Learning economics

My first lesson in economics came around age six when I asked my father where money comes from. He deliberated for a moment and rather tentatively suggested that it sort of went round and round. We were not a very talkative family (certainly my father and I were not) and I did not pursue the topic.

One of the wonders of the world (in the far north west of Tasmania) was the Montague Swamp Development to create small farms for soldier settlers. We sometimes drove to visit this project on the weekend to gaze in awe and wonder at the massive machinery that was engaged in draining the swamp, clearing the scrub and setting up new farms. I knew it was very expensive to get a single small bulldozer onto the farm to push trees and stumps around for a day or two, so it was mind boggling to think of the cost of all this major activity over many months or even years.

Later, perhaps around the age of ten, I contemplated some problems with the labour theory of value, especially the impact of technological innovations. This was entirely an internal monologue. I could see how the cost of a barn could be based on the cost of materials plus the hourly rate of men that were hired for the construction. Similarly I could understand the cost of the poles for the barn that were being chopped by men with axes on an hourly rate. But what about the cost of the poles when the men started to use the newfangled chain saws which dramatically increased the speed of the work? How did the cost of the chain saw get built into the price, given that the poles took so much less time to cut? How did you cost the labour involved in making a tractor, and the cost of the labour involved in making the steel that went into the tractor? I must have been dimly aware of advancing methods of making steel (for example) and I wondered how the reduced cost of production lined up with the cost of labour to generate a final price for the product. At that time the notions of profit, competition and demand factors were invisible to me, I was just looking at the labour cost of production with the assumption that this dictated the price.

Cutting to the chase, I don’t recall getting any real understanding of economics or economic policy through the seventies and into the eighties until I encountered the Austrians in a small and short-lived libertarian bookshop very near my workplace in the central Sydney business district. The bookshop was a part of Centre 2000, one of the free enterprise think tanks which became a controversial feature of the political landscape during the 1980s. Some time before that I started reading the output from The Centre for Independent Studies, established under inspiration of Hayek circa 1976. I think I found Centre 2000 round about 1983 and the first obvious result of this learning experience was an essay on the Austrians and their policy implications that appeared in a the (also) short-lived Melbourne Age Monthly Review (essentially a literary supplement) in 1985.