Conclusion

At the beginning, we considered an economics text sitting on the desk in front of you. Making sense of that text appeared to be a straightforward problem of reading carefully. By now, however, you may wonder what sense, or how many senses, you can make of the text The problems that we have considered challenge any interpretation you may attempt, be it the construction of a general position along Stiglerian lines, a rational reconstruction, or a historical reconstruction. In conclusion, then,...

D4 Consolidation and Outreach 1990s onward

During the past decade, Post Keynesian economists addressed a changed intellectual and economic context. Neoclassical macroeconomics, which previously had been reasonably unified around the rationality principle within a general equilibrium framework, become increasingly fragmented. One branch developed around new Keynesian economics, and efforts were made by Post Keynesians to see how much scope existed for any synergy with Post Keynesianism (Rotheim, 1998). Furthermore, the confident...

The Americans Fisher Chicago Young and Currie

The story of 20th century macroeconomics begins with Irving Fisher, declares De Long (2000, p. 83). The quantity theory goes back to David Hume, if not before. But the equation-of-exchange and the transformation of the quantity theory of money into a tool for making quantitative analyses and predictions of the price level, inflation, and interest rates was the creation of Irving Fisher (De Long, 2000, p. 85). Fisher (1896) stressed expected inflation as the difference between real and money...

Transmission of Knowledge and Influence on the Scholastics

The revolution brought about by Aquinas and the Scholastics was influenced by medieval Muslim scholars it was also a reaction to the Greco-Islamic rationalism that was initially introduced to medieval Latin Christianity by the likes of Ibn Sina, Farabi, and Ibn Rushd. But how did that influence come about First, as we are reminded by historians such as Butler, Harkins, Leff, Ronan, Hitti, and others, scholars in medieval Islam were bearers of the torch of culture and civilization throughout the...

A6 Conclusion

Contemporary Austrians straddle heterodoxy and orthodoxy within the economics profession. They offer a heterodox critique of formal theory, but contribute to the policy consensus that has emerged in the past 20 years, that has moved away from state-led development to a more laissez-faire position in international and domestic policy. But the intellectual battleground today is much more defined by methodological issues than ideological ones. Indeed, many of the policy wisdoms that flow from an...

Barter and money

Ibn Khaldun, and various medieval Muslims before him, had understood the problems of barter and the importance and functions of money in a more complex economy. For example, Ghazali (1058-1111), in his Ihya, identified three problems associated with barter - the lack of double coincidence of wants, the indivisibility of goods due to the lack of a common denominator, and limited specialization (Ghazanfar and Islahi, 1990, p. 391). Ghazali was able to trace the evolution of a money-exchange...

Abandoning Whig History and the Search for General Positions

So far, we have asked what sense you as a member of the contemporary community of economists can make of a past economist's work. Stigler's principle of scientific exegesis was our starting point, and we have examined the pitfalls such as mythologies of coherence and Whig history into which it may lead us. While the legitimacy of general positions, Whig history, and notions of progress in the history of economics remain topics of debate (see Henderson, 1996 see also the discussion on history of...

A1 The Earlier History of the Austrian School

The doctrines that comprise the Austrian school of economics have varied and the relative position of the school within the mainstream of economic thought has moved from the center to the fringe several times throughout the 130 years of its history. Carl Menger, in his Grundsatze der Volkswirthshaftslehre of 1871, substituted subjective marginal utility for the classicists' objective cost of production as the theory of value. Friedrich von Wieser introduced the idea of opportunity cost and...

Anthony Brewer

The early development of economics in Britain falls into two distinct phases, before and after 1700. The seventeenth-century literature is almost wholly English and London-centered - mainly pamphlets or short books arguing a particular viewpoint or tackling a particular policy issue. There was a first flush of activity in the 1620s, a lull during the civil war and the Cromwellian republic, and sustained debate after 1660, reaching a climax in the 1690s, the first major concentrated burst of...

Tortuous Maze of Terminology

Let us start with the term orthodox economics. This term is often used interchangeably with mainstream, modern, or neoclassical economics. It is questionable how useful these terms are, especially the latter one. Colander (2000) argues that neoclassical economics is not synonymous with modern mainstream economics. Even when Veblen coined the term, it was not meant as a description of mainstream economics (p. 131). Certain aspects of neoclassical economics remain as part of modern economics, but...

Confirmation and a Counter Example

Almost in the same month that Arrow and Debreu published their seminal paper on the existence of general equilibrium, Joan Robinson (1953-4) precipitated the Cambridge-Cambridge debate in capital theory, at least when it was followed a decade later by Samuelson's surrogate production function article in 1962, the Quarterly Journal of Economics symposium on capital-reversing and capital-reswitching in 1962 and, finally, the Harcourt (1969) survey article in the...

A model of conceptualized reality

The concept of an economy involving a flow of goods and services, and the appreciation of the importance of intersectoral dependencies, were familiar in the eighteenth century. Such themes are dominant features of the work done, for example, by Sir James Steuart and David Hume. Smith's work was distinctive, at least as compared to his Scottish contemporaries, in the emphasis given to the importance of three distinct factors of production (land, labor, and capital) and to the three categories of...

