Why economics was late in starting

by on April 5, 2008 at 5:44 am in Economics, History | Permalink

I’ve already posed the question, I’d like to add two points.  First, sustained economic growth in the Western world starts in 17th century England, as shown by Greg Clark.  Interest in economic reasoning then comes rapidly, first from the mercantilists, then in Adam Smith and some earlier free trade thinkers, such as Dudley North and Nicholas Barbon.

Second, the idea of "private vices, publick virtues" was central for eighteenth century economic thought and for social science more generally.  This came from Bernard Mandeville (drawing upon the French Jansenists) in 1720.  It’s no accident that Mandeville lived in the Dutch Republic, which had very little censorship.  No, I am not a Straussian but the merits of that viewpoint are often overlooked.

The School of Salamanca had an excellent marginal utility theory in 17th century Spain, the framework simply did not go anywhere.  For that matter we can look later and see that Samuel Bailey, Mountifort Longfield (1834), and others had critical components of Marshall.  But no one really cared because they could not yet see how important those contributions would turn out to be.  This is a central theme in why the growth of economic thought took so long.

It also suggests that today we might have some very important ideas amongst us, we simply cannot yet see how fruitful they will be.  Their own proponents may not even know it.

J.Lo April 5, 2008 at 7:40 am

Kling makes a good point–until Quetelet brought probability and statistics over from astronomy in the early 19th century, there really wasn’t much in the way of tools on which to found econ (or really other social sciences) at any significant societal level. More interesting to this frequent reader, though, is your use of history to place economic thought, development, and growth into a useful temporal context. Highly thought-provoking, especially in how other schools of thought parallel or depart from econ.

Anonymous April 5, 2008 at 9:20 am

Important ideas not yet fully appreciated are “free” and “attention”.

The economics of “free” (zero price) have yet to be fully thought through (some discussion at Wired (Chris Anderson) and Kevin Kelly). If we get inexpensive nanotech replicators someday, or if we all upload ourselves into virtual worlds and live there, perhaps “free” will simply become standard mainstream economics.

There is also the “attention economy”. The notion of fame as something that can be easily and routinely monetized is a very recent concept historically. Post-retirement, Ulysses Grant lived in poverty until he wrote his Memoirs; Bill Clinton, on the other hand, as we have just learned, has made about $80 million since leaving the White House mostly just by giving speeches. Someday, someone will win the Nobel Prize for Economics with a scholarly thesis explaining the Paris Hilton (famous for being famous) phenomenon, perhaps with some kind of Black-Scholes formula for accurately pricing a quantum of fame.

PQuincy April 5, 2008 at 11:40 am

Fascinating to see the historical genealogy of economic ideas discussed, and taken seriously — and also good to remind us that ideas that may seem ‘obvious’ to modern thinkers or just in modern discourse were not obvious at all even a few centuries ago. Bravo.

But one gentle reminder, if I may: eschew teleology. You write: “But no one really cared because they could not yet see how important those contributions would turn out to be. This is a central theme in why the growth of economic thought took so long.”

This is true enough at one level, but it also carries the assumption, at least implicitly, that certain ideas _inevitably_ ‘turn out to be’ important? Yes, I know that economists believe that they are studying ‘objective’ processes, and can therefore claim that certain ideas ‘must’ eventually triumph, but economics’ fairly limited ability to make falsifiable predictions that test out true should lead us to be cautious. I’d urge the avoidance of even implicit teleology, and just say that “But no one really cared because from their perspective, these contributions were not important.”

Note that I’m not arguing that ‘all cultural frames are equally valid’, just that people in a given frame usually find it hard to imagine that certain ideas are important, even if those ideas seem obvious in a different frame, and also turn out to allow more rational responses to specific challenges. We haven’t yet found a ‘general enlightenment process’ that makes genuinely more rational and perceptive ideas also necessarily more persuasive. Humans are sufficiently capable of believing what they want, and incapable of imagining themselves out of their current perspective, that enlightenment proceeds (or not) more like random walk than like the unfolding of a flower.

fundamentalist April 5, 2008 at 12:48 pm

First, sustained economic growth in the Western world starts in 17th century England, as shown by Greg Clark…The School of Salamanca had an excellent marginal utility theory in 17th century Spain, the framework simply did not go anywhere.”

Actually, the first sustained economic growth in the Western world started in the Dutch Republic in the 16th century. See Israel’s “The Dutch Republic” and De Vries’s “The First Modern Economy.” The Dutch merely implemented the economis of the Salamancan School, which as Alejandro noted reached its peak in the 16th century. But scholastic thought on economics goes back centuries before the Salamancan school.

What drove the creation of economics was the amazing success of the Dutch, who had no gold, as opposed to the amazing failure of the Spanish who enjoyed boat-loads of gold that they stole from the natives in the Americas.

