Academic journal article History of Economics Review

Wilfred E.G. Salter: The Merits of a Classical Economic Education

Academic journal article History of Economics Review

Wilfred E.G. Salter: The Merits of a Classical Economic Education

Article excerpt

Abstract: During his honours research on an index of industrial production at the University of Western Australia, Wilfred Salter gained an understanding of the composite commodity theorem. The applied work on the index of industrial production provided him with the analytic foundations for his two famous contributions to economic theory, in capital theory and international trade theory. In his PhD thesis at the University of Cambridge he agreed with Joan Robinson that it is impossible to measure the aggregate capital stock because the assumptions of the composite commodity theorem do not hold in a general equilibrium framework. In the dependent economy model, however, Salter accepted the aggregation of exportables and importables because in a small open economy the terms of trade are unaffected by domestic economic policy. Thus, Salter recognised that the capital stock is an invalid aggregate in a macroeconomic model, but internationally traded goods are a valid aggregate in the dependent economy model. His success as an economic theorist lies in the fact that he understood when to apply the composite commodity theorem as an analytic tool, and when to avoid it.

1 Introduction

In 1953, Wilfred Edward Graham Salter submitted his honours thesis at the University of Western Australia, in which he constructed an index of industrial production for Australia. The thesis was well received by the faculty and, after some revisions, it was published in a monograph series of the Department of Economics. In this paper the connection between Salter's honours research and his pioneering contributions to economic theory and policy is considered. Salter was a gifted student who had the good fortune to be involved in a fruitful research project at the beginning of his professional career. During the honours year, he learnt to apply the analytic tools of economics, and he worked with new production data that had become available in many countries, including Australia, after World War II. Both the analytic skills and the applied statistical work were critical for his PhD research at the University of Cambridge and his distinguished career as an economist in the public service, which was tragically cut short at a young age.

Born in 1929, Salter spent his childhood during the Great Depression and he experienced World War II as a teenager. (1) From 1948 to 1953, he studied economics at the University of Western Australia, graduating with first-class honours. Frank Richard Edward Mauldon served as his supervisor, and Salter also acknowledged the help of Frank Benson Homer, who worked at the New South Wales Bureau of Statistics in the early 1950s. After the honours thesis, Salter embarked on an ambitious, if not hectic, schedule of research and writing. The honours thesis is dated February 1953 and the revised thesis was published by the University of Western Australia Press in 1954. (2) In January 1953, Mauldon asked Salter and Ronald William Peters to conduct a feasibility study on regional income measures for Western Australia. In September, Salter submitted a preliminary report with sectoral income measures at the state level, leaving it to Peters to disaggregate the State figures to the regional level. Pointing out some limitations of his study, Salter (1953a, p. i) mentions that he had been forced to complete it 'by a certain date', which was given by his departure for England in the second half of 1953.

In the Department of Applied Economics at the University of Cambridge, Salter found a research culture that was conducive to his research interests. In 1954, he won the Stevenson Prize for the best graduate essay, and in 1955 he submitted his PhD thesis on technical change and labour productivity. The supervisor, William Brian Reddaway, was an authority on the British index of industrial production who shared Salter's enthusiasm for applied statistical work. Salter was also helped by Laszlo Rostas, who was an expert on taxation and the measurement of productivity. …

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