B2 How it Began

In the 1970s and 1980s, the economics profession appeared to welcome neither women nor feminist ideas. Women received only 6 percent of the economics Ph.D.'s awarded in the USA in 1970, about 14 percent in 1980, and just 20 percent in 1990 (Kahn, 1995, p. 194 see also Albelda, 1997). Most economists, wrote Barbara Bergmann (1987, p. 132), were hostile to any suggestion that the economic position of women needs improvement. Economic literature had little to say about gender. Economists showed...

Autobiography

Thus far, I have only discussed biographies. Given their status as raw material for biographers and others and their recent efflorescence, autobiographies also merit attention. At the heart of any autobiography is the memory of the subject, supplemented by other external evidence. Given the importance of memory in many walks of life and the consequences of memory loss, psychologists and others have been concerned with its characteristics for decades. In the 1920s, F. C. Bartlett conducted a...

C5 The Evolving Agenda for Modern Institutionalism

A number of developments in the 1990s, in Europe, America, and elsewhere, have created a new agenda for institutional economics and an opportunity for those working in the older institutionalist traditions to contribute to cutting-edge developments. The first point of note is that the study of institutions has become one of the major topics of research throughout the social sciences. The importance of institutions in both economic theory and policy is now widely recognized. At the same time,...

A5 Economic Systems and Economic Development

The collapse of the Soviet-type economies in the late 1980s was the most significant political economy event since the Great Depression. Standard models of optimal planning and the macroeconomic examination of Soviet economic growth proved to be unable to explain the collapse of the Soviet system and offer advice for the transition from socialism to capitalism. The Austrian economists had long been the most vocal critics of the socialist economic system within the economics profession. Don...

Clarifying the Economists Role in Policy

At the end of World War II, the prospects were brighter than ever before for the close involvement of economists in the policy process. Economists had come to believe that now they had the answers to many pressing problems - and, based on their performance during the war, the citizenry was prepared, by and large, to let them prove it. The main remaining question was how best to construct institutions to use economists effectively while guarding their professional integrity. Several models from...

Carl Mengers Subjectivist Marginalism

The distinctly Austrian strand of the marginalist revolution begins with Carl Menger's path-breaking Grundsatze, or Principles, published in 1871. Like others of his time, Menger was steeped in the tradition of the older German historicists, and it is fairly clear that the Principles was Menger's attempt to bring that tradition forward. It is of note that the book is dedicated with respectful esteem to Wilhelm Roscher, then perhaps the leading thinker of the historical school. The final two...

Economics in the Utopian Literature

Utopist authors are more like social than economic theorists, and what economists of all schools would recognize as coming within their purview will vary, in part because of their diverse interests and perceptions, in part because of the heterogeneity of the ideas presented in the literature of utopia and dystopia, and in part because the central orientation and arguments, as it were, differ between utopias and dystopias. It is really impossible to generalize without exceptions. In general,...

D5 Conclusion

We have attempted a very brief account of the postwar evolution of thought loosely categorized as Post Keynesian. We have seen common threads of awareness of methodological distinctiveness from orthodox economics and of substantive-theoretical analysis of effective demand, unemployment, growth and development, and distribution, many emphasizing the role of financial markets, and the uncertainty of knowledge underpinning decision-making and institutions. As it happens, both threads...

D2 The Early Days of Post Keynesianism 1950s and 1960s

Post Keynesian economics grew out of the work of Keynes's Cambridge contemporaries. Their focus was on the principle of effective demand. By the postwar period, much work had already been done by Keynes and his circle in developing the key ideas of The General Theory (Keynes, 1936) the income multiplier, the theory of liquidity preference, and the need for demand management to address problems of unemployment equilibrium. The focus next was on extending Keynes's short-period analysis into the...

Competition the Price System and Welfare

Price theory has always been closely linked to welfare. Walras (1954 1874 , p. 255) had reached the conclusion that free competition would, subject to two conditions, give the greatest possible satisfaction of wants. This idea was developed by Pareto, who argued that free competition would produce maximum ophelimity, which he defined in the following way We will say that members of a collectivity enjoy maximum ophelimity in a certain position when it is impossible to find a way of moving from...

E4 Power Difference and Deconstruction in Radical Political Economics

The decade of the 1980s was characterized by (1) an institutionalist Marxist account of historical change through a social structure of accumulation (SSA) model and (2) a microeconomic analysis of the inefficiency of capitalist production. An SSA is a long period during which the social, economic, and political institutions supportive of capitalist accumulation are (a) explored (b) established and successfully reproduced and (c) threatened by internal contradictions within the institutional...

D3 The Spread of Post Keynesianism 1970s and 1980s

Awareness of Post Keynesian arguments in the USA was increasing. A new generation (for example, Davidson, Eichner, Kregel, Nell, and Minsky), some with Marxian as well as Keynesian and Kaleckian influences, created a body of work that challenged the growing neoclassical orthodoxy (see Lee, 2000). A meeting between Robinson and sympathizers was organized at the ASSA meetings in New Orleans in 1971 by Eichner a growing sense of identity as a school of thought was built up, finding expression in...

