History

“The aim would not be to unravel a hidden coherent structure of the philosophical, theoretical, political dimensions of his work, but to give a sense of the contingencies that his work was subject to – both in terms of its origins and its receptions. Don’t make up an Arrow that he himself was not aware of.” -Till to me, email conversation on Kenneth Arrow, summer 2012

Excerpts from “Retrospect and Prospect,” the concluding remarks Bob Coats presented at (or maybe wrote after) the History of Economics conference held in 1972 at Bellagio to commemorate and reassess the 1870s “marginal revolution” (full proceedings here).

Robert Solow, “Notes on Coping.” In Szenberg ed. Eminent Economists: their Life Philosophy, 1992, p270

Yesterday, I had my first introductory economics seminar with my new students.

I thought I was on to an inside reference when re-reading the General Theory when Keynes calls Marx, Edgeworth and others simply by name, but refers to “Professor Pigou” in several instances.

Mid August, with the Olympics over, Paralympics and Premiership starting (that’s Soccer for the American readership), it is well and truly the quiet period for most of academia.

If the meetings of European historians of economics are urbane and cosmopolitan, the meetings of American historians are, by contrast, frank and toilful.

The International Human Dimensions Programme on Global Environmental Change (IHDP) recently published the Inclusive Wealth Report 2012, in which the authors propose a measure of wealth based on the stock of capital present in a country, as opposed to the flow measure of GDP.

A few weeks ago, I attended the H2S 4th workshop on “Cross disciplinary ventures in postwar American Social Sciences,” (research program outline here).

Last weekend, I was in Tübingen - very close to my home town: the same smell, the same surreal Swabian idyll that makes you think of Hölderlin and Hesse rather than DSGE.

A few days ago, I began researching on the history of a subfield of economics which was born in the sixties, then thrived and institutionalized itself in the early seventies.

[We are inaugurating something new in this blog: a jointly written post!]

“We choose this stochastic structure for computational reasons. This reduces the dimension of the variables. With (such and such) alternative, the computational burden would have dramatically increased.”

This paper tracks the development of sectoral saving and borrowing in the US economy over the past 50 years.

The University of Chicago is well-known for as the place where a famous group of economists, including Milton Friedman, Georges Stigler, Gary Becker, among others, developed a method for analyzing economic facts based on Marshallian price theory, a vision of the evolution of macroeconomic aggregates called monetarism, and an approach to individual liberties and the role of the state known as (neo)liberalism.

I always think of Adam Smith when I hear the term ‘division of labour’ - but I’m being cured of this by reading a bit more about Britains late 18th century in Jenny Uglow’s The Lunar Men.

In a recent post I wrote: “I am sure it will not take long before Journal of the History of Economic Thought (Cambridge Uni. Press) makes that list [Thompson Reuters, Social Science Citation Index].”

Last Friday, philosophers from the University of Leiden hosted the symposium ‘Between Science and History,’ in an attempt to figure out what the differences are between practicing scientists’ use of history and historians use of history.

Ivan Moscati is one of the most exciting voices in the historiography of decision theory.

Steven Shapin is visiting the UK. For those unfamiliar with the history and sociology of science, he is one of the giants of the field.

My attempt at a double riddle. “I find familiar faces only in unfamiliar places. Who am I? And whom are the faces?” The answer to the first is, I am an academic, to the second, my conference buddies.

Our usual problem in history (of economics) is a lack of information.

The paper deals with the mysterious persistence of the Chicago approach as the main analytical engine driving antitrust enforcement in the US.

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.

Like many economists, I have enjoyed Axel Leijonhufvud’s “Life 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.

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.

The title of the conference, “Paradigm Lost,” is an obvious combination of two references.

The ongoing eurozone crisis has prompted many to argue that monetary union withoutfiscal union was bound to fail.

Leading thinkers from outside the developed countries look to the future, spotlighting the pitfalls and opportunities thatawait us.

