sense – but disappointed given what I had intended to write – to find that the passage as printed was exactly as found in the original. I am no Keynesian, but Keynes was served astonishingly well by the work that Don Moggridge put in to edit his writings and his correspondence. The History of Economics has lost a great scholar.
`
Let me also note here how shallow economic theory has become due to the abandonment of its history by economists worldwide. “The inconvenient aunts locked away in garretts” discussed by Andrew Reamer are the many astonishingly deep analyses of the operations of an economy that are found in so many of the great works of economic theory that are not only no longer read, but no longer can be read. I have merely scratched the surface in my pursuit of the economics of John Stuart Mill, whose Principles, in my view, provides a better understanding of how an economy works than any of the textbooks we mass produce today. I therefore would like to support and endorse the views of Andrew Reamer, assuming I have understood him correctly, and can only wish that a new generation of economists will increasingly rediscover the lost treasures of our economic past. If economists are not scandalised by the economic policies which are being introduced around the world today, and do not say so in public, then really what is the point of any of what we are doing in writing the empty articles that pour out of our modern economic journals?
`
This was the post that had been sent by Andrew Reamer.
‘
James Galbraith, “Dismal Economics,” July 23, 2021

Although neoclassical economics relies on assumptions that should have been discarded long ago, it remains the mainstream orthodoxy. Three recent books, and one older one, help to show why its staying power should be regarded as a scandal.

Opening:

Self-regarding economics departments at prestigious academic institutions no longer bother to teach the history of economic thought – a field that I studied at Yale University in 1977, forever compromising my academic career. Why was the topic abandoned – and even shunned and mocked? Students with a skeptical turn of mind would not be wrong to suspect that it was for scandalous reasons (as when, in past centuries, inconvenient aunts were locked away in garrets).

The four books reviewed here each uncover parts of the scandal. Three are brand new, and the other, The Corruption of Economics, first appeared in 1994 and was re-issued in 2006. Its principal author, the American economist Mason Gaffney, kept his remarkable pen flowing until passing away last summer at the age of 96.

You don’t often see an article as pointed as that and it was very welcome to me. But I have remained the only person who has entered into this discussion. I think it is interesting and worth continuing with but no one is willing to put their hand up any longer. Everywhere careers are too fragile to buy into any such controversy. And this was the note put up on June 23 announcing the death of Donald Moggridge.

I write to share the sad news that Donald E. Moggridge died peacefully in Toronto on April 10, 2021. Don was the main editor of The Collected Writings of John Maynard Keynes (1970-1989) as well as the author of biographies of Keynes (1992) and Harry Johnson (2008). Although subscribers to the SHOE list will know Don as a pre-eminent historian of economic thought, he was also a noted economic historian with a specialty in British monetary policy.

Perhaps there was no more to say, but perhaps there was. Anyone who has done work on Keynes must be extremely grateful for the painstaking efforts that went into the thirty volumes of the Keynes Collected Writings. I might add that I am such an outcast that Andrew Reamer has not bothered to write to me either, although I wrote to him offline on two occasions. And that I find just plain rude.

What my book on classical economics is actually about

Posted on by
1

This was the start of the review of my book on Classical Economic Theory and the Modern Economy provided by EH.Net to the Societies for the History of Economics online list:

This book is about how little Steven Kates thinks of the “modern economy,” an umbrella term for all variants of Keynesian economics. Bold and pretentious statements abound. “Just about the whole of modern economic theory is perniciously wrong … there is virtually nothing useful one can learn from a modern economics text in how to manage an economy” (p. 1). “Economists know nothing whatsoever about the analytical depth of the classical economists” (p. 16). Kates aims “to explain why classical economics is vastly superior” (p. 17). Kates wants to convince us that he is “almost uniquely placed” to do so, though he acknowledges “how obscure [he is] within the world of economics” and notes that “virtually no one sees things as [he does]” (p. 17). This does not prevent him from boasting about how, as chief economist of Australia’s national employers’ association, he “never made a single wrong call on the economy or the effects of public policy” (p. 20). Unfortunately, the book is filled with errors. Relevant quotes and texts are omitted or distorted for the sole purpose of justifying his anti-Keynesian narrative.