Economics and Philosophy

Most important for our present purposes is the work of the past three decades on the links between Keynes's philosophy and his economics. Many seminal writings on these themes started their lives as Ph.D. dissertations in Cambridge - Rod O'Donnell, Anna Carabelli, John Coates, Flavio Comim, and Jochen Runde, for example. An early, influential volume, edited by Lawson and Hashem Pesaran, was published in 1985. Subsequently, John Davis published a major monograph (1994a) and edited a major volume...

Economic policy the price of grain and taxation

In the papers written in the years 1756-7, Quesnay was busy with economic government, defined thus The state of the population and of the employment of men is therefore the principal matter of concern in the economic government of states, for the fertility of the soil, the market value of the products, and the proper employment of monetary wealth are the results of the labour and industry of men. These are the four sources of abundance, which co-operate in bringing about their own mutual...

Ethics and Jurisprudence

One of the most interesting sections of the course is that which deals with public jurisprudence. Smith began by discussing the pattern of development known to have taken place in the classical world, before going on to consider those forces which caused the decline and fall of the Roman Empire in the West. This argument, with its emphasis on the four stages, made it possible to appreciate the significance of, and the interrelations between, books V and III of the Wealth of Nations (WN). The...

Economists Biographers on the Role of Biography

In the many biographies, even those published during the past decade, there is little mention of this literature, the exceptions being Moggridge (1992, pp. xvi-xxvi) and Groenewegen (1995, p. xii). This is not surprising, as biography stands on its own as a genre - one with its own scholarly infrastructure, including the journal Biography, which is now in its 24th year. With economists, there are number of possible justifications for the exercise. One is nobody has ever written a full biography...

Frank Hahn at Cambridge

We have concentrated on the writings of, mostly, those closest to Keynes (or his ideas) as well as being influenced by the classicals and Marx, and becoming more and more disillusioned with neoclassical economics. But we also mentioned how others discerned in the IS-LM approaches the core of Keynes's system, at least as a starting point and a pedagogical device. Although the developments flowing from this were deplored by the first group, this way of doing Keynes has been most influential in...

IA What is capital How it arises

Capital might be a sum of money, a quantity of means of production, or an investment in commodities. All such shapes of capital have in common that they are value-forms. For Marx the commodity is the elementary shape of the value-form. Therefore he starts with its analysis (Capital I, Part 1), turning in succession to money and capital. There are two aspects to Part 1. First, Marx seeks in value a reference point for all of his volume I analysis. The problem of a suitable reference point has...

Game Theory and Experimental Economics

The still-continuing wave of pluralism in economic theory, begun in the wake of general equilibrium theory's collapse, is seen in the work on complexity (Mirowski, 2002), experimental economics, the market demand approach championed by Hildenbrand, Grandmont, and others, and other approaches (Rizvi, 1997b). The most prominent of the pluralist approaches became rational-choice game theory. (Rational-choice game theory contrasts with game theory that emphasizes rule-following behavior, such as...

Heterodoxy and the History of Thought

Roy Weintraub has taken a strong position that work in the Austrian, Marxian, institutionalist, or post-Keynesian tradition cannot be regarded as legitimate history of economic thought. In his view, citing long-dead economists and employing historical references does not generate historical scholarship. Weintraub notes that the history of the discipline is being increasingly told by those who are hostile to the discipline and its major contributors, and is being used to justify or criticize the...

Jeff E Biddle

What is the history of economic thought One could answer, paraphrasing Jacob Viner's answer to the question What is economics , that the history of thought is what historians of economic thought do. One purpose of this Companion is to acquaint those unfamiliar with the field with what historians of economic thought do. The first part of the Companion does this by surveying the body of knowledge that has been built up by historians of economic thought. It consists of a series of individual...

Power and Protection

A picture emerges that emphasizes how mercantilism - both as a doctrine and as a system of economic policy - was not at all particularly cohesive. It is true that, to some extent, many writers on economic topics in England as well as other countries shared a common vocabulary and some common ideas. As we have seen, many of them were preoccupied with the importance of trade and payment balances, defined either as a positive balance of trade theory or as a positive balance of labor theory....

Introduction

To judge by the distribution of Nobel Prizes in economics over the past three decades or so, it would appear that American economics - for good or ill - has come to occupy a position of world preeminence. This has not always been so. To the contrary, if we roll the clock back to consider the state of the art during the first century of the nation's existence, the United States was largely on the periphery of major intellectual developments in the discipline. Indeed, when the country's...

Market Structure and Supply

In 1920, the standard theory of supply was that of Marshall's Principles. The main characteristic of this book is that Marshall used a formal mathematical structure as a framework for constructing an evolutionary theory. Neither the algebra of the appendix nor the graphical analysis of the footnotes matched the complexity of the text. Industries, the basic unit of analysis, comprised changing groups of heterogeneous firms. Markets were competitive (free competition) but not perfectly...

Macroeconometric models

Structural macroeconometric modeling began before World War II (Tinbergen, 1939). Although Keynes was deeply skeptical of the econometric enterprise, the model-builders quickly incorporated the Keynesian framework. Nearly every postwar model is an elaboration on the simple IS-LM aggregate-supply framework. In part, this is a testament to the flexibility and breadth of that framework and, in part, a reflection of the mutual adaptation of the Keynesian model and the national-accounting...

