The Making of Modern Economics: The Lives and Ideas of the Great Thinkers

Rating:
Summary: Ol man take a look at my life it's a lot like you
Review: There's a saying in the economics department of academia that the answers to the test are always the same, only the questions change. Mark Skousen does a masterful job in telling us why this is true.

Skousen begins this marvelous book with a quote by J.M. Keynes. I'll paraphrase it as follows: "the ideas of economists and political philosophers are more powerful than commonly understood; indeed the world is ruled by little else". A quote on the same page by J.M. Ferguson avers, "Economics concerns itself with the greatest of all human dramas... the struggle of humanity to escape from want". These two quotes suggest that one: the "follow the money" theory of history has credence, particularly over the Hegalian master-slave theory, and its Marxist class oppression version. And, two: that the study of economics has essentially revolved around how to alleviate poverty, and to create a greater surplus for all people.

Skousen begins this tome with a salute to Adam Smith whose "invisible hand" thesis explains the counter intuitive concept that "individual self interest attains for the greatest common good." This idea supports Tom Sowell's assertion that social policy should consist of ways to incentivize industrious, commercially competent, ambitious, self centered men; a push for the idea that greed is good.

Skousen compares Smith's "Harmony of interest" model, which asserts that workers, landlords and capitalists work together to provide goods and services", with Ricardo's "Class conflict" model, one that suggests that the same parties compete with one another for a share of those goods and services." What's good about this book is that Skousen gives both sides an equal hearing, and he tells it as a storyteller might. He makes it readable and engaging.

He wends his way thru the stories of French economists Alex de Tocqueville, Frederic Bastiat, and Jean Baptiste Say as they relate to the study of economics in the period following the printing of Adam Smith's opus, "the Wealth of Nations". This continuing study weaves forward thru Hegal's dialectic and its influence on Marx's "Communist Manifesto."

We're then treated to Skousen's insights into the thinking of Thomas Carlyle, a critic of capitalism; John Stuart Mill; Jeremy Bentham; E.B-Bawerk who wrote a devastating critique of Marx's "labor theory of value", where a mud pie was said to be worth as much as an apple pie; W.S. Jevons who led the revolution in the concept of "marginal utility" along with Leon Walrus, also known for his use of mathematical equations and his work on economic equilibriums; and the brilliant Italian Vilfredo Pareto, the fellow who decided that all human behavior could be classified in 80-20 terms; Pareto's Law.

As we mosey thru the rise of the Fabian Socialists in the 1870's, George Bernard Shaw et al, we're introduced to the greatest economist of the late 19th century; the neo-classicist in the Adam Smith tradition, Alfred Marshall. His chore was to rescue free-market capitalism back from the big-government socialists.

But, Socialist-Leftist-Communist-progressive thinking began to gain traction, J.M. Keynes and his Bloomsbury group helped its furtherance by seizing control of the intellectual ferment of Western civilization in the early 20th century. As England weakened economically after WWI the idea of big government, with its command and control model, began to seem efficacious as a way to run society, at least in the mind of Keynes. After all, government control of the economy seemed to be working just fine in Japan, Italy, Germany and Russia in the early 1930's.

Keynes felt that, much in the image of Plato's Republic, a small group of individuals, gifted with superior intellect and judgment, should make public policy for all of those not their equal. Alas, he like Marx missed having a firm grip on the concept of the "Law of Unintended Consequences." Like Marx, he failed to discern that the most important factor in the means of production was the human initiative of those upon whom he cast his snidest of intellectual aspersions. Keynes, though academically brilliant, got many things wrong in his set of assumptions about the economic workings of the world.

A group of Austrian economists (L. Von Mises, Frederic Von Hayek, and Joseph Schumpeter), known as the "Austrian School", took exception with the Keynesian theories. Hayek engaged Keynes in fierce academic debates in the early 1930's, but Keynes won out and became the most influential economist of the early and mid-20th century. However, with the rise of the microchip and the ability of ever more powerful computers to crunch the numbers, the jury is in and the Austrians, represented by the University of Chicago, have dominated the Nobel Prize in the last 25 years. Hayek, who wrote "the Road to Serfdom" predicting the failure of socialist communism, has been vindicated. To continue the irony, his flag bearer, Milton Friedman, the Monetarist extraordinaire, has been the named the most influential economist of the last 40-50 years.

Skousen tells this story in a page turning fashion that makes me wish he had been my econ prof back in the early 60's at Michigan State. It's odd that even today, freshly minted MBA's everywhere know little about Alfred Marshall and Frederic Von Hayek. It's a stain on academia that they have failed so in their mission to compare and contrast the great thinking done about "the business of life", which is what economics is all about. Read this book and give it to your children. Discuss it with them; you'll be a better man because of it.

Rating:
Summary: Ol man take a look at my life it's a lot like you
Review: There's a saying in the economics departments of academia that the questions to the test are always the same, only the answers change. Mark Skousen does a masterful job in telling us why this is true.

Skousen begins this marvelous book with a quote by J.M. Keynes. I'll paraphrase it as follows: "the ideas of economists and political philosophers are more powerful than commonly understood; indeed the world is ruled by little else". A quote on the same page by J.M. Ferguson avers, "Economics concerns itself with the greatest of all human dramas... the struggle of humanity to escape from want". These two quotes suggest that one: the "follow the money" theory of history has credence, particularly over the Hegalian master-slave theory, and its Marxist class oppression version. And, two: that the study of economics has essentially revolved around how to alleviate poverty, and to create a greater surplus for all people.

