The post-war period
The achievement of Australian economics in the inter-war period was to have created something where there had been (almost) nothing. The Second World War put this new creation to intensive use, without itself being transforming.
But the economic context of the post-war was transforming; an ‘age of opulence' had begun, and Australian economics was not excluded from its benefits.Enrolments leapt; between 1940 and 1980 the annual output in Bachelor degrees in economics rose in Australia from 128 to 3,195 (Butlin, 1987). And a degree that had largely consisted of night classes given by part-time lecturers had by the 1960s become one taught by full-time staff to day students. Perhaps the most telling distinguishing mark from the inter-war era was the belated introduction of the PhD in economics (Melbourne — 1954; ANU — 1956; Sydney — 1964; Adelaide — 1971). This accelerated domestic production of human capital was complemented by the arrival of overseas talent escaping a fallen European continent: Fred Argy, Heinz Arndt, Harro Bernadelli, Max Corden, Peter Groenewegen, Fred Gruen, Helen Hughes, Jan Kmenta and Kurt Singer.
For all the transformation of its material situation, post-war Australian economics mostly followed tracks marked out by the previous generation. In economic history the massive narratives of Sydney and Noel Butlin of Australian growth and development were plainly stirred by the four volume chronology of Australian development authored 50 years before by T.A. Coghlan (1855—1926). Coghlan's example had a dual significance for the rapidly emerging sub-discipline of Australian economic history; he was the most eminent representative of a vigorous statistical movement in nineteenth-century Australia (Groenewegen and McFarlane, 1990, 92—117; Haig, 2006), a legacy of Australia being the costly possession of a mother country concerned for its expensive charge account for itself.
And Coghlan, as Australia's most senior civil servant of his time, also implicitly heeded the Deakinite outlook by casting active governors and politicians as the most creative individuals in his history. Noel Butlin shared both Coghlan's vision of the partnership of the market and state, along with his statistical method; a specifically statistical (rather than econometric) quantitative method contributed to Australian economic history remaining distinct in style from its American counterpart (Coleman, 2014).In international economics, the Brigden Report of 1929 was the starting point of Corden's investigations of the trade-policy small open economy, which yielded the earliest diagrammatic analysis of partial equilibrium of a tariff of an industry facing a given world-price, now found in all the text books (Corden, 1957). Still more novel was Corden's exploration of the notion of ‘effective protection' that confronted tariffs in vertical production relations, ‘an aspect until recently completely neglected in the literature of international trade theory' (Corden, 1968, 2004).
The post-war period did see the sudden germination of one new branch of Australian economics that was to have an impact out of proportion to its size: the marginal limb of agricultural economics. In New Zealand, Horace Belshaw had established firmly agricultural economics during the 1920s. But in Australia the genesis of this field came later, in reaction to the failure of government attempts to assist struggling agriculture. The Commonwealth Bank of Australia, whose finances had been marshalled into supplying cheap loans to the rural sector, began to generously fund the establishment of chairs in agricultural economics in Sydney, Melbourne, Adelaide, Monash, Western Australia and above all the University of New England (Bearman, 1985).
This sudden burgeoning of agricultural economics had two reverberations. First, the value of quantitative precision in designing agricultural policy, along with a good supply of data, made the field an excellent terrain for post-war econometric revolution; thus A.R.
Bergstrom's first paper — also the first paper by a New Zealand author in Econometrica — concerned the British demand for New Zealand pastoral products. The extension of these techniques to general equilibrium models became a field in which Australia achieved a global prominence (see Challen and Hagger, 1979). Second, agricultural economics introduced a new strain of thought into the doctrinally inbred Australian scene: it introduced an American accent.As one agricultural economist later explained ‘it was quite obvious' that adequate training in agricultural economics was not to be had in the United Kingdom, and therefore, violating almost all precedent, post-graduate training was sought in the United States (Gruen, 1988). In 1950—1 Fred Gruen initiated what was to become a small chain migration to the University of Chicago; he was followed by Ross Parish, Alan Powell and K.O. Campbell. This Chicago training favoured ‘price theory' over the mix of effective demand and monopolistic competition that was then the pith of local economics pedagogy, and Australian agricultural economists formed a novel constituency for deregulation of agriculture. More generally, the ‘price theory' critique of the hapless state of Australian agricultural policy (e.g. Sieper, 1982) became one of the more powerful gusts in the gathering wind of ‘economic rationalism' pressing against Deakinite presumptions.
