History of Economics Playground

Let me tell you everything

Our usual problem in history (of economics) is a lack of information. Archival sources, if available at all, always present gaps of correspondence between people you just know should be there, and never contain that vital review report, or the minutes of that one crucial meeting. Moreover, if the people you write about are alive and willing to talk, it turns out they’re only human: they’ve forgotten the vast majority of their past, mix up events and people, mistake a recollection they once read for their own memory, or even willfully rewrite history. All too bad, although it gives us the possibility, perhaps even obligation, to speculate, interpret, and fill in. And then of course spend hours and hours discussing with one another whether we have done so correctly.

But now suppose you are lucky enough to not have this problem. Imagine the economist you want to write about maintained a diary most of his life, kept detailed notes of all the courses he attended as a student, as well as of comments on books and papers he read, of articles and books he intended to write, and that also the vast majority of correspondence between this economist and others has been saved. Suppose further that archival sources on his most important contemporaries are abundantly available. You then imagine yourself the situation Susan Howson found herself in when writing her biography of Lionel Robbins (2011).

As much as this may sound like a description of the historian’s Nirvana, it actually presents two new problems. For what will you tell, and what will you leave out? At 1100 pages, Howson clearly had more difficulty deciding what to leave out then what to put in. More importantly, all the detail and description comes at the expense of explanation and interpretation. Partly this is the direct consequence of having so much information – there’s simply no need to fill in blanks and explain gaps. But the reader who is not an expert in twentieth century UK economic history and history of economics frequently struggles to, well, put it all in context. To make it a story with an argument.

I happen to read Howson’s Robbins biography in conjunction with the concluding tome of Jonathan Israel’s Enlightenment trilogy, entitled Democratic Enlightenment (2011). The books are of similar length, but where Howson uses 1100 pages to talk about one man, Israel spends 1100 pages discussing all men (and an occasional woman) who had something to do with the literature, arts, and politics of the Enlightenment in the second half of the eighteenth century. However, like Howson, Israel wants to tell everything. There’s not a scholar, book or pamphlet in Europe and the America’s that passes unnoticed. On the other hand - and the reason the books make for an unusual but great pair to read together - in terms of explanation Israel has the exact opposite intuition of Howson. All scholars, politicians and events in Democratic Enlightenment are discussed in – one might even say forced into – Israel’s well-known trichotomy of radical, moderate, and counter Enlightenment, among whom he clearly favors the radicals.

Now don’t mistake these minor critical remarks for final assessments. These are exceptional books by outstanding historians. But just as a thought experiment: What would have happened if Howson had written Israel’s book on the Enlightenment, and Israel Howson’s book on Robbins?

Relativist versus absolutist history of economics

I don’t seem to be able to fully grasp Mark Blaug’s distinction between a relativist and an absolutist approach to the history of economics – first introduced in Economic Theory in Retrospect (1962) – and that is a source of much frustration. At first sight, the distinction seems obvious enough. Relativist historians emphasize the social, political, personal etc context in which economic ideas were developed; absolutist historians view history as a sequence of Great Economists building on and/or refuting each other’s theories. Obviously, most histories of economics use a bit of both.

To figure out what I don’t get about it, I thought I should perhaps look at that field that is best known for using the relativism-absolutism dichotomy: Ethics. If you evaluate an action or an opinion against the yardstick of country-, social-, and history-specific context (which may differ from your own benchmark), you take a relativist approach. If you judge the action or opinion against (somehow established) universal ethical principles, you take an absolutist approach. Part of Roy Weintraub’s recent essay on Keynes’ anti-Semitism I think seeks to bring that often implicit discussion to the fore in histories of Keynes – but I’m digressing.

The point is that in ethics you support either the one or the other. In the end it really is a matter of personal moral conviction whether you think the death penalty in the U.S. is a culture-specific ethical principle we have to accept, or a violation (or not) of universal ethical principles. But where it concerns intellectual history of economics, I don’t see how relativism versus absolutism is a matter of personal conviction in that sense.

