Classical chic?

At a recent GES/Bank of England conference on how to improve the education of economists, a paradox became apparent. The academic world is slow to change and universities have done nothing since the financial crisis to reverse the previous trend in the undergraduate economics curriculum towards a narrower and increasingly technical education. Yet all the participating employers, from investment banks to the Government Economic Service, called for students to be given more context, in the form of both history of the economy and the history of economic thought. Who would have expected an investment banker to demand more reflective graduates while the universities resist providing them?

I read a lot of history already, and am old enough that it was still a required course in my PhD program, but know shockingly little about the history of thought in economics (albeit more than many other economists – it’s a low bar). Recently I read an excellent book, Economics Evolving, by Agnar Sandmo, from which I learned a lot. Yesterday I picked up Thomas Sowell’s collection of essays On Classical Economics, which has made its way to my book pile for reasons too complicated to go into here.

Only one chapter in, it has opened my eyes. I suppose I knew that Adam Smith was an anti-colonialist, but had wiped the memory: “Great fleets and armies … acquire nothing which can compensate the expense of maintaining them,” hindering the development of the colonies while not benefiting the imperial power. James Mill described the British Empire as “a vast system of outdoor relief for the upper classes.” The classical economists opposed slavery, mainly but not only for moral reasons; they also argued that: “Its key economic weakness was the absence of the incentive of self interest by the worker,” (to quote Sowell. p7).

The classical economists were no fans of the landed aristocracy. John Stuart Mill was scathing about landlords growing richer “in their sleep”, Ricardo saw them as profiting at the expense of capitalists and workers, the productive groups in society. J.B Say even expressed a view not dissimilar to the thought-experiment of Rawls’s veil of ignorance:

“Persons, who under a vicious order of things have obtained a competent share of social enjoyments, are never in want of arguments to justify … such a state of society… If the same individuals were tomorrow required to cast anew the lots assigning them a place in society, they would find many things to object to.” (quoted p 12)

Throw in Smith’s scathing verdict on politicians who regulate everybody else’s behaviour except that of their own kind, and it all starts to sound more radical than classical. Fascinating.

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2 thoughts on “Classical chic?

  1. One of the common accusations against “liberal” economics is that it somehow maintains the existing power structures. Of course it doesn’t. Your examples here nicely undermine this false but widespread assumption. Thanks for that.

    Hayek’s “I am not a conservative” is worth a read too, at http://www.lewrockwell.com/orig6/hayek1.html or any number of other sites.

  2. Indeed, Adam Smith was pretty virulent about monopoly power. As well as the famous quotation, there’s: “The monopoly which our manufacturers have obtained..has so much increased the number of some particular tribes of them that, like an overgrown standing army, they have become formidable to government, and upon many occasions intimidate the legislature.” I think I know what he’d say about 21st century bankers…..