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There has never been a ‘school’ of Australasian economics in the sense that English, German, Austrian, Italian, American and Swedish schools are said to have existed.

This is not to say that Australians and New Zealanders have contributed little or nothing to the history of economics. On the contrary, an economics literature commenced from the early decades of the 19th century. For the most part, economic analysis was derived from ideas originating outside the region, though imported ideas were adapted, extended and refashioned to meet peculiar Australasian conditions and circumstances. Between the two world wars, economics in Australia experienced a golden age when a remarkable group of economists exerted a profound impact on economic policy, and in the process advanced economic thought. Since the Second World War, Australasian economics has been dominated by approaches and methods that are characteristically associated with the discipline in the United States, a phenomenon by no means unique to Australia and New Zealand.

The 19th Century

Survival was difficult and far from guaranteed for some years immediately after the establishment of European settlement in Australia in 1788. In these circumstances there was little time to write about economics. But as private activity evolved from the original penal settlements, economic issues were debated more frequently. By the 1840s, a flourishing private economy had developed around the wool export trade with Britain. The pastoral industry was land intensive, giving rise to discussion about the occupation and alienation of crown land. The growth of domestic production led to an interest in its measurement and the contributions made by different industries. The creation of private institutions, especially those catering to foreign trade, including banks and other financial institutions, wholesaling and retailing, shipping and inland transport, became subjects of interest among those who wrote and talked about economic matters. Population growth and immigration were other subjects that drew attention. With the rise of domestic and foreign trade, instability occasioned by excessive optimism and pessimism was manifested in booms and slumps; this, too, engaged the interest of writers.

E.G. Wakefield, though he never visited the antipodes, wrote in 1829 that the Australian colonies were in a barbarous condition, like that of every people scattered over a territory immense in proportion to their numbers; every man is obliged to occupy himself with questions of daily bread; there is neither leisure nor reward for investigation of abstract truth; money-getting is the universal object; taste, science, morals, manners, abstract politics are subjects of little interest unless they bear on the wool question. (Quoted in Nadel 1957, p. 36)

There is some truth in this, but, by the time Wakefield wrote, pamphlets and books by colonists on economic topics had started to appear. In 1819, for example, W.C. Wentworth published A Statistical, Historical, and Political Description of the Colony of New South Wales and its Dependent Settlements in Van Diemen’s Land. Wentworth estimated the national income of New South Wales and Van Diemen’s Land (since renamed Tasmania), and discussed processes of economic development that borrowed heavily from Adam Smith. Another early writer of some significance was the Reverend John Dunmore Lang. In 1834 he published An Historical and Statistical Account of New South Wales which provided a description of economic progress in the colony and an analysis of the nature and causes of the depressions of the late 1820s and the early 1840s.

William Stanley Jevons spent some years in Australia in the 1850s as assayer to the Royal Mint in Sydney. He wrote on railways and land development, and commenced a social survey of Sydney, revealing some of the promise that later was to emerge in his work in economics. Perhaps the most important writer on economics in Australia during the second half of the century was William Edward Hearn. Born in Ireland and educated at Trinity College, Dublin, an exact contemporary of Cairnes and Cliffe Leslie, Hearn in 1854 was appointed foundation Professor of Modern History, Modern Literature, Logic and Political Economy in the University of Melbourne. As an academic (he later became a Member of Parliament), Hearn published a number of books, of which the most important was Plutology (1863). Written as a university textbook, it was widely known in Britain and elsewhere as an outstanding summary of the state of economic knowledge. Hearn believed that the satisfaction of wants, and the efforts to meet them, constituted the chief problems of economics.

Another prominent writer of the second half of the 19th century was Sir Anthony Musgrave, Governor of South Australia and later of Queensland. His major work, Studies in Political Economy (1875), contained six essays critical of J.S. Mill. He claimed that Mill had failed to explore adequately the role of money as a store of value and there were deficiencies in Mill’s discussion of capital. Though Musgrave’s work was often quoted, his jaundiced view of Mill’s writing won him few friends among authorities overseas. David Syme, proprietor of The Age, a Melbourne newspaper, was yet another writer with a reputation beyond Australia. Better known for his powerful advocacy of protection, and for his writing on the disposal of crown land, Syme published as well on economic methodology and other abstract topics.

His Outlines of an Industrial Science (1876) seems to have been known in Europe, notably in Germany. Syme supported the application of inductive approaches to economics and criticized Mill for arguing that economics should be based on deduction. He wrote as well on economic motivation and on supply and demand analysis, criticizing as he did Mill’s theory of value.

