Consumer Demand as the Basis of Credit

JJ begins with a Berkeleyan Query '..whether comfortable living doth not produce wants, and wants industry, and industry wealth?' and links his arguments with those of Keynes, which he had followed closely since the work of the latter on the economic consequences of the Versailles Treaty (1919).

He introduces his first essay, 'Non-Monetary Causes of Economic Depression', with the Query '...whether power to command the industry of others be not real wealth? And whether money be not in truth tickets or tokens for conveying and recording such power and whether it be of great consequence what materials the tickets are made of?'. It is based on a paper he had read on November 17 1932 to the Institute of Bankers in Ireland.

His second essay, 'The Economic Atavism of Mr Keynes', ('whether bank bills should at any time be multiplied but as trade or business were also multiplied?') is based on an unpublished 1937 critique of Keynes's General Theory.

The third essay, 'Monetary Manipulation Berkeleyan and Otherwise', is based on work he did in 1964. He prefaces it with 'whether a national bank should not at once secure our properties, put an end to usury, facilitate commerce and supply the want of coin, and produce ready payments in all parts of the kingdom?

He then rounds it off with a re-statement of his 1937 essay 'Consumer Demand as the Basis of Credit'. He updates it with some addenda relating it to the current 'Ireland in the EEC' situation. The Query introducing it is 'whether the discovery of the richest gold-mine that ever was, in the heart of the kingdom, would be a real advantage to us?'.

He reproduced some copies which he must have tried to get distributed, without however making any noticeable impact. I must leave to other to judge whether he was 'before his time' or simply a 'yesterday's man'. I would not expect a valid judgment to come out of the contemporary temples of economic orthodoxy.

Comments on Other Authors

JF Dempsey of Aer Lingus spoke on 2/4/65 on aircraft selection, outlining the methodology and showing how it was applied to the analysis of various manufacturers' proposals.

Being then active in support of this process in the Aer Lingus Economic Planning Department under Niel Gleeson, I took the opportunity of making a supplementary comment arising from Thekla Beere's intervention; she commended Aer Lingus for making commercial investment choices without bowing to political pressures, and ventured to hope that the purchase of the new computer would open up new possibilities.

I took this as a cue and mentioned the current use of the computer in the measurement and analysis of variability, and the use of the measured variability in forecasting, using random numbers. The result would be a distribution of forecast traffics; knowing the penalties for over or under-providing fleet, one could use statistical decision theory to establish an optimum investment strategy. This work was done in co-operation with Micheal O Riain.

The next session was on April 30 1965 and I also took part, on a theme which related to my then current political interests. Dr EA Attwood spoke on 'Economic Aspects of Land Use in Ireland'. I was also at the time enthusing about the use of the computer in micro-economic systems modelling. I made the case that afforestation and arterial drainage were two important elements in an overall allocation of resources study of land utilisation. Arterial drainage on its own was of questionable value; lowering the average level of the water-table, in order to reduce the peak level, introduced a risk of drought in dry spells. It was better to try to reduce the variability of flow, and forest in the upper catchment did this.

I also touched on the problem of the 'dole barrier' and mentioned the need for analysis of the performance of small-farm systems in response to changes in dole policy.

EA Attwood gave a paper on the comparative development of agriculture, north and south, on April 3 1967 (Vol XXI, part V, p9).

JJ, who had supervised Dr Attwood's PhD, came out of his semi-retirement to comment (p30) on the paper. With typical modesty he remarked that '..Dr Attwood sat nominally at my feet while I sat in fact at his..'. He regarded the paper as a useful supplement to his thesis, and went on to add some insights of his own.

On volume, he remarked that if the South had expanded over the period 1926-66 at the same rate as the North, volume would be 50% more than at present, and average farm income would be some £500 greater, the current level being £812. On subsidy, the UK Treasury hands out nine times as much per farm unit as does the Republic.

