7. The knowledge network, 1950 – 1970
7.1. The orthodox approach
Alongside the development of multidimensional social interactions was a new, dominant approach to the study of Australian economic history. The orthodox school is primarily attributed to the work of Noel Butlin at the ANU in the 1950s and early 1960s. This culminated in his two highly influential volumes - Australian domestic product, investment and foreign borrowing (hereafter shortened to Domestic product) and Investment in Australian economic development (hereafter shortened to Investment). In the former, Butlin compiled historical national statistics within the national income accounting framework. In the latter, Butlin used these statistics to describe the sector by sector mechanism of growth in the latter half of the nineteenth century.1 This project was published gradually in the form of articles, monographs and conference presentations throughout the 1950s.2
7.1.1. Before the big bang
Like any intellectual movement, Butlin’s contribution emerged partly through dissatisfaction with the earlier approaches to economic history.3 In particular, Butlin contended with interwar analytical scholars and their emphasis on external determinants of Australia’s economic development. He disagreed with the existing explanations for the 1890s Depression, arguing that overseas decline in wool prices and British investment came after the end of domestic expansion. Butlin argued that:
1 Butlin, Domestic Product; Butlin, Investment.
2 The following discussion considers this body of work as a whole. See Arndt and Butlin, 'National output'; Butlin and de Meel, Public capital formation; N. G. Butlin, Private capital formation in Australia, estimates 1861 - 1900, Canberra: Australian National University, 1955; N. G. Butlin, 'The shape of the Australian economy, 1861 - 1900', Economic Record, 34, 67, 1958; Butlin, 'Australian capital formation'; Butlin, Domestic Product; Butlin, Investment; N. Butlin and A. Barnard, 'Pastoral finance and capital requirements, 1860 - 1960', in Barnard, ed., The simple fleece, Melbourne:
Melbourne University Press, 1962; Butlin, 'Distribution'; Butlin, 'Rural capital'. It is also helpful to distinguish between Butlin’s descriptive and statistical texts. Descriptive texts are those that discuss the mechanisms of growth and the development of each industry from both a macroeconomic and microeconomic frame (this is mostly Butlin, Investment, though there is also some in Butlin, 'Australian capital formation'). The statistical texts discuss sources and methods, and provide an overview of the macroeconomic trends of the period.
3 Frickel and Gross, 'Scientific/intellectual movements' argue that intellectual movements emerge to challenge received wisdom or dominant ways of thinking.
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“The external influences did not affect the Australian economy by initiating a slump. Moreover, the external disequilibrium was due, not to general
disequilibrium but to a special form of domestic imbalance”.4
Butlin was fairly dismissive of Shann throughout his body of work, arguing in Investment that Shann “does little more than summarise Coghlan”. For Fitzpatrick, although Butlin conceded that his use of dialectic materialism was “special”, he also commented that that he disagreed with Fitzpatrick’s interpretation “on almost all its fundamental points”.5 Butlin commented that “all of us who have worked in Australian economic history owe to stimulus from and irritation by Brian Fitzpatrick”, and that The British Empire, at the time, served to define the basics of Australian economic history in the minds of recent
graduates, “even if not in those of more advanced practitioners”.6
Butlin took Coghlan’s approach more seriously. He and Arndt, in their co-authored article in 1950, acknowledged their debt to Coghlan’s statistical material and deliberately structured their article so the two sets of estimates were comparable. However, they criticised Coghlan’s lack of source information and description of methods, with their lucky access to his unpublished working sheets the only way a complete picture of either could be given.7 Coghlan’s failure to acknowledge sources or methods remained a criticism in Investment, with Butlin commenting that this was the key reason why the work had been disregarded by some in the economic history community. Butlin argued that this was a “tragedy”, praising the “grandeur” of Coghlan’s mind.8 A quantitative emphasis, largely inherited from Coghlan, remained consistent throughout the work of the orthodox school.
