Outline One - Introduction: Why study the evolution of economic ideas, etc.?

I use quite a number of sources for my lectures. But I wanted to list some of the main ones here. Others I will site throughout the text of the lectures (especially journal articles and original writings from the dead

Karl Přibram, A History of Economic Reasoning (1983, posthumous and incomplete)

Murray Rothbard, Economic Thought Before Adam Smith: An Austrian Perspective on the History of Economic Thought (1995)

Murray Rothbard, Classical Economics: An Austrian Perspective on the History of Economic Thought, (1995)

Mark Blaug, Economic Theory in Retrospect, 5th ed. (1997)

Steven G. Medema and Warren J. Samuels, The History of Economic Thought: A Reader, 2nd ed. (2013)

Israel M. Kirzner, The Economic Point of View, 1976 ed. (first published in 1960)

Israel M. Kirzner, “The Economic Calculation Debate: Lessons for Austrians” (1988)

Ludwig von Mises, Human Action, (1949)

Lionel Robbins, A History of Economic Thought: The LSE Lectures (2000)

Robert B. Ekelund, Jr. and Robert F. Hebert, A History of Economic Theory & Method, 6th ed. (2014)

Robert Heilbroner, The Worldly Philosophers (1953)

Kenneth Boulding, “After Samuelson Who Needs Smith?” History of Political Economy (1971)

Martin C. Spechler, Perspectives in Economic Thought (1990)

William Breit and Roger L. Ransom, The Academic Scribblers, 3rd ed. (1998)

Todd G. Buchholz, New Ideas From Dead Economists (2007)

Joseph Schumpeter, History of Economic Analysis (1954)

Joseph Schumpeter, Ten Great Economists (1951)

Daniel R. Fusfeld, The Age of the Economist, 9th ed. (2002)

Bruce Caldwell, "Adam Smith? Who's He?", The John William Pope Center, Commentary, Sept. 01, 2010

Karen Vaughn, “Why Teach the History of Economics?” Journal of the History of Economic Thought, (1993)

Ian A. Kerr, "The Value of the History of Economic Thought," Journal of Economic and Social Policy, (2002)

Why Study The History of Economic Thought? After all - isn't everything we should know incorporated into the textbooks we read today?

These of my favorite quotations on why it is important to study the ideas of the past:

Essays on the history of economic thought are to be appreciated not only purely as history. No less important is the fact that they enable us to re-examine the present state of economic theory in the light of all attempts earlier generations made for their solution. In comparing our point of view with past achievements and errors we may either detect flaws in our own theories or find new and better reasons for their confirmation.

This is a book about a handful of men with a curious claim to fame. By all the rules of schoolboy history books, they were nonentities: they commanded no armies, sent no men to their deaths, ruled no empires, took little part in history-making decisions. A few of them achieved renown, but none was ever a national hero; a few were roundly abused, but none was ever quite a national villain. Yet what they did was more decisive for history than many acts of statesmen who basked in brighter glory, often more profoundly disturbing than the shuttling of armies back and forth across frontiers, more powerful for good and bad than the edicts of kings and legislatures. It was this: they shaped and swayed men’s minds.

The ideas of economists and political philosophers, both when they are right when they are wrong, are more powerful than is commonly understood. Indeed the world is ruled by little else. Practical men, who believe themselves to be quite exempt from any intellectual influences, are usually slaves of some defunct economist. Madmen in authority, who hear voices in the air, are distilling their frenzy from some academic scribbler of a few years back. I am sure that the power of vested interests is vastly exaggerated compared with the gradual encroachment of ideas.

In all democratic countries, in the United States even more than elsewhere, a strong belief prevails that the influence of the intellectuals on politics is negligible. This is no doubt true of the power of intellectuals to make their peculiar opinions of the moment influence decisions, of the extent to which they can sway the popular vote on questions on which they differ from the current views of the masses. Yet over somewhat longer periods they have probably never exercised so great an influence as they do today in those countries. This power they wield by shaping public opinion.

"The Intellectuals and Socialism," The University of Chicago Law Review (Spring 1949)

Many schools no longer require a History of Economic Thought course. But, according to Caldwell, that is changing - and he is happy about that (and so am I). "This situation is deplorable. The history of economic thought constitutes an essential part of the broader liberal education of economists."

Therefore, according to Caldwell (and Deb), the benefits of studying the history of economic thought include:

1. Debate the Big Questions: In many economics classes, students never really debate the "big questions" -- but that's what we will do in this class. As Caldwell says, "it is a means of engaging the greatest minds on issues of great significance."

2. We do have a lot to learn from the past. Studying the ideas of the past allows us to gain insight that we otherwise would never achieve. Or as Ekelund and Hebert put it, ". . . studying the past for lessons that might be learned, or fresh insights gained, can be of enormous benefit."

3. We gain an understanding that "the development of ideas always involves argumentation and criticism" -- not seen in most textbooks today (we are supposed to just take whatever the text says as being "true" or the only way to look at an issue.

4. Exposes "students to alternatives to mainstream views." Along with this is the idea that it also keeps alive research paradigms that are alternatives tot he prevailing mainstream orthodoxy (Kerr).

5. Interdisciplinary: History of thought courses often "connect economics to other disciplines within the social sciences and humanities." Mainstream economics tends to be taught in a vacuum. That is why many see economists as intellectual snobs! Not so when discussing the history of the economic thought. Many of the characters we will talk about (actually most) were political, legal, philosophical and social scholars in their own right. They were big picture men who were looking for better ways for people to live (for the most part).