Albeit the majority of the profession either ignores Minskyís Financial Instability Hypothesis (FIH) or considers it plainly wrong, at least since the mid-80’s a few influential economists —who have certainly not embraced any unorthodoxcredo —have grown more receptive to this idea and eager to incorporate it in their models, even if diluted and sometimes disguised in order to make it more palatable to the conventional “representative” macroeconomist

In the seemingly never-ending aftermath to the economic crisis that began in 2007, there is little disagreement that financial markets are characterized by instability rather than stability.

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:

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.

Taking a long‐run view from economic history, I make three points about instability in financial markets. First, I argue that economic historians have a relatively good understanding of the proximate causes of financial crises.

“Natural rate theory” has dominated interpretations of economic trends and policy prescriptions over many decades. European-type welfare state institution were claimed to cause a compressed wage distribution that distorts otherwise well functioning labor markets.

Many models of economic growth exclude materials from the production function. Growing environmental pressures and resource prices suggest that this may be increasingly inappropriate.

The topic of this session of the INET conference is a question: does the effectiveness of fiscal policy in stabilizing an economy depend on the underlying economic context in which the policy is implemented?

The present paradox, as ecological economist Bill Rees is fond of putting it, is simple yet profoundly troubling: “The ecologically necessary is politically infeasible, but the politically feasible is ecologically irrelevant.”

The effectiveness of fiscal stimulus in promoting economic recovery appears to depend upon many factors.

What creates instability in financial markets? How does the weight of debt, the structure of expectations, or radical uncertainty contribute to instability?

Inequality has been growing and destabilizing confidence in many countries in recent years.

Evidence of climate change is widely accepted by scientists.

Three major crises are confronting the world. The first is the increasing and uneven burden of humans on the biosphere, and the observation that we have already surpassed the ‘safe operating space’ for humanity with respect to three planetary boundaries: climate change, the nitrogen cycle and biodiversity loss.

How can we distribute growth globally when the developed world needs growth to emerge from debt overhangs and inequality between nations is still quite formidable?

We analyze shareholders’ incentives to change the leverage of a firm that has already borrowed substantially. As a result of debt overhang, shareholders have incentives to resist reductions in leverage that make the remaining debt safer.

Budget cuts can be dangerous. Inspired by the wrenching experience in Greece, increasing attention is now being paid to the fact that austerity may fail to reduce the government deficit if the economy declines in response, as is likely in a liquidity trap (Delong and Summers 2012).

A country that produces goods of high quality at a competitive price is likely to be rewarded for its ingenuity with a trade surplus. Small countries often achieve great development success through export-led growth. At the same time, the entire economic system must be balanced.

These are truly testing times. The world economic order – capitalism – is being called into question following the Lehman crisis. The world’s best form of societal organization – democracy – is being challenged by the economic success of autocratic countries such as China and Singapore.

When the very fabric of society is threatened by prolonged austerity or a financial sector collapse, a deliberate re-structuring of debt may be necessary to restore the hopes of renewed prosperity.

After an era of vigorous expansion a downturn can reveal a large stock of debt relative to the economy’s capacity to service it.

What has been learned now that the Euro zone’s fault lines have been revealed? Where are Europe and the Euro zone today?

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.

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.

Behind all the technical language and the common theme of bashing bankers, there remains the Great Divide between Germans and the rest.

On my way back home from the Brandenburger Tor, I recalled that I already have been there, it must have been in 1988.

A suprisingly large number of talks refer to the issue of human decision making.

The Institute joined the Centre for International Governance Innovation, and the Mercator Research Institute on Global Commons and Climate Change in hosting its third-annual plenary conference in Berlin from April 12-15, 2012.

In modern economies, individuals and companies engage in innovative activities, discovering new ways to use existing physical and human capital, and new technologies in which to invest. The institutional and broader social context within which these activities take place also changes in novel ways.

With my remarks today on financial markets and the financial crisis, I do not make any claims to originality. Rather, they are intended as a reminder of certain circumstances that are already familiar to us, in one form or another.

The global economy is in turmoil. Societies are unstable and not anchored by faith in the system or social order.

