Alec Cairncross

Introduction to Economics.

Introduction to Economics, Sixth Edition gives a general and nonmathematical introductory approach to the field of economics. The monograph also updates the reader with economic issues over the years and modern economic analysis. The book is divided into seven parts. Part I includes basic topics such as the aim and purpose of economics; production, consumption, and trade; and the factors of production. Part II discusses industrial organization; growth, transformation, and development; localization of industry; and large-scale production. Part III tackles the dynamics of supply and demand, while Part IV talks about the distribution of income, wages, interest, and profit. Part V deals with the national income; expenditure, production, and income in a closed economy; and inflation. Part VI discusses international trade and finance, and Part VII covers the establishment of economic policies and its inherent problems. The text is recommended for economics students who need a good foundation of different principles and concepts in economics as well as their real-world applications.

Economic Ideas and Government Policy: Contributions to Contemporary Economic History.

This volume collects together Sir Alec Cairncross most important contributions to the economic history of the post-1939 period. They address such major issues as the role of economists in the 2nd World War, the significance of the Marshall plan and Britains relative economic decline. Together they demonstrate a keen insight into the changing role of the economist in government and the gradual transformation of the economic landscape.

Planning and Coordination

Let me begin by summarising the thesis from which Devons set out. War, he pointed out, is a great centraliser. It is the government that conducts the war, decides what strategy to follow, and determines how the country’s resources can best be used if the war is to be won. For this purpose it assumes in total war all necessary powers, taking control over the entire economy and acting as ‘the sole consumer of the products of the economic system’, even to deciding what should be left for civilian consumption. Civilians are regarded as instruments for carrying on the war rather than as ‘individual persons with separate and different objectives of their own’. A war economy is thus in complete antithesis to a decentralised, consumer-driven, peacetime economy in which market forces, expressing the myriad preferences of individual producers and consumers, dominate the pattern of production and consumption, with the government intervening here and there.

Chapter 7 – Small-scale production

This chapter presents an analysis of small-scale production. The overwhelming majority of business units are extremely small; many are one-man businesses and many more employ only a handful of workers. Over a wide span of industry, the typical situation is one of what is described as oligopoly, that is, domination of the market by a small group of sellers. In spite of this concentration in large units, the fact remains that there are small firms in most trades and that in some trades it is the large firm that is rare. The process of growth takes time. This is true partly because of imperfections in competition that give shelter to an existing concern and allow it to carry on in spite of comparative inefficiency and partly because a large firm cannot grow without a great deal of effort, involving planned additions to its resources and their reorganization in a new administrative framework. Thus, many small firms are able to survive for a time because the bigger firms suffer from indigestion if they try to gobble them up too quickly. It takes time for big firms to expand that helps the small firms in another way. The managerial obstacle to growth is, in the last resort, a personal one.

Localization of industry

This chapter discusses the localization of industry. Geographical specialization can be looked at from two different angles. The influence of labor costs on the location of industry within a country is generally limited. It might seem unlikely, unless the country is large, that there should be wide differences in rates of pay or in labor efficiency between different areas. First, there are the natural advantages of the area. These include its amenities—its possession of suitable sites and a suitable climate. The natural advantages of an area include also its access to sources of power and to raw materials and markets; these determine the savings in power and transport costs that it can offer. The natural advantages of an area in any given industry are generally reinforced by acquired advantages. Transport facilities are provided or improved. Roads, railways, docks, and harbors are built. Commercial services of all kinds such as banking, warehousing, accounting, and so on become available. Labor becomes familiar with the technique of the industry and a high standard of workmanship is developed.

Production, consumption and trade

This chapter discusses production, consumption, and trade. Economic theorists exclude from production all services that yield nothing tangible and they measure the growth of production by an index composed entirely of physical products like coal and steel. Nor are the Soviet economists without some claim to orthodoxy because they derive their practice from the usage of the classical economists including Karl Marx and Adam Smith. Production, to sum up, is simply the creation of utility, that is, of the power to satisfy human wants. Consumption is the using up of utility when one comes to satisfy ones wants. When one produces goods, one builds up a store of wealth upon which one can draw. But, one does not produce or consume goods at all. Production is organized in units that vary widely in size and complexity. The simplest type of unit is the establishment, which is the work-place of a single worker or a group of workers under common direction.

The Place of Capital in Economic Progress

Capital occupies a position so dominant in the economic theory of production and distribution that it is natural to assume that it should occupy an equally important place in the theory of economic growth. In most of the recent writings of economists, whether they approach the subject historically (e.g. in an attempt to explain how the Industrial Revolution started) or analytically (e.g. in models of an expanding economy) or from the side of policy (e.g. in the hope of accelerating the development of backward countries), it is the process of capital accumulation that occupies the front of the stage. There is an unstated assumption that growth hinges on capital accumulation, and that additional capital would either provoke or facilitate a more rapid rate of economic development even in circumstances which no one would describe as involving a shortage of capital.

Long-term Operations: 1955–59

The first of these, which failed to establish itself, was a five-year forward survey of the Exchequer cost of the social services (housing, education, health, national insurance, child care). It was begun in the last year of Mr Butler’s Chancellorship, in mid-1955, and presented to Ministers early in December, just before Mr Butler was succeeded by Mr Macmillan. By our later standards, it was not a very sophisticated survey.1 But it showed without any doubt that even on departments’ expectations on the basis of their policy of the time, before the great expansions of the late 1950s had got under way, the cost would expand much faster than any expansion that could possibly be expected in the gross national product.

Stamp Memorial Lecture

In February 1964, I was invited to give the Stamp Memorial Lecture, then as now a signal honour. Lord Stamp (1880–1941) was one of the truly outstanding men of his time. His death so early by enemy action makes it impossible to compare him with his contemporaries, such as Lord Waverley (still better known as Sir John Anderson, 1882–1958) or Lord Beveridge (1879–1963). But his career showed the immense opportunities offered to young men of ability by the civil service before the First World War: he entered the Inland Revenue as a clerk at the age of sixteen: by 1916 (aged 36) he was assistant secretary to the Board of Inland Revenue, and already perhaps the greatest expert on taxation in the country. He left the Inland Revenue in 1919 to be a director and secretary of Nobel Industries (future constituent of ICI); and was at once put on the 1919 Royal Commission on income tax and on the 1924 Colwyn Royal Commission on taxation and national debt.1

The Theory of Economic Growth.

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