Some Case Studies

Physiocracy is precisely one of the schools of economic thought that has been studied more frequently from the perspective of the processes involved in its international diffusion. This was, in fact, the subject underlying the organization of a conference, whose papers were later published in Delmas, Demals, and Steiner (1995), and whose original aim was a comparison of different countries in relation to the specific question of the assimilation and critical use of the analytic, doctrinal, and...

Piero Sraffas Production of Commodities

Sraffa had started long before the 1950s on a critique of the foundations of the neoclassical value and distribution theory. The first public inklings of this, as Joan Robinson saw it, were in the 1951 Introduction to the Ricardo volumes edited by Sraffa in collaboration with Maurice Dobb. She was then searching for a satisfactory theory of the origin and size of the rate of profits in her emerging work on growth theory. In the Introduction, Sraffa discussed Ricardo's theory, starting with a...

On Marx and his Capital

Marx was born in 1818 in Trier and died in 1883 in London. He studied law and philosophy and received a Ph.D. in 1841. Trained to pursue the positions of either a state official or university professor, both his studies and the repressive political climate in Prussia induced a different course. During his student years he helped fight for democratic rights, opposing the vested political regime. His subsequent writings and editorship of a liberal journal brought him into conflict with Prussian...

New Schoolers Versus Old Schoolers in the 1880s

The battle lines between the rivals in the American Methodenstreit of the 1880s were sharply drawn at the Johns Hopkins University, an institution founded in 1874 with the primary charge to compete with German universities (and all other comers, for that matter) in the production of graduate students with doctoral degrees in the liberal arts and sciences. Two strong personalities with interests in political economy were on the scene there. Simon Newcomb (18351919), an astronomer-mathematician...

Marxs Theory and Marxian Theory as a Strand

The main interpretations of Marx's work should be distinguished from the twentieth-century growth of Marxian theory as one strand alongside, in economics, the institutionalist, neoclassical, post-Keynesian, and others (for a historiography, see Howard and King, 1989-92). Marxian theory and institu-tionalism share an interdisciplinary emphasis, although Marxian theory is also a multidisciplinary project conducted by philosophers, economists, political scientists, sociologists, social...

Robert Mertons Functionalism

Prior to the publication of Kuhn's path-breaking study of scientific revolutions, the leading American sociologist of science was the functionalist Robert K. Merton, whose publications spanned the period from the late 1930s to the late 1970s. Unlike the Marxist tradition in science studies - which had a direct, if limited, impact on economic ideas - the Mertonian writings were only indirectly relevant to economics, although they were influential in shaping the prevailing view of the essential...

Self Managed Socialism After 1945

Largely in response to developments in Yugoslavia, a very substantial literature on the economics of self-management grew up in the 1970s (see Jaroslav Vanek, 1975). Branko Horvat argued that socialism required the replacement of both private and state ownership by social ownership of the means of production. This entailed that enterprises be self-managed, with their decisions coordinated by the market - but a market corrected and regulated by the state. Economic democracy, Horvat claimed,...

Policy Prescriptions

The classical economists were the first group of writers to appreciate fully the allocative role of the market. But the market operated within a framework of law, which was properly subject to development, pragmatically, as needs were discovered. Thus from Smith onward, a legitimate role for the state was recognized. Bentham and J. S. Mill distinguished between what the state should do and what it should leave alone, the contents of each list depending upon the stage of economic and political...

Money and the Economy

Money is reputed to have emerged shortly before 600 B.C. in Lydia, possibly to pay soldiers in pre-measured amounts of precious metals. Minted money, however, spread over the Mediterranean basin during the following century as a convenience in local trade. Ed Will has contended that the concept of credit preceded minted money (Will, 1955). This is supported by the early references to tally sticks and tokens that suggest fiat money. Aristotle's discussion of money has been widely recognized. He...

Research in the History of Economics

One could tell a story of how research in the history of economics has been colored by the stance that various scholars have taken toward orthodox economics. The written history could then be regarded as a vehicle for the defense or criticism of orthodoxy. The work of Terence Hutchison seems a natural place to start. Since The Significance and Basic Postulates of Economic Theory first appeared in 1938, the central methodological themes of Hutchison's research has remained essentially unchanged...

Socialism Before Marx 180050

Arguments for some form of socialism date back to classical antiquity. The case for beginning this survey around 1800 is a simple one all the writers considered here preached a socialism of affluence, denying the Malthusian claim that nature placed severe limits on material progress. For them, capitalism stood condemned for perpetuating poverty in the midst of potential plenty. The rise of modern industry, they asserted, demonstrated that human ingenuity was boundless social, political, and...

The Era of Keynesian Dominance 19451970

For at least 25 years after the end of World War II, mainstream macroeconomics was predominantly Keynesian. The General Theory had collapsed the rich debates of the 1920s and 1930s into a static, short-run, aggregative model, concerned exclusively with a closed economy. One central plank on the agenda for macro-economic research was to recover what was lost in Keynes's simplifications. A second was to use the newly available data sources to give empirical content to ever more detailed Keynesian...

The Administrative Tradition

Ancient administration emphasized personal leadership and decision-making involving labor, materials, and efficient organization. In retrospect, the best evidence shows that primitive human beings and their hominid ancestors evolved in East Africa as hunter-gatherers in simple extended family groups. In such a system, anthropological studies indicate that social bonding and informal leadership roles provided the organizational cohesion necessary for survival (Reader, 1998 1997 ). The first...

