Adam Smith's Disciplinary Capitalism

I typically cringe at the language of "disciplinarity" in contemporary political theory (at least, in political theory tinged with Foucault). Usually, the jargon seems at best unnecessary, and at worst deliberately obfuscatory.

Very broadly, "disciplinarity" is meant to pick out the new way that modern societies wield social power and control over their subjects. Unlike traditional explicitly hierarchical regimes, the modern, liberal world is committed to an ideal of open, transparent, egalitarian government. Gone is the traditional relationship of "ruler-ruled." In its place have arisen "disciplinary" institutions that bend souls rather than break them.

At least, that's my understanding of Foucault passages like the following:

The disciplines show, first, according to artificially clear and decanted systems, the manner in which systems of objective finality and systems of communication and power can be welded together. They also display different models of articulation, sometimes giving preeminence to power relations and obedience (as in those disciplines of a monastic or penitential type), sometimes to finalize activities (as in the disciplines of workshops or hospitals), sometimes to relationships of communication (as in the disciplines of apprenticeship), sometimes also to a saturation of the three types of relationship (as perhaps in military discipline, where a plethora of signs indicates, to the point of redundancy, tightly knit power relations calculated with care to produce a certain number of technical effects). 

What is to be understood by the disciplining of societies in Europe since the eighteenth century is not, of course, that the individuals who are part of them become more and more obedient, nor that they set about assembling in barracks, schools, or prisons; rather, that an increasingly better invigilated process of adjustment has been sought after-more and more rational and economic-between productive activities, resources of communication, and the play of power relations. 

(The insights found in such passages are probably better expressed by Tocqueville and Weber. And there without any Cohenite "bullshit.")

Though I hate the language, unfortunately, I can think of no better description than "disciplinary capitalism" for Adam Smith's defense of price-gouging in times of scarcity.

Libertarian or classical-liberal defenses of price gouging are well known. In short: Driving up the price of a scarce resource seems morally icky, but it is actually a socially beneficial means of encouraging suppliers to bring the needed-resource to the deprived area. What a fantastic convergence of private interest (the interest of the seller in making as much money as possible) and the common good (the benefit following from the inflow of the needed resource)!

That, so far as I understand it, is the standard classical-liberal position. (John Locke's Venditio may be the earliest articulation of this core logic. Michael Munger has an interesting post on that here).

So one would expect Adam Smith to say something like that. Yet here's his own explanation (from WN) of the benefit of price-gouging in a time of famine:

[the merchant] is likely to sell all his corn for the highest price, and with the greatest profit; and his knowledge of the state of the crop, and of his daily, weekly, and monthly sales, enable him to judge, with more or less accuracy, how far they really are supplied in this manner. Without intending the interest of the people, he is necessarily led, by a regard to his own interest, to treat them, even in years of scarcity, pretty much in the same manner as the prudent master of a vessel is sometimes obliged to treat his crew. When he foresees that provisions are likely to run short, he puts them upon short allowance. Though from excess of caution he should sometimes do this without any real necessity, yet all the inconveniencies which his crew can thereby suffer are inconsiderable, in comparison of the danger, misery, and ruin, to which they might sometimes be exposed by a less provident conduct.

In other words, the benefit of price gouging is NOT that the price signal will draw in further grain merchants. The benefit is that the high price will force consumers to more frugally consume! This is not a story of market equilibration, but of character reformation! Free-trade capitalism disciplines people by teaching them prudence. What happens to the imprudent family that can't afford the sky-high price of grain? Well, they better learn!

Smith says something similar about the benefits of free trade in alcohol. It is true (as the moralists claim) that liberalizing this trade will lead to cheaper booze, which will, in turn, increase drunkenness in the short term. Yet Smith claims the experience of drunkenness will somehow discipline the people! Having experienced the harmful effects of excessive liquor consumption, the people will learn the virtue of sobriety. Also WN:

Were the duties upon foreign wines, and the excises upon malt, beer, and ale, to be taken away all at once, it might, in the same manner, occasion in Great Britain a pretty general and temporary drunkenness among the middling and inferior ranks of people, which would probably be soon followed by a permanent and almost universal sobriety. At present drunkenness is by no means the vice of people of fashion, or of those who can easily afford the most expensive liquors. A gentleman drunk with ale, has scarce ever been seen among us.