Put differently, if I think theory 1 of economist A should be understood principally within the context of the time and place in which s/he lived, while I think theory 2 of economist B is first of all a response to theory 3 of economist C, that could make for very fine history. But when I say that principle X of People 10 should be viewed in its cultural context, while arguing that principle Y of People 11 is to be judged against universal benchmarks, I would be quickly pushed aside as one more inconsistent philosopher.

Perhaps the real distinction Blaug was after was that between good history and bad history, with bad historians often taking a relativist approach (say Marxist historians). We’re talking 1960s and 1970s here after all.

Then again, it can’t be just that.  

Life Among the Econ: Talking history with Axel Leijonhufvud

Like many economists, I have enjoyed Axel Leijonhufvud’sLife among the Econ” and nodded appreciatively when he described the social classifications of the Econ as “Grads, Adults and Elders” and chuckled when the young grad tries to impress the elders of the ‘dept’ through adept ‘modl’ building; so when the man himself was holding a glass of champagne and chatting with me at the INET conference, I had to ask how he got that paper started.

“Ah that, you know, of all the papers I have written that is the one they probably translated into the most languages”. [At this point Till jumped in and said of course we all started with ‘Keynes and the Keynesians’ but I digress].

“You know, that paper came out of me being department head, and after a long day of administrative duties, I found myself writing a paragraph here and there, and putting them all in a drawer by my desk.”  Over time those paragraphs accumulated, but there was further inspiration from Farlay Mowat’s Never Cry Wolf – a study of arctic wolves in their harsh northern climate – and it might have provided more than just the homeland of the Econ, as Mowat later wrote:

When I began 'Never Cry Wolf' thirty years ago, I intended to cast the wolf in a rather minor role. My original plan was to write a satire about quite a different beast - the peculiar mutation of the human species known as the Bureacrat, who has become the dictatorial arbiter of all our affairs. I also thought it would be fun to take the mickey out [i.e. make fun] of the new high priests of our times, the Scientists, who now consider themselves the only legitimate interpreters of truth. (Mowat, 1963 2001 paperback edition, Preface p. V)

Mowat’s intention was never published with the original book, but life among the Econ definitely puts it across very nicely for the economists…

Publication is a different story of editorial (mis)fortune. The new editor of the Western Economic Journal, Bob Clower, was in the process of changing the journal to Economic Inquiry and was purging a lot of previously accepted papers which he felt were not good enough for his new standards. Clower was in the rare position of being short for the next issues, and as a close friend of Axel, and sometime co-author, Bob asked Axel for his sociological piece (which Axel “had no plans to try and get into print”). The many paragraphs and loose sheets from the drawer were put together in a “somewhat consistent manner” and if you haven’t yet read it, or it’s been a while, it starts a little something like this:

“The Econ Tribe occupies a vast territory in the far North. Their land appears bleak and dismal to the outsider, and travelling through it makes for rough sledding... More research on this interesting tribe is badly needed… Read on

Feelings Offstage

INET Berlin 2012 - back home again. On stage, it’s been a huge amount of claims, assertions, and arguments about what went wrong, about what exactly happened, about why this time was different, about what will certainly happen, and about what remains deeply uncertain, about what “we” shall do about it, about what “we” could do better. And despite the many uses of “we” I felt little addressed, and will not remember much of it, I’m afraid.

Instead, it’s how it feels that we keep in memory, in particular if the meeting is so symbolically-laden. Off-stage, Rob Johnson told me he wishes that people go away with a sense of hope. This was certainly the case for the Commons. Excitement was great. Students told me that they want to bring life into INET from the bottom up as it is still very much run top down. They also mentioned the comparison with the somewhat aged post-autistic movement, and INET indeed might have the chance to harbor the current generation of economics student who want to do it better. The divide between the heterodoxy and orthodoxy would not be the same. As Rob Johnson’s wish came true in the case of the Commons, I wish that INET will manage to support the young in their new excitement.