Skousen begins this tome with a salute to Adam Smith whose "invisible hand" thesis explains the counter intuitive concept that "individual self interest attains for the greatest common good." This idea supports Tom Sowell's assertion that social policy should consist of ways to incentivize industrious, commercially competent, ambitious, self centered men; a push for the idea that greed is good.

Skousen compares Smith's "Harmony of interest" model, which asserts that workers, landlords and capitalists work together to provide goods and services", with Ricardo's "Class conflict" model, one that suggests that the same parties compete with one another for a share of those goods and services." What's good about this book is that Skousen gives both sides an equal hearing, and he tells it as a storyteller might. He makes it readable and engaging.

He wends his way thru the stories of French economists Alex de Tocqueville, Frederic Bastiat, and Jean Baptiste Say as they relate to the study of economics in the period following the printing of Adam Smith's opus, "the Wealth of Nations". This continuing study weaves forward thru Hegal's dialectic and its influence on Marx's "Communist Manifesto."

We're then treated to Skousen's insights into the thinking of Thomas Carlyle, a critic of capitalism; John Stuart Mill; Jeremy Bentham; E.B-Bawerk who wrote a devastating critique of Marx's "labor theory of value", where a mud pie was said to be worth as much as an apple pie; W.S. Jevons who led the revolution in the concept of "marginal utility" along with Leon Walrus, also known for his use of mathematical equations and his work on economic equilibriums; and the brilliant Italian Vilfredo Pareto, the fellow who decided that all human behavior could be classified in 80-20 terms; Pareto's Law.

As we mosey thru the rise of the Fabian Socialists in the 1870's, George Bernard Shaw et al, we're introduced to the greatest economist of the late 19th century; the neo-classicist in the Adam Smith tradition, Alfred Marshall. His chore was to rescue free-market capitalism back from the big-government socialists.

But, Socialist-Leftist-Communist-progressive thinking began to gain traction, J.M. Keynes and his Bloomsbury group helped its furtherance by seizing control of the intellectual ferment of Western civilization in the early 20th century. As England weakened economically after WWI the idea of big government, with its command and control model, began to seem efficacious as a way to run society, at least in the mind of Keynes. After all, government control of the economy seemed to be working just fine in Japan, Italy, Germany and Russia in the early 1930's.

Keynes felt that, much in the image of Plato's Republic, a small group of individuals, gifted with superior intellect and judgment, should make public policy for all of those not their equal. Alas, he like Marx missed having a firm grip on the concept of the "Law of Unintended Consequences." Like Marx, he failed to discern that the most important factor in the means of production was the human initiative of those upon whom he cast his snidest of intellectual aspersions. Keynes, though academically brilliant, got many things wrong in his set of assumptions about the economic workings of the world.

A group of Austrian economists (L. Von Mises, Frederic Von Hayek, and Joseph Schumpeter), known as the "Austrian School", took exception with the Keynesian theories. Hayek engaged Keynes in fierce academic debates in the early 1930's, but Keynes won out and became the most influential economist of the early and mid-20th century. However, with the rise of the microchip and the ability of ever more powerful computers to crunch the numbers, the jury is in and the Austrians, represented by the University of Chicago, have dominated the Nobel Prize in the last 25 years. Hayek, who wrote "the Road to Serfdom" predicting the failure of socialist communism, has been vindicated. To continue the irony, his flag bearer, Milton Friedman, the Monetarist extraordinaire, has been the named the most influential economist of the last 40-50 years.

Skousen tells this story in a page turning fashion that makes me wish he had been my econ prof back in the early 60's at Michigan State. It's odd that even today, freshly minted MBA's everywhere know little about Alfred Marshall and Frederic Von Hayek. It's a stain on academia that they have failed so in their mission to compare and contrast the great thinking done about "the business of life", which is what economics is all about. Read this book and give it to your children. Discuss it with them; you'll be a better man because of it.

Rating:
Summary: Good history, but don't use it to decide economic policies
Review: This book provides a very readable and fairly informative introduction to the history of economic thought. But it's mainly valuable as a description of the differences between economists, and shouldn't be confused with a serious attempt at finding the correct answers to economic controversies.
The author's libertarianism sometimes overcomes his objectivity, particularly when dealing with the great depression. He credits the Austrian school with predicting the depression without noting the frequency with which their theory predicts downturns. He is rather uncritical in reporting the claim that the Fed could have expanded the money supply faster in 1931-32 without endangering the gold standard. That claim depends on the rather questionable assumption that broad measures of the money supply are all that matters. Arguments such as those in Wigmore's The Crash and Its Aftermath that make proper note of the large increase in currency in circulation seem more thoughtful.
He is a bit unfair to Keynes, whose main theory makes some sense if his ambiguous references to savings are interpreted as an increased desire to hold currency (which, by causing deflation, distorts real interest rates and wages). But Skousen assumes that Keynes meant savings in the broader sense of choosing to invest wealth instead of consuming it. Many of Keynes followers have interpreted Keynes' theory that way in order to rationalize using Keynes' theory as a solution to recessions that don't involve deflation - Skousen's criticisms seem fair when applied to that version of Keynesianism. And of course Keynes deserves some criticism for being unclear. I propose as a better way of expressing what Keynes was groping for is that there was a speculative bubble in currency. I.e. people bid up the value of the dollar relative to other goods, and the trend caused people to decide that currency was a good investment.