Humean Utility: Good Enough

A professor of mine is fond of this striking passage from Appendix III of David Hume's Enquiries: 

All the laws of nature, which regulate property, as well as all civil laws, are general, and regard alone some essential circumstances of the case, without taking into consideration the characters, situations, and connexions of the person concerned, or any particular consequences which may result from the determination of these laws in any particular case which offers. They deprive, without scruple, a beneficent man of all his possessions, if acquired by mistake, without a good title; in order to bestow them on a selfish miser, who has already heaped up immense stores of superfluous riches. Public utility requires that property should be regulated by general inflexible rules; and though such rules are adopted as best serve the same end of public utility, it is impossible for them to prevent all particular hardships, or make beneficial consequences result from every individual case. It is sufficient, if the whole plan or scheme be necessary to the support of civil society, and if the balance of good, in the main, do thereby preponderate much above that of evil. Even the general laws of the universe, though planned by infinite wisdom, cannot exclude all evil or inconvenience in every particular operation. (emphasis added)

The puzzle: Why do we honor the laws of property when they appear to take from the poor, beneficent man and give to the wealthy miser? 

The answer: Because law forces us to deal abstractly and formally with matters of property. We cannot take into account the relative deservingness of the parties. We must enforce "general inflexible rules" because they ultimately best serve the "public utility."

This is a familiarly Humean thought. Hume is, after all, the great theorist of rules, norms, and conventions. Good rules need not return the just outcome in every particular instance, what matters is that they promote utility taken on the whole. 

In that sense, Hume is broadly read as anticipating "rule consequentialist" improvements on utilitarianism. 

But that interpretation misses a key detail of this passage. Consequentialism, even of the rule-sort, is interested in maximization. But Hume's point here is not that these inflexible property rules will maximize public utility in the long run. His point is that these rules are good enough. The reason to enforce these rules is because in the long run they promote substantially more good than harm. 

The obvious reply is: Well what if we can develop a system of property that does better than the current laws in the long run?

Importantly, Hume doesn't go down that path. Indeed, the calculating, maximizing instinct characteristic of utilitarianism is broadly absent in the Humean system. 

Hume's focus on rules/laws that get us good enough is key to understanding Hume's conservatism. For Hume, it is a miracle that anything works at all. The laws of property are to be defended not because they are perfect, and not because they are utility maximizing, but because they do a good enough job of staving off the dysfunction characteristic of feudal and primitive societies. 

The right question for politics is not: How do we maximize utility. It is rather: How is it that anything functions at all? The instinct of asking how to best maximize any desirable output would probably appear to Hume the path of madness. 

In "Of the Original Contract," Hume makes the anti-revolutionary character of this "it's-good-enough-conservatism" clear: 

Did one generation of men go off the stage at once, and another succeed, as is the case with silk-worms and butterflies, the new race, if they had sense enough to choose their government, which surely is never the case with men, might voluntarily, and by general consent, establish their own form of civil polity, without any regard to the laws or precedents, which prevailed among their ancestors. But as human society is in perpetual flux, one man every hour going out of the world, another coming into it, it is necessary, in order to preserve stability in government, that the new brood should conform themselves to the established constitution, and nearly follow the path which their fathers, treading in the footsteps of theirs, had marked out to them. Some innovations must necessarily have place in every human institution, and it is happy where the enlightened genius of the age give these a direction to the side of reason, liberty, and justice: but violent innovations no individual is entitled to make: they are even dangerous to be attempted by the legislature: more ill than good is ever to be expected from them: and if history affords examples to the contrary, they are not to be drawn into precedent, and are only to be regarded as proofs, that the science of politics affords few rules, which will not admit of some exception, and which may not sometimes be controuled by fortune and accident. The violent innovations in the reign of Henry VIII. proceeded from an imperious monarch, seconded by the appearance of legislative authority: Those in the reign of Charles I. were derived from faction and fanaticism; and both of them have proved happy in the issue: But even the former were long the source of many disorders, and still more dangers; and if the measures of allegiance were to be taken from the latter, a total anarchy must have place in human society, and a final period at once be put to every government.

