Visions and soporifics

Teachings from the Worldly Philosophy - The Crisis of Vision in Modern Economic Thought
May 23, 1997

The Worldly Philosophers by Robert Heilbroner is a modern classic of popularisation in economics, a book that actually makes the ideas of the great economic thinkers of past not only accessible but interesting to the average reader. It first appeared in 1953 and now, in its fifth edition as a Penguin paperback, it continues to serve as an extraordinarily effective introduction to economics.

There was little space in The Worldly Philosophers for direct quotations from the worldly philosophers themselves but that deficiency is now made good in Teachings from the Worldly Philosophy, which consists of huge chunks of selected excerpts from the masterworks of our subject, interspersed with exegetical commentaries by Heilbroner. All the favourites are there - the first few chapters of Smith's Theory of Moral Sentiments, the first few chapters of Book 1 of The Wealth of Nations plus juicy extracts from Books 2-5, short excerpts of Malthus's Essay on the Principle of Population, the rent and machinery chapters of Ricardo's Principles of Political Economy and Taxation, the property and stationary state chapters of Mill's Principles of Political Economy, paragraphs here and there of Marx's Capital, the utility chapters of Jevons's Theory of Political Economy, large parts of Walras's 1892 paper on price determination (but, oddly, nothing from his Elements of Pure Economy), some 20 pages of Marshall's Principles to convey the flavour of the whole, a generous portion of Veblen's Engineers and the Price System, long extracts of Keynes's General Theory and equally long extracts from Schumpeter's Capitalism, Socialism and Democracy.

Heilbroner's comments are almost always incisive and helpful but perhaps too kind to Marx in implying that he was correct in attributing unique productive powers to labour when in fact all inputs are productive in the sense of producing more value than they cost, and unfair to Walras in implying that he solved the stability problem in general equilibrium theory by assuming the existence of an "auctioneer'', a term that never occurs in his writings. This book is fun to read and cannot help but open one's eyes to the house that economists have built.

If all great minds think alike, so do all publishing economists. It has long been standard practice to publish introductory textbooks in economics alongside a book of ancillary readings, if only to give students some variety in their homework assignments without straining library resources. There are some dozen textbooks in print in the history of economic thought but these have never previously been published with complementary readings.

However, the fourth edition of one of these, A History of Economic Theory and Method, by Robert B. Ekelund and Robert F. Hebert has just appeared with an accompanying Classics in Economic Thought: A Reader. It is fascinating to compare Heilbroner's selections with those of Ekelund and Hebert: they agree only about half of the time but that is in part because Heilbroner's selections are generally longer, while Ekelund and Hebert spend their last 50 pages on excerpts of late-20th-century economists. Let us hope that, having shown the way, Heilbroner and Ekelund/Hebert will start a trend which will see economics undergraduates reading the works of eminent economists rather than commentaries on them.

Heilbroner's The Crisis of Vision is one of a number of books in recent years sharing a similar theme: modern economics is sick; the discipline has increasingly become an intellectual game played for its own sake and not for its practical consequences in understanding the economic world; economists have converted the subject into a sort of social mathematics in which rigour is everything and relevance is nothing; to pick up a copy of The American Economic Review or The Economic Journal these days is to wonder whether one has landed on a strange planet in which tedium is the deliberate objective of professional publication. Economics was once condemned as "the dismal science'', but the dismal science of yesterday was infinitely preferable to the soporific scholasticism of today.

Such is the diagnosis of Heilbroner and Milberg - and I fully concur. But they ascribe the malaise that is modern economics to the breakdown of Keynesianism and the unravelling of the consensus that united most economists in the 1950s and 1960s, at least on macroeconomic issues. I am not convinced that the undeniable scepticism about the possibilities of demand management which swept through the profession in the 1970s can carry the weight they assign to it. They argue that successful economic theories are always erected on powerful sociopolitical visions and that Keynesian economics was the last of these visions which characterise what Schumpeter called "classical situations'' in the history of economic thought. Now that Keynesianism and its "vision" of an economic system which fails to be inherently self-correcting has lost its hold on our intellectual sympathies, there is nothing left to unite economists, say Heilbroner and Milberg, except the appeal of esoteric technique understood only by the cognoscenti. That is why economics has become increasingly barren and has steadily vacated the policy arena.

I remain unconvinced that this is the whole story because laissez-faire, policy ineffectiveness, neutral money, vertical Phillips curves, voluntary equilibrium unemployment - in short, all the trappings of the new classical macroeconomics - are just as much characterised by "vision'' as is neo-Keynesianism. But the marriage of this style of macroeconomics to econometric pyrotechnics was not ordained and still requires convincing explanation in terms of the sociology of the economics profession.

Once their schema is accepted, the two authors take us compellingly through the evaluation of macroeconomics since the death of Keynes in 1946 (whatever happened to microeconomics? Is it not part of economics?). They conclude with some indication of the directions in which economic thought ought to move to regain its real-world relevance.

Needless to say, their positive agenda for change is, at best, thin and, at worst, hollow. But that is the nature of the beast: it is easier to criticise than to reconstruct. Still, that is no reason not to criticise: one may not be able to lay eggs but one can still taste a rotten egg when one eats it.

Mark Blaug is visiting professor ofeconomics, University of Exeter.

Teachings from the Worldly Philosophy

Author - Robert Heilbroner
ISBN - 0393 03919 6
Publisher - W. W. Norton
Price - £22.00
Pages - 353

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