Book Review by Sapphire Ng
Columbia University Press
Copyright May 2016
Economic Thought provides an eclectic survey of the history of economic thought, and a myriad of pertinent economists. Exceedingly lucidly written and highly accessible, the concise chronological rendition of the diverse schools of economic thought, encompassing both the better known and the more unfamiliar, qualifies the book as an excellent outline for further in-depth study and research, for both students of economics or economic history, and the general reader.
The book sequentially and satisfactorily explored the various economic doctrines, beginning with the ancient Scholasticism, and mercantilism—the German variant of which is cameralism—moving onto classical economics, and marginalism, and then progressing to the more recent Marxism and Keynesianism.
The author rather effectively conveyed the crux of each economic thought discussed—the Scholastic economic thought, as embodied by its most important thinker Thomas Aquinas, asserts that “self-restraint and the repression of needs” represents the solution to material hardship; the mercantilist economic thinking advocates export promotion and import restrictions, and prioritizes “on running a trade surplus;” classical economics, as personified by Adam Smith and David Ricardo, revolves around the concept of “free competition,” and of market-mediated coordination, price formation, and the resultant income distribution; and marginalism, which the idea of “perfect competition” embodies its “analytical workhorse,” is credited for accelerating the entry of the twin concepts of “marginal productivity” and “marginal utility” into the intellectual arena, and thus the assimilation of “the mathematical tools of differential and integral calculus” into economics.
John Maynard Keynes and Karl Marx are most prominently explored in the book. The exceptionally influential economist Keynes, whose message “revolutionize[d]” economic policy, was very incredibly and substantially expounded upon, while Marx, the founder of “scientific socialism” and the believer of the “transience of the capitalist mode of production,” was very excellently examined. The notion of “commodity fetishism” contended by Marx to have plagued capitalism was beautifully written—people “develop a quasi-religious relationship to products and attribute imaginary and supernatural features to commodities, money, and capital.”
Especially interesting in the book is the examination of the classical economist Adam Smith; he who was recognized as the originator of countless influential and lasting ideas—Smith coined the term “mercantilism;” popularized the phrase “invisible hand” which illustrates free competition; anticipated the basic idea of “efficiency wages;” reinterpreted the “ethical status” of profits and interest to be “socially acceptable;” addressed in taxation, the ability-to-pay principle and the equivalence principle; and postulated a “famous water-and-diamond paradox” which was conjured later in the book to demonstrate another point.
The book introduces a myriad of other prominent figures in economic history, including Alfred Marshall, one who championed the method of “partial equilibria,” and whom the graph of “intersecting supply and demand curves” typically used in partial equilibrium analysis was named after, known as the “Marshallian cross;” Leon Walras who introduced the concept of tatonnement, a “groping” or trial-and-error movement toward equilibrium; and Ludwig von Mises, he who coined “praxeology”—a doctrine decreeing that economics ought to be “of human action and not of non-action as in the doctrine of equilibrium.”
Vilfredo Pareto was also explored, the architect of the famous “Pareto principle,” or the 80-20 rule, and who also introduced the concept of “ophelimity” in place of “utility;” Joseph A. Schumpeter was noted for his famous term “creative destruction;” Francis Ysidro Edgeworth was the first to introduce the concept of the “indifference curve;” David Ricardo developed the “principle of comparative advantage;” and Friedrich von Wieser elaborated what was later called “opportunity costs.” In a more intriguing note, the discussion of Plato's economic blueprint was reasoned to have “totalitarian features.” Other more modern prominent figures were also explored in the book, including Kenneth J. Arrow, John Hicks, and Amartya Sen.
Probably the most outstandingly fascinating facet of the book pertains to the examination of the critiques and comparisons of, and the disparities and clashes in, the various economic thought. The resulting dynamism is rather positively stimulating and thought-provoking, and could even conjure in the minds of readers rather comical images of intellectual sparring amongst the generations of prominent thinkers.
Smith opposed the mercantile system of monopolies, import restrictions, and export promotion, and the mercantilist promotion of cities and foreign trade; Ricardo accused Smith for his failure to recognize the inverse relationship between the real wage rate and the profit rate “for a given state of technology,” and criticized Smith's “especially unsuccessful” explanation of ground rent as an expression of the “fertility of nature;” Marx rejected Ricardo's explanation that diminishing returns in agriculture caused the fall of the rate of profit.