Do Great Ideas Sink or Float?

It is commonplace to praise great ideas for having stood "the test of time." Implicit in that thought is that if an idea keeps kicking around, then it must capture some deep truth, a truth that allows it to resurface again and again in wildly different historical moments.

Francis Bacon thinks the opposite. On his view, the persistence of an idea is likely a symptom of its superficiality. It floats along the waters of time precisely because of its frivolity. Serious ideas are heavy and thus difficult to understand. So they sink down with time, rather than float along with the current.

From The Great Instauration:

"Now as far as the people are concerned, the doctrines that most flourish are either contentious and pugnacious, or bland and empty, such, that is, as either ensnare assent or win it by flattery. And therefore the greatest minds in every age have doubtless felt their force; while being men of uncommon capacity and understanding they have nonetheless, with an eye to their popular reputation, submitted to the judgement of time and of the multitude; and as a result, any more exalted reflections that may have gleamed forth were straightaway buffeted and extinguished by the winds of popular opinion. The result has been that Time, like a river, has brought down to us the light and inflated while it has sunk the weighty and solid." (Preface)

The pre-Socratics were better than Plato and Aristotle. They "did not open schools, so far as we know, but applied themselves to the search for truth more quietly, austerely and without fuss, making no great show or parade about their work. They did their work better, in my opinion, only their teachings have been obscured over the passage of time by those shallower men who pay more attention and regard to the grasp and wishes of common people. Time, like a river, brings down to us what is lighter and more puffed up, and lets the heavier, solid matters sink." (I.71)

Philosophy was corrupted after it became dominated by Plato and Aristotle. Things were fine until the fall of Rome, when Aristotelian and Platonic philosophy became dominant (I imagine he's blaming the Church for that): "It was only in still later times, with the flooding of the barbarians into the Roman Empires and the virtual shipwreck of human learning, that the philosophies of Aristotle and Plato, like light and insubstantial flotsam, survived the waves of time." (I.77)

Locke on Intellectual Inheritance and Progress

From the fascinating fourteenth chapter of John Locke's The Reasonableness of Christianity:

When Truths are once known to us, though by Tradition, we are apt to be favourable to our own Parts; and ascribe to our own Understandings the Discovery of what, in reality, we borrowed from others; Or, at least, finding we can prove what at first we learnt from others, we are forward to conclude it an obvious Truth, which, if we had sought, we could not have missed. Nothing seems hard to our Understandings, that is once known; And because what we see we see with our own Eyes, we are apt to over-look or forget the help we had from others, who shewed it us, and first made us see it, as if we were not at all beholden to them for those truths, which they opened the way and lead us into. For Knowledge being only of Truths that are perceived to be so, we are partial enough to our own Faculties to conclude that they of their own strength would have attained those Discoveries without any assistance from others. Knowledge is light in the mind, which we see and perceive: And whilst it is certain that they be our own eyes that see and perceive it, who shall perswade us that ours were not made and given us to find truth as well as theirs who had no other advantage but the luck to be before us? Thus the whole stock of Human Knowledge is claimed by every one, as his private Possession, as soon as he (profiting by others Discoveries) has got it into his own mind; And so it is: But not properly by his own single Industry, nor of his own Acquisition. He studies, 'tis true, and takes pains to make a progress in what others have delivered; But their pains were of another sort, who first brought those Truths to light, which he afterwards derives from them. He that Travels the Roads now, applauds his own strength and legs, that have carried him so far in such a scantling of time; And ascribes all to his own Vigor, little considering how much he owes to their pains, who cleared the Woods, drained the Bogs, built the Bridges, and made the Ways passable; without which he might have toiled much with little progress. 

A wonderful little passage.