7.1.2. Butlin’s contribution
In Investment, Butlin concluded that economic growth in the latter half of the nineteenth century was initially led by pastoral investment, with manufacturing and residential construction taking the lead from the 1870s. This conclusion developed gradually, first emerging in Butlin’s co-authored article with de Meel. They argued that the growth of output was led by the production of wool for export, which then stimulated capital outlays
4 Butlin, Investment, p.407.
5 Dialectic materialism is a key cornerstone of Marxist economic history, to which Fitzpatrick contributed to.
6 Butlin, Investment, p.407, emphasis mine; Butlin, 'Shape of the Australian economy', p.10.
7 Arndt and Butlin, 'National output', pp.46-7.
8 Butlin, Investment, p.xv.
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in the pastoral industry.9 Here, though the core argument is similar, they give greater determinism to wool than Butlin does in Investment. The quantitative importance of the manufacturing industry was identified, but residential construction was not mentioned.10 Residential construction emerged in the 1955 monograph, with Butlin commenting that there had been silence about this industry in the literature, and noting surprise that it was the most important item in his estimates.11 Butlin’s emphasis on construction remained reasonably consistent in later works, with his 1958 article arguing that building was the most important industry, and specifically focussing on the concentration of people into cities in his 1959 text.12
Consistent with his focus on non-rural industries, Butlin’s work had an internalist
interpretation. He concluded that domestic factors were relatively more significant to the historical development of Australia’s economy. In Investment, Butlin argued that
urbanisation and domestic manufacturing (rather than export markets) were the dominant industries in Australia from the 1870s. When this conclusion first emerged in his monograph with de Meel in the mid-1950s, it was fairly radical.13 Butlin and de Meel seemed surprised that export trends were not as important as they initially thought, arguing that the Australian economy’s “intimate links with the British economy”, suggests that domestic economic activity should move with Britain’s.14 However, they found no consistent relationship between the two, and they speculated that comparable increases in the value of exports and imports over this period meant that trade may have played a more minor role in the determination of growth. This justification for focussing less on exports remained consistent in Butlin’s 1958 article.15
Butlin’s second key internalist conclusion was that structural disequilibrium in the form of speculation on the real estate market and inefficiencies in railways construction caused an initial downturn before the severe depression of the 1890s.16 This conclusion first
emerged in 1955. Butlin argued that the willingness of the British to invest was important
9 Butlin and de Meel, Public capital formation, p.8.
10 Butlin and de Meel, Public capital formation, p.10.
11 Butlin, Private capital formation, p.3.
12 Butlin, 'Shape of the Australian economy', p.17; Butlin, 'Australian capital formation', p.413.
13 Though Hartwell had concluded the significance of urban areas and manufacturing for the colony of Van Diemen’s Land in the early 19th century.
14 Butlin and de Meel, Public capital formation, p.11.
15 Butlin, 'Shape of the Australian economy', p.18.
16 Specifically, Butlin argued that these highly unstable domestic conditions in the second half of the 1880s meant that it was “not surprising that British investors began to hesitate, even before the Baring crisis in 1890”. See Butlin, Investment, p.351.
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for economic expansion and decline in the nineteenth century, though he was adamant that this was only part of the story, and “in some respects, not the most interesting part”.17 Butlin here argued that the initiative for British investment in this period came from Australia rather than Britain, and that although railway building was made possible by increased supply of overseas funds, it was “more importantly” possible through rising local revenues.18 Butlin’s choice of language here suggests his agenda of highlighting the worth of studying Australia for itself – though he acknowledged external factors as important, they were, in his mind, not the ‘most important’ or ‘most interesting’ factors.
