fifty major economists a reference guide phần 1 potx

FIFTY MAJOR ECONOMISTSFifty Major Economists provides a comprehensive and clear exposition of the ideas of thoseindividuals responsible for shaping the discipline of economics.. A sense

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FIFTY MAJOR ECONOMISTS

Fifty Major Economists provides a comprehensive and clear exposition of the ideas of thoseindividuals responsible for shaping the discipline of economics Numerous examples help toillustrate the key concepts and ideas of these economists The book covers a wide range ofthinkers, spanning several centuries, beginning with Thomas Mun and Adam Smith, and

progressing to recent Nobel Prize winners such as Robert Lucas and Amartya Sen Fifty Major Economists contains brief biographical information about each economist, references to themajor works of each figure, guides to further reading and a glossary of economic terms used inthe book

Steven Pressman is Professor of Economics and Finance at Monmouth University, New Jersey.

He is the author of Interactions in Political Economy: Malvern after ten years, also published

by Routledge, Quesnay’s Tableau Économique and Economics and its Discontents (edited with Richard Holt) He also serves as co-editor of the Review of Political Economy.

Fifty Contemporary Choreographers

Edited by Martha Bremser

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In memory of my mother, Phyllis Pressman (1926–95); a major figure

First published 1999

by Routledge

11 New Fetter Lane, London EC4P 4EE

Simultaneously published in the USA and Canada

by Routledge

29 West 35th Street, New York, NY 10001

Routledge is an imprint of the Taylor & Francis Group

This edition published in the Taylor & Francis e-Library, 2002.

© 1999 Steven Pressman

All rights reserved No part of this book may be reprinted or reproduced or utilized in any form or by any electronic, mechanical, or other means, now known or hereafter invented, including photocopying and recording, or in any information storage or retrieval system, without permission in writing from the publishers.

British Library Cataloguing in Publication Data

A catalogue record for this book is available from the British Library

Library of Congress Cataloging in Publication Data

SBN 0-203-02472-9 Master e-book ISBN

ISBN 0-203-20625-8 (Glassbook Format)

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Antoine Augustin Cournot (1801–77) 40

Francis Ysidro Edgeworth (1845–1926) 69

John Maynard Keynes (1883–1946) 99

INTRODUCTION

“The ideas of economists and political philosophers, both when they are right and when theyare wrong, are more powerful than is commonly understood Indeed, the world is ruled bylittle else Practical men, who believe themselves to be quite exempt from any intellectualinfluences, are usually the slaves of some defunct economist.” So wrote John Maynard Keynes

at the end of The General Theory of Employment, Interest and Money Keynes was pointing

out that the key economic issues are generally argued within a context and framework thatwas developed over many centuries Not knowing that history results in less informal discussionand also in worse economic policies History counts not only because, as Santanyana remarked,those who lack a knowledge of history are bound to repeat its mistakes History also has valuefor the perspective it bestows Like other disciplines, economics was not developed in a vacuum

To the contrary, economic ideas were developed by real people who were responding to theimportant issues of their time A sense of history is necessary to comprehend this noble function

of economics and to understand how great economists of the past responded to the problems

of their time Finally, history is important because, in a sense, history is the arbitrator of whathas only fleeting importance and what has lasting interest and significance

Unfortunately, at the end of the twentieth century the majority of the economicsprofession has come to reject historical pursuits and perspectives Most economists evenlook down on those who study economics from an historical perspective Part of the reasonfor this is that over the past several decades economists have come to value techniqueover ideas Another reason economists ignore history is that they hold an outmoded view

of what counts as truth in the social sciences Believing that we can come to know timelessand universal economic truths, many economists ignore history; past ideas are thought to

be either imbedded in current economic knowledge or just plain wrong

Historians of economic thought must also share some of the blame for the demise oftheir area of specialization They tend to present their field as a history of dead figureswhose ideas have little contemporary importance Rarely do they explain how studyingthe great figures from the past can help illuminate current issues, or how it can help usunderstand how economics might help mitigate important contemporary problems Evenless frequently do they study the ideas of economists who are still alive and who continue

to contribute to our knowledge of how economies work

When Alan Jarvis of Routledge approached me about doing a book on the major figures

in economics I took his inquiry as an opportunity to remedy this situation, and also torevitalize interest in the long and great history of economic ideas All the key economicfigures from the past are contained in this volume They are great figures for good reasons.However, history does not end in the distant past; it continues up to the present and itpermeates much recent economic thought Thus, this volume explicitly recognizes theimportant contributions made by more recent economists

