Judy Klein is Professor of Economics at Mary Baldwin College in Virginia. She is the author of Statistical Visions in Time: A History of Time Series Analysis 1662-1938, (Cambridge 1997) and co-editor of The Age of Economic Measurement (Duke 2001), and co-author of The Strange Career of Cold War Rationality (in preparation). She has been a research fellow/visiting scholar at the National Humanities Center, the École des hautes études en sciences sociales, the École normale supérieure de Cachan, and the Max-Planck Institute for the History of Science.
Research for her forthcoming book, Protocols of War and the Mathematical Invasion of Policy Space, 1940-1975, has been supported by the National Science Foundation and the Institute for New Economic Thinking. Her study examines how US military needs during World War II and the Cold War steered engineers and applied mathematicians to an economic way of thinking about scarce resources, including limited computational resources, and how economists subsequently incorporated that mathematics.
1. Why is it important to understand the relationship between economics and its military patrons? In the USA during World War II and the Cold War the selection process of military patronage favored economists trained in statistics and mathematics. Also, organizations such as the Applied Mathematics Panel and the Air Force Project at RAND hired economists, in the words of Thomas Schelling, to practice the “science of economizing” for a client. This enhanced the importance of normative welfare economics that complemented new developments in operations research and management science. Subsequently, normative decision science led to the conceptualization of new positive, descriptive theories such as those of rational expectations and bounded rationality. There was also an indirect influence on economics via the type of applied mathematics required for the decision-making protocols for the military. The client expected mathematicians to incorporate uncertainty into their models and give them solutions that went beyond mere proof of uniqueness and existence. The military client wanted specific rules of action and the solutions had to be timely so approximate rather that exact solutions were preferred. The requirement of effective computation forced modelers to be mindful of their own scarce computational resources and bring rational thinking to their modeling production process –what Herbert Simon called procedural rationality. What emerged from all this were modeling strategies that adapted optimizing models of the problem to scarce information-processing capacities for the generation of a computable solution in the form of an algorithm that yielded a rule of action for operational use in the field. The large scale of the patronage and the logical imperative of the military client shaped applied mathematics in the USA in the 1940s-1960s into a science of economizing, and economists who could work with mathematical decision-making protocols and weave their economic way of thinking with a statistical way of thinking were selected, thrived, and passed on their skills to the next generation.
2. Your work often uncovers surprising connections between economics, its underlying metaphors and the non-economic. Have you ever been surprised? And can you give us an example? I was surprised by the very material origins of models we use in economics and by how limits on computational resources molded modeling strategies. Friedman’s and Cagan’s macroeconomic adaptive expectations model as well as the exponentially weighted moving averages that Box and Jenkins generalized in their time series analysis originated in attempts during WWII to model information flows between gunner and analog computer in the lead computing gun sights of B-17 bombers. Rational expectations was a product of the digital computer age, including Richard Bellman’s development of dynamic programming to solve the Air Force problem in the late 1940’s of how to allocate scare nuclear bombs to competing targets in a potential multistage strike on the Soviet Union. I was surprised to learn that so much of what was cutting edge when I was in graduate school at the London School of Economics in the early 1970s had its origins in war, including adaptive expectations, the simplex method, and mathematical programming generally. I was also struck by the irony that a decade-long government planning contract employing Carnegie Institute of Technology economics professors and graduate students underwrote the modeling strategies for the Nobel-prize winning demonstration that the rationality of consumers renders government intervention to increase employment unnecessary and harmful.
3. What do you find encouraging in recent developments in the history of economics? I am encouraged by the growing links between historians of science and historians of economics. There is a growing interest among historians of science in the history of the social sciences. Historians of economics are more aware of a broader discourse, and I think they are more likely than in the past to take seriously the practice of history including the importance of exploring archival resources. That venturing beyond the confines of purely textual analysis to close study of archival sources and historical context has yielded in many cases a richer, more interesting, and more relevant history. This shift has been amplified by the increase in access to archives through digitization and Internet access of primary sources, such as the Herbert Simon papers, or at least of finding aids for collections. Another positive encouragement to archival research has been the bringing together of several important collections in the Economists Papers at Duke University. The recent crises in credit markets, economies, and economics have rekindled an interest in the history of economics. Whig history taking the form of a couple of paragraphs in an academic paper detailing the intellectual pedigree of the latest technical advancement no longer satiates. The crisis has inspired a serious examination of how mainstream macroeconomics got to the point where it was difficult to generate foresight of the possibility of a crisis or even in hindsight reasoned explanations of the key problems. There has been a renewed interest in the economic history of past debt /credit crises as well as in the discarded ideas of economists who had incorporated insights on financial markets into their theories. Economists’ blogs, some columns in the Financial Times newspaper, and the Institute for New Economic Thinking have provided new forums for serious discussions of the history of economics. A history of economics can rightfully stand on its own without having to address current concerns. The recent, persistent crisis has, however, foreclosed on the approach of history serving to edify the status quo by merely documenting progress to that end, and it has encouraged historians of economics to be more sensitive to the economic history surrounding the texts that interest them. Both are positive developments arising from a serious, defining crisis that has brought hardship in its wake.