He mentioned in passing that the root of the difference went back to 1912 when armed resistance to Home Rule was threatened. Had Home Rule been established on an all-Ireland basis, economic unity would have been conserved within a locally autonomous framework, and agriculture would have been supported equally.

He concluded by saying that our agricultural problems were insoluble within the current framework, and political sovereignty was of no use to us.

On December 16 1966 there was a symposium on 'Science and Irish Economic Development' with papers from Prof DID Howie of TCD, Prof TE Nevin of UCD and AV Vincent of Guinness's Brewery. I was present, and probably contributed, this being a primary concern of mine, then as now. I am however not on record in the minutes as having contributed, nor is there any printed record.

The symposium was in response to the OECD Report, produced by Patrick Lynch and HMS 'Dusty' Miller, which laid the basis for the setting up of the National Science Council in 1969. This was a landmark event, in that it indicated that after a long period of neglect the Government was prepared to begin to take science seriously.

David Howie stressed the low level of support for research, and the high level of dependence on funding from abroad. Tom Nevin criticised the size of the proposed National Science Council compared to the resources projected for it to have. He adduced US experience where industrial firms hire PhDs as a matter of course. He queried the stress laid on 'interdisciplinary research', and complained that industry in Ireland seldom if ever made its needs known to universities. He was appreciative of the support of Guinness and Bord na Mona for the UCD Chair of Industrial Microbiology, and called for scientists in industry to get leave to work from time to time on university-based research.

Tony Vincent's contribution was the one on which I probably commented, and will do so now from a standpoint such as I was in a position to adopt at that time. After going into the history of science-based research in Guinness, which goes back to 1893, he outlined the barley improvement work which was done from 1901, with the then new Department of Agriculture. Systematic hybridisation and field trials had increased yields by 40% over the period. He then called for the development of teaching and research into statistics, the utility to industry of which had been demonstrated by FW Gossett (known as 'Student' in the published literature; 'Student's t-test' etc) in Guinness's in the context of the barley breeding programme. (A Department of Statistics was set up in TCD shortly after, in 1970, under Prof Gordon Foster. RJ). He went on to call for increased efforts into university-based computing, and training in computer languages, with a centre for statistics and operational research having computer access.

I find that I had marked this latter point of Tony Vincent, in my contemporary (ie received about a year later) copy of the Proceedings. I was at that time in touch with him and other like-minded people in the Operations Research Society of Ireland (ORSI) context. Previous to this occasion, in 1964, I had been working with the TCD computer (an IBM 1620), facilitated by John Byrne, in order to predict the performance of the projected Aer Lingus real-time reservations system which Aer Lingus was negotiating to purchase. I used a statistical queue-theoretic approach, writing in Fortran. By 1966 this approach was well developed in Aer Lingus and was being applied to other areas, like fleet and route planning.

The ORSI was at this time seeking to establish some sort of university recognition for the type of training required for industrial applied mathematics. Tony Vincent was expressing the emerging consensus of an existing active applied-maths community, whose members were to some extent aware of each others' work. If I had been there, the above is substantially what I would have said. Perhaps I was, and did not get on the record.

JJ Scully on Pilot Area Development, 26/1/68; Vol XXI Part VI, p51. JJ spoke, and his contribution is on record; Justin Keating and Sean Cooney are also minuted as having spoken.

The Scully paper had presented the usual gloomy picture of a declining agriculture in the West, with considerable statistical detail. JJ's response (p69) was to be critical of the author's lack of historical perspective, and to relate the decline to deep-seated forces rooted in British decisions made in 1934 and 1947. In 1945 he had prophesied that the proposed differential price system would cause a large increase in the export of agricultural producers instead of products, and it has indeed done so.

He then went on to give as the body of his response the text of an article he had published on Jan 17 1957, in the Irish Times. In it he had re-iterated his earlier plea for intensive grass-based livestock rearing, in large-farm units, supported by complementary intensive tillage, and with improved cattle quality, reared locally. The traditional pattern, of Western calf-producers supplying Eastern ranchers, was no longer viable.