 

John Locke and the Janitorial Theory of Philosophy

From the wonderful "Epistle to the Readers" in Locke's Essay Concerning Human Understanding:

The commonwealth of learning is not at this time without master-builders, whose mighty designs in advancing the sciences, will leave lasting monuments to the admiration of posterity; but every one must not hope to be a Boyle, or a Sydenham; and in an age that produces such masters, as the great — Huygenius, and the incomparable Mr. Newton, with some others of that strain; it is ambition enough to be employed as an under-labourer in clearing the ground a little, and removing some of the rubbish that lies in the way to knowledge; which certainly had been very much more advanced in the world, if the endeavours of ingenious and industrious men had not been much cumbered with the learned but frivolous use of uncouth, affected, or unintelligible terms, introduced into the sciences, and there made an art of, to that degree, that philosophy, which is nothing but the true knowledge of things, was thought unfit, or uncapable to be brought into well-bred company, and polite conversation. Vague and insignificant forms of speech, and abuse of language, have so long passed for mysteries of science; and hard and misapplied words, with little or no meaning, have, by prescription, such a right to be mistaken for deep learning, and height of speculation, that it will not be easy to persuade, either those who speak, or those who hear them, that they are but the covers of ignorance, and hindrance of true knowledge. To break in upon the sanctuary of vanity and ignorance, will be, I suppose, some service to human understanding: though so few are apt to think they deceive or are deceived in the use of words; or that the language of the sect they are of, has any faults in it which ought to be examined or corrected; that I hope I shall be pardoned, if I have in the third book dwelt long on this subject, and endeavoured to make it so plain, that neither the inveterateness of the mischief, nor the prevalence of the fashion, shall be any excuse for those, who will not take care about the meaning of their own words, and will not suffer the significancy of their expressions to be inquired into.

I take this to be a great statement of the ambition of modern philosophy. Locke apparently lowers the sights: Philosophers cannot hope to be "master builders" of human knowledge in the way the great scientists can be. The philosopher's task is merely to clear the ground of intellectual debris. But that janitorial project (clarifying some terms, making some distinctions) is soon revealed to be transformative in its own right. The goal is to do away with the prejudices and superstitions that clutter human thought. Without such a clearing, we are incapable of exercising reason or persuasion.

Sheldon Wolin has a nice reading of this section in chapter nine, part II of Politics and Vision (expanded edition).

Two Visions (Or Two Assessments) of Democratic Freedom

Plato on democratic man:

He lives out his life from day to day, gratifying the desire of the moment. One day he drinks himself under the table to the sound of the pipes, the next day he is on a diet of plain water. Now he is taking exercise, but at other times he is lazing around and taking no interest in anything. And sometimes he passes the time in what he calls philosophy. Much of his time is spent in politics, where he leaps to his feet and says and does whatever comes into his head. Or if he comes to admire the military, then that is the way he goes. Or if it’s businessmen, then that way. There is no controlling order or necessity in his life. As far as he is concerned, it is pleasant, free, and blessed, and he sticks to it his whole life through. (Republic 561c-d)

Karl Marx on freedom:

In communist society, where nobody has one exclusive sphere of activity but each can become accomplished in any branch he wishes, society regulates the general production and thus makes it possible for me to do one thing today and another tomorrow, to hunt in the morning, fish in the afternoon, rear cattle in the evening, criticise after dinner, just as I have a mind, without ever becoming hunter, fisherman, herdsman or critic. This fixation of social activity, this consolidation of what we ourselves produce into an objective power above us, growing out of our control, thwarting our expectations, bringing to naught our calculations, is one of the chief factors in historical development up till now. (From the German Ideology)

Compare and contrast.

