The Science of Economics: the economic teachings of Leon MacLaren

A New book by Raymond Makewell, Sydney, Australia

How did this venture come about?

A few years ago I was fortunate to be able to undertake an Economics degree full time. Having spent many years studying economics in the School my object was to become conversant with the theories on which professional economists base their insights and to try to understand the language they use.

During the course of my studies research work and an essay were required for every subject. There were many occasions when I wanted to refer to what I had learnt in the School, including the work of Henry George. Here two problems emerged. First, Henry George had acquired such a bad name in academia that any reference to his work had a negative effect on the credibility of my arguments. Secondly, none of the work of Mr MacLaren or of the School had ever been published. Mr MacLaren’s book the ‘Nature of Society’ had been written for students in the School but had never been catalogued by the British Library, and although a Google search turned up a few copies for sale on Ebay this work could not be referred to in an academic paper.

Initially I asked that ‘Nature of Society’ be registered with an ISBN number and a copy placed in the British Library, but as the end of my studies drew near my frustration grew, and I began to conceive a plan to make the School’s contribution to Economics more widely available. When I approached Mr Ian Mason with this proposal he suggested that, instead, I take the last economics course that Mr MacLaren had been directly involved with (1966), and turn it into a book.

What is in the book?

Almost all the 1966 course has been included but to produce a book the material had to be extensively rearranged and updated. The course had been prepared for a London audience; a wider public might not appreciate many of the examples cited

‘The Science of Economics’, begins by looking at first principles, the timeless natural laws that govern the creation and distribution of production, as well as those individual factors that make exchange possible. Contemporary and historical examples are used to illustrate these. Based on these principles the book goes on to show how our contemporary economic structure evolved, how the concepts of rent, profit and interest came into operation and their effect.

This foundation provides the basis for an examination of the economic world around us. Money, banking and inflation; the company; international trade and finance; trade cycles; and taxation are all examined as they appear in the English-speaking world today, with a brief description in some cases of their historical development.

These economic phenomena are then placed in a larger perspective. Consideration is given to ethics, to justice including concepts of property and their effect, to civil and economic rights and duties, and to the natural roles of government.

Finally a view is offered of how society is structured, of the place of economic activities within nations, nations within cultures, cultures within civilisations, and civilisations within Mankind as a whole. Although a glossary of some of the commonly used terms is provided in the book, the language used is simple and, with only a few exceptions, specialised terms are avoided.

The book challenges the way we have come to view the world around us, calling into question a great deal of what is taught and written on economics. It is founded on the vision of a society in which free men and women, enjoying both civil and economic justice, may achieve prosperity in every sense of the word.

How can the insights in this book contribute to economics?

On the face of it the understanding of economics is elusive, surrounded by mystique and controversy. Contemporary study of the subject has become largely the study of theories that seek to explain economic behaviour, rather than of economic behaviour itself. Around the subject a language has developed that has made economics even more obscure. Who would have known, for instance, that many English-speaking countries practice ‘horizontal fiscal equalisation’? Few today would call economics a science.

The economics I was taught at university was based on the idea that each individual’s desires are unlimited, but their capacity to satisfy them is limited. Further, each individual is assumed to act selfishly, to maximise his or her own benefit in every encounter between people [1]. Academic economics holds no truck with the idea that someone may, for instance, place a higher value on their contribution to society than on what they receive. Its premises have permeated other areas of social science and the behaviour of many institutions.

The objective of this book, as stated in the opening lines of the course material, is that ‘…. Through this study we shall … discover the natural laws [2] which govern the relationships between individuals in society, and the laws, customs and practices by which communities are governed.’ The premise here is that it is natural for individuals to live in society, and that what governs society is neither arbitrary nor accidental. Being a study of natural laws, it is a science, in the same way that ecologists look to discover the laws that govern the relationships between species. Being about relationships, it cannot reasonably avoid considerations of freedom and justice, nor can it ignore custom and civil law. This alters and enriches the scope of the subject.

This book places the ‘Law of Rent and Wages’ at the heart of the Science of Economics. It suggests for instance that moving the primary burden of taxation from earned to unearned income would have immediate impacts in terms of economic efficiency and economic justice. Pragmatically, to end the period of economic malaise since the Global Financial Crisis two approaches are obvious: first, to use taxation policy to penalise holding land out of production [3], and secondly, to stem the loss of jobs to ‘low wage’ countries by acknowledging that taxation calculated on wages and salaries is in fact a cost of production, borne by employers.

Also proposed is an analysis of the nature of money and the banking system that could profoundly change the way banks are regulated and their roles in the economic system.

Nor does the book shirk issues of academic debate, giving them practical value. Since the time of Aristotle for instance writers have been debating the distinction between value and price. Mr MacLaren argues that ‘value’ is personal and internal and that ‘price’ is a manifestation of the values of the parties to an exchange. His argument is based on observation and the book invites the reader to follow this path.

What still needs to be done?

It is obvious that to prepare the original course, Leon MacLaren and those who worked with him had undertaken an enormous amount of detailed research, both contemporary and historical, to distill and illustrate the principles enunciated. The course and this book present an outline of their findings. The principles are here. They now need filling out in the context of the situation today.

The book, for example, argues for free trade on an international basis, a principle that is widely accepted. But justice demands that all producers have equal opportunity to participate in trade and production subject to natural variations of conditions. This is clearly not the case today. The book also argues that anyone holding land or using natural resources is responsible for ensuring that the land or the natural resource is retained in good condition for future generations. How these issues can be addressed in our society requires a great deal of insight and detailed examination.

The challenge is to provide an ongoing body of literature to expand this work in ways relevant to the current situation

[1] Consider for instance Nobel prize winner Gary S Becker, 1992, “for having extended the domain of microeconomic analysis to a wide range of human behaviour and interaction, including non-market behaviour”. Marriage he includes as market behaviour and the union as increasing the utility enjoyed by both partners, and expressed mathematically. Love is ‘a non-marketable household commodity’. (See Economics of the Family: Marriage, Children, and Human Capital, Published by UMI, 1974).

[2] My Italics.

[3] Perhaps this is now not so radical. It was suggested in a leader in The Economist 9th March 2013.

This book is available to purchase from our online bookshop.

A review and more information about the book are available on the publisher’s website.