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)