It would not be a problem of scarce resources. Memorable was Rob Johnson as he was saying “thank you” after Soros and Janeway announced to give seventy-five million to INET. It’s been a difficult “thank-you” that stresses this gesture beyond its scope of meaning. I mean, how is it possible to say thank you for seventy-five million dollars? And so Johnson was shaking and trembling as though the money had been given to him. Another “thank you” followed that was equally difficult to grasp: walking from the stage, we were shown flashy images of money trees and the like, as though in “the price is right”, closed by another “thank you”. I guess I don’t know enough economics in order to understand such transactions.

Another set of different feelings, at the margin of the event, were caused by the art group that need special mention. They kindly introduced us, among others, to homo oeconomicus, sometimes lying around, sometimes walking in slow motion up and down the hallway – embarrassing or disturbing for some, causing smiles and inspiration for others, and great fun for me! The buttons they produced were an actual success: I myself was wearing the “post-paradigm”, and the “paradigms cannot be lost”, the “1 %”, and the “99 %”. The System was also patiently standing there during the breaks, or so I understood their nice pyramid-performance. I heard comments that suggested that some participants knew already too much in order to be inspired by art to pose new questions, but I hope the majority agrees with me that INET should indeed become open enough to include the arts: This Is New Economic Thinking!

I must admit a feeling of uneasiness when standing next to this person in the bathroom – someone who I exclusively and regularly see in the news. May be if we “kids” are grown up we will deal more easily with the simultaneous presence of knowledge and power, though I’m afraid it’s too late already. I couldn’t hold back the question: what went wrong with my life that the former minister of finance pees next to me?

It cannot be only a matter of prominence. For another noteworthy impression was the talk by Amartya Sen – one of the few that I followed from the beginning to the end. He somewhat managed to obey an honest concern for being on the good side of economic debates that was not obvious in other talks. I am certain that most of the participants in the conference were actually concerned people, but claiming truth might not be the best way to transmit this feeling.

And I will remember a lovely sense of nervousness among those we interviewed: INET provided us with a professional camera-team – Ben and Scot – meaning that we had to set up the light, hook up the people with microphones, stand or sit at the right spot: then thinking on command. It’s not obvious that we found people willing to go through this procedure only for a little blog as ours. And so I want to thank all who were ready to answer our questions: Steve Keen, Doyne Farmer, Dirk Bezemer, John Davis, Nicola Giocoli, Julie Nelson, Judith Klein, Jean-Philippe Bouchaud, and Axel Leijonhufvud. I’m looking forward to see the result and to comment on the actual content of what that is, New Economic Thinking.

A last remark about exclusion and inclusion: For the last session, and the reception, the Commons were allowed to walk over to the main event. Good so.

Next time, perhaps, Hong Kong!

 

Explaining 'New Economics' with Two Diagrams

I think I am on the track of what 'New Economics' is, and one could roughly sum up two days of presentations in two diagrams:

 vs.  Read more

How to spend the $75m Janeway and Soros just gave to INET!?!

Lunch was just interrupted Bill Janeway standing up to announce that this morning he decided to give $25m to INET and the board will fund-raise this up to $100m over ten years, but then George Soros added $50m in unconditional funding for INET... Not sure what more to say. Two days of talks about how Austerity doesn't work, and then this. INET staff, if you're reading, consider this the first grant application: The future of New Economic Thinking in Historical Perspective! Oh yeah, of course they finished by playing "the best things in life are free" and are now introducing Amartya Sen. Unreal.

