Note: This is a guest post by Neil Kay. It is part of a chapter that he is writing for a book that I am editing with David Rooney and Greg Hearn called Handbook of the Knowledge Economy, volume 2. We’ll post Neil’s chapter as he writes it over the next few weeks. He explains the overall theme of the chapter here. I’ll do the same with mine, which is seriously overdue too. – Tim
I have a nice addendum for my blog “The World is getting more complex – or is it” Professor John Foster (UQ Economics) sent me some useful comments on my other blog on Mankiw and mentioned Alfred Marshall (widely regarded as the first modern economist) and whose “Principles of Economics” was first published in 1890.
John’s mention of Marshall prompted me to go back to original sources and I found this gem in Marshall which really is an interesting addition to the question of whether the world is more (or less complex) than say 100 years ago:
The conditions of industry change so fast that long experience is in some trades almost a disadvantage, and in many it is of far less value than a quickness in taking hold of new ideas and adapting one’s habits to new conditions. A man is likely to earn less after he is fifty years old than before he is thirty; and the knowledge of this is tempting artisans to follow the example of unskilled labourers, whose natural inclination to marry early has always been encouraged by the desire that their family expenses may begin to fall off before their own wages begin to shrink. (“Principles” VI.XII.38)
That is a remarkable paragraph which raises so many questions when it is set against modern experience (and not just about complexity, but also rate of innovation, distribution of income, demographics, amongst other things) that it is best just to let it percolate.
Mind you, Marshall was not always right, I also found this other gem “Adam Smith was not indeed the only great English economist of his time”. (“Principles” App.B.9)
Indeed (said the Scot through gritted teeth), and Adam Smith was not even an English economist.
Hi Neil
I’m enjoying your chapter fragements!
I like the “new world order” (1848) version, which I show to business students sometimes. It also seems to acknowledge the new knowledge economy, though Marx probably didn’t see the coming of the patent attorney but the final remark makes me thing of You-Tube and the like.
“All old-established national industries have been destroyed or are daily being destroyed. They are dislodged by new industries, whose introduction becomes a life and death question for all civilised nations, by industries that no longer work up indigenous raw material, but raw material drawn from the remotest zones; industries whose products are consumed, not only at home, but in every quarter of the globe. In place of the old wants, satisfied by the production of the country, we find new wants, requiring for their satisfaction the products of distant lands and climes. In place of the old local and national seclusion and self-sufficiency, we have intercourse in every direction, universal inter-dependence of nations. And as in material, so also in intellectual production. The intellectual creations of individual nations become common property.
John, that is very interesting and useful. If you had not said it was Marx (1848), I would have thought it was Schumpeter (1943) on innovation and creative destruction. And of course Marx in turn drew on Adam Smith, Darwin, and even Defoe’s Robinson Crusoe. As the man said, “the ideas of economists and political philosophers, both when they are right and when they are wrong, are more powerful than is commonly understood. Indeed the world is ruled by little else. Practical men, who believe themselves to be quite exempt from any intellectual influence, are usually the slaves of some defunct economist”. (John Maynard Keynes)
After I posted my blog, I found a Working Paper on work force aging published by the OECD which found that “age-earnings profiles in 1995 for 20 OECD countries … tend to have an inverted U-shape, with lower earnings among younger workers rising to a peak around age 50 and then declining” (see Page 132 at http://www.oecd.org/dataoecd/21/44/2429096.pdf )
This appears to be the reversal of what Marshall claimed (above) when he observed that even for skilled trades that peak earnings tended to be much earlier. Admittedly there are some industries today where physical capabilities matter, leading to peak earnings being in their twenties for some workers (e.g. some areas of construction, sport). However, the interesting thing about Marshall’s claim was that it was not so much the ability to cope physically that limited the earnings ability of even skilled workers later on, but the fact that the “conditions of industry change so fast that long experience is in some trades almost a disadvantage”.
Thanks for the feedback, this is an interesting journey.
Neil
Love your work, Neil. I remember reading an essay about Marx owing a lot to Hegel and the dialectic (and I am getting out of my depth here). I wonder if this is another intellectual tradition that we are drawing upon when we talk about the changing economy?
Neil and John,
A fascinating discussion has caused me to pull out an old favourite for your pleasure.
The Athenians are addicted to innovation, their designs are characterized by swiftness alike in conception and execution; … they are adventurous beyond their power, daring beyond their judgment, in danger they are sanguine … swift to follow up a success, and slow to recoil from a reverse … they hope to extend their acquisitions, you fear to endanger what you have left … they toil … with little opportunity for enjoying, being ever engaged in getting: their only idea of a holiday is to do what the occasion demands. Laborious occupation is less of a misfortune than the peace of a quiet life … they were born into the world to take no rest themselves and to give none to others.
Herodotus (420BC)
Another best left to percolate; I look forward to this pending Handbook.
Rohan
Thanks for that Rohan and John, much appreciated. All this is grist to the mill for my last blog on this journey, which follows shortly – please let me know what you think if it also, I think (hope) it will tie some threads together …
Thanks again
Neil