One of a Few

A Course Through Life
by H.W. Arndt,
Canberra, National Centre for Development Studies, ANU

During my years at Ipswich Grammar School I regarded Heinz Arndt as the best academic economist in Australia.  For most of those years he was a socialist -- an ideology which I detested, and still do.  But he underwent a remarkable conversion -- a change of faith -- in the Whitlam years, and no doubt partly because of them, a conversion which he explains in his book of memoirs, A Course Through Life.

The reason he was such an admirable academic had its roots in his personal qualities -- his transparent intellectual honesty (above all), his fine analytical mind, and his fierce desire to arrive at the truth.  He was not a "pure" academic because, like Copland and Giblin of an earlier generation, he participated publicly in the great economic controversies of the post-World-War II era.  I disagreed with most of his prescriptions for policy from the 1950s and 1960s -- particularly those on taxation and his belief, in those days, in the need for central planning -- but that did not lessen my admiration for him as a person and as an economist.

While he held his opinions passionately, he did not -- like so many economists of strong ideological convictions -- let his passions submerge his reasonableness and objectivity.  That was why he was so good to talk to.

He is also, unlike most ivory-tower economists, a first-rate communicator.  He writes with clarity and distinction and because he is always interesting, he is easy to read.  One doesn't have to waste valuable time in puzzling out what he means.

A large part of his book is fairly straight biography of his professional life, but the final two chapters are partly an essay in self-analysis and partly an examination of the nature and the limitations of economics as an instrument for effecting improvements in public policy.

It was the explosion of government spending, the emergence of "big government" and its associated interfering, big-spending bureaucracies in the Whitlam era that completed Arndt's rejection of his socialist faith.  (Previously he had been concerned about what he calls "the more extreme follies" of economic nationalism and environmentalism, the former having to do with the opposition from many quarters to foreign investment, the latter with the anti-growth ideology and the hostility towards uranium mining).

Arndt writes, "... I found myself increasingly in the liberal camp.  While I could not persuade myself that the libertarians had the whole answer, and in particular the inescapable minimum demands for social justice, I became convinced that something had to be done to limit the role of government and that, on this crucial issue, the libertarians were wholly on the side of the angels".

I remember visiting Arndt in Canberra and asking him what he thought of central planning (to which he was formerly addicted) in the light of the Whitlamite excesses.  His answer was to the effect that he had given all that away.  This came as a stunning, but welcome surprise to me because of his life-long marriage to socialist ideas.

In his final chapter Arndt reveals a rather puzzling, because ambivalent, attitude to modern developments in economic theory.  On the one hand he says that the almost exclusive concentration of theoretical economics in the past thirty years on mathematical and econometric techniques has contributed little to the sum total of economic knowledge or to economic welfare.  "I ... remain unconvinced that these techniques, the theoretical construction and empirical testing of econometric models, can do much to help us understand economic behaviour, the working of economic systems and the nature of economic problems".  (With this I would entirely agree).  At the same time he reveals a personal predilection for pure economic theory over practical economics.  "I must confess that I have derived more pleasure from my modest output of theoretical articles than from my larger, and generally more appreciated, applied work".  He even argues that pure theory and its development should be left to "the most talented minority", thereby implying that the theoreticians are intellectually at any rate a cut above those concerned to contribute to the solution of the problems of the everyday world.

This, I think, is quite wrong.  The truth is that those who are able to make notable contributions, contributions of real worth, to practical problems are really "the talented minority".  They are a minority because as Keynes said in a famous passage "Good, even competent, economists are the rarest of birds".

My experience of economics and economists have made me realise how true this is.  During those years the really good economists in Australia could be numbered, I believe, on the fingers of one hand, certainly on those of two.  The reason for this is to be found in the nature of the subject.  Simply stated, economics is not a science which, like physics, provides ready-made answers to the problems of the real world.  It merely furnishes the tools with which to grapple with those problems.  How effectively the tools are used depends on the attributes of the user.

What are these attributes?  Alfred Marshall set them down very simply in the first chapter of his tremendous work, Principles of Economics -- common sense, judgment, imagination, intuition (Marshall, being what he was, would have taken intellectual honesty for granted).

To these attributes I would add close practical experience of the real world (Keynes' superb biographical essay -- which should be read by all aspiring economists -- makes clear the great importance which Marshall placed on a first-hand acquaintanceship with the world of industry and commerce).

All this seems to have been forgotten, or never learnt, by many of the modern breed of economists.  But Arndt, despite what he seems to think were his intellectual shortcomings, has the attributes of the first-rate economist.  These attributes were infinitely more important than any lack of theoretical expertise.