Sunday, August 21, 2011

From A Debate Among Historians of Economic Thought

John Womack (a contributor to a debate underway among some historians of economic thought) is closest to revealing the real problem: our graduates do not receive accurate accounts of the history of economic thought (HET), even of its major historical figures, because much of the past is presented through the lens of passing current controversies as addressed and as understood by modern authors.

This is not a new phenomenon. The ideological conflict between rising Soviet power and Western capitalist economies from the 1930s, led to the decades of the Cold War. One such apparently minor struggle in that major global competition had significant side-affects on HET, which are still with us.

Paul Samuelson wrote his canonical “Economics: an introductory Analysis” (1945-48) before achieving tenure, but felt ‘safe’ to undertake the project because of the numerous outstanding journal articles he had already published and because the invitation came from of his head of department, not the publisher, to undertake the assignment. But his knowledge of the history of economic thought in at least one area was limited to the secondary and misleading garbled (from the ‘Chinese Whispers’ affect*) Chicago oral tradition, not from his own familiarity with the original text. (My article detailing Paul Samuelson's role in these events was published in The History of Economic Ideas, 2010.)

Samuelson initiated a fatal misleading allusion that unintentionally has misled and dominated almost the entire profession since, because his famous textbook (20 editions to 2010, 5 million plus sales, numerous foreign language editions, plus a thriving secondary market) had such a mass side-effect. Readers and tutors believed what they read about this aspect of the Smith's ideas, propelled by Samuelson's deserved reputation in modern economics (Nobel Prize plus other accolades).

I refer to Samuelson’s description of Adam Smith and the “invisible hand” in Wealth Of Nations, both by a paraphrase on page 36 (1st edition), and from his various changing paraphrases of what it, supposedly, meant in the body of the textbook thereafter. These remarks were taken to extremes in associating the IH metaphor with the Welfare Theorem (A. Pigou) and General Equilibrium (Debreu), which ignores Smith's clearly stated moral stances in TMS.

Samuelson's (and presumably his tutors’) erroneous interpretation of Smith’s use of the IH metaphor in TMS and WN have dominated the beliefs of generations of graduates since the 1940s. Those beliefs are now ubiquitous, even among the majority of historians of economic thought of the highest caliber, and presumably will continue to infest the thinking of new generations of our students, current and future legislators, and those who influence them, the media the public, and the history of economic thought generally.

That is why I await publication in September of Warren Samuel’s forthcoming new book “Erasing the Invisible Hand: Essays on an Elusive and Misguided Concept in Economics”, Cambridge University Press, which was brought to completion with the assistance of Marianne Johnson, with great interest - and anticipation.

[* “Chinese Whispers’ – comes from the story of the message from a military commander that is passed on verbally through the numerous ranks to command HQ. What starts out as: “Send reinforcements we are going to advance” duly becomes garbled into “Send three and four pence we’re going to a dance”.]

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