@INET Berlin: Paradigm Regained

The title of the conference, "Paradigm Lost," is an obvious combination of two references. "Paradigm" refers to Thomas Kuhn's use of the term, as the dominant and imposing mode of thinking of a particular group of scientists. "Lost" refers to John Milton's Paradise Lost. Based on Kuhn, the title of the conference says: Too many anomalies have built up, and we're looking for the new paradigm that will replace the old. Fine, and very true. The reference to Milton is more complicated, however. Is the paradigm that we lost a paradisiacal world we (should) seek to regain? By relying on Milton, the title suggests a romantic longing for an innonence that we lost during adolescence and that we forever struggle to regain during the rest of our lives. Read more

Manufacturing jobs will disappear - no matter where you are

just as the agricultural share of employment has fallen from 40% in the 1920s to less than 2% of the workforce in Europe today, manufacturing's share of employment will fall to less than 5% of employment. That is not jyst for Europe, according to Adair Turner's excellent dinner speech, but that is across the world. He has pointed out that it is not an issue of international transfer of jobs (although it dominates headlines) but it is because of innovation which makes the productivity of (manufacturing) labour increasinglty higher. As that happens, less and less labour input will be needed to prodcue the tangile products we need - hey, even China's manufacturing workforce has been falling for a decade - and the logical conclusion of such a tendency is that we won't need as much labour. Read more

@INET Berlin: The Great Divide

Behind all the technical language and the common theme of bashing bankers, there remains the Great Divide between Germans and the rest. To Angel Gurria of the OECD, Michael Hudson of the University of Missouri and many others, the key lesson for the EU is that cutting the deficit too quickly does not work, that temporary QE is according to the book, and so on. To Germans such as Kai Konrad from the Max Planck Institute for Tax Law and Public Finance, the key lesson is that we thought all countries in Europe had responsible governments with well-functioning institutions, but then found out we don't. Economics versus politics if you like. Or technical finance versus trusting The Other. Can they be reconciled?

@INET Berlin: Doing the actual work

While yesterday presented a number of frontrunning scientists discussing current economics and state of the economy in general, academic terms, today starts with ECB executive board member Asmussen. Interstingly, the ECB is quite a bit more positive about the development of the crisis and about the measures taken by politicians. But maybe that's just politics. It also gets more technical. Key message: 1) LTRO bought time, it is not the solution, 2) Now politicians should adjust budgets to "sustainable paths" - but no timeline given. Who could disagree?
But then, briefly and only at the end, a plea for fiscal and political integration, addressed at Germany principally. Nice.

Kids Behind the Wall

On my way back home from the Brandenburger Tor, I recalled that I already have been there, it must have been in 1988. Like many other Western German school kids we visited Berlin for a week. We climbed up a little elevated visitors’ platform on the West front of the gate to peer over the wall and watch Eastern German soldiers walking up and down. No way to pass.

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@INET Berlin: Decisions

A suprisingly large number of talks refer to the issue of human decision making. This afternoon Gigerenzer set out his story about the mind working on the basis of heuristics, right now Damasio talks about emotions as an effective decison making tool that has developed over evolutionary time. But the topic recurs in many of the other presentations as well. Gigerenzer has always been very clear with whom he disagrees (Kahneman and Tversky, and neoclassical economics principally) and so has Damasio (neoclassical economics, people who accept Descartes' mind-body distinction, people who appreciate Spinoza's understanding of human decision making). But what do they think of each others' work?.. Work to do next week...

Asking questions about paradigms and INET

Dinner has already rolled around on what has been a quick day. We have managed to corner Steve Keen and Dirk Bezemer for a round of questions and have confirmed Axel Leijonhufvud and Nicola Giocoli for tomorrow (in fact I am borrowing Nicola's iPad for this post as my laptop seems to have given up). That all said we are asking people four key questions and then building around that depending on answers and who people are.  Read more

Blogging Live from Berlin - Any Requests?

Just wanted to let you all know that amongst the distinguished, distinguishable and disturbing people at the INET conference we have inserted ourselves in the middle to do some interviews, attend talks and blog about what is going on. So far, I've managed to have a Curry-wurst, get a room and see George Soros invest twenty five million dollars in a new research collaboration, and just about getting ready to go and be part of the Young Scholar Initiative's 'Commons' event, which is running as part of the conference. Read more