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Nonetheless, choosing which fifty economists to include in this volume quicklybecame a daunting task While the first forty or so were relatively easy decisions,things soon became difficult And as time went on, and as the number of figures Iselected approached fifty, it became more and more difficult to make the finalchoices My general guidelines for these decisions were the power of the ideasdeveloped by each economist, the breadth of their overall contributions, and of course,the judgment of history In the latter case I was guided by how history has viewed thecontributions of past and present figures and also by how I thought that history willlikely view their ideas in the future

Of course, there can be considerable dispute concerning who should be included andwho should be excluded In fact, “Who should be number fifty?” became an amusingparlor game that I played with many colleagues over the past several years Alas, thisparlor game led to little or no consensus On the bright side, there was much heated andenjoyable debate about the most important ideas and figures in the long history ofeconomics I thank my many colleagues who humored me by playing this game, and by

so doing, for helping me to think about what is really important in economics and what

is really important about economic ideas While I may not have gotten everything exactlyright, and while I am sure that people will point out many important figures who wereignored, as the failure to find consensus around number fifty shows, there is probably

no right answer here However, I am confident that I have pretty much gotten thingsright The fifty economists whose ideas I explain in this volume are all major figureswho have made important contributions History is likely to view them as importanteconomic figures, worthy of continued study

For each economist in this volume I have provided a short biography and a summary

of the several key ideas that they promulgated I have also attempted to assess theirplace in the history of the discipline Towards this end, I have made some effort to letthe reader know where these figures rank according to the views of most economists Ihave also gone out on a limb and provided my own assessments of the rankings of thesefigures I know that my colleagues will dispute many of these rankings; and, of course,these rankings will likely generate as much controversy as my decisions about who toinclude in this volume Again, although my assessments may not be perfectly right, Ithink I have gotten things pretty much right in this regard

Each entry ends with a bibliography containing the most important writings of eachfigure and a few references to the most accessible and most important secondary literature.These references should allow interested readers to pursue further the economic ideas ofthese major figures The volume closes with a glossary of key terms, so that frequentlymentioned concepts do not have to be continually defined and explained

In all writing endeavors one incurs many obligations This is especially so in a workcovering so many ideas, so much history, and so many figures Many colleagues readearlier drafts of this work and provided substantial comments in an attempt to correct

my mistakes For their hard work I thank Nahid Aslanbeigui, Peter Boettke, CharleyClark, Milton Friedman, John Henry, Sherry Kasper, Mary King, Roger Koppl, FrancoModigliani, Laurence Moss, Douglass North, Susan Pashkoff, Alessandro Roncaglia,Ruth Sample, Mario Seccareccia, John Smithin, Gale Summerfield and Naomi Zack.Any errors, of course, remain my responsibility

Several of my students at Monmouth University and the University of New Hampshireread and commented on many individual chapters, thereby forcing me to make the ideas

of all fifty economists clear to someone who is not cursed by having a Ph.D in

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their assistance and support I am very grateful

But perhaps my greatest debt and gratitude goes to those people who typed thenumerous revisions to each chapter, as I tried to get the ideas of these fifty economistsexactly right and as I tried to make them intelligible to a broad audience For their hardwork, and for their patience in putting up with my endless revisions, I thank BethBoyington, Nancy Palmer and Diana Prout

respected member of a group of

seventeenth-century British merchant-economists called

“the mercantilists.” This group proposed that

England run trade surpluses in order to prosper

economically As set forth by Mun ([1664]

1954, p 125),

The ordinary means…to increase our wealth

and treasure is by Forraign Trade, wherein

wee must ever observe this rule; to sell more

to strangers yearly than wee consume of theirs

in value …[T]hat part of our stock which is

not returned to us in wares must necessarily

be brought home in treasure

Little is known about the life of Mun His

grandfather worked for the Royal Mint; his

father was a textile trader Mun himself became

a merchant early in life, lived in Italy for many

years and quickly accumulated a great deal of

wealth He later became involved with the East

India Company, a large British joint-stock

company that traded (primarily) in the Far East

In 1615 Mun was elected to be a Director of

the East India Company, and he remained a

Director of the firm for the remainder of his

life After Mun achieved wealth and social

status he was appointed to several British

committees and commissions Most of these

commissions issued reports containing Mun’s

name as part of a long list of committee

members; but Mun himself wrote only two

economic tracts

His first work (Mun 1621) defended the

East India Company against critics who

claimed that the firm was exporting gold and

silver to the Orient (in exchange for spices)

and that this loss of precious metals was

hurting the British economy A Discourse of

Trade was rather unmercantilist in its

orientation Rather than advocating a trade

surplus and the accumulation of gold, Mun

advanced any and all arguments he could

think up to support the East India Company

families become poor by spending too muchmoney Thus, Mun reasoned, as long as theEast Indian Company made money it couldnot make Britain poorer

