Economic economic economist essay history political thinking trend

The Trend of Economic Thinking

Social phenomena, like other matters of interest to be found in the real world, lend themselves to analysis by a number of disciplines. The same raw data may be capable of classification and explanation in a variety of ways, each of which complements the others and so contributes to the full grasp of the phenomena under consideration. In the interests of reaping the advantages attendant upon the division of labor, a sequence of events may be seen as reflecting the simultaneous operation of several distinct chains of cause and effect.

Each of these chains may then become the focus of inquiry, and it may enhance the advantages to be derived from the division of labor to be able to set forth in precisely what ways any one such causal chain constitutes a potentially fruitful theme for separate investigation. Such a classification of the factors in the observed phenomena that require explanation will, of course, reflect the different points of view with which the observer approaches the data. In the final analysis, the definition of a particular field of investigation is tantamount to the exposition of the point of view chosen by the investigator.

They have discussed at length the relationship of the economist to the sociologist, the psychologist, the moralist, the technologist, and the jurist. And they have, in addition, engaged in heated and protracted controversies about the utility of these same definitions, disquisitions, and discussions. They have, in short, made a large number of attempts to determine precisely the particular point of view of the economist, to dispute existing expositions of it, or to deny altogether to the economist the joy of having a distinct point of view.

The sum total of this activity over the better part of two centuries is a vast and fascinating literature. The contemplation and subsequent digestion of this literature yields a series of formulations of the economic point of view that are astounding in their variety.

The present essay attempts to survey the literature and to review in historical perspective this wide range of formulations. As a chapter in the history of ideas, this account of the constant search for the precise expression of the point of view of the economist focuses on the particular avenues by which it has been approached and on their remarkable heterogeneity. Although the present account is historically oriented, we shall adopt the topical, rather than the chronological, approach. We shall not present the various formulations in the order in which they were successively proposed in the history of economic thought.

Instead, we shall take up one by one the principal groups of definitions to be found in the literature and shall treat each of them separately as fully as possible. The part played by each group in the history of the problem will become apparent from the discussion of the definitions themselves. We shall discover, in fact, that at any one time a number of widely differing formulations have usually been current. It will be convenient, therefore, to devote to each of these groups of formulations a discussion of its development that will be complete in itself, without the distraction of noticing the simultaneous parallel developments of other definitions.

In this introductory chapter we shall attempt to bring our problem into perspective. It will be helpful in this connection to discuss the significance to be attached to the task of making explicit the nature of the economic point of view; to make clear which operation is, and which related operations are not, the objects of our interest; and to survey briefly the place that has been occupied in economic thought by the attempts to elucidate this economic point of view. The formulation of the nature of the economic point of view is, of course, intimately related to discussions concerning the scope of economics.

The problem of the scope of economics, however, has frequently involved questions with which this essay has nothing to do, and it is perhaps worthwhile to make this clear at the outset. But the subject matter of economics grows apace This growth in the subject matter of economics of which Marshall writes is typical of those aspects of the question with which we are not concerned.

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A perusal of a list of courses offered in the economics department of any university or a cursory examination of the catalogue of the economics room in a large library will easily convince one of the luxuriance of this growth. At least one outside observer of the controversies concerning the scope of economics has hinted darkly that they represent simply a way of claiming the exclusive right to teach certain subject matter in the universities.

When it is asserted, that in interpreting history we must look chiefly at the economic factors, we think at once of technical conditions, of the distribution of wealth, of classes and subclasses bound together by definite common interests, and so on. It is true these different representations cannot be reduced to a single concept, but no matter, there is no question of that; here we are in an entirely different sphere from that in which abstract questions are discussed.

Our own inquiry, on the other hand, concerns that entirely different sphere in which abstract questions are discussed. For ordinary purposes, as Cannan remarked, 5 it may well be true that economic things can best be described as economic. The emergence of a voluminous literature attempting to define the economic point of view is not, however, to be dismissed as unfruitful pedantry; it is rather the expression of concern with the epistemological character of economic theory to an extent that goes far beyond that sufficient for ordinary purposes.

Friedrich Hayek

The point can perhaps be expressed somewhat more succinctly by the use of the terminology of the logician. Definitions in general lend themselves fundamentally to classification as either nominal definitions or real definitions. Certainly the most outstanding result of the urge to expound the nature of the economic point of view has been the number and the range of the definitions to which it has given rise. This startling multiplicity and variety of formulations was noticed long ago—at a time when their number was modest in comparison with the subsequent accumulations.

And for over three—quarters of a century the depressing lack of unanimity among these formulations has led writers to doubt seriously whether they have any value at all. Economists have, for example, been well agreed among themselves that the operations of the merchant are of specific interest for the economic perspective on social phenomena; but at this point their unanimity abruptly breaks down.

For some, the merchant is engaged in economic activity because he deals in material goods; for others, because his operations involve the use of money; for still others, because these operations hinge on acts of exchange. Some writers see the merchant as an economic agent be- cause his activities are allegedly motivated by selfishness or marked by a peculiar shrewdness in calculating the pros and cons of his dealings. And the list could be still further extended.

The disquietude to which the contemplation of such an array of criteria gives rise is deepened by the realization that in most cases each of them represents a completely different opinion concerning the function of economic analysis. Nor is our equanimity restored by observing the diversity of ways in which the problem of definition is approached. Probably the most significant differences are not those among the specific definitions arrived at, but the disagreements among writers concerning the kind of entity that they are seeking to define and the very direction in which they are to begin their search.