Towards the end of the 19th century a number of factors combined to encourage greater scrutiny of economic issues. One was the banking and financial crisis and collapse of economic activity in eastern Australia in the 1890s. As a consequence of the depression, debate sharpened on subjects such as the causes of fluctuations in economic activity, the role of government in moderating booms and slumps, the need for a central or government bank, unemployment and tariff policy. Another issue was the projected federation of the Australian colonies. Hitherto the six colonies of Australia had acted independently, having their own administrations, including armies and navies. Ever since the middle of the 19th century there had been calls for an Australian federation; during the 1890s several inter-colonial conventions were held to draft a federal constitution, at which economic and financial considerations, including tariffs, taxation, federal–state finance, money and banking, were debated at length.

Reflecting the heightened interest in economics for these and other reasons, an Australian Economic Association was formed in Sydney in 1887. Between March 1888 and December 1898 the Association published a monthly periodical (for a short time it was published fortnightly). Contributors to the Australian Economist were interested principally in the issues of the day, including unemployment, wage rates, tariff policy, recovery measures, control of banks and money, land tenure, federation, socialism, state banks, education, immigration, the role of women, democracy, bimetallism, old age pensions and industrial arbitration. Short extracts from the works of prominent economists, including Jevons, Marshall and F.A. Walker, were often included, as were articles about the work of these and other economists.

The most original of the local contributors to the Australian Economist was Alfred De Lissa, whose work sometimes is heralded as a forerunner of the multiplier. In March 1890 he read to the Australian Economic Association a paper on The Law of the Incomes (1890), in which he noted that incomes arising from primary production led to an increase in income in other sectors. Using production data, and taking into account leakages abroad, he concluded that, as a general rule, incomes of primary producers equalled incomes of secondary producers; the original primary income, in other words, had a general tendency to multiply by a factor of two. De Lissa later argued that the relationship between primary and secondary income would diminish progressively until the additional income reached zero.

An area where Australia was clearly at the forefront of work internationally by the end of the 19th century was the official collection and interpretation of economic and social statistics. The most acclaimed of the colonial statisticians was Timothy Coghlan, the New South Wales Statistician, who pioneered the measurement of the national income using income, output and expenditure methods, an approach similar in many ways to modern national income accounting. Coghlan later worked in London as Agent-General for New South Wales. There he wrote a four-volume economic history of Australia – Labour and Industry in Australia (1918) – that drew upon quantitative information he had assembled when he was in Sydney. Later work in Australia by Colin Clark (1940), H.W. Arndt (1949), N.G. Butlin (1962) and G.D. Snooks (1994) acknowledged the ground-breaking statistical work, including national income estimation, of Coghlan and other 19th-century colonial statisticians.

Economics in the Universities

When the first universities were established in Sydney in 1851 and in Melbourne in 1854, economics was not a subject that attracted much attention. At the University of Sydney, the Professor of Classics (John Woolley) and the Professor of Philosophy (Francis Anderson) took occasional classes in economics. The Professor of Mathematics (Morris Birbeck Pell) and a later Professor of Classics (Walter Scott) gave some lectures in economics outside the university. But, as a result of growing interest in the subject by business organizations, chambers of commerce, and professional associations of bankers and accountants, courses in economics over three years began at the University of Sydney in the early 1900s. A department of economics was established in 1912, to which R.F. Irvine was appointed Professor of Economics, the first separate chair of economics in Australasia. A graduate of Canterbury University College, New Zealand, Irvine had been a pupil of James Hight. Earlier, at the University of Melbourne, Hearn had taught courses in economics for both the BA and the MA. His successor, J.S. Elkington, however, seems not to have taken the same interest in economics, and as a consequence the subject languished for a time in Melbourne.

A final year course in political economy for the BA had been offered at the University of Tasmania since the university’s creation in 1889. Later a lectureship in philosophy and economics was established, but the lecturer taught courses mainly in philosophy rather than in economics. The major breakthrough in Tasmania – and, as it turned out, for economics in Australia – occurred in 1917 when Douglas Copland was appointed lecturer in history and economics. In 1920 he was appointed to a chair in economics, and later was elevated to the deanship of a new Faculty of Economics and Commerce. Like Irvine, Copland was a graduate of Canterbury University College, where he, too, had been a pupil of Hight’s. In 1924 Copland was the leading force behind the establishment of the Economic Society of Australia and New Zealand, which, in the following year, published the first issue of its journal, The Economic Record. In the same year, 1925, Copland was appointed Professor of Commerce in the University of Melbourne.

In the University of Adelaide, founded in 1874, courses in political economy were taught by William Mitchell in the 1890s, and by Herbert Heaton in the early 1920s; in 1929 L.G. Melville was appointed to the foundation chair of economics. Meanwhile, the universities of Queensland and Western Australia, founded just before the First World War, had established combined chairs of history and economics; Henry Alcock was appointed to the chair at Queensland, and Edward Shann to the chair at the University of Western Australia. In New Zealand by the early 1920s, chairs in economics had been established at four universities: Auckland (Horace Belshaw), Canterbury (J.B. Condliffe), Otago (A.G.B. Fisher) and Wellington (Barney Murphy).