Butlin had a largely inductive, quantitative approach. Unsurprisingly in light of his critique of Coghlan, Butlin included an immaculate description of sources and methods throughout his main statistical works.19 He mentioned no explicit model for the project, beyond that he was placing it within an adjusted social accounting framework. Even then, Butlin argued that “whole approach has been framed with the particular circumstances of the Australian economy […] in mind”.20 Although Butlin made small manipulations to the data – such as interpolation, extrapolating from small samples, and applying ratios across time and place – his conclusions were determined inductively from primary sources.21 Butlin used no hypothesis-testing nor counterfactuals in these works, instead building his narrative of economic growth by applying concepts to the trends found in his evidence.
Butlin’s explicit use of a theoretical framework, as shown by citations, was limited. Butlin had a low propensity to cite secondary material, with most citations used for specific quantitative data or incorporating the interpretations of other authors into his analysis.
Economic theory emerged most readily through Butlin’s measurement methods, with the national income accounting framework dominating. Coghlan, an early pioneer of national income accounting, was cited with the most frequency in Butlin’s works, with others who engaged in similar work also drawn upon.22 Kuznets’ work on business cycles and national
17 Butlin, Private capital formation, p.2.
18 Butlin, Private capital formation, p.14.
19 These are Butlin and de Meel, Public capital formation; Butlin, Private capital formation; Butlin, 'Shape of the Australian economy'; Butlin, Domestic Product.
20 Butlin and de Meel, Public capital formation, p.1. Similarly, in his 1955 volume, Butlin argued that rigid or precisely defined concepts make the estimate of private capital formation impossible, so he adopted a “cruder” and more pragmatic approach. See Butlin, Private capital formation, p.27.
21 This involved quantitative material for the most part, but also non-statistical sources such as committee hearings and recollections.
22 This includes Clark and Crawford, Wilson, and ANU colleagues Barnard and Bailey.
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income accounting was cited very little, and was used to compare Australia’s growth with the US rather than any explicit influence over procedure or approach.23
Butlin’s implicit theory was a mixture between neoclassical individualism and a Keynesian framework. Neoclassicism was demonstrated by Butlin’s emphasis on market signals and the decision-making of rational economic actors. The Keynesian influence most likely emerged from Butlin’s direct, early exposure to Keynesian economics through Nugget Coombs, Leslie Melville, and his work as a Commonwealth public servant during and immediately after WWII. At this time, he participated in “virtually a six-month continuous seminar from John Maynard Keynes telling the assembled company from the Dominions and colonies how economics should be handled”.24 More generally, Butlin’s involvement in planning for post-WWII reconstruction, biased towards the de rigueur Keynesian public policy interventionism, may have influenced his theoretical leaning. Butlin’s focus on the duality of the public and private spheres gained the most explicit expression in his work on ‘colonial socialism’, and remained a theme in Investment.25 The focus on national income accounting, and the quantitative measurement required for any public policy intervention supported this, as did Butlin’s focus on the macroeconomy and his
acceptance of capital formation as the key engine of growth. Further, though Butlin’s focus on market signals was neoclassical, his argument that macroeconomic instability was due to individuals behaving non-rationally (thus not properly responding to market signals) was reminiscent of Keynes’ contribution on the effect of herd-behaviour on markets.
Keynesianism was the dominant paradigm in the economics discipline until the 1970s.26 Butlin’s contribution was thus theoretically consistent with the contemporary economics discipline. This implicit use of economic theory was maintained by other members of the orthodox school.
7.1.3. Direct reaction and debate
Butlin’s body of work in the 1950s and early 1960s was an influential contribution to the Australian economic history community. His inductive approach, while holding roots in Coghlan’s quantitative tradition, was more refined, and provided a clear picture of sectoral
23 See Butlin, 'Shape of the Australian economy', p.13.
24 Foster, Interview with Noel George Butlin.
25 Butlin, 'Colonial socialism'.
26 P. Groenewegen and B. McFarlane, A history of Australian economic thought, London: Routledge, 1990.
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economic growth in the second half of the nineteenth century. His interpretation was relatively new, emphasising internal determinants of growth. Both Butlin’s approach and interpretation generated debate in the economic history community.
