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It is quite a shame the article I had written in reply to Roy Grieve’s will not be published along with his.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 Thereafter, I heard nothing for two years until I was told what I had written was not suitable, would not be published, and was offered a truncated version of my paper that I could include instead.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
Submitted 11 June 2020


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.

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.