The German Historical School

By the 1830s, the economics taught and published in Germany was pragmatically eclectic, drawing widely on contemporary English and French political economy, but simply integrating this work with existing German work on the subject. As elsewhere in continental Europe, the writings of Jean-Baptiste Say had a greater substantive impact than that of the English writers, and Say's manner of combining the concept of value with utility and need, rather than labor, meant that patterns of consumption...

The Sociology of Scientific Knowledge

In recent years, students of the sociology of economics and economic methodology have drawn a distinction between the older sociology of science and the more recent sociology of scientific knowledge (SSK), arguing that whereas the former focused on the changing social and cultural context of science, the latter has been more radical, and focused on the content of science (Hands, 2001, pp. 183-4). In accordance with the positivistic, rules-based (so-called Received View) of scientific (and...

Trade and the trade balance

To understand the voluminous literature on trade in seventeenth-century England, one must first understand the way contemporary Englishmen saw their situation relative to the Dutch. The United Provinces (the modern Netherlands) had finally established their independence in 1648 after a ferocious 80-year war against Spain. They were the trading and financial center of Northern Europe and, in per capita terms, the richest place in Europe. English merchants obsessively scrutinized the Dutch to...

The Neoclassical Synthesis in Historical Perspective

In 1955, Paul Samuelson introduced the term neoclassical synthesis into his textbook We shall again and again meet in later chapters what is called the neoclassical synthesis. According to this if modern economics does its task so well that unemployment and inflation are substantially banished from democratic societies, then its importance will wither away and the traditional economics (whose concern is the wise allocation of fully employed resources) will really come into its own -almost for...

The English Historical School

In the early 1890s John Neville Keynes published a survey of economic method that would remain a standard work until Lionel Robbins's Nature and Significance of Economic Science (1932). Keynes consistently contrasted deductive and inductive approaches to the subject, suggesting however that no reasonable practitioners adhered exclusively to the one or the other. Moreover, he noted a feature that was already evident in the German case the greater the clarity and vehemence with which the one or...

World War II as a Transitional Period

Despite a degree of arbitrariness, World War II provides a natural division in the history of macroeconomics. The macroeconomics of the interwar period was a rich tapestry of competing models and methodologies, pursued with a sophistication that was only gradually regained in the postwar period (see chs. 19 and 20 Laidler, 1999). John Maynard Keynes's The General Theory of Employment, Interest and Money, published in 1936, three years before the onset of war in Europe, appeared to many as an...

The Reformation and developments in Britain

After the thirteenth century, the Church's political hegemony began to totter. Instability affected every European institution. Land-wasting wars and population-killing epidemics were frequent. Also a variety of instability-causing inventions - for example, gunpowder, navigation discoveries that opened up the New World, and the impact of book printing - changed people's thinking. The Catholic bishops, long-accustomed to thwarting pietists' demands for internal reforms, now faced strong armies...

The Rise and Fall of the Economists Prestige

The high point for economists' influence in the policy process came in the 1960s and 1970s, in the administrations of Presidents Kennedy, Johnson, Nixon, Ford, and Carter. In addition to their roles - which were well established by this time - as public administrators and advisers, economists began to appear as highranking political appointees and elected officials. Their apparent success in showing how to respond to recession, and in preparing for such domestic challenges as President...

The Tableau conomique capital and the circulation process

Quesnay devoted much effort to understanding the functioning of a large agricultural kingdom in which the government has implemented free trade the Tableau conomique was the result of this effort. In line with his theory of knowledge, Quesnay considered that genuine economic science should be grounded on sensations or, more precisely, on facts grasped through a quantitative dimension. In this respect, Quesnay was close to Petty's political arithmetic, in which the latter characterized his...

Welfare economics

Walras enunciated the principle of consumer sovereignty and modeled the way in which it operates to determine the set of commodities that are produced. The entrepreneur transmits the desires of consumers to the production side of the market, thus allocating resources so that the set of commodities produced is in accordance with the structure of consumer demands and hence reflects consumer preferences and purchasing power (1988, 188, pp. 283-4). On the basis of that analysis, Walras developed a...

A4 Beyond Microeconomics

Our story has emphasized the distinguishing characteristics of the Austrian approach in the field of microeconomic theory. The Austrian position with regard to macroeconomic theory can be summed up as follows while there may indeed be macroeconomic problems (unemployment, inflation, business cycles), there are only microeconomic explanations and solutions. There are no aggregate relationships unmoored to individual choices that matter for economic analysis. This position, of course, brought the...

Biography and the History of Economics The Literature

The conversation on the relation between biography and the history of economic thought began with William Jaff (1965) attacking the view that some historians of our science think that it a virtue to overlook biographical material as if the personal aspects of it were a contaminating substance about which the less said the better (p. 224). He attempted to make a case, with examples from his work on Walras, for the importance of biography in the understanding of analysis (p. 226). He reported...

Circular Flow and Physical Real Cost

According to Sraffa, there are two especially important interrelated features characterizing the classical theory of production and cost. First, the classical concept of production is essentially that of a circular flow. This idea can be traced back to William Petty and Richard Cantillon and was most effectively expressed by Fran ois Quesnay (1972 1759 ) in the Tableau conomique (see Aspromourgos, 1996). The classical view that commodities are produced by means of commodities is in stark...

