26 November 2020
The Classical School:
The Turbulent Birth of Economics in Twenty Extraordinary Lives
220, Profile/Economist Books, 226 pages,
Reviewer: Rosemary Connell
This book covers the works of twenty economic thinkers spanning about three centuries (1600-1900). These economists were influenced by the prevailing economic, social and political conditions of their time. The author cleverly demonstrates how their thoughts and theories intertwine and clarifies both what they got wrong and the influence they have had. As well as a number of well-known names the author also covers lesser known writers whose thinking was influential in their time. The histories of their lives and the many anecdotes make riveting reading. This review briefly touches on some of the key thoughts of each of the characters while putting them in the context of their often well-lived lives by delving into their histories.
Jean-Baptiste Colbert (French finance minister) was a mercantilist and put these ideas into practice. He believed that a trade surplus equalled national prosperity so imposed import tariffs. He also believed in full employment and protected industries with non-tariff barriers. As a result the French economy declined.
William Petty’s contribution to economics was in measurement and statistics. He produced the “Down Survey” a systematic mapping of Ireland following the Cromwellian conquering. In England he focused on measuring the countries level of production or income using an empirical approach, something for which Ricardo and Marx had no time.
Bernard Mandeville endorsed self-interest and immorality with his bee poem, “The Grumbling Hive”. He seemed to believe in Laissez- Faire economics where society is judged by how rich it is. But he questioned whether capitalism should survive if it means sacrificing ethical principles.
The colourful Richard Cantillon developed the theories of opportunity cost and ceteris paribus.
Francois Quesnay believed agriculture was the source of a nation’s wealth. His “Tableau Economic” attempted to show how money flowed round the economy.
David Hume began the development of monetary theory and debunked mercantilism.
Adam Smith was a great friend of Hume. His famous exposition of the division of labour and specialization is a template for capitalism. He was against mercantilism and in favour of free trade. Despite the famousness of the “Invisible Hand”, Smith never clarifies that it will lead to the best outcome.
Nicholas de Condorcet is known for his paradox: if society faces three options none of which has more support than the other two combined then if a yes/no decision is required the result will be shambolic. He believed that people should be given money not food in a famine.
David Ricardo made millions in the Napoleonic wars and developed the theory of comparative advantage. Some of his other theories have been proved wrong.
Jean Baptiste Say is known for Say’s law: supply creates its own demand, true in some cases, not in others!
The puritanical Robert Malthus argued that the food supply would only increase arithmetically while population would rise geometrically –another wrong theory partly due to increased productivity and the industrial revolution.
Simonde de Sismondi believed that Capitalism would lead to weak growth and recession. This influenced Marx.
John Stuart Mill supported utilitarianism. He favoured free trade which he believed to increase productivity and encouraged people of different background to communicate and exchange ideas.
Harriet Martineau was a popular writer who made economics easy to understand, but did not develop her own theories.
Karl Marx, not a believer in empirical evidence, built his case against capitalism on the assumption that labour input is the source of value. He later realized that this did not hold true.
Friedrich Engels collaborated with Marx on The Communist Manifesto. His predictions of a revolution were wrong.
William Stanley Jevons aimed to apply mathematics to help solve economic problems. His utility theory of value undermined the labour theory of value.
Dadabhai Naoroji developed the drain theory to try to explain why the world was becoming more unequal.
Rosa Luxemburg believed that capitalism required colonialism to continue to sell its products.
The last character, Alfred Marshall collated pre-existing theories into his famous “Principles of Economics”. He also produced many of his own theories for improving capitalism.
This is a fascinating, very well written book. It is an absorbing and instructive history lesson, so should have wide appeal.