In fact, Hutt simply redefines what is generally called (1) involuntary unemployment, and (2) unused (but potentially useable) capital goods as types of “pseudo-idleness.” Hutt’s analysis consists of serial use of the fallacy of equivocation. Hutt simply re-defines terms at will and implies that he has made some substantive point that refutes Keynesianism. But his arguments do no such thing.
For example, for Hutt, an unemployed man actively searching for work is really “employed,” because he is “working on his own account without immediate remuneration” (Hutt 2011 : 24). But such an eccentric definition of “employment” does not change the fact that the man in question remains unemployed in the sense of not being employed in work for which he receives money wages which can be used to buy output, and where he creates goods and services for sale in the community. Hutt refutes no substantive idea in Keynesian economics with his hare-brained re-definition of “employment.”
Amongst Hutt’s other inane observations we find the statement that humans who are sleeping are not economically “idle” resources (Hutt 2011 : 23). Yet no Keynesian, or any other economist for that matter, has ever regarded sleeping human beings as an economic problem requiring government intervention. So what’s the point of Hutt’s trivial comment?
With regard to capital goods, Hutt says that idle capital goods maintained by their owners but not used in production are only “pseudo-idle,” because the owners are preserving the availability of the capital goods for future use (Hutt 2011 : 25). This does not change the fact that the capital goods in question would be of greater social and economic use if they were actually employed in production. During recessions, that can be brought about by government policy to create more demand for final output.
One can only marvel at the stupidity of Hutt’s verbal legerdemain and the awe with which he is treated by equally deluded libertarian ideologues.
Finally, this statement by Hutt gives us an example of the level of his economic analysis:
“If we consider the actual ‘unemployed,’ it is impossible to regard them as ‘valueless resources.’ They are not unemployed for that reason. At low enough wage-rates they could practically all be profitably absorbed into some task, even if their earnings were insufficient in many cases to pay for physically or conventionally necessary food, let alone clothing and housing. In a slave economy, such people might be allowed to die off; or they might, for sentimental reasons, be kept alive.” (Hutt 2011 : 19).There you have it.
In Hutt’s imaginary world, all involuntary unemployment can just be eliminated by lowering wages and prices, and employment is reduced to a simple function of well-behaved supply and demand curves for labour. Unfortunately, some equilibrium wages might be below subsistence level, so that people working for such wages can expect to starve to death – a state of affairs that will no doubt provide a “final solution” to all those pesky unemployed people.
In the set of assumptions required for Hutt’s imaginary world to work, there are no complex causes of unemployment. If only wages and prices were near perfectly flexible, economic problems would disappear. Hutt’s fantasy world economics requires that businesses and households can just magically change fixed nominal debt or wage contracts. Businesses do not prefer to administer prices. Business inducement to investment is not strongly influenced by expectations, demand, expected demand, the level of consumption in the community, or the state of the financial system, and so on.
In short, William Hutt’s economics has virtually zero relevance to a real world market economy. And it doesn’t inspire much confidence in the rest of his analysis.
Hutt, William Harold. 2011 . The Theory of Idle Resources (2nd edn.). Ludwig von Mises Institute, Auburn, Ala.