A Maryland Farmer on Popular Ignorance

One of the Antifederalists' chief objections to the new constitution was its insufficient guarantee of the right to a local jury trials. The jury was taken as indispensable for the protection of liberty and as a constitutive of democratic self-government. Here's how one Antifederalist (A Maryland Farmer IV) replies to the objection that the people are too ignorant to participate in self-rule through the jury. This objection (and A Maryland Farmer's reply) are relevant for a number of contemporary debates that circle around the alleged ignorance of citizens and voters:

Why shall we rob the Commons of the only remaining power they have been able to preserve, for their personal exercise? Have they ever abused it? I know it has and will be said they have; that they are too ignorant; that they cannot distinguish between right and wrong; that decisions on property are submitted to chance; and that the last word, commonly determines the cause. There is some truth in these allegations, but whence comes it. The Commons are much degraded in the powers of the mind: They were deprived of the use of understanding when they were robbed of the power of employing it. Men no longer cultivate, what is no longer useful, should every opportunity bed taken away, of exercising their reason, you will reduce them to that state of mental baseness, in which they appear in nine-tenths of this globe. ... Give them power and they will find understanding to use it.

Chesterton Against Determinism

A beautiful excerpt from The Outline of Sanity: (emphasis added)

Now no doubt most people even in the logical city of Paris would say that the Eiffel Tower has come to stay. And no doubt most people in the same city rather more than a hundred years before would have said that the Bastille had come to stay. But it did not stay; it left the neighbourhood quite abruptly. In plain words, the Bastille was something that man had made and, therefore, man could unmake. The Eiffel Tower is something that man has made and man could unmake; though perhaps we may think it practically probable that some time will elapse before man will have the good taste or good sense or even the common sanity to unmake it. But this one little phrase about the thing "coming" is alone enough to indicate something profoundly wrong about the very working of men's minds on the subject. Obviously a man ought to be saying, "I have made an electric battery. Shall I smash it, or shall I make another?" Instead of that, he seems to be bewitched by a sort of magic and stand staring at the thing as if it were a seven-headed dragon; and he can only say, "The electric battery has come. Has it come to stay?" 

Before we begin any talk of the practical problem of machinery, it is necessary to leave off thinking like machines. It is necessary to begin at the beginning and consider the end. Now we do not necessarily wish to destroy every sort of machinery. But we do desire to destroy a certain sort of mentality. And that is precisely the sort of mentality that begins by telling us that nobody can destroy machinery. Those who begin by saying that we cannot abolish the machine, that we must use the machine, are themselves refusing to use the mind.

Of course, it must be acknowledged that sometimes the only way to destroy the mentality that tells us the machine cannot be destroyed is by destroying some machines. 

Goethe's Allegory for Intellectual Dogmatism: The Old Castle

Johann Wolfgang von Goethe developed a famous theory of optics to criticize the dominant theory of his day: That developed by Sir Isaac Newton over a century prior. The details of Goethe’s theory (and the metaphysical stakes of his dispute with Newton) are interesting in themselves. But below is an excerpt from Goethe’s Preface that makes a powerful, more general critique of dogmatic intellectual parochialism. We cling to old theories as we do to old castles, mistaking incoherence for sophistication. To save a failing theory, we introduce unprincipled epicycles and caveats. To save a falling castle, we build incongruous corridors and wings. These solutions might address local problems, but they fail to confront the deeper, systematic issues. The proper course in both cases is to tear the thing down. (One wonders how this imagery of the “old castle” relates to Goethe’s praise for Gothic architecture, most famously the Strasbourg Cathedral).

From Goethe’s Preface:

In the second part [the polemic part] we examine the Newtonian theory; a theory which by its ascendancy and consideration has hitherto impeded a free inquiry into the phenomena of colours. We combat the hypothesis, for although it is no longer valid, it retains a traditional authority in the world. Its real relations to its subject will require to be plainly pointed out; the old errors must be cleared away, if the theory of colours is not still to remain in the rear of so many other better investigated departments of natural science. Since, however, this second part of our work may appear somewhat dry as regards its matter, and perhaps too vehement and excited in its manner, we may here be permitted to introduce a sort of allegory in a lighter style, as a prelude to that graver portion, and as some excuse for the earnestness alluded to.

We compare the Newtonian theory of colour to an old castle, which was at first constructed by its architect with youthful precipitation; it was, however, gradually enlarged and equipped by him according to the exigencies of time and circumstances, and moreover was still further fortified and secured in consequence of feuds and hostile demonstrations.

