Does economics have a useful past? Or is it the case that all truly important contributions of the past are incorporated in our present theory? Is the discovery of the errors made by earlier thinkers a waste of time? In this course we will examine the efficiency of the market for ideas. We will see that there are arguments in the work of earlier thinkers which remain unincorporated in our contemporary theory and which, once incorporated, can improve our understanding of matters.
The course focuses on both themes (such as the labour theory of value, the law of markets, gender in economics) to detailed studies of selected authors (e.g. Hume, Say, Malthus, Keynes). The unit is largely based on reading extracts from primary texts although some attention is also paid to the secondary literature, the contemporary reception of the works and the historical situations in which they were written.
Introduction: Why study history of economics?
Does economics have a useful past? How did the economic revolution change economic though and how, at the same time, have economic ideas moulded the economic environment?
1. From Plato to Adam Smith
What early works were the sources of economic thought? How did analytical economics emerge and how did the early economic thought transition into classical economics?
2. The emergence of economic systems
What was mercantilism and how did the physiocrats criticise it? How did we get from moral philosophy to political economy? How is it possible for a community in which everyone is busily following their self-interest not to fly apart from sheer centrifugal force? What is it that guides everyone’s private business so that in conforms to the needs of the group?
3. Dismal Science: The political economy of value and distribution
Is the number of people bound, sooner or later, to outstrip the amount of food available? Is a society where everyone moves up the escalator of progress possible? Could it be that the escalator works with different effects on different classes, and while some ride triumphantly to top, others are carried a few steps only to be kicked back to the bottom?
4. Man as a creature of circumstances
Is production the true province of economic laws? Does that make distribution a matter of human institution? What were the early views of utopian socialists and how did they influence political economy?
5. The criticism of political economy
How can profits exist? What is the surplus value? What is the materialist conception of history? Are the ultimate causes of all social changes and political revolutions to be sought not in the minds of men or in changing modes of production and exchange? Will capitalism sooner or later destroy itself?
6. The Marginalist Revolution and the subject matter of economics
Was there such a thing as a Marginalist Revolution? How did economic take place of political economy becoming a science of allocation? How did economists come to see capitalism not an historic social vehicle under constant tension but as a static, rather ahistorical, mode of organization? What is the subjective theory of value? How is it different from the labour theory of value? Was neoclassical economic theory appropriated wholesale from mid-nineteenth century physics?
7. The heresies of John Maynard Keynes
What were Keynes’s key points about the uncertainty and decision making? Is there a kind of unemployment that cannot be remedied by the price mechanism? Could saving harm the economy?
8. Beyond high theory
What were the origins of institutional economics as a characteristically American counterpart of European historical schools of economics? What were the historicist and institutionalist lines of criticism regarding conventional economic science of the time? What is the Coase theorem? How did the application of the analytical tools of economics to political science and law give rise to Public Choice and Law and Economics? Did economists forget history?
1. Self-interest and sympathy in the work of Adam Smith.
We will read Bernard Mandeville’s “Grumbling Hive” (1732 ) and selected parts of Adam Smith’s Theory of Moral Sentiments (1759 ) discussing the role of sympathy in the work of Smith.
2. Division of labour, profit and the invisible hand
We will read selected paragraphs from Turgot’s Reflections, Cantillon’s Essai and Smith’s Wealth of Nations.
3. Corn laws, free markets and international trade
We will read Smith’s “Digression on Corn Laws” (WN, Book IV, ch. 5), compare Robert Torrens’s Essay on Corn Trade (1815) with David Ricardo’s discussion of foreign trade (1817 ) and evaluate reasons in favour of Corn Laws by Thomas Malthus (1815) and John Stuart Mill (1825).
4. The law of markets
Is production the source of market demand? Can there be a case of general overproduction? We will read James Mill’s “Commerce Defended” (1808), compare the argument with the writings of Jean Baptiste Say (1803) and David Ricardo (1817), and discuss why Thomas Malthus (1836) thought Mill’s and Say’s argument is utterly unfounded. Finally, we will see why John Stuart Mill thought that the demand for money matters for understanding of the law of markets (1844).
5. Gender in the history of economics
We will read parts of John Stuart Mill’s essay on the Subjection of Women (1869), selected paragraphs of Adam Smith’s Lectures on Jurisprudence (1762-1766 ), and selected paragraphs pf J. B. Say’s novel Olbie ( 2001) discussing why “the standard economic model of the family is a story of a benevolent patriarch” (Strassmann 1993, p. 58).
6. Choice and equilibrium
We will read W. S. Jevons’ Theory of Political Economy (1871) and the Lionel Robbins’s Essay (1932) discussing the source of value and compare the subject matter of economics to that of political economy.
7. Risk, uncertainty and The General Theory
We will read selected chapters of Keynes’s General Theory (1936), discuss the main charge that Keynes raises with respect to the “classical” economics, compare his theory of uncertainty with that of Frank Knight (1921) and decide whether Joseph Schumpeter was right that Keynes’s theory is not in fact “general”.
8. The problem of historical specificity: Induction vs Deduction in economics
Are there universals in economic theory? We will read and compare the accounts of the method of political economy by Cliffe Leslie (1876), Thomas Malthus (1836), Reverend Richard Jones (1831), John Stuart Mill (1844) and Alfred Marshall (1885).