As you may see, not a positive review. He describes my discussion of  my record of accurately predicting the harmful consequences of using Keynesian policies as “boastful”, but at least it’s accurate which you would think would count for something. Because economists are so convinced that their theories are right, they never, and I mean never, go back for a post mortem to see what went wrong. And what I point to is not just failures, but also to the phenomenal success of Peter Costello’s economic management from 1996 onwards where the economy ripped along not only with zero deficits year after year but also zero debt! Anyway, I have written my book and this chap speaks for almost the entire profession in his review. At least writing for an Australian audience here at Catallaxy, there will be at least some memory of much of what I write. Also, you should go to the article at Quadrant if you would like to see not just what I wrote but also how I wrote. The difficulty in cutting through their arrogant ignorance is just how it is.

_____________My reply to the review is found below

Suppose I believe, as I do believe, that economic theory reached its highest level of analytical power in the economic theory of the mid-to-late-nineteenth century, and especially with the economic theory presented by John Stuart Mill in his Principles of Political Economy first published in 1848, how would I go about saying so? Suppose going further, I had come to believe, based on having reached this conclusion, that virtually the whole of modern economic theory is vastly inferior to economic theory of the mid-to-late nineteenth century, how exactly should I go about trying to explain what I think to others? Suppose, as in fact is actually how things have turned out, that I had concluded that a student of modern economics, who studies modern macro and micro, is by that very fact, unable to read a nineteenth century economics text and understand what it says, how should I have tried to express those thoughts to others? This was the dilemma I faced and Classical Economic Theory and the Modern Economy is how I went about trying to resolve these problems.

The sad but for me not surprising part is that it would be very difficult for a modern economist to make sense of what I am saying, as Guy Numa in the review of my book has so clearly shown. Perhaps I should not be surprised to find such a negative review of my book, but none the less I find it very disappointing. But at least I can be grateful for his undertaking the review which has highlighted a number of important points although he has has missed the central point the book was trying to make. If you would like to understand what the book is about, I can only suggest you read this brief article of mine that was published at the start of this month, by the Australian magazine Quadrant, which is titled: “What Classical Economists Knew that Modern Economists Do Not”. If you go to the link, this is how the passage from my book starts:

“# My aim in writing this book is to explain why classical economics is vastly superior to modern economic theory. And in attempting to demonstrate that this is so, I will explain how a classical economist understood the operation of the economy. But in outlining the classical approach to economic analysis, I begin with the recognition that anyone who has already been taught modern economics will be virtually incapable of understanding classical economic theory.

“# I will therefore start with a personal explanation of why I believe I am almost uniquely placed to explain classical economic theory and why it is important that we do so. It will be argued that the disappearance of classical economic theory has led to an enormous loss in our ability to understand what needs to be understood if we are to make sense of how an economy works.

“# Modern economic theory is a labyrinth. Perhaps all theory is like that. Once one enters into its precincts it becomes virtually impossible to escape other than by accident. I will therefore explain how I accidentally found my way out as a possible way to assist others to attempt to do the same.

“# And even as I begin, I will acknowledge how obscure I am within the world of economics. I have published papers and books. I have attended conferences and meetings of economic societies around the world. And in all this time, I have come across virtually no one who sees things as I do. There are a handful of others, but our numbers are trivially small. So to my story.”

Guy describes my approach as “boastful”. I think of my attitude as exasperated, since if you go to the link, you will find the lengths that I have gone to in an attempt to get these points across in the past. There have been others who have tried to do this before me, with Henry Hazlitt and W.H. Hutt the most notable. In criticising Keynesian macro, I would not describe their attitude as “boastful”. I am merely following in their tradition.