The same system was pursued by his successors and heirs; their increased wants within, the harassing vigilance of their opponents without, and various accidents compelled them in some places to build near, in others in connection with the fabric, and thus to extend the original plan.

It became necessary to connect all these incongruous parts and additions by the strangest galleries, halls, and passages. All damages, whether inflected by the hand of the enemy or the power of time, were quickly made good. As occasion required, they deepened the moats, raised the walls, and took care there should be no lack of towers, battlements, and embrasures. This care and these exertions gave rise to a prejudice in favour of the great importance of the fortress, and still upheld that prejudice, although the arts of building and fortification were by this time very much advanced, and people had learnt to construct much better dwellings and defences in other cases. But the old castle was chiefly held in honour because it had never been taken, because it had repulsed so many assaults, had baffled so many hostile operations, and had always preserved its virgin renown. The renown, this influence lasts even now: it occurs to no one that the old castle has become uninhabitable. Its great duration, its costly construction, are still constantly spoken of. Pilgrims wend their way to it; hasty sketches of it are shown in all schools, and it is thus recommended to the reverence of susceptible youth. Meanwhile, the building itself is already abandoned; its only inmates are a few invalids, who in simple seriousness imagine that they are prepared for war.

Thus there is no question here respecting a tedious siege or a doubtful war; so far from it we find this Eighth Wonder of the World already nodding to its fall as a deserted piece of antiquity, and begin at once, without further ceremony, to dismantle it from gable and roof downwards; that the sun may at last shine into the old nest of rats and owls, and exhibit to the eye of the wondering traveler the labyrinthine, incongruous style of building, with its scanty, make-shift contrivances, the result of accident and emergency, its intentional artifice and clumsy repairs. Such an inspection will, however, only be possible when wall after wall, arch after arch, is demolished, the rubbish being at once cleared away as well as it can be.

To effect this, and to level the site where it is possible to do so, to arrange the materials thus acquired, so that they can be hereafter again employed for a new building, is the arduous duty we have undertaken in this second part. Should we succeed by a cheerful application of all possible ability and dexterity, in raising this Bastille, and in gaining a free space, it is thus by no means intended at once to cover the site again and to encumber it with a new structure; we propose rather to make use of this area for the purpose of passing in review a pleasing and varied series of illustrative figures.

The basic contention here—that apparent inconsistencies derive from ad hoc, sub-optimal additions, not deep wisdom—contrasts with the more conservative disposition often identified with “Chesterton’s Fence.” So-named for Chesterton’s example in The Thing:

In the matter of reforming things, as distinct from deforming them, there is one plain and simple principle; a principle which will probably be called a paradox. There exists in such a case a certain institution or law; let us say for the sake of simplicity, a fence or gate erected across a road. The more modern type of reformer goes gaily up to it and says, “I don’t see the use of this; let us clear it away.” To which the more intelligent type of reformer will do well to answer: “If you don’t see the use of it, I certainly won’t let you clear it away. Go away and think. Then, when you can come back and tell me that you do see the use of it, I may allow you to destroy it.

This paradox rests on the most elementary common sense. The gate or fence did not grow there. It was not set up by somnambulists who built it in their sleep. It is highly improbable that it was put there by escaped lunatics who were for some reason loose in the street. Some person had some reason for thinking it would be a good thing for somebody. And until we know what the reason was, we really cannot judge whether the reason was reasonable. It is extremely probable that we have overlooked some whole aspect of the question, if something set up by human beings like ourselves seems to be entirely meaningless and mysterious. There are reformers who get over this difficulty by assuming that all their fathers were fools; but if that be so, we can only say the folly appears to be a hereditary disease. But the truth is that nobody has any business to destroy a social institution until he has really seen it as an historical institution. If he knows how it arose, and what purposes it was supposed to serve, he may really be able to say that they were bad purposes, or that they have since become bad purposes, or that they are purposes which are no longer served. But if he simply stares at the thing as a senseless monstrosity that has somehow sprung up in his path, it is he and not the traditionalist who is suffering from an illusion.