It was universally recognised that Butlin’s work represented a significant contribution to the field. Lydall, for the AEHR, explicitly likened Butlin’s work to other prominent national income accounting historians, arguing that “what Kuznets did for the United States, and Phyllis Deane and others for Britain, has now been done by Noel Butlin for Australia”.27 Boehm agreed that the work was significant through “the stimulus […] given to economists and historians to contribute with Professor Butlin to a more definitive Australian
historiography”.28 Labour economist Keith Hancock attributed the maturation of the field in the 1960s to Butlin’s work, arguing he had made the subject “one of the most fruitful fields of research at the ANU”.29 Oral history sources have also largely confirmed the prominence of Butlin, arguing that his primary contribution was tackling big questions, providing innovative interpretations of Australia’s development, and the determination and stamina to unearth a wealth of primary quantitative data.30
These testimonials are supported by the citation analysis. Table 7.1 and Table 7.2 present centrality scores for the citation network, indicating prominence based on the number and range of colleagues who cited the particular author.31 The in-bonacich power scores in Table 7.1 indicate that Butlin was unrivalled amongst his peers, with greater prominence than any of his contemporaries, and the interwar analytical scholars. Only Coghlan’s influence outstripped Butlin’s. This is a particularly impressive result considering the relatively brief period that his major works were available to the community prior to 1970. Table 7.2 presents betweenness scores, indicating prominence based on the degree to which the researcher formed the path between different groups. A high betweenness score indicates that someone either cited a wide range of scholars, or were cited by a wide range of scholars. Butlin’s betweenness score was almost double that of the next highest-scoring author. Combined with his high in-bonacich power score, this suggests this was the result of the latter. The qualitative, oral history, and quantitative sources thus concur that
27 H. Lydall, 'N.G. Butlin's anatomy of Australian economic growth', Business Archives and History, 3, 2, 1963, p.204.
28 E. A. Boehm, 'Measuring Australian economic growth, 1861 to 1938-39', Economic Record, 41, 94, 1965, p.232.
29 K. Hancock, 'Review: Butlin, Investment; Forster, Industrial Development', American Economic Review, 55, 3, 1965, p.571.
30 Boot; Davison; Dingle; Gregory; Macintyre; Pincus; Sinclair; Troy interviews.
31 Hanneman and Riddle, Social network methods. See the discussion of metrics in chapter 4.
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Butlin’s body of work rapidly achieved status as a ‘standard’ text in Australian economic history.
Table 7.1: Citation centrality, in-bonacich power, 1950 – 1970
In-bonacich power In-bonacich power as % of base value
Coghlan, TA 4193 100
Butlin, NG 3752 89
Fitzpatrick, B 3713 89
Shann, EOG 3546 85
Butlin, SJ 3374 80
Wilson, R 3122 74
Rostow, WW 2882 69
Hall, AR 2521 60
Barnard, A 2470 59
Roberts, SH 2439 58
Blainey, G 2153 51
Sinclair, WA 2021 48
Wood, GL 1931 46
Hartwell, RM 1860 44
Arndt, HW 1794 43
Cain, N 1784 43
Mills, RC 1600 38
Forster, C 1561 37
Imlah, AH 1553 37
Birch, A 1475 35
de Meel, H 1444 34
McCarty, JW 1437 34
Shaw, AGL 1432 34
Cairncross, AK 1415 34
Clapham, JH 1407 34
Jenks, LH 1406 34
Schumpeter, JA 1346 32
North, DC 1335 32
Hunter, A 1321 32
Bruns, GR 1311 31
Note: Top 30 scholars ordered by in-bonacich power score. In-bonacich indicates prominence from the actor being cited by a number of otherwise disconnected authors. As the highest-scoring scholar, Coghlan’s in-bonacich power score is taken as the base value. Average in-bonacich power for the top 30 scholars is 2120. For the whole sample, average in-bonacich power is 347.