John R. Commons—“considered to be one of the founders of the law and economics field”—argued against methodological individualism; William Stanley Jevons “advocated an anticlassical program,” and attacked “the classical theory of value;” Mises “strictly opposed” the theory of neoclassical mainstream, and “fiercely opposed” the use of mathematics in economics, and for economics to be shaped in the image of physics; Schumpeter accused “all previous economists, excepting Marx,” for ignoring “the most important feature of capitalism: its dynamism;” Pareto repudiated cardinal utility and opted instead for the ordinal form; and last but not least, Piero Sraffa was noted to have criticized partial analysis.
Other debates within the discipline had official designations, such as the Methodenstreit debate, and the “socialist calculation debate.” The former refers to the “battle over methods”—the question of the appropriate method for economics which underlies many discussions surrounding marginalism—and the latter, relatively self-explanatory, refers to the debate about socialism.
The occasional cultural and linguistic references lend the book a unique flavor. “Chrematistics,” a word of Greek origin was introduced, and described as an “unnatural acquisitive art” that serves “the end of enrichment,” and “of acquisition for acquisition's sake.” In another instance, the French concept of “laissez faire” was said to have originated from economic liberalism.
Though subtle, the book is aptly structured to serve and guide its readers. A numbered list of the eight “Characteristics of Classical Thinking” at the start of chapter 2 is an example that helps the reader digest information. Bolded headings used throughout the book as clear signposts represent another useful tool. In chapter 2, for instance, bolded headings were used to segment “Adam Smith on the Division of Labor,” “Adam Smith on Wages, Profits, and Rent,” and “Adam Smith on the Role of the State and Taxes.” In chapter 10—“Reactions to Keynes”—the bolded headings were similarly used to organize information; there were “Post-Keynesian Theory,” “Neoclassical-Keynesian Synthesis,” “New Keynesian Macroeconomics,” and more.
In certain occasions, the author ought to have furnished more elaboration. The section on “Say's Law” for example, when introduced amidst discussions of David Ricardo's perspectives, was rather cursory and lacked further exploration or explanation that could potentially deepen the reader's understanding regarding the subject matter. Additional coverage of “Say's Law” appears even more warranted especially when the law was alluded to later in the book, for example in chapter 9, during the examination of Keynes's ideas.
Admittedly, as the author meticulously, and rather successfully, attempted to provide as extensive a survey of pertinent economic figures as possible, certain efforts, unavoidably or not, fell into the category of mere name-dropping. At specific occasions the effect could be positive—students could be stimulated to conduct further independent research—for example during the discussion of Mises, the author wrote, “Mises had several followers, especially in the United States, both in academia and in politics. It suffices to mention the economists Ludwig Lachmann (1906-1990), Murray Rothbard (1926-1995), and Israel M. Kirzner (b. 1930). Misesian ideas resonate, for example, in the writings of the Russian-American novelist Ayn Rand (1905-1982) and in proposals of members of the Tea Party.”
In other instances however, the mere name-dropping is inadequate. The final sentence of the final paragraph of chapter 1 went, “Major cameralist thinkers included Johann Joachim Becher (1635-1682), Philipp Wilhelm von Hornigk (1640-1714), Johann Heinrich Gottlob von Justi (1717-1771), and Joseph von Sonnenfels (1732-1817).” In this case, it potentially gives the reader the impression of having ended prematurely, and rather abruptly. More details and specifics could have been provided, perhaps to distinguish certain thinkers apart from the others.
At other times, compounded by the complexity of the subject matter, the compactness in which many new figures are introduced might come across as unpleasantly overwhelming for the reader. In chapter 6, within a single paragraph and in consecutive sentences one after another, an example goes, “Emil Lederer (1882-1939), a member of the German Socialization Commission along with Hilferding, Schumpeter, and others, advocated socializing “key industries”...and bring about a less unequal distribution of income. Otto Neurath (1882-1945) argued that central planning did not need prices but ...in the war economy. Carl Landauer (1891-1983) pleaded for the gradual transformation of the economy into...and expected a rapid increase in economic rationality and efficiency to result. The religious Eduard Heimann (1889-1967) placed the community above the individual and had confidence in the power of social welfare policy to transform the system.”
In contrast to the first few chapters, the second half of the book comparatively appeared to be more comprehensive, and to be laden with much more details and elaboration. Greater research ought to have been conducted pertaining to, for example, the ancient economic thoughts at the start of the book, such that the coverage is more proportional to that in the second half of, and more consistent throughout, the book.
Disclaimer: I received an advance review copy of this book from NetGalley for this review.