The importance of knowing what we thought

I’ve just finished reading

by Agnar Sandmo, and commend it to every economist and student of economics. It’s a clear and fair account of the contribution to the subject by the key figures in its intellectual history, with a focus on Adam Smith and his immediate predecessors to the 1970s. The book would make an ideal text for a history of thought module in a degree course, but is also an accessible general read for an economist seeking some perspective on the state of economics today. I particularly appreciated not being able to tell the author’s own opinions; the book simply gives a straightforward account of both sides of the various controversies.

Throughout there are enjoyable nuggets from the various economists. I liked Adam Smith’s: “Consumption is the sole end and purpose of all production; and the interest of the producer ought to be attended to, only in so far as it may be necessary for promoting, that of the consumer.” (p51). Also Marshall’s call for economists to have a cool head and warm heart, a useful reminder when so many hotheads have the stage (p265). There are also interesting sidelights: Christen Smith, one the first economics professors in the Nordic countries, had a joint appointment in economics and botany – it apparently was not uncommon to link the study of natural resources and economics in the early 19th century. What a good idea.

That it’s important for economists to know more than is the norm now about the intellectual history of their own subject seems obvious to me. As Sandmo puts it (in a discussion of Ricardo and Ricardian equivalence): “When modern economists invoke the economists of the past in support of their own views, they may sometimes provide a misleading impression of what the older economists actually said.” (p85) The book demonstrates interesting continuing strands in economic thought: there is a thread linking John Stuart Mill to John Maynard Keynes to Tyler Cowen in their shared belief – in successive centuries – in the inevitability that as capital accumulates over time, the rate of return on investment is bound to decline.

Also interesting, though, is the clear evolution of the subject. Compared with the 19th and 20th centuries, economics is now a far more empirical subject – the book touches briefly on the history of econometric thought while noting that most intellectual history of the subject ignores it. The fact that for the past decade only we’ve started to accumulate substantial amounts of economic data and the computer power and econometric techniques to analyse the datasets is going to transform the subject for the better. Economics is now also more global, with an international community of scholars in constant communication (hello Twitter economists!). Finally, economics is thoroughly professionalised compared to its early days, although only now is there a sufficiently self-aware debate amongst economists about what professional status ought to consist in, and – to an extent – what responsibilities it brings.

Anyway, Economics Evolving is a highly commended book, which completely defied my initial impression that it was going to be worthy but dull. Heilbronner’s

is still a terrific introductory read but is nothing like as substantial as this book, which is the best overview I’ve come across of the history of thought in economics.

[amazon_image id=”0691148422″ link=”true” target=”_blank” size=”medium” ]Economics Evolving: A History of Economic Thought[/amazon_image]

The Enlightened Economist is off on her annual two-week summer break now. Normal service will resume in mid-August with a series of reviews of my holiday reading.



4 thoughts on “The importance of knowing what we thought

  1. Another book for my reading list.

    An anecdote to support Sandmos’ comment “When modern economists invoke the economists of the past in support of their own views, they may sometimes provide a misleading impression of what the older economists actually said.”

    Whilst doing my time in asset management during the dot com boom, stock pickers and market commentators regularly supported their case for a bull market in technology shares by referencing Schumpeter and his concept of creative destruction.

    I warned against placing too much stock on Schumpeter for a bull case on equities as he also said “ Can capitalism survive? No. I do not think it can.”

  2. Maybe – looking at the scene in my home borough of Ealing after the riots last week – he was right? Time to re-read Schumpeter properly? As well as many important differences, many echoes of the 1930s right now.

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