The Real Economy

Editorial objectives

The editorial objective of this site is to explain the theory and policy propositions of the Real Incomes Approach to Economics. This approach is largely based on the work of Hector McNeill, a British economist, who initiated research into this approach in 1975.

Role in the Real Incomes Approach

Hector McNeill started this research and development effort as a result of his dissatisfaction with taught economic theory and practice. In particular Keynesianism, and the then promise of monetarism, were unable to provide a convincing theoretical model or policies to resolve the slumpflation crisis without generating significant prejudice for substantive segments of the social and economic constituencies. In spite of this reality being observed in the 1920s-1930s, in the 1970s-1980s and again since 2007 nothing has been done to address the persistent lack of public choice and constitutional oversight of the British economy. That is, the mechanisms whereby the social and economic constituencies influence economic policy remain unaddressed by mainstream economics and policy makers. As a result macroeconomic policy continues to fail to accommodate the needs of a diverse and complex economy.

The Real Incomes Approach development programme was initiated at the same time as the emergence of supply side economics propositions. Although the Real Incomes Approach possesses significant supply side elements its mode of operation is quite different from what emerged as supply side economics.

Why the Real Incomes Approach is a distinct theory and policy approach

The main difference between Keynesianism, monetarism and supply side economics as a group (KMS) and the Real Incomes Approach is that KMS theory and policies are founded on:

assumptions concerning the role of an aggregate demand model (ADM) and the profit motive to explain how the economy works
the use of centralized coercive top down monopoly interventions in markets via interest rate setting, money volume control, taxation, public expenditure and government debt
the establishment of different sometimes contradictory objectives including increasing national income and growth, reducing inflation and unemployment, influencing exchange rates and promotion of exports and import substitution
there is no overall policy guide for the achievement of a 'positive systemic consistency' ¹

As a result, there is a failure to address the perverse outcomes of policies resulting in winners, losers and those unaffected by policy. In particular KMS theories and policies do not embed productivity enhancing incentives and there is the failure to address the impact of the profit paradox² that lowers productivity. As a result the currency is constantly devalued resulting in a cost of living problem and a falling trade balance. The fall in purchasing power has given rise to significant increases in the levels of credit and debt to maintain "standards" on the basis of an "income illusion".

Real Incomes theory and policy are founded on

assumptions concerning the role of the Production, Accessibility & Consumption Model³ of the economy and the real incomes motive to explain how the economy can operate
an acceptance of economic constituent diversity and complexity as necessitating a proactive policy enabling appropriate productivity enhancement according to the conditions of each economic unit
the use of policy instruments that can be manipulated by enterprise management according to business rules that enable a proactive and systemic control of productivity, inflation, more competitive prices and growth in real incomes
the establishment of a single comprehensive objective of increasing national real income where national income represents the aggregate real incomes of company owners, shareholders and employees as well as the self-employed and unemployed
the elimination of the profit paradox to enhance resource allocation efficiency and remove conflict between wages and profit while enhancing real incomes of ownership and employees
the elimination of corporate taxation as a constraint on microeconomic allocative decisions and solving the profit paradox to enhance resource allocation efficiency and remove the conflict between wages and profit while enhancing real incomes of ownership and employees
the overall policy outcome as a result of the ability of economic units to respond according to their specific requirements, within the policy framework, leads to the achievement of a 'positive systemic consistency' ²

As a result there is a growth in employment, real incomes and a stabilization in the purchasing power of the currency because of a direct control over inflation.

The Real Incomes Approach is based a more direct reliance upon the proactive decisions of economic participants and therefore enhances qualified public choice and strengthens constitutional oversight of the conduct of economic affairs.

The Editor

This website is edited by Hector McNeill, the lead developer of the Real Incomes Approach and director of SEEL (Systems Engineering Economics Lab). He is also the Editor of the Series "Charter House Essays in Political Economy", the only international journal dedicated to the Real Incomes Approach, published by Hambrook Publishing Company. He was born in Portsmouth, Hampshire and attended Friends School, Great Ayton, North Yorkshire and the Southern Grammar School in Portsmouth. He completed his undergraduate studies Clare College, Cambridge University and post-graduate studies at Cambridge and Stanford University, California in macroeconomics, microeconomics and systems engineering. He is the author of the constitutional work,"The Briton's Quest for Freedom - Our unfinished journey...", HPC, 2007.

Contacts: hector.mcneill@realincomes.org.uk
Telephone: +44 (0) 7760 444 625