Definitions of economic science have time and again required preliminary discussions revolving around the question whether the discipline concerned a kind of object, a kind of activity, a kind of man, or a kind of satisfaction or welfare. The natural consequence of this state of affairs has been to stimulate frequent soul—searching among economists about the fundamental purpose of defining the economic point of view, as well as a salutary awareness of the real complexity of the problem.

The fact that so many different starting points to a territory of knowledge are conceivable is a sign of the intricacy with which the purely economic must be intertwined with other phenomena. And it raises serious questions regarding the very concept of a specifically economic point of view and the usefulness of its precise formulation through rigorous definition.

As we shall discover, a number of sharply contradictory opinions have been expressed on the usefulness of undertaking the careful definition of the economic point of view or of the nature of the subject matter of economic theory. To those who have considered such a task as significant, its fulfilment represents in itself a distinct scientific achievement. On the other hand, many writers have been at pains to disassociate themselves from an undertaking whose accomplishment seems, in their opinion, to possess no scientific value in itself nor to promise any fruitful results for further work.

This book will deal in some detail with many more or less careful attempts at such a definition; and it is only proper to pause to consider the question whether these attempts were potentially fruitful or were by their very character necessarily doomed to be wordy disquisitions, fertile in nothing but the stimulation of sterile controversies. Among those considering any search for a precise definition of the economic point of view to be a barren enterprise, we find Pareto, Myrdal, and Hutchison.

Myrdal, writing some thirty years later, voiced a closely similar view. A definition of economics can only be a search for arbitrarily drawn boundary lines. But the contrary opinion has been repeatedly expounded. The very voluminous literature on defining economic theory, including the works of the most illustrious masters of the science, constitutes in itself a formidable monument to this position. For the appreciation of the historical trend to the investigation of which this essay is devoted, it is important to understand the nature of this sharp divergence of views concerning the usefulness of a precise definition of the economic point of view.

It is possible to interpret the disagreement as merely the expression of different attitudes towards the utility of expending energy in discussing the nature of economics, as compared with that of the effort devoted to the actual increase of our stock of economic knowledge. Numerous justifications for merely perfunctory attempts to provide a definition of the economic point of view do, in fact, stress the great difficulty of the undertaking, in conjunction with its alleged lack of importance for the work of the economist.

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But such an interpretation would be a superficial one and would ignore the most significant aspect of the controversy. The notion of a peculiarly economic point of view has been variously defined in terms of a large number of different criteria. The subsequent chapters of this essay set forth the more important of these formulations. So, said Keynes, if business expectations remained the same, and government reduces interest rates the costs of borrowing , investment would increase, and would have a multiplied effect on total spending.

Interest rates , in turn, depend on the quantity of money and the desire to hold money in bank accounts as opposed to investing. If not enough money is available to match how much people want to hold, interest rates rise until enough people are put off. So if the quantity of money were increased, while the desire to hold money remained stable, interest rates would fall, leading to increased investment, output and employment. For both these reasons, Keynes therefore advocated low interest rates and easy credit, to combat unemployment.

But Keynes believed in the s, conditions necessitated public sector action. Deficit spending , said Keynes, would kick-start economic activity. This he had advocated in an open letter to U. President Franklin D. Roosevelt in the New York Times The New Deal programme in the U. It provided conceptual reinforcement for policies already pursued. Keynes also believed in a more egalitarian distribution of income, and taxation on unearned income arguing that high rates of savings to which richer folk are prone are not desirable in a developed economy.

Keynes therefore advocated both monetary management and an active fiscal policy. Keynes died little more than a year later, but his ideas had already shaped a new global economic order, and all Western governments followed the Keynesian economics program of deficit spending to avert crises and maintain full employment.

One of Keynes's pupils at Cambridge was Joan Robinson — , a member of Keynes's Cambridge Circus , who contributed to the notion that competition is seldom perfect in a market, an indictment of the theory of markets setting prices.

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In The Production Function and the Theory of Capital Robinson tackled what she saw to be some of the circularity in orthodox economics. Neoclassicists assert that a competitive market forces producers to minimize the costs of production. Robinson said that costs of production are merely the prices of inputs, like capital.

Capital goods get their value from the final products.


And if the price of the final products determines the price of capital, then it is, argued Robinson, utterly circular to say that the price of capital determines the price of the final products. Goods cannot be priced until the costs of inputs are determined. This would not matter if everything in the economy happened instantaneously, but in the real world, price setting takes time — goods are priced before they are sold. Since capital cannot be adequately valued in independently measurable units, how can one show that capital earns a return equal to the contribution to production?

Alfred Eichner — was an American post-Keynesian economist who challenged the neoclassical price mechanism and asserted that prices are not set through supply and demand but rather through mark-up pricing.

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Eichner is one of the founders of the post-Keynesian school of economics and was a professor at Rutgers University at the time of his death. Eichner's writings and advocacy of thought, differed with the theories of John Maynard Keynes, who was an advocate of government intervention in the free market and proponent of public spending to increase employment.

Eichner argued that investment was the key to economic expansion.

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Economic economic economist essay history political thinking trend
Economic economic economist essay history political thinking trend
Economic economic economist essay history political thinking trend
Economic economic economist essay history political thinking trend
Economic economic economist essay history political thinking trend

Related economic economic economist essay history political thinking trend

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