Conclusion Trapped in the Status

We have applied the classical insight that the status quo is important to our reading of the classics. From our status quo, in which racial explanations are anathema, we see nothing unusual in the classical doctrine that racial explanations are the height of vulgarity, as John Stuart Mill put it. Philosophers who radically move the status quo tend to seem commonplace when viewed from the status quo of their creation. But this supposition of unoriginality cannot survive immersion in the context...

Economics Hutcheson

The early analyses of questions relating to political economy are to be found in three documents The Early Draft (Scott, 1937), the lectures delivered in 1762-3 (Lothian, LJ(A)), and the text discovered by Cannan (1896, LJ(B)). Cannan's discovery is the most significant in respect of both date and content. The version contained in LJ(B) is the most complete and polished and provides an invaluable record of Smith's teaching in this branch of his project in the last year of his Professorship...

Diminishing the importance of money

Although the title of Keynes's masterwork included Money and Interest, early postwar Keynesians emphasized fiscal policy over monetary policy. Although not accurate as exegesis, Hicks (1937) famously justified his judgment that the General Theory of Employment is the Economics of Depression by the special form of Mr. Keynes's theory in which the LM curve is infinitely elastic (later referred to as the liquidity trap). Empirical research in prewar Britain also suggested that the investment...

Examples of Mathematical Modeling in the History Of Economic Thought

The earliest example of an author's using MM in HET is that of William Whewell (1971b 1831 ), who produced a mathematical exposition of some of the leading doctrines in Ricardo (1851 1817 ). It was Whewell's belief, expressed in an earlier lecture on mathematical economics, that Some parts of this science of Political Economy may be presented in a more systematic and connected form, and I would add, more simply and clearly, by the use of mathematical language than without such help and moreover...

How Economics Became the Dismal Science

Perhaps the hegemony of classical thought on population growth and the stationary state is in part responsible for today's misconceptions on the origins of the dismal science phrase. Certainly, critics of the classical system would have us believe so. And almost everyone believes that Carlyle called classical political economy the dismal science as a response to T. R. Malthus's prediction that population would always grow faster than food, dooming mankind to unending poverty. In fact, Carlyle's...

Keynes Keynesians and World War II

Although a group of Keynesians dispute it (see pp. 351-2 below), those closest to Keynes regarded Keynes's core model as set in the short period. He was mostly concerned with the employment-creating effects of investment expenditure and virtually ignored its capacity-creating effects. He analyzed the conditions for the establishment of a rest state that could be associated with unemployment in a situation in which the existing stock of capital goods, supplies of skilled and unskilled labor, the...

Kahn versus Sraffa

With the change in perspective from seeing firms as identical and competing in a unified market to seeing them as single monopolies, each one with its individual market, the question arose as to whether a world of monopolies would imply different results as far as the determination of the equilibrium price was concerned. In other words, would price in an imperfect market be different from price in the case of monopoly This issue was at the heart of the contrast between Sraffa's approach and...

Money and the interest rate

Money was a perennial topic of discussion for a number of reasons. Money consisted of coins at that time, and the English coinage was in a very poor state because of wear and clipping. By the time of the eventual recoinage in 1696, coins had on average fallen to half their supposed weight. Gresham's Law (named after Sir Thomas Gresham, advisor to Queen Elizabeth), that bad money drives out good because it pays to pass on coins with a low metal content and melt down better coins for the metal,...

Putting the Theory of Value and Distribution to Work

The overwhelming importance of the theory of value and distribution for the classical economists derives from the fact that all other economic analysis was developed in terms of it the theory was indeed designed to provide a solid base from which such intricate problems as capital accumulation or different forms of technical change or various economic policy issues could be studied. A few illustrations must suffice. The data (a)-(d) singled out in order to determine the rate of profits, rents,...

Spontaneous order and Mengers marginalism

One overriding theme in Menger's Austrian marginalism is what Hayek would later term spontaneous order. Economic phenomena emerge unintentionally from the economizing activity of human beings. We, as Menger argues, only aim to do the best with what we have, whether as consumers or producers, and in so doing, we set in motion chains of causality that produce economic value, market prices, and broader patterns of economic activity. These are the causes and effects that Menger begins the text...

The Formation of Institutionalism as a Movement

The explicit identification of something called the institutional approach to economics, or institutional economics, goes back only to 1918. In 1916, Walton Hamilton mentioned that Robert Hoxie had called himself an institutional economist, so the term was in verbal use by then (Hamilton, 1974 1916 ), but its first prominent use in the literature of economics occurred in 1918 with Hamilton's American Economic Association conference paper titled The Institutional Approach to Economic Theory,...

Stiglers Principle of Scientific Exegesis

One starting point for answering that question is found in the work of George Stigler. In Textual exegesis as a scientific problem, Stigler (1965) addressed the problem of choosing among competing interpretations of a portion of an author's work. Stigler clearly has Werenfels's problem in mind when he points out that one can find in many authors' works individual passages that seem to support widely different theoretical conclusions. How should those passages be interpreted Which of them should...

