Steven Kates

Defending the History of Economic Thought

This book explains the importance of the history of economic thought in the curriculum of economists, whereas most discussions of this kind are devoted only to explaining why such study is of value simply to the individual economist. Steven Kates reaches out past the individual to explain the crucial importance of the history of economic thought in the study of economics itself; without its history at the core of the curriculum, he contends, economics is a lesser subject, less penetrating, less interesting and of much less social value.

MILL’S FOURTH FUNDAMENTAL PROPOSITION ON CAPITAL: A PARADOX EXPLAINED

John Stuart Mill’s Fourth Fundamental Proposition Respecting Capital, first stated in 1848, had become an enigma well before the nineteenth century had come to an end. Never challenged in Mill’s own lifetime and described in 1876 as “the best test of a sound economist,†it has become a statement that not only fails to find others in agreement, but fails even to find an internally consistent interpretation that would make clear why Mill found it of such fundamental importance. Yet the fourth proposition should be easily understood as a continuation of the general glut debate. Economists led by Malthus had argued that demand deficiency was the cause of recession and a body of unproductive consumers was needed to raise the level of demand if everyone who wished to work was to find employment. Mill’s answer was that to buy goods and services would not increase employment, or, in Mill’s own words, “demand for commodities is not demand for labour.â€

A Letter from Keynes to Harlan McCracken dated 31st August 1933: Why the Standard Story on the Origins of the General Theory Needs to be Rewritten

This article contains a previously undocumented and unpublished letter from John Maynard Keynes that was written during the early stages of his writing the General Theory. The letter was to the American economist Harlan Linneus McCracken and dated 31 August 1933. The letter was only discovered in July 2007 where it had been hidden away amongst the McCracken papers held in the archives at Louisiana State University. This letter should lead to a revision of the standard chronology of the sequence of events that led to the eventual publication of the General Theory in February 1936 and provide a deeper understanding of the aim and intent Keynes had in writing the book he wrote. In particular, the letter shows the important influence that Thomas Robert Malthus had on Keyness thinking while the General Theory was being written.

Classical Economics Explained: Understanding Economic Theory Before Keynes

Since the publication of The General Theory, pre-Keynesian economics has been labelled “classical,” but what that classical economics actually consisted of is now virtually an unknown. There is, instead, a straw-man caricature most economists absorb through a form of academic osmosis but which is never specifically taught, not even as part of a course in the history of economics. The paper outlines the crucial features that differentiate modern macroeconomics from classical theory, with the emphasis on what an economist would have understood as The General Theory was being published. Based on the differences outlined, a model of classical economic theory is presented which explains how pre-Keynesian economists understood the operation of the economy, the causes of recession and why a public-spending stimulus was universally rejected by mainstream economists before 1936. The classical model presented is an amalgam of the final edition of John Stuart Mill’s 1848 Principles of Political Economy published in his lifetime and Henry Clay’s influential 1916 Economics: an Introduction for the General Reader, a text which was itself built from the economics of Mill.

The Hundredth Anniversary of Clay’s Economics: The Best Introduction to Economics Ever Written

Abstract Clay’s Economics was first published in 1916 with no pretensions to be anything more than just a summary of the state of economic theory as it then was. Yet so well was it written that it became one of the most widely used economics texts of its time, found on reading lists from workers’ colleges and mechanic’s institutes through to the leading universities of the world. Its interest today is therefore twofold. It is, firstly, a near-perfect summary of pre-Keynesian economic theory, incorporating Say’s Law, J.S. Mill’s theory of value and the classical theory of the cycle, along with many other of the most important features of the standard classical model. Secondly, the text makes clear how wrong Keynes in The General Theory had been in his description of what the economists he had described as “classical” had actually believed and taught. Even a century later, Clay’s Economics may well remain the single best introduction to economic theory ever written.

The Global Financial Crisis

The Global Financial Crisis is a unique investigation into the causes of the most savage economic downturn experienced since the Great Depression. Employing wide and divergent perspectives – which are themselves critically examined – this study analyses the measures that have been taken to restore our economies to acceptable rates of unemployment and growth.

Policy in the Absence of Theory: The Coming World of Political Economy without Keynes

The Global Financial Crisis is a unique investigation into the causes of the most savage economic downturn experienced since the Great Depression. Employing wide and divergent perspectives – which are themselves critically examined – this study analyses the measures that have been taken to restore our economies to acceptable rates of unemployment and growth.

The Use of Multiple Choice Questions with Explanations for Economic Assessment

Dissatisfaction with the use of multiple choice tests as a means of evaluating the comprehension of students led to experimentation with a hybrid form that combined multiple choice questions with written explanations for why the particular answer was chosen. A comparison of the multiple choice component of such tests with the written component shows not only a poor correlation between the two sets of results but what was more disturbing, a poor rank correlation. Combining the two forms of assessment was shown to be not only a more accurate means of judging the understanding of students but allowed tests to be set in ways which probed far more deeply into student abilities.

Mill, McCracken and the Modern Interpretation of Say’s Law

This article deals with three overlapping issues. The first is the enormous role played by the American economist, Harlan McCracken, in the development of the ideas underlying the General Theory and in particular his role as the source of the phrase ‘supply creates its own demand’. The paper then looks at the genealogy of this phrase, beginning with John Stuart Mill, and tracing its evolution from Mill to James Bonar to McCracken and then on to Keynes. Finally, the article looks at John Stuart Mill’s own short statement on Say’s Law, which has been overlooked in the economic literature until now. Mill’s short statement is used to develop a proper understanding of the law of markets, demonstrating, amongst other things, the inadequacies of the phrase ‘supply creates its own demand’ as a proper definition of this crucial classical concept.