Engineering, Economics and Policy-Making: Retrospect and Prospect

In August 1967, Hall gave a paper at a conference on “Economic Policy” at the University of Queensland where, as noted, he had taken a degree in Civil Engineering before being awarded a Rhodes Scholarship to study PPE at Oxford.

This paper does not deal with the mathematical problems or conditions involved. What it attempts to do is to look at the nature of the problems with which an economist engaged in planning is likely to be involved.. We may first glance at the question as it confronts the engineer. An example recalled from my own days as a student of Civil Engineering is the “run-off” problem—what is the greatest volume of water which will flow past a given point from a given catchment area. The problem is first to get the data, and then to decide the point at which additional accuracy is not worth the trouble and how much to add to allow for the remaining uncertainty. The economist has to deal with economic behaviour and in macroeconomics the main aggregates are expressed in terms of money and of people; the most interesting ones are usually National Income per head and the rate of growth of this income. Such calculations imply, if they are to be meaningful, that there is a system of allocating real resources which is accepted as valid for the purposes for which these aggregates are being discussed.

Hall then returned to arguments he had made three decades before in his 1937 book The Economic System in a Socialist State (Hall 1970: 2-3):

All this led to planning, either in a socialist sense in which the judgment of plan­ners is substituted for market prices or in the form in which it is mainly prac­tised in countries which still have an enterprise system, on lines systematised by Pigou, affecting income distribution or the use of resources in production. The planner is then faced with a sort of engineer’s problem, that he has to work in aggregates and that he has to take the units as they come.. A description of a market economy which assumed that men were activated by economic motives, and that the proviso that other things should be equal was one that could gener­ally be made, was pragmatically useful, and could indeed construct a model for a planned economy as well as for a market one as long as the objective was the efficient use of resources.

Hall then turned to issues of competition and pricing, this time referring to his 1939 paper with Hitch, and answering Chamberlin (1952) cited above. He wrote (Hall 1970: 4-5):

Although from a planning point of view it is not very important, the problem can be illustrated by considering the question of imperfect competition. The difficulties arise, both in analysis and in making useful models, because the consumers are not homogeneous. In the analysis of perfect competition, it was basic that all potential buyers would prefer a cheaper to a dearer unit of the same commodity and that all commodity units were perfect substitutes for one another. Thus the original imperfect competition models were very unsatisfac­tory. They showed the change in sales which corresponded to price variations, but not the gain or loss of sales which resulted from blocks of buyers transferring from one producer to another, nor of course the effect on other producers, who were not even shown on the demand curve for the firm.

Hall summed up his arguments as follows (ibid.: 12):

To repeat in brief the thesis of this paper which I have tried to illustrate by a few examples, we cannot expect fine performance from blunt instruments. Planning, which takes as its task the improvement of performance, soon runs into difficul­ties because of the lack of knowledge about the dis-aggregations needed to do better. It is no good expecting more from an economy than the means at our disposal allow: if we raise our targets, we must improve our instruments.

In a series of articles between 1981 and 1983, Hall set out his views on incomes policy, monetarism, full employment and international economic co-operation. In the April 1981 issue of the Institute of Economic Affairs' magazine, Economic Affairs, he published an article on the problem posed by trade unions in the policy nexus relating employment, wages and inflation under the balance of payments constraint in the UK. In the article, he explained his change of opinion regarding the efficacy of incomes policy to combat inflation (see Hall 1981a).

In November 1981, he published an essay in the London Review of Books which the magazine titled “Lord Roberthall, Economic Adviser to Macmillan's Government, Looks at the Failure of Monetarism” (Hall 1981b). In it, he essentially repeated the position given in his testimony as Chief Economic Adviser to the Treasury before the Radcliffe Committee almost 25 years before, in 1957, at the high point of the Macmillan government's application of monetary policy to combat inflation. He testified that ‘by and large the government has not used monetary policy as an instrument primarily to be used to secure stable prices', asserting that there was ‘an institutional factor' causing inflation that had ‘been behind' its ongoing requests for restraint of wages (Hall 1960: 98-99).

In 1982, in a retrospective essay entitled “The End of Full Employment”, Hall surveyed economic and political developments during the period of his tenure in the Cabinet Office and Treasury from 1947 to 1961 and the subse­quent period of increasing economic instability up to the second oil price shock.

Finally, in a popular article in History Today entitled “International Economic Co-operation After 1945”, Hall published his recollections as the British representative on the UN's Economic and Employment Commission from 1945 to 1949 and his views on post-war developments in international organisations (see Hall 1983).

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