Chapter XII. Long — Thornton — Mill — Cairnes
We come now to the most dramatic episode in the history of the wages fund doctrine, — the attacks on it by Longe and Thornton, and Mill’s surrender to the latter. Immediately after, came Cairnes’s endeavor to reshape and rehabilitate the doctrine; the first attempt, since Adam Smith’s day, at a deliberate and careful statement of its meaning. All this stir was due, as is usually the case with such a burst of active discussion, to the pressure of practical problems.
In just two years, inflation targeting (namely, the quest for 2 percent inflation) has gone from the lunatic fringe of economics to mainstream dogma. Much of the allure springs from notions that a little inflation motivates people to speed up spending, thereby greatly increasing the efficacy of central bank stimulus. It is touted as a cure for sagging demand and a defense against the (overly) dreaded deflation.
Chapter X. From Ricardo to John Stuart Mill
We come now to the period of active discussion which begins with Ricardo and ends with John Stuart Mill; the period in which the doctrines of the classic economists gradually secured their strongest hold on students and thinkers, and in which the wages fund doctrine is often supposed to have arisen and flourished. All of the writers of the period were contemporaries of Ricardo; most of them knew him, or might have known him, in person.
Mark Spitznagel, a hedge fund manager known for employing Austrian economics in his investment strategies, recently noted in an interview with The Financial Times that central bank policy have destroyed the value of markets: “Markets don’t have a purpose any more — they just reflect whatever central planners want them to.”
Chapter XI. John Stuart Mill
With the younger Mill’s Principles of Political Economy we may advantageously begin a fresh chapter. Not that the book can be said by itself to have made any substantial change in the discussion of the wages fund. On this topic, as on most others of economic theory in its narrower sense, Mill hardly did more than to set forth and codify the accepted views of his time.
Chapter IX. Ricardo
Next in order, for the development of the wages fund doctrine, as for economic theory at large, comes Ricardo. In regard to the direct relation of capital to wages, he reflected faithfully the views of his own generation; while the mode in which he stated that relation, and connected it with other parts of economic theory, served to impress these views strongly on the generation that followed.
On April 20, 2016 US Secretary of the Treasury Jack Lew penned an announcement on Medium:
[T]oday I am excited to announce that for the first time in more than a century, the front of our currency will feature the portrait of a woman — Harriet Tubman on the $20 note.
The Tubman change dominated headlines, but the Jackson-Tubman swap is a part of a larger, longer-term strategy:
Last year, we covered a story coming out of Texas in which the state government was planning to institute a state-controlled “gold depository” that would allow individuals to store their gold in a presumably safe place outside the United States banking system.
Chapter VIII. The Immediate Followers of Adam Smith
In the ferment of economic discussion which followed the appearance of the Wealth of Nations, other subjects than those with which the present investigation is concerned, were uppermost: Attention was given chiefly to external and internal commerce, and so to the questions of free-trade without and of unshackled industry within. Adam Smith’s was a catholic mind, and he had the interests both of the scientific thinker and the practical agitator. But his immediate followers laid stress mainly on those parts of the subject in which he had called for prompt legislative reforms.