Of course, there is no necessary contradiction between these two claims. Goethe would respond that in the case of the old castle, we know why these wings and corridors and moats were built, and we know how to better achieve the purposes they once served. One also might want to distinguish between practical and theoretical matters. We may favor a presumptive commitment to parsimony in theory building (we want our theories to be short, elegant, and powerful), while nonetheless acknowledging that apparently convoluted social systems embody truths our limited human reason doesn’t fully grasp at the moment.

Still, the contrast between the two dispositions is illuminating, I think.

On the History of Economic Thought

Should economists study the history of economic thought? They certainly used to! But today, the history of economic ideas has become something of mere antiquarian interest (if that) to most economists. In political theory and philosophy, intellectual history remains an invaluable store of conceptual insights, ready to assist our thinking about contemporary problems. Social scientists once approached the history of their fields in much the same way. But as economists have come to understand their discipline as more of a hard science, their attitude toward the history of economic thought has come to approximate the physicist’s attitude toward the history of physics. Intellectual history might be fun. But few natural scientists believe that reading Galileo or Newton (let alone Aristotle or Galen) will advance their understanding of physics or biology.

The natural scientist is probably generally correct in this belief. (Though there remain good reasons why the history of science is worth studying). So the question is to what degree the social scientist should think of him or herself as a natural scientist.

Of course, the history of ideas might be valuable and worth studying in its own right. It does not need to be justified in terms of its usefulness for social science research. But it’s still worth thinking about why social scientists have come to abandon this part of their field. Does reading Smith, Ricardo, Marx, Sombart, Keynes, and Robinson actually help us to better understand how the economy works?

The Influence of Ideas on History

One reason social scientists might be interested in the history of political and economic thought is that ideas could have consequences for history. If it’s true that ideas shape social change, then social scientists who want to understand how a variety of social phenomena arise will need to understand ideas and their afterlives. This is Keynes’ point in the famous concluding section of the General Theory:

The ideas of economists and political philosophers, both when they are right and when they are wrong, are more powerful than is commonly understood. Indeed the world is ruled by little else. Practical men, who believe themselves to be quite exempt from any intellectual influence, are usually the slaves of some defunct economist. … I am sure that the power of vested interests is vastly exaggerated compared with the gradual encroachment of ideas.

On this point, Keynes and Hayek were in complete agreement. Hayek too was convinced that the history of ideas was the key to understanding contemporary political and economic developments. The Road to Serfdom is in large part a sustained argument about the role of a particular set of ideas in bringing about both communism and fascism.

Other Reasons to Study the History of Economic Thought

Even if we disagree with Keynes and Hayek and conclude that ideas themselves have little influence on history, social scientists may still have good reason to study the history of their disciplines. Studying the history of economic and political thought is fertile ground for studying economic and political theory.

I appeal to authorities.

Istvan Hont in Jealousy of Trade:

The eighteenth century produced a vision of the future as a global market of competing commercial states. Its analytical depth still ought to command our attention … political insights in eighteenth century theories of international market rivalry … continue to be relevant for the twenty-first century. [This was] the period in which the interdependence of politics and the economy first emerged as the central topic of political theory. … The history of political thought is at its most helpful when it unmasks impasses and eliminates repetitive patterns of controversy. 

Later Hont adds:

by taking the history of political and economic thought seriously we can see that the globalization debate of the late twentieth and early twenty-first centuries lacks conceptual novelty. … History cannot be expected to solve the core analytical puzzles of political or economic theory. But it has its hour when the long-expected solutions of social and political science fail to materialize.

Albert Hirschman, who managed to be both a premier economist and a premier historian of economic thought, broadly agreed. He wrote that he was drawn to study the history of ideas as a response to

the incapacity of contemporary social science to shed light on the political consequences of economic growth and, perhaps even more, in the so frequently calamitous political correlates of economic growth no matter whether such growth takes place under capitalist, socialist, or mixed auspices.