Mun also pointed out that food, clothing,and munitions were necessities, so importingthese goods improved the welfare ofEngland On the other hand, importingluxury goods was harmful to the nation Munthen went on to argue that the East IndiaCompany was importing only itemsnecessary for consumption

Taking yet another line of defense, Munargued that trade with India provided amarket for English exports In addition, tradewith India was good for Britain because iteliminated trade with Turkey; had the samegoods been imported from Turkey, Munpointed out, the cost to Britain would havebeen much greater

Finally, Mun argued that not all luxuryimports were harmful; some imports wereimproved by British firms and re-exported,thus leading to a net influx of precious metalsinto England The goods imported by theEast India Company, Mun claimed, weregenerally goods needed by British exporters

While the Discourse made Mun an

apologist for the East Indian Company, hissecond book, published posthumously (1664),established Mun as an important earlyeconomic thinker What is most noteworthy

about England’s Treasure by Forraign Trade

is its much broader perspective No longer doesMun try to defend the East India Company;rather he adopts the viewpoint of the nation as

a whole He looks at trade in general, ratherthan trade by the East India Company, and hemakes the case that foreign trade enriches anation whenever it leads to a trade surplus Munalso examines the factors that cause a country

to run trade surpluses Finally, Mun advances

a set of proposals that British leaders could

THOMAS MUN

2

implement if they wished to improve the

national trade position

The trade balance is merely the difference

between what a nation exports and what it

imports When a nation runs a trade surplus,

its exports exceed its imports Sales abroad,

over and above what is bought from foreign

countries, must be paid for by foreigners In

the seventeenth century these payments were

made with precious metals—gold and silver

Trade surpluses thus enabled a nation to

accumulate wealth and enrich a country In

contrast, domestic trade could not make

England wealthier because the gain in

precious metals by one citizen would equal

the loss of another citizen To generate trade

surpluses, Mun noted, England must become

more self-sufficient and reduce its need for

foreign-made goods Britain must also

become more frugal so that more goods were

available for export Mun especially looked

down on and discouraged the consumption

of luxury goods

With the domestic money supply rising

as a result of these trade surpluses, a

danger lurks that people might try to

purchase more goods This would cause

domestic prices to increase and would

eventually lead to the loss of exports, since

domestically produced goods would

become too expensive to sell abroad But

these consequences, Mun noted, could

easily be avoided To make sure that the

inflow of money from abroad actually goes

to benefit a nation, all new money must be

re-invested Reinvestment would also

create more goods to be exported in the

future Here Mun recognized the

importance of capital investment, and he

viewed a positive trade balance as a way

to accumulate productive capital

Besides explaining the benefits of trade

surpluses, Mun also explained what could

be done to encourage such surpluses First,

there was price policy Mun wanted exports

sold at the “best price”; that is, the price

that brings in the most revenue and wealth

Where England had a monopoly in world

trade, or something close to a monopoly, hergoods should be sold at high prices Butwhen foreign competition was great, Britishgoods should be priced as low as possible.This would result in more sales for Britainand help drive out foreign competitors.When foreign competitors disappeared,Mun recommended that prices be raised, butnot to the point that competitors are enticed

to come back into the market

Second, Mun explained that higherquality goods would be in greater demandthroughout the world and would also lead

to greater exports for Britain He thenexplained how the British government couldhelp improve product quality Mun wantedthe government to regulate manufacturersand to establish a council of trade (similar

to the functions now performed by the USDepartment of Commerce) which wouldadvise the government in matters pertaining

to the regulation of trade and industrialactivity These regulations on Britishmanufacturers should be quite strict in order

to ensure that Britain produced high qualitygoods

Finally, Mun explained how national taxpolicy could help generate trade surpluses

He recognized that (in opposition to thenational interest) some firms might want toimport luxury goods In such a case,government policies must bring private andnational interests into harmony Mun looked

to taxation to achieve this end Export dutieswere to be discouraged because they wouldcost Britain sales in foreign countries.Import duties should be low on goods thatare subsequently exported and high ongoods that tend to be consumed by Britishcitizens Excise or sales taxes, Mun argued,did little harm Although they raised theprice of food and clothing, Mun believedthat these taxes would lead to higher wagesand thus be shifted to employers AlthoughMun did not offer any explanation for this,one possibility is that he had in mind a

subsistence theory of wages (see alsoSMITH)

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