The Policy Challenge of Two World Wars and Depression

Two developments in the twentieth century prompted economists to rethink their participation in the making and implementation of economic policy conflict on a massive scale between highly complex market economies, and global stagnation that seemed unwilling to disappear on its own. World War I was fought mainly without the participation of professional economists in positions of real power. Businessmen, personified in the United States by the financier Bernard Baruch, were the main advisers to...

The Fall Out from the American Methodenstreit

The Methodenstreit was to leave a formidable mark on the subsequent flow of American economics. By the mid-1890s, economists on both sides of the barricades in the preceding decade concluded that it would be opportune to mute their differences. Further blood-letting - at least in public - would be unseemly and counterproductive. Economists of all persuasions were then eager to claim standing as professionals, not least because they wished to solidify a secure position for the discipline in the...

Value

Smith designed his value theory to produce a theory of relative price, on the basis of adding up the per-unit costs of the labor, capital, and land inputs into production, the valuation of the inputs being determined separately. He explained the value of commodities in long-run equilibrium, in terms of wages, profit, and rent. Market price fluctuated around long-run equilibrium price, with departures from long-run equilibrium eliminated by the mobility of capital in response to profit...

Uses of Mathematical Modeling in the History of Economic Thought

In most of the examples reported in section 33.3, MM has been used as a simple tool of exegesis (26) less frequently in the strict, Lakatosian sense of RR employed in this essay (236) and hardly at all in IH (1236, 1246, and 12346). It is certainly the case that Samuelson's MM is almost always employed in the cause of Whig history and therefore implies the RR of a series of progressive problem-shifts. See, for example, Samuelson (1957, 1959, 1978), discussed above, in which the classical...

And History

It is obvious that MM is not RR as Lakatos understands the latter, for MM is synchronic and RR diachronic. Consider the first example of MM in Takashi Negishi's History of Economic Theory (1989), which addresses John Locke's concept of vent and its function in Locke's value theory. A simple model of supply is constructed which takes account of limited information, search for buyers and sellers, and both buying and selling costs. Negishi uses the model to show that John Law (1966 1705 ) and all...

After the Fall Socialist Economics Since 1989

The sudden and unexpected collapse of the Communist system in 1989-91 was interpreted in various ways. Many economists concluded that the infeasibility of any form of socialism had been demonstrated for all eternity. Some were more thoughtful, and less triumphalist. Joseph Stiglitz (1994) argued that information problems constituted the most important reason for the failure of the socialist experiment even Hayek had not recognized the full extent of the problem. The market socialists and the...

Larger Conception

A Platonic idealist element seems to pervade the exercise of the human intellect. One source is positivist and another is normative. The positivist source consists of efforts to distill the transcendent fundamental elements underlying the diverse and kaleidoscopic phenomena of experience in order to best describe what social reality is really all about. One version of this is Max Weber's notion of an ideal type. The normative source is grounded in efforts to transform the imperfections of...

C3 American Institutionalism

Clarence Ayres (1891-1972) was a leading American instutionalist in the postwar period. To understand Ayres's role and contribution, it is necessary to look at the context in which Ayres originally intervened and some aspects of his own thought. The original institutional economics of Veblen was partly founded on ideas from Darwinism, pragmatist philosophy, instinct-habit psychology, and cultural anthropology - from the works of Charles Sanders Peirce, William James, and several others....

David Hume

David Hume (1711-76) was a central figure in the Scottish Enlightenment. With Francis Hutcheson (Adam Smith's teacher and predecessor at Glasgow), Adam Ferguson, and others, he pioneered an approach that was historical, in that it saw human societies as the result of a long process of development, and rational, in that it refused to accept tradition or authority as a guide. His main contributions to economics are to be found in a number of short but pointed essays (1752). His most influential...

Fin de sicle Assessments

By 1900, American economics had moved a long way from where it began. This reflected transformations in the structure of the economy, as well as changes in the character of the international marketplace for economic ideas (and America's position within it). In the early going, American political economy had been heavily import-dependent, even though foreign ideas were altered to adjust their fit to circumstances in the New World. Domestic production - though sometimes strident in its assertions...

Institutionalism in the 1930s and Beyond

The above represents a significant record of achievement, but even by the 1930s areas of weakness in the institutionalist program were beginning to become apparent and new challenges were emerging from elsewhere. The difficulties internal to the institutionalist program were several. First, the effort to provide a foundation in modern psychology had met the problem that psychology was itself not anything like as stabilized as Parker had thought, and had moved from instinct habit psychology to...

Growth and Distribution

In the postwar period, Kahn, Joan Robinson, and Sraffa, stimulated by Harrod's seminal prewar and early postwar writings on growth (1939, 1948) and by the problems of reconstruction and development generally, turned their attention to generalising The General Theory to the long period. (They were later joined by Kaldor and then Luigi Pasinetti.) They reached back over the neoclassical interlude of resource allocation and price theory generally to the preoccupations of the classical political...

Intention

Although historians of economics may think of the notion of intention as intuitively straightforward, this notion has been the subject of considerable philosophic and literary debate (e.g., Newton-de Molina, 1976 Davidson, 1980a Patterson, 1990 Iseminger, 1992 Anscombe, 2000 1957 ). One categorization of notions of intention that are relevant for interpretive debates has been proposed by the philosopher Donald Davidson, as follows There are, I think, three sorts of intention which are present...