Fernand Baurdel April 5, 2008 at 1:42 pm

@Dan Karney: the condemnation of loans bearing interests by the Catholic Church is partly a myth. First, you have to make the difference between what the church said and its real influence on economic agents. Second, in the second part of the Middle Ages, as Italian merchants were becoming quite important, the Church started to make the difference between usury and interest, forbidding the first, but allowing the second.

Well of course the Protestant Reformation had an important economic influence, as it contributed to change the cultural framework of economic agents (cf Max Weber on this point.)

Pre-capitalist economies had to major problems : the impossibility to exceed a certain production of food (because of technical constraints), and the problem of a limited money supply (which meant high interest rates: never less than 10%, often 30 or 40%.) The second problem was partly solved by the enormous flow of gold and silver from America in the 16th century and by the apparition of an efficient credit market from the last decades of the 17th century on (in relation with the creation of the first National Bank in England in 1694, to manage the fast growing public debth -see P. O’brien on this point.)

It’s true that the question “why economics was late in starting” is in itself teleological. Late compared to what?? Modern physics appeared in the 17th century. History as we practice it in the 19th century.

David Zetland April 5, 2008 at 3:47 pm

Correction: Mandeville was Dutch, but he lived in England, wrote the Fable of the Bees in English, and was an active pamphleteer. I am not sure how free speech was in the Netherlands and UK at the time, but Mandeville would have been silenced in many other parts of the world (then, as now). Perhaps we should date the emergence of economics to the emergence of free speech (the coffee house revolution) and political rights (Magna Carta). It’s all connected.

Steve Sailer April 5, 2008 at 4:00 pm

Lots of fields took even longer to develop than economics, such as Pasteur’s Germ Theory, which had immediate and gigantic benefits.

Or, the study of human differences didn’t begin to get put on a scientific footing until Francis Galton got interested in it in the later part of the 19th Century. And many still find the entire concept of studying statistical differences among types of humans abhorrent, as the recent firings of James Watson and Larry Summers point out.

The most obvious path along which economics could make major advances would be for economics to incorporate the Galtonian / Darwininan framework, but that would require economists to stiffen their backbones considerably. If they can kick to the curb, almost without protest, the man who ranks second on the 2006 Atlantic Monthly survey of historians of the Most Influential Living Americans, James Watson, it’s hard to expect individual economists to show some spine.

Enda April 5, 2008 at 8:01 pm

Can I expect Mountifort Longfield (or John Law?) to feature in your ‘My favourite things Ireland’ post, then?

It would be nice to see Francis Edgeworth get a mention, too.

Oh and given your propensity to blog about his book, perhaps Kevin O’Rourke warrants a hat-tip.

In fact, I call for a “My favourite Irish economics” post!

bjk April 6, 2008 at 5:12 am

Economics was not a *theoretical* but a practical science before Adam Smith. The Wealth of Nations was about the very Aristotelian “origins and causes” of the WON and the title “Theory of Moral Sentiments” is deliberately paradoxical (Smith loves paradoxes, such as charitable greed). “Theory” typically applied to astronomical phenomena, not to “moral sentiments,” but Smith offers a Theory of (the System) of Moral Sentiments much as Newton provided a theory of the System of the World, although Smith was a Cartesian and not a Newtonian (he objected to the unexplained principle of gravity). So I would say that society had to be separated from state before it was conceived as an object of theoretical contemplation ala economics.

Hegel agrees.

Hegel, Rechtsphilosophie, sec. 189 Zusatz.

http://www.marxists.org/reference/archive/hegel/works/pr/prcivils.htm#PR189

“Political economy is the science which starts from this view of needs and labour but then has the task of explaining mass-relationships and mass-movements in their complexity and their qualitative and quantitative character. This is one of the sciences which have arisen out of the conditions of the modern world. Its development affords the interesting spectacle (as in Smith, Say, and Ricardo) of thought working upon the endless mass of details which confront it at the outset and extracting therefrom the simple principles of the thing, the Understanding effective in the thing and directing it. . . . The most remarkable thing here is this mutual interlocking of particulars, which is what one would least expect because at first sight everything seems to be given over to the arbitrariness of the individual, and it has a parallel in the solar system which displays to the eye only irregular movements, though its laws may none the less be ascertained.”

To find this same sort of argument in Newton, see the General Scholium to Book III. The System of the World, in the Principia:

http://members.tripod.com/~gravitee/genschol.htm

tollison April 6, 2008 at 7:42 am

You neglect Dupruit, Cournot, and the French engineers in the first part of the 1800′s.

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kyle May 15, 2009 at 2:29 am

It is enlightening!

karasu May 18, 2009 at 3:04 pm

thans eems to me that Economics was mostly confined to discussions of Moral Philosphy early on, because human behavior and choice-based judgements revolved around top-down rules of what God thanks you

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catlak kremi January 5, 2011 at 1:54 pm

thans eems to me that Economics was mostly confined to discussions of Moral Philosphy early on, because human behavior and choice-based judgements revolved around top-down rules of what God thanks you

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