British subsidies for agriculture, which in Northern Ireland amounted to £1000 per farm, had squeezed producers in the Republic out of the market. Joining the Common Market would change the scene in the short run, and bring us in on the feather-bedding of European agriculture. This however would aggravate the ultimate international problem by penalising the underprivileged markets of the outside world.

Bob O'Connor on 'Policies on Beef and Milk' 16/1/70; Attwood spoke, and JJ submitted a written comment, in which he said that he regarded the paper as confirming his opinion that our agricultural problems were insoluble within the framework of a national economy. They would only be soluble if the commercial policies of the major external economies are fundamentally modified in such a way as to facilitate the exports of the minor developing economies.

JJ went on to refer to Colin Clark, in the current Lloyds Bank Review, who pointed out that the developing countries had been steadily increasing their exports but earning less money with them due to the presence of artificially induced surpluses exported from the developed countries, which depressed the market.

He concluded by contrasting the cost-effectiveness of the Congested Districts Board in the 1900s with the current extravagant use of taxpayers' money to displace rural labour, and referred back to the predictions he made in the report of the 1945 post-war agricultural commission.

This was JJ's swan-song in the SSISI. He continued in polemical mode, letter-writing and pamphleteering, right up to the end. I put some of this on record in the 'Barrington' sequence, because it fits seamlessly into this tradition, with continuity back to the 1920s.

Colm O h-Eocha contributed a paper on 'The Science Budget' 20/3/70; this was one of his earlier contributions to the public debate about science policy, arising from his chairing the National Science Council.

Professor O h-Eocha defined what science policy was, and categorised it under several focused headers, against a somewhat diffuse background. He drew on international comparisons.

I participated in the discussion, having then just commenced producing a regular weekly column on 'science and technology' for the Irish Times. Patrick Lynch was supportive, pointing out that Adam Smith and Karl Marx had seen clearly the role of science in economic development, though in contemporary Britain the view was hazy. He castigated economists for their failure to analyse the 'residuals' where this type of knowhow lurked.

Dr Tom Walsh expanded at length on his understanding of what was meant by the management of research and development, and called for the development of criteria for evaluation of proposals for allocating funds as between sectors and fields.

In my own contribution I homed in on the economists' concept of 'residuals' and urged scientists to make known their work better, and to convey to the economics community the importance of science-based technological knowhow as the major engine of economic advance. The 'residual' is the reservoir of human creativity.

I rejected the idea of a 'science policy research unit' and urged that if there is to be an academic unit in this field, it should be looking historically at the role of science and technology in the economic development and innovation process, specifically in the small-nation context. It was necessary to study the dynamics of this process and make it known to students of science and economics.

I had made submissions to the processes which had led to the setting up of the National Science Council (NSC), as from the Operations Research Society and from the Institute of Physics, along the lines of the need for a Senate-like structure, representative of the various specialist interests, with a weighted voting system, so as to enable a body like the NSC to benefit by having some degree of democratic control by the people concerned.

A voting system was in use by the International Federation of Operational Research Societies which depended on the square root of the memberships of the national affiliated bodies. This enhanced the influence of the smaller groups. The producers (ie the universities) and the users (industry and the State agencies) as well as the various science disciplines should be concerned with this electoral process, in suitably designed constituencies. Such a structure would bring the politics of science out into the open, and the public would be made aware. Instead we had simply a government-nominated body.

Dr RC Geary wondered, somewhat diffidently, whether economists, some of whom regarded themselves as scientists, should be catered for in the NSC. (It is interesting that Geary should have raised this question; it was never answered, and the gulf between the science and economics communities in the 90s is wider than ever. I have occasion to address this issue increasingly in the 80s and 90s. RJ.)

Some navigational notes:

Copyright Dr Roy Johnston 1999