From Physical Real Costs to Quantities of Labor

The move away from physical real costs and toward labor was first due to the fact that the relatively backward analytic tools at the disposal of the classical economists did not allow them to translate the former concept into an adequate analytic framework. In order to coherently determine the general rate of profits and the exchange ratios of different commodities in terms of given physical real costs of production, the problem would have to be stated in terms of a set of simultaneous...

From the Art to the Science of Political Economy

The great classical political economists - Smith, Bentham, Ricardo, Malthus, Torrens, and the two Mills - viewed the construction of economic policy as an art. They appreciated the complexity of the process. The objectives might be several there were innumerable parties at interest to be taken into account various actors had to be mollified or foiled and new policy mechanisms had to be imagined. Colonial policy is an example. Here was the problem of balancing the interests of the metropolis and...

Economic Activity in Medieval Islam

Jourdain's observation (above) was indicative of the medieval Christian scholars' disapproval of the pursuit of riches. The Greeks too were less approving of the pursuit of riches than medieval Muslims. In Plato, we see a derogation of economic activity, reinforced by his description of the property arrangements for each class. For him, only the lowest classes - farmers and artisans - were allowed to work for profit and accumulate property the pursuit of money by the base would not arouse the...

James Steuart

Sir James Steuart (1713-80) was Scottish but spent most of his adult life on the continent and little in Britain, still less in England. While traveling as a young man he met the Stuart claimant to the British throne and committed himself to the Jacobite cause. After the defeat of the 1745 rebellion he was in exile, starting work on his Inquiry into the Principles of Political Oeconomy (1767) well before he returned to Scotland in 1762. He did not take British (really, English) success as the...

Keynes and the Classics

The General Theory emerged as a reaction to the system of thought, principally associated with Alfred Marshall and A. C. Pigou, on which Keynes was brought up and which he was to subsume, misleadingly, under the rubric of the classical school. Keynes rationally reconstructed the classical system by setting out what, though it could not be found in the writings of any one classical economist, must have been assumed and developed if sense were to be made of their attitudes and claims. (Keynes's...

Medieval Muslim Contributions to the History of Economics Beyond The Eighth Century

Although scholars in the first two and a half centuries of Islamic history demonstrated a thorough understanding of the economy of their age, their understanding of the economy was enhanced when they witnessed the rise of non-Islamic thought in their midst. Islamic understanding of economic matters benefited from the works of Greek masters, and the mirrors of Persian origin which were translated into Arabic.2 Philosophy entered Islam when, during the ninth century, the Abbasid Caliph Maamoun...

Political economy as a variety of authoritystatements and authoritysystems

For generations, economic literature prepared by pamphleteers (pens-for-hire), as distinguished from the philosophically wise (Schumpeter's ConsultantAdministrators), offered advice designed to persuade the decision-makers (in England the Parliament, elsewhere the Crown) on virtually everything. Why these English scribblers thought of themselves as brilliantly competing openly in the market of ideas, while Schumpeter thought of them as intellectual harlots, reveals much about differences in...

Materialism and Sympathy The Occupational Structure of Wages

This narrowing of the discipline also entailed the removal from economics of nonmaterial concerns. It is a commonplace to read the utilitarian economists of our period as simple materialists, concerned only with the aggregate wealth produced by society. But recent scholars have distinguished utilitarians from Adam Smith, for whom the desire for approbation is foundational and for whom approbation is incommensurate with income. Smith's treatment of the desire for approbation carried by cultural...

Markets and competition

Turgot made intensive use of Quesnay's concepts of producer and consumer prices, fundamental prices, and net product and, according to Dupont's summary of one lost letter, Turgot used a table similar to Quesnay's in Grains and Hommes, and endorsed those fundamental ideas according to which free trade offered what could be now labeled a Pareto-improving policy. However, he added new insights on the functioning of free trade. Quesnay had explained why price volatility will diminish, but Turgot...

The Capital Theory Critique

Simultaneously with these positive developments of classical cum Marxian cum Keynesian ideas occurred a critique of the foundations of neoclassical value, growth, and distribution theory associated with the so-called Cambridge controversies in the theory of capital. Starting as an attack on the capital variable in the aggregate production function, it developed, especially in the hands of Joan Robinson and Kahn, into a critique of the long-period method - comparisons of long-period positions...

Should Economics be Understood as a Natural Or A Social Science

Before Kuhn, this question was better phrased as follows Do all sciences operate on the same general principles, or do the social sciences operate on distinct principles In the 1950s, the majority view among philosophers of science and those interested in economic methodology was the former one. Logical empiricism, the dominant philosophy of science, required that all scientific theories - whatever their subject matter - be translatable into empirical observation language. Scientific inquiry...

Some Further Comments on English Marginalism

To complete this overview of English marginalism, some additional observations need to be made. These fall into two categories. First, some recognition has to be given to Sidgwick, Edgeworth, and Wicksteed. Secondly, the post-Pigovian phase of English marginalism needs brief mention as part of a summary overview of the subject. Henry Sidgwick (1838-1900) was a co-founder of the Cambridge school of economics with Marshall, since he contributed to its teaching during its formative period. His...