The Cambridge economist Arthur Pigou once dismissed the history of economic thought as the wrong opinions of dead economists. It might have been a bit short-sighted because when he went to that bliss point in the sky he, too, lost some validity. Actually, we still use his work today in the shape of Pigouvian welfare theory. Always remember it takes a theory to kill a theory. However as John Quiggin reminded us, some of these theories never really die–they become zombie economic ideas; nor are they confined to the graveyard of economic ideas, they circulate all around like spectres. Given this, it is ironic that the History of Economic Thought (HET) is now only taught in a few economic degree programmes within Australia. It was once a compulsory subject and taught at honours level, but it has been squeezed out by more technical, quantitative offerings. So HET has gone the way of units like urban economics, transport economics, regional economics and economic history. Things began to stir a few years ago, however.
The Global Financial Crisis was an almighty reality check for economists and led to calls to greater humility and introspection from the profession. It has also led to requested changes in the economic curriculum, specifically, that economic history and HET be brought back into the undergraduate syllabus. Before the GFC economists like Robert Lucas said that macroeconomics had killed the business cycle. Big mistake! Just as well he had been awarded his own Nobel Prize in Economics!
It is a great pity that HET has fallen out of favour, as it is central to the understanding and the evolution of economic theory. HET is an integral part of economics. It also gives one a sense of history and background about how current economic theory evolved. My colleague, Steve Kates of RMIT University, has mounted a robust defence on the place of HET in economics programs, having recently written a book entitled Defending the History of Economic Thought. According to Kates, the bulk of the economics profession do not see the need for HET. He holds, however, that HET is central to the education of a young economist: it is neither an indulgence nor a hobby, but rather a vital element in one’s economic education. The teaching of HET, he contends, makes economists better qualified and trained.
Kates also upholds that HET makes for a better economics in that existing economic theory is embellished by the insights from the work of economists of the past. He further argues that taking the subject is a prerequisite for the development of economic theory and that, in your case, delving into HET deepens your understanding of textbook theory.
There are some other benefits that HET can bestow upon the serious economic student. Kates and I listed five others in an earlier publication:
- HET is a pathway to understanding economic theory and its application
- HET provides a perspective on existing theory and provides orientation for its future development.
- HET is a conversation with economists of the past upon contemporary questions.
- HET is a vast storehouse of theoretical approaches and ideas for dealing with economic issues.
- HET provides a literary approach to dealing with economic issues different from but as valid as mathematical and statistical approaches.
More informally, HET humanizes economics by informing us about the lives of the great theorists, men and women and what were their motivations for doing so. Here you encounter mega-minds like Smith, Marx, Malthus, Keynes, Schumpeter and, well, the list is endless. They would all make excellent dinner companions with the table top conversations all about market capitalism, economic development and, inevitably, why they turned to economics to explain the world. The other attraction is that these thinkers could write with some of the most powerful passages in economic literature flowing from their pen.
In your lives the greatest economic occurrence, apart from the rise and fall of China, was the GFC. It’s interesting that this major failing of capitalism has not led to calls and agitation for new types of economic system. It did, however, lead to an avalanche of commentary upon why it happened. Historians of economic thought take hope that it will, in turn, see young minds turn to what the old masters of their discipline said about the gyrations of capitalism.
Alex Millmow is the President of the History of Economic Thought Society of Australia.