In 1914 Irvine wrote: ‘When one considers the political and economic evolution of Australia, one cannot but be astonished at the neglect of these studies [that is, economics] in Australian universities’ (Goodwin 1966: 636). That was certainly true of Australia prior to the First World War, but it was not true of New Zealand. By the 1890s, economics had become an important subject of study at Canterbury. There, James Hight was the foundation Professor of History and Economics. More a political historian than an economist, Hight nevertheless promoted economics as a significant field of study. A number of able students were attracted to the subject, including the first two professors of economics in Australia. By the 1920s, John Maynard Keynes could justly write that training in economics at Canterbury ‘was as good as any place in the world’ (Harper 1986, p. 41).

The Golden Age of Australian Economics

Yet it was in Hobart where the so-called golden age of Australian economics had its origins. Soon after his arrival at the University of Tasmania, Copland became a protégé of L.F. Giblin, a graduate in mathematics of King’s College, Cambridge. Born in Tasmania, Giblin had fought on the western front in the First World War, and on leave in England had met Keynes through mutual friends. When he returned to Hobart, Giblin was appointed Tasmanian Statistician. As a member of the Council of the University of Tasmania, he was instrumental in Copland’s appointment to the newly established chair in economics and for the creation of the Faculty of Economics and Commerce. Copland then attracted J.B. Brigden to fill the lectureship that he had vacated. Copland’s star pupil at Hobart was Roland Wilson, who later completed doctorates in economics at Oxford and Chicago. Wilson was to become Commonwealth Statistician and later head of the Australian Treasury. The four – Giblin, Copland, Brigden and Wilson – were at the centre of the most important work undertaken in economics in Australia from the 1920s to the 1940s.

The early promise of this group, and the coming of age of Australian economics, can be seen in Copland’s paper, ‘Currency Inflation and Price Movements in Australia’, published in the Economic Journal in 1920. Using Australian data for 1901–17, and invoking Fisher’s equation of exchange, Copland derived P as a residual after applying data for M, V and T. He then compared an actual price series with the hypothetical series for P, showing that the two series exhibited close agreement. Copland concluded that the ‘equation of exchange may be regarded as true for Australia’. Keynes praised Copland for this work, referring as he did to Copland’s ‘masterly article’ (Coleman et al. 2006, p. 51).

Later in the 1920s, Giblin, Copland and Brigden were appointed to the committee of enquiry into the Australian tariff (The Australian Tariff: An Economic Enquiry, often known as the Brigden Report) established by the federal government in 1927 (Brigden et al. 1929). The Enquiry concluded that, in Australian circumstances, protection had raised the ‘standard of living’. This controversial conclusion, and the analysis upon which it was based, is said to have been significant for the emergence of modern international trade theory (Coleman et al. 2006, 65–73); Keynes adjudged that the Enquiry was ‘a brilliant effort of the highest interest’ (Millmow 2005, p. 1013). Similarly, Giblin’s inaugural lecture in April 1930, upon his appointment to the first research chair in economics in Australia (the Ritchie Chair in the University of Melbourne), in which he produced a multiplier based on the repercussions of a decline in exports on total domestic output, is thought to have been an important stepping-stone to the eventual formulation of the Cambridge multiplier. When Giblin sent an early version of his multiplier to Keynes in August 1929, Keynes admitted that Giblin’s ‘method of argument’ was ‘novel’ (Coleman et al. 2006, p. 83).

The youngest member of ‘Giblin’s Platoon’, Roland Wilson, published a book in 1931 that attracted the attention of Viner, Harrod, Hicks, Robertson and Pigou. In Capital Imports and the Terms of Trade, Wilson disputed Mill’s contention that the import of capital would improve a borrowing country’s terms of trade. More importantly, Wilson focused on the consequences of capital imports for the price ratio of tradables to non-tradables. He showed that the ratio would decline. This conclusion was taken up in the 1970s, when it was incorporated in notions such as the Dutch disease and the Gregory thesis (named after R.G. Gregory, an Australian economist who argued in the 1970s that Australia’s massive export of minerals would serve to push up the Australian dollar exchange rate with adverse consequences for other industries, particularly manufacturing industry in Australia).