Later he adds: “vaguely similar circumstances at two different and perhaps distant points of time may very well give rise to identical and identically flawed thought-responses if the earlier intellectual episode has been forgotten”

Whiggism and Economics

In his 1962 Presidential Address to the American Economics Association, Paul Samuelson gave a different account of why the history of ideas might be interesting to economists. Samuelson runs through several canonical figures in modern economics (beginning with Adam Smith), and gives his assessment of their major contributions. Samuelson isn’t at all interested in understanding these thinkers in their own terms. He’s just interested in figuring out what trends in contemporary economics they anticipated. What role they played in the progressive accumulation of knowledge that characterizes the past two centuries of economic thought. This is the economic equivalent of what Herbert Butterfield famously termed the "Whig Interpretation of History."

But this approach renders the history of ideas practically useless. As Donald Gordon put it (in the American Economic Review!! ... in 1965):

It is certainly desirable that we have as accurate a record as possible of the sources of modern theory, but exclusive concentration upon this has some serious drawbacks. … it also neglects some fascinating intellectual puzzles. … If economists are to talk glibly about government policy—and there is no doubt that they will—it would be some comfort to know they had been at least exposed to the wide variety of what we might call basic paradigms concerning the nature, role, and possibilities of the state.

In other words, a Whiggish approach to the history of economic thought stunts our creativity. It does the opposite of what proper intellectual history aims at.

Kenneth Boulding, "After Samuelson, Who Needs Adam Smith?" 

Kenneth Boulding gives one of my favorite accounts of why we should study the history of economic thought.

He begins by critiquing the whiggish, progressive view of social science:

There is an implicit assumption in this [whig interpretation], however, which is rather startling. It is that there is no need to study the failures of the past, simply because all that we have to learn is embodied in the present scriptures

Boulding then distinguishes between two approaches to the history of economic thought: the scriptural approach (at the extreme, an “ultrahistorical” approach); and the “antihistorical school” approach.

According to the scriptural approach:

the truths of economics were revealed through Adam Smith and Ricardo, or perhaps through Karl Marx, and all that we have to do now is to find out what these authors really meant. There is a touch of this in nineteenth-century attitudes towards Adam Smith and more than a touch of it in even some quite contemporary attitudes in various parts of the world towards Karl Marx.

Boulding is somewhat partial to the scriptural approach, emphasizing the extraordinary insights of Adam Smith in particular:

a book like The Wealth of Nations is ‘seminal’ in almost the literal sense of the word, in that it can easily play the same role in the development of the phylum of economics in the minds of economists, as, shall we say, frozen semen from some distant ancestor which might be used to fertilize an egg and so produce direct intervention from its original source into the course of the biological phylum.

To stick with the (weird) metaphor, Boulding’s point is that there is an opportunity for cross-fertilization between contemporary theory and the history of economic thought.

But there is a danger in too historical an approach to economics. Taken to an extreme, history leads to “mystified and defeated students who simply abandon economics.” Economics might not be linearly progressive, but progress can be made nonetheless.

The “antihistorical” approach, on the other hand, thinks of economics like math. Economics is taken to be a discipline in which knowledge “grows continuously and without loss.”

The antihistorical approach to economics (the dominant paradigm today) has its own problems:

[It] leads to the development of slick technicians who know how to use computers, run massive correlations and regressions, but who do not really know which side of anybody’s bread is buttered, who are incredibly ignorant of the details of economic institutions, who have no sense at all of the blood,s weat, and tears that have gone into the making of economics, and very little sense of any reality which lies beyond their data.

Ouch.

Ultimately, Boulding concludes, the chief reason to study the history of economic thought is that it can help us to escape our own parochialism. It provides the economist: “a sense of an extended present and indeed an extended place beyond his own backyard and his own immediate needs, emotions, and experiences … It is a mark of intellectual poverty to know only one’s own time and place.”

Classic works in the history of economics introduce us “to whole areas of thought which have become unfashionable" and thus help us "to transcend limitations which are imposed ... by the fashions of [our] own time.”

(I've written elsewhere about how intellectual history can be used as an antidote to Whiggish, progressive approaches to history)