The economics profession stands on the fragile foundation of presuppositions adopted by professional agreement rather than as a result of empirical observation.

Dinner has already rolled around on what has been a quick day.

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.

In science, empirical disciplines such as physics, chemistry, history, and parts of sociology and political science, reason from facts.

Having just started Findlay and O’Rourke’s mammoth history of world trade in the second millenia, I have been struck by a strange incongruity

Yesterday the Chancellor of the Exchequer (or UK ‘finance minister’) gave his annual budget speech where UK fiscal policy is set for the coming years.

In his notorious “How Did Economists Get It So Wrong” NYT article in 2009, Paul Krugman relied on the freshwater/saltwater distinction to explain that the economists’ inability to predict and solve the current economics crisis was due to the fact that MIT/Harvard economics lost their long dispute against their Chicagoan counterparts.

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)

I am writing from my notes. The event I want to report took place some two months ago, I have since been preoccupied, then occupied, and now increasingly overwhelmed.

In recent years, an increasingly significant part of the history of economics has modeled itself after the methodologies developed by Science and Technology Studies (STS) scholars.

So with a suitably provocative title I think we can declare 2012 open.

So with a suitably provocative title I think we can declare 2012 open.

This research project offers a radical reconsideration of the centrality of the Corn Returns to the development of classical liberal political economy and shows how much the Corn Laws enriched agrarian interests and how their repeal represented a boost to British manufacturing.

This research project 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 into mathematics.

This research project documents long-run trends in personal bankruptcy, with special emphasis on the use of the bankruptcy law at the local level and among women.

My friend read somewhere that the experience of death makes people think in philosophical terms. He might have thought of religion rather than philosophy, I replied. We agreed, and wandered off talking about our crypto-religious experiences in good old secular Europe.

On November 2nd, I was sitting in the Hayden Library Special Collection reading room at MIT, browsing archives on the undergraduate and graduate students’ discontent during the early 70s and the response of the economics department faculty.

The INET roundtable on “new conversations and the academy” took place a week ago. Most panelists were bloggers, including Mike Konczal from RortyBomb and Noah Smith from Noahopinion.

A recent e-mail conversation I had with Harro Maas concerning one of my latest drafts (shameless self-promotion) made me buy and read Naomi Oreskes and Erik Conway’s, Merchants of Doubts.

The following text was sent to us by Roger Backhouse and Bradley Bateman, we reproduce it in its entirety.

Professors Roger Backhouse and Brad Bateman wrote an op-ed for the New York Times a few days ago, arguing that “thanks to decades of academic training in the “dentistry” approach to economics, today’s Keynes or Friedman is nowhere to be found” - we have stopped thinking big they say.

This is the question I’m supposed to answer for an experimental INET conference aimed at inspiring new thinking through interdisciplinary conversation and collective reflection without rules.

In the case of utility, it’s all in the name.

Till is right. It’s not the historian’s task to question the legitimacy of the decisions of the Nobel Committee.

It’s Nobel Prize time again. And what a beautiful prize this year it is!

This one is different. Tiago, Benjamin and Floris have asked a dozen economists in the Bretton Woods hotel hall to reflect on the way their teaching has been affected by the current economic crisis and their answers, taken collectively, are quite puzzling.

I cannot resist but to start quoting Mary Morgan’s second entry to the second edition of the New Palgrave: “Modeling became the dominant methodology of economics during the 20th century.”

I thought I could use some of my illegitimate blog administrator’s privileges to participate in the discussion on the “progress in economics” post by Floris without being lost in the midst of other users’ comments.

Ok, time to deal with the elephant in the room: when is one theory better than the other? What is progress in economics?

The transatlantic conference has been moving targets: sociology went first, then economics, then history, today it was political science and international relations.

It’s not everyday that one finds economists using history as not just the right way but the only way to answer a question.

Our interviews in the halls of the Mount Washington Hotel, covered the range of opinion about the severity of conflicts of interest in economics: we are alright; economics is no more corrupted than other sciences; corruption is substantial; it is rotten to the core.