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Why economics was late in starting
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.
Posted by Tyler Cowen on April 5, 2008 at 05:44 AM in Economics, History | Permalink
Comments
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.
Posted by: J.Lo at Apr 5, 2008 7:40:59 AM
Was the Egyptians storing up grain in warehouses - saving for a rainy day so to speak - economic activity? Were they trying to arrange scarce resources to fit the percieved needs?
Then there were the Cistercians in 12th century Europe who kept records on crop yields, again trying to figure out the greatest yields for scarce inputs. First time for that as I understand.
Are these not basic economic activity? Saving for a rainy day kind of thing - trying to manage scarce resources to fit both present and future needs?
Posted by: Ed D. at Apr 5, 2008 8:54:54 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.
Posted by: at Apr 5, 2008 9:20:52 AM
A minor point: the School of Salamanca made its contributions in the 16th, no the 17th, century.
Posted by: Alejandro Hope at Apr 5, 2008 9:41:23 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.
Posted by: PQuincy at Apr 5, 2008 11:40:09 AM
At first thought, I am going to have to go with a one word answer – usury.
The Protestant Reformation began chipping away at the power and influence of the Catholic Church, which forbid charging interest on loans.
I think that it is fair to say that interests bearing loans are one key to focusing economic thought. That is, it quantifies trade-off values in an explicit manner.
Also, loans are a key to capital flow and thus growth, which seems to be correlated with the rise of economic theory, as has been pointed out above.
Posted by: Dan Karney at Apr 5, 2008 12:37:13 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.
Posted by: fundamentalist at Apr 5, 2008 12:48:13 PM
That's how I see a lot that is done in heterodox economics and theoretical social sciences: maybe one day we will find some use for that stuff.
Posted by: NPTO at Apr 5, 2008 12:53:00 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.
Posted by: Fernand Baurdel at Apr 5, 2008 1:42:34 PM
To return to Tullock's approach:
We are looking into "Fields of Inquiry."
What forces motivate inquiries, initially, and then sustain them? First, why do we inquire; then, secondly, why do our inquries take particular forms and directions?
How and why are particular fields selected for inquiry; and why?
If one looks at Tullock's approach to those issues (and motivations; See, Chapter II) and then consider what inquiries were begun in what periods to deduce motivations, the absence of "formal" Economic Inquiry should not seem so strange.
But that is quite apart from Tullock's commentary.
Posted by: R. Richard Schweitzer at Apr 5, 2008 2:42:43 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.
Posted by: David Zetland at Apr 5, 2008 3:47:34 PM
I agree with Fernand--late compared to what? As long as everything technically belong to the monarch, and property rights were undefined, and all exchange was subject to grants of privilege, there was no use for theoretical economics. Even so, primitive notions of trade and credit were well-understood and widely practiced as early as Roman times, and perhaps in Biblical times.
But the kind of property rights that might give rise to private capital, traded debt instruments, and significant exchanges with perfect strangers slowly evolved in post-medieval times, around the same period that the scientific method began to gain its own currency.
But the social sciences have never maintained the distinction between descriptive and normative that was adopted by the "natural sciences" around the time of Galileo. Today, most people have an impossible time separating the evidence from the argument. E.g., "minimum wages might be good based on Kreuger's study..." That will continue as long as evidence in the social sciences remains much less conclusive than it is in the harder sciences, and as long as the policy implications of that evidence is so easily politicized.
Posted by: M. Hodak at Apr 5, 2008 3:48:28 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.
Posted by: Steve Sailer at Apr 5, 2008 4:00:47 PM
I read this as him attributing it to an emerging individuation of what was previously a more social consciousness.
[The more deeply we go back into history, the more does the individual, and hence also the producing individual, appear as dependent, as belonging to a greater whole: in a still quite natural way in the family and in the family expanded into the clan; then later in the various forms of communal society arising out of the antitheses and fusions of the clan. Only in the eighteenth century, in ‘civil society’, do the various forms of social connectedness confront the individual as a mere means towards his private purposes, as external necessity. But the epoch which produces this standpoint, that of the isolated individual, is also precisely that of the hitherto most developed social (from this standpoint, general) relations. The human being is in the most literal sense a {political animal}, not merely a gregarious animal, but an animal which can individuate itself only in the midst of society. Production by an isolated individual outside society – a rare exception which may well occur when a civilized person in whom the social forces are already dynamically present is cast by accident into the wilderness – is as much of an absurdity as is the development of language without individuals living together and talking to each other. There is no point in dwelling on this any longer. The point could go entirely unmentioned if this twaddle, which had sense and reason for the eighteenth-century characters, had not been earnestly pulled back into the centre of the most modern economics by Bastiat, Carey, Proudhon etc.] - Karl Marx, "Outline of the Critique of Political Economy (Grundrisse)", in the introduction.
Posted by: ideogenetic at Apr 5, 2008 7:48:43 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!
Posted by: Enda at Apr 5, 2008 8:01:26 PM
I'm still unconvinced that there's a phenomenon in need of explanation here. Sociology dates from the mid/late-19th century, with theorists like Marx, Durkheim, and Weber. Psychology dates from the late 19th century, with theorists like Freud, Wundt, and James. Linguistics as a discipline is very much a 20th-century phenomenon, with the foundations of (what would now be recognized as) semantics starting with Frege's distinction between sense and reference and generative syntax invented by Chomsky (though Wikipedia tells me that the study of language was more detailed than I had thought). Wikipedia gives more elaborate descriptions of older work in all of those fields than I had expected but by Wikipedia standards the same is true of economics.
Other than maybe history I don't think the other social sciences date from much earlier than that. I don't see any reason why economics should have developed earlier than the other social sciences, so I don't buy that anything needs explaining here.
Posted by: Elliot Reed at Apr 5, 2008 11:52:51 PM
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
Posted by: bjk at Apr 6, 2008 5:12:17 AM
Seems 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 expects and any given state mandates. But then as inquiry started to concentrate more attention on the impetus and dynamics of human action by individuals (i.e. bottom-up), Economics inevitably got free-up to being the study of markets and choice theory that it's become.
Posted by: TomG at Apr 6, 2008 6:18:48 AM
You neglect Dupruit, Cournot, and the French engineers in the first part of the 1800's.
Posted by: tollison at Apr 6, 2008 7:42:12 AM
Most sciences were driven by early successes, physics with Newtonian mechanics, chemistry later with the periodic table, etc. There simply were no successes of economics. Other early subjects, such as alchemy, declined not because of a lack of practitioners (Newton worked hard on alchemy) but because of a lack of success.
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Seems 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
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Posted by: geciktirici sprey at Aug 8, 2008 6:47:10 AM
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.
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