One part of ‘Chicago' that had almost no resonance in Australia was ‘monetarism'. Australian macroeconomists of the post-war were satisfied with a hydraulic Keynesianism; the multiplier macroeconomics of Giblin — which had never disputed Say's Law — was ignored. It is true that in 1947, Murray Kemp (rightly) dismissed the General Theory’s assumption of exogenous money supply as redundant to Keynes' project of establishing the existence of ‘unemployment equilibrium', by demonstrating that an infinite elasticity of the supply of money at some critical interest rate was sufficient to destroy the equilibrating effect of money wage adjustments (Kemp, 1948).
But Kemp's point was totally ignored by macroeconomists, and it resurfaced quite independently as a ‘post-Keynesian' tenet in the 1970s.Neither did earlier Australian attempts at quantitative articulation of Keynesianism receive any development in the post-war period. Colin Clark's 1938 The National Income of Australia provided the first empirical assessment (‘test') anywhere of Keynes' multiplier doctrine of national income, but his method was entirely neglected. Swan in 1945 (Swan, 1989) developed an elaborate econometric model that closely followed the General Theory (e.g. distinguishing aggregate supply and aggregate demand functions), but the first published Keynesian modellings of the Australian economy followed Klein. A student of Swan, John Pitchford, explored what became known as the ‘AK’ model of economic growth a generation before Barro et al. (Pitchford, 1960), but had had no impact. All this bespeaks the difficulty in a small intellectual community of keeping afloat and moving the stray bright ideas that it launches.
The antipodean contribution to macroeconomics that did launch a thousand papers was by someone not working in Australia or New Zealand, or working on Australasian data: A.W. Phillips. Phillips’ performance is acutely singular, and is surely largely traceable to inborn brilliance and a lack of formal economics education, with little left over for his native land to claim. And yet it remains true that several decades before Isles (1932) had already drawn attention to the negative correlation between the unemployment rate and the rate of change in wholesale prices in Australia between 1913 and 1930.
If the inter-war Australian economics might be commended for making a good start from a low base, how might post-war economics be judged? Professional standards were established, certainly. Yet a critic can add some negatives to the balance. Australia managed to make only a very limited impact on the wider world of economics. Thus in a careful review of Economic- Record in the mid-1960s, Butlin notes of it ‘one finds depressingly few citations in overseas journals’ (1966, 611).
Beyond international attention, Australian economics as an analytical entity did not seem to keenly serve its idiosyncrasies of the Australian context. The only real attention to minerals came from an economic historian (Geoffrey Blainey), until the early 1970s when, amidst an international focus on exhaustible exhaustion, analytical contributions were made by Ngo van Long, Murray Kemp and Neil Vousden. Despite her empty spaces there was little interest in spatial economics (save Blainey, 1966), although transport economics was pursued. In the matter of population, Australian economists largely ceded the area in the post-war period to demography. Australia’s industrial tribunals — which Keynes at least noticed — received a considerable ‘institutional’ attention, but barely any theoretical analysis. Despite the precedent interest of Australian economists in capital inflows, it was a visiting Scotsman who first tackled the subject with analytical heft (MacDougal, 1960); and it took the arrival of a footloose Scot (Alex Hunter) to make the acutely monopolised state of Australian business an issue amongst Australian economists. In sympathy, one economist declared the existence of a vacuum in industrial organisation in Australia (Round, 1974).