Giblin’s group, supported by other economists, played a decisive role in furnishing advice to Australian governments and banks during the early 1930s. The economists were critical of the central bank’s policy to retain a fixed rate of exchange with sterling, advising the Bank of New South Wales early in 1931 that it should use its power and prestige as Australia’s largest and oldest commercial bank to devalue the Australian pound. The economists’ advice was accepted and the Australian pound was devalued. The federal and state governments then appointed Copland and Giblin to a committee (the ‘Copland Committee’) charged with the responsibility of formulating policies to deal with the depression. The committee’s recommendations formed the core of measures included in the famous Premiers’ Plan of 1931. A common theme running through the anti-depression measures proposed by Australian economists was that the loss of income occasioned by the decline in exports should be spread among all income groups and not be confined to export and related trades. Their work was highly praised by foreign observers. Keynes, for example, wrote in 1932 that: ‘I am sure that the Premiers’ Plan last year saved the economic structure of Australia’ (1932, p. 94). As a measure of the influence of Australian economists, Copland was invited to present the inaugural Alfred Marshall Memorial Lectures in Cambridge in 1933; the lectures were published under the title Australia in the World Crisis, 1929–1933 (1934).

Australian economists were prominent again during and immediately after the Second World War. Shortly before the outbreak of war, the federal government established an Economic and Financial Committee (the F&E) to advise it on economic questions that might arise in the event of war. Giblin was appointed chairman of the committee, which included Copland, Brigden and Wilson. When the war came, the F&E formulated the government’s approach to war finance, following principles that Keynes had put to the British government.

When it came to formulating plans for post-war reconstruction, Australian economists prepared at the government’s request a domestic employment policy based on demand management. Their proposals were published in the famous government white paper of 1945, Full Employment in Australia (Cornish 1981). The economists supported Keynes’s Clearing Union, opposing as they did the rival Stabilization Fund of the United States Treasury. In fact, they went further than Keynes by formulating what they called the ‘international full employment approach’ or ‘positive approach’, sometimes known as ‘Australia’s Keynesian crusade’ (Cornish 1993). This policy arose from Article VII of the Mutual Aid Agreement signed in 1942. In return for United States assistance during the war, recipient countries pledged to enter discussions aimed at liberalizing foreign trade and international payments. Given uncertainty about the restoration of world trade, and concerned about the impact on employment of abolishing preferential trade arrangements, the ‘positive approach’ maintained that Australia would support Article VII provided the United States and other major economic powers committed themselves to policies aimed at maintaining full employment in their domestic economies. Such policies, it was believed, would provide a buoyant demand for Australian exports. Australian representatives promoted the ‘positive approach’ at major international conferences during the 1940s, including those at Bretton Woods, San Francisco and Havana.

Australasian Economics Since the Second World War

The numbers working in economics increased enormously after the Second World War. It is estimated that, in Australia, whereas 5000 persons graduated in economics between 1916 and 1947, 50,000 graduated between 1947 and 1986 (Butlin 1987). While there had been no increase in Australian universities between the two world wars, between 1945 and the early 1990s the number rose from six to more than 30. Some of the newer universities offered economics simply as a subsidiary course in business studies programmes; most, however, offered specialist degrees in economics (Groenewegen 1996). In the 1970s, reflecting the growth of economists, the Economics Society of Australia and New Zealand was divided into two professional organizations – the Economic Society of Australia, and the New Zealand Economic Association. Yet another indicator of the expanding scale of the discipline was the increase in the number of journals dedicated to economics, from one in 1945 (Economic Record) to four by the mid-1960s (the additions were Australian Economic Papers, Australian Economic Review and New Zealand Economic Papers).

However distinctive the character of Australasian economics may have been in the interwar period, it disappeared after the Second World War as the American approach, with its emphasis on model building, mathematics and econometrics, began to dominate the discipline (Groenewegen and McFarlane 1990). It is understandable perhaps that economists seeking to publish their work in leading international journals, many of them American-based, would want to incorporate the latest ideas and methods arising in the United States. The Americanization of the discipline also stemmed in part from the increasing number of students from Australasia going to the United States for postgraduate studies; previously the United Kingdom (Cambridge in particular) had been the destination for graduate studies in economics. Yet the American dominance of economics did not inhibit Australian and New Zealand economists from making important contributions to the subject. For example, there was the work of T.W. Swan (1956, 1963) and W.E.G. Salter (1959) in growth theory and on issues of internal–external balance in small dependent economies; W.M. Corden’s work in the theory and measurement of effective protection, tariff policy and international monetary economics (1971); Murray Kemp’s formulation of general equilibrium trade models (1964); G.C. Harcourt’s writing on capital theory (1986); A.W. Phillips’s contributions to the theory and measurement of inflation, and the relation between wages and unemployment (1958); and the writing on Australia–Asia economic relations by J.G. Crawford (Evans and Miller 1987), H.W. Arndt (1972) and Ross Garnaut (2001).

See Also