Some Thoughts on my Experience as Co-Editor of Economic Thought
The journal Economic Thought renews the dialogue between theoretical developments in economics and the history of economic thought. It is also one of the latest additions to the growing list of open peer-reviewed journals. It was a privilege to contribute to the launching and development of this journal.
The history of economic thought can take different paths. One consists in identifying the sequence of contributions made by different authors since the birth of the discipline. The typical narrative is that of a list of discoveries and developments where each stage is considered to be an improvement over its predecessors. The study of the older ideas and doctrines becomes a curiosity, something for the visitors to the museum of obsolete doctrines on a rainy afternoon. History of economic thought, from this perspective, is a venture of limited scientific value.
But if one considers the fact that contemporary economic theory has not been able to solve several fundamental problems that were identified since the origins of the discipline, the simple chronological sequence of discoveries is not only not enough: it is totally misleading.
This realization leads to a different way of looking at the history of economic thought. It is based on the idea that the history of a scientific discipline is the history of the efforts to build or to determine the discipline’s fundamental concepts. These fundamental concepts are those elementary particles without which it would be impossible to enunciate statements with an economic sense. At least three or four come to mind: price formation, markets, money and, finally, capital. When looked at from the vantage point of how different authors contribute to the development of these fundamental concepts, the history of economic thought corresponds really to a study in comparative economic theory.
It is difficult to think of examples of economic utterances that do not contain or make reference to these fundamental concepts. And yet, there is a raging debate on the nature of each of one of these concepts in the discipline of “Economics”, cutting across micro and macroeconomics, and even confronting different schools of thought. Even money, without doubt the most important economic object, remains a problem area where origin and nature are hotly debated. The fact that money was exiled from the analysis of market processes as the discipline was being born and that this tradition has been maintained until our days is one of the most outstanding facts of economic theory. The difficulties in the integration of value theory and monetary theory occupied the attention of authors as diverse as Marx, Hahn, Clower, Samuelson and Patinkin. But the problem remains largely unsolved and microeconomics continues to be developed in terms of relative prices in a non-monetary context.
But the problems surrounding the concept of money are not the only example. The state of economic theory today reflects a collection of many unsolved problems that go back in time, in some cases, to the days of the foundation of economics as an autonomous branch of the social sciences. Let me just focus on what is perhaps the best example of this. The well-known reference made by Adam Smith in Book IV of his Wealth of Nations to the invisible hand helped design and launch a research programme that led all the way to general equilibrium theory. This is why Arrow and Hahn, in their General Competitive Analysis (published in 1971) say that Smith was the creator of general equilibrium theory. It also explains why they think that the underlying idea that a social system moved by independent actions is consistent with a final coherent state of balance is “the most important intellectual contribution that economic thought has made to the general understanding of social processes”.
But that research programme ended in a resounding failure. The first symptoms came with the rather unsatisfactory results of stability theory produced by Arrow, Block and Hurwicz in 1959 and then with the more lethal findings contained in the Sonnenschein-Mantel-Debreu theorems of 1974.
That mainstream theory continues to have a difficult time swallowing these results is revealed by the fact that they are seldom taught and are in many ways systematically ignored in current theoretical thinking. Almost nobody teaches stability theory any more. And only cursory references made en passant on Lyapunov functions are offered to students even in advanced microeconomic courses. On the other hand, macroeconomic theory, from the rational expectations critique to the real business cycle and New Keynesian models, has systematically proceeded to ignore these negative results from mainstream microeconomic theory. Ironically, this was common practice even as the cry to provide microeconomic foundations for macro models was raging!
The practice of incorporating the standard assumptions of microeconomics to build a theory of the aggregative behaviour of capitalist economies is a colossal mistake. It not only denies the essence of macroeconomics, it also says a lot of the subordinate place that has been assigned in academia to the history of economic thought.
Once we recognize the shortcomings and limitations of contemporary economic theory, going back in time to study the contributions of past authors becomes a necessity. It can help unravel the nature of the problems that occupy our attention today and it can improve our understanding of the way in which those problems can be tackled in contemporary societies.
I suspect this is what students had in mind in 2000 when they first started to protest in the beginnings of the post-autistic movement. They were right. History of economic thought should be seen as part and parcel of a scientific research programme in economic theory.
Learning from my colleagues in the editorial team of Economic Thought, as well as from contributors, authors and commentators alike, was a great privilege. I owe special thanks to Edward Fullbrook for inviting me to take part of this project.
From: pp.6-7 of World Economics Association Newsletter 5(4), August 2015