I will just emphasise that the book is not about Say’s Law although Say’s Law naturally does come into it. It is about the classical economic theory that was the core of the profession between the 1840s and its complete disappearance with the publication of The General Theory in 1936. But the following discovery of mine is for the first time acknowledged by someone else and it is important where Numa wrote: “It is true that Taylor invented the term ‘Say’s Law.’” That is, it was the American economist Fred Taylor who invented the term “Say’s Law” in the twentieth century where it became a much discussed issue mostly in the US during the 1920s and 1930s. It is Taylor’s understanding of Say’s Law that ends up being refuted in The General Theory. J.B. Say’s Law of Markets, first stated in 1803, has virtually nothing to do with Say’s Law and to bring J.B. Say into it obscures the core issues. That too is discussed in my book, along with the also unknown fact that the phrase “supply creates its own demand” is also twentieth century American having been first stated by the American economist, Harlan McCracken in 1933. The origins of The General Theory cannot in my view be properly discussed without knowing these facts.

I will close by using the same quotes from my book used in the review by Numa since these do accurately describe what the book is about: “Just about the whole of modern economic theory is perniciously wrong … there is virtually nothing useful one can learn from a modern economics text in how to manage an economy” (p. 1) and “Economists know nothing whatsoever about the analytical depth of the classical economists” (p. 16). Both of these statements, so far as I am concerned, are absolutely true. If you want to know why I think so and why it matters, you really should read the book.

Anyone who supports a public works program because it will create jobs knows nothing about how an economy works

Posted on by
1

There is this grand distinction between an individual borrower and a borrowing government, that, in general, the former borrows capital for the purpose of beneficial employment, the latter for the purpose of barren consumption and expenditure.— J. B. Say

If there is anything that exposes both economists and politicians as economic frauds it is where they argue that public sector spending creates jobs. This is the great Keynesian lie. Job creation programs have never on any occasion created an increase in jobs, not once, not ever. Anyone who thinks otherwise is as wrong as it is possible to be about how an economy works.

Keeping this in mind will prevent you from falling into the Keynesian trap which has infused the whole of mainstream economics. Keep an ear open for carriers of this disease since it is everywhere and on all sides of politics. No one any longer knows any better. Let me go through two recent publications, one a book I wrote, and the other an article by Per Bylund at the Mises Institute. First my own which is mostly, but not entirely a reprint of the first third of the book’s opening chapter. The book is Classical Economic Theory and the Modern Economy and the article at Quadrant is titled, What Classical Economists Knew that Modern Economists Do Not. The book is about a lot more than just what’s wrong with modern macro, but that is a substantial part of it.

The article at Quadrant is taken from the opening chapter of the book where I try to explain why anyone should pay attention to what I have written since it really is odd to be arguing that the whole of economic theory is utterly wrong, but that is what I have done. I describe how I came upon John Stuart Mill and the economics the mid-nineteenth century England, how I discovered “Say’s Lw”for myself, how because of the work I was doing at the time how I had instantly understood the point Mill and his contemporaries had been making, and how thereafter, in every test of the classics versus the moderns, that classical economics would unfailing forecast what would happen.

Why anyone should believe that public spending at the direction of political leaders will automatically create value and growth is one of those things that has entered into how economics is taught. The more you think about it, the more incredible the idea ought to be, but onwards it goes. Here again, as inane as Keynesian theory is, the science has long been settled. I only recommend the article and the book if you would like to see the antidote to the economics version of global warming. Keynesian theory is a scam and a hoax, but trillions of dollars are made through the application of Keynesian policies because everyone believes it. If you read what I wrote, you will merely have the satisfaction of understanding how you are being defrauded by governments. Nothing can ever be done about, I suspect, but you will at least understand what is going on.

Per Bylund’s article at Mises is titled, More Spending Does Not Drive More Employment which is more direct but reaches the same conclusion. Here is what he is denying:

It is almost universally asserted today that consumer spending drives employment. This thesis gives support to the general Keynesian idea that government should “stimulate” the economy when it is suffering from a recession, whether it is through fiscal or monetary policy.

At the core, the idea is that if spending on goods and services goes up, then more people are needed in their production. And, as a consequence, more people are able to get jobs, earn a wage, and thus buy goods and services. In other words, it doesn’t matter if government wastefully increases spending — even if it is borrowed money — because the economic wheels start turning and as growth picks up we’ll be able to deal with debt, deficits, and so on.

He absolutely gets the point. Read his entire article. Again, the value is merely to understand the world in which you live. Nothing can be done, but there is some satisfaction in understanding what is being done. Not necessarily a lot of satisfaction, but at least some.