135 Table 7.2: Citation centrality, betweenness, 1950 – 1970
Betweenness Betweenness as % of base value
Note: Top 20 scholars ordered by betweenness. Betweenness is measured as the proportion of shortest paths to other nodes that pass through the particular actor. As the highest-scoring scholar, Noel Butlin’s betweenness is taken as the base value. Average betweenness for the top 20 scholars is 3101. Average for all authors is 2099.
While influential, not all of the attention that Butlin’s work attracted was positive. In reviews, criticism centred on the construction of his statistical estimates. Lydall and Boehm both urged caution when using Butlin’s estimates, due to the occasional use of small samples and filling back from census data taken every 10 years.32 Boehm criticised Butlin’s aggregation of statistics across Australia, arguing that there was quantitative and qualitative evidence to suggest economic development fluctuated between each colony.33 There was also criticism of Butlin’s underestimation of some elements of private
investment,34 and of the limited price index.35
Butlin’s calculation of wool values generated some debate. Alan Beever, in a piece for Economic Record, praised Butlin’s work as an “invaluable pioneering study of Australian
32 Lydall, 'Anatomy'; Boehm, 'Australian economic growth'.
33 Boehm, 'Australian economic growth', p.230.
34 Boehm, 'Australian economic growth', p.213.
35 For Domestic Product, see Boehm, 'Australian economic growth'. For the 1954/1955 monographs, see R. W. Goldsmith, 'Review: Butlin and de Meel, Public capital formation in Australia; Butlin, Private capital formation in Australia', The Journal of Economic History, 18, 01, 1958.
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social accounts”, though he commented that Butlin’s use of official pre-Federation trade statistics overvalued wool by a considerable margin.36 Beever recommended non-government sources, expressing the value of the wool clip in terms of the price they received at London auction houses. Butlin’s reply, also within this journal, defended his use of trade statistics, and criticised Beever’s use of what, at face value, appeared to be a
“tantalizingly simple solution” to the very complex issue of wool values.37 Beever gave little ground, continuing to advocate for bale values. Butlin’s final reply has become
infamous with members of the community.38 In the first page and a half, Butlin argued that Beever was “wrong” on no less than 25 separate issues, and remarked to the Record’s editor that he did not wish to continue the discussion.39 Although this debate was about a fairly minor part of his estimates, and hindsight has shown that Butlin was probably correct, the patronising assertion of his point here was destructive to the community.
Beever recognised this, commenting that “Professor N. G. Butlin’s final reply leaves little scope for fruitful comment”.40 The event was also much more aggressive than other exchanges in the community, with Fogarty and Beever engaging in a much more constructive debate about the wool industry at around the same time.41 Subsequent anecdotal evidence has indicated that Butlin regretted his hasty response,42 but this debate, and others like it,43 may have contributed to the “intimidating” or “discouraging”
impression of Butlin within the wider economic history community.
There was also some criticism of Butlin’s internalist interpretation. Simkin was surprised by how little attention exports received within Butlin’s alleged overall narrative of growth, arguing that exports were a major determination of output for any small open economy
36 Beever, 'Australian wool clip', p.437.
37 See N. G. Butlin, 'A problem in prices and quantities', Economic Record, 40, 90, 1964, p.233. Butlin here conceded (as he did in Domestic Product) that the data may be flawed and in need of revision.
He recommended a number of ways forward, one of which is a project that Barnard was apparently working on at the time to determine market prices and the quality and type of wool in this period (Barnard seems to have never completed this particular project).
38 Merrett; Hutchinson interview.
39 N. G. Butlin, 'A tangled web', Economic Record, 40, 90, 1964, pp.255-6.
40 E. A. Beever, 'Spider without a web', Economic Record, 40, 91, 1964, p.467.
40 E. A. Beever, 'Spider without a web', Economic Record, 40, 91, 1964, p.467.