6. Therefore - in order to communicate across disciplines - we become aware of our own "disciplinary biases" when we study the history of economic ideas -- that is, we discover the underlying assumptions that are too often not spoken of but should be (Deb's commentary).

7. A better understanding of the creative process. Most of the great economists we will look at had a skeptical attitude toward traditional ideas and maintained an open mind towards new concepts.

8. Gain an appreciation for the ideas that have staying power. In other words, we might gain an understanding of what separates good ideas from bad ones. Although -- sometimes politics enters the picture and good ideas are put on the back burner!!

9. Gain a keener understanding of contemporary economic theory by showing how the concepts, theories, policies and tools of analysis of economics evolved over time.

10. Exposes students to the comprehensive, holistic systems of economic and social thought constructed by Marx, Smith, Keynes, Mises and the other great minds.

11. And finally -- the only justification we really need is that the subject is interesting and fun to study!!

SUMMARY of the progression of ideas from most history of thought economists:

The word “economics” comes from the Greek but then meant household management.

Household Management and More – Ancient Greece, China, India, The Hebrews and the Bible

Economics as a subset of Moral Philosophy, Mercantilism and Political Arithmetic – 17^th Century (this is where we will start)

Mainstream Economics and the Non-mainstream (heterodox) theories – 20^th Century and into the 21^st Century

Economics is not a “settled body of thought.” It is a "heterogeneous discipline with numerous traditions, each based on a cluster of theories." (Ekelund and Hebert)

Most theories produce models of human behavior. Some are very simple, some are very complex.

Any economist who is ignorant of these differences among economists (or who fails to appreciate the differences and their consequences) has had inadequate training as an economist!! Or has a closed mind (not sure which is worse)!

The science of economics, like all sciences, had to be created. But the question is -- how should that "system" look - or what principles should it follow?

Economics is a science, just like physics, etc., inasmuch as it comprises a set of analytical principles that work with consistent regularity. However, unlike the natural sciences, economics is a social science.

Why? Because it studies human behavior rather than nature (or the physical world).

So what distinguishes economics from other social sciences (such as sociology or psychology)?

This is hard to answer. A popular answer (Ekelund and Hebert) is that what makes it different is that it studies human behavior within the context of markets (market: an institutional arrangement that fosters trade or exchange).

I would not answer that way. I would answer that what makes economists different is in the questions they ask, in the issues they focus on, and the way by which they go about answering those questions.

Mises was quite clear on the dividing line between psychology and an economist studying human action:

Psychology deals with theories to explain why people choose certain ends (ethics would judge those ends as being good or bad).

Economics, on the other hand, deals with the logical implications of the fact that people have ends and the fact that they act to achieve them. Why Bob prefers to buy American made goods over foreign made goods is not something an economist would study per se (although an economist might look into whether or not Bob has an education in good economics). However, the implications of Bob's choice and his actions that follow are interesting to an economist.

To economists, per se -- ends are given, it is the means that economists look at (and the results of those means).

Can there be some overlap in disciplines? Yes. Behavioral economists are taking ideas from psychology and incorporating them in their theories - actually mostly in their policy recommendations. For example, psychological experiments have shown that people tend to choose the option that exists such that a person does not have to "opt out" of something.

In other words -- if the law said that everyone is automatically an organ donor (they don't have to "opt in") and the only way to not be an organ donor is to "opt out." Most people don't opt out -- therefore, the end result is more organ donors. When the law says you have to "opt in" - there are fewer organ donors.

So if you want more organ donors -- make the law an "opt out" not an "opt in" law.

Interesting but .... hopefully we will have time to discuss more the behavioral economist's ideas (pretty contemporary).

In the case of economics, although its fundamental principles had all been dimly recognized for centuries – the connections between them and their logical implications were not set down until the end of the seventeenth century.

Then – a number of men devised slightly different but basically similar theories within a few decades.

But what is interesting in economics is that the "inventors" of economics were not men who tried to hold on to a detached objectivity - what we might call the "scientific attitude" - they did not generally create scientific theories deliberately - for the sake of knowledge so-to-speak, but their ends were a by-product of their efforts to convince others to follow a certain or certain economic policies -- so they were really political philosophers as well as economists.

In other words -- they wanted to convince others that their policies were good ones and so they derived theories in order to explain and back up their policies.

F. A. Hayek (The Counter-Revolution of Science): “the study of economic and social phenomena was guided in the choice of its methods in the main by the nature of the problems it had to face.”

They didn’t care (before the first half of the 19^th century) whether economics was described as a branch of science or of moral or social philosophy.

During the first half of the nineteenth century a new attitude made its appearance.

The “scientific method” . . . (which certainly enabled the natural sciences to make great progress) . . .

Systematic testing of the phenomena, so as to be better able to recognize the particular as an instance of a general rule - Inductive logic.

Whether or not this “mainstream method” has been fruitful for the understanding of social phenomena is a matter of opinion (and not agreed upon by all).

Furthermore, in studying or understanding the history of economic thought - there is also not agreement!

Relativists cannot rank the theories of different periods in terms of better or worse – absolutists cannot help but do so.

Example: Ricardo was correct in advocating the labor theory of value in 1817 because fixed capital was little used at that time.

Can anyone deny that there has been progress in economics – with regard to techniques and analytical constructs?

There is an absolute truth that economists have been searching for..... and it is true no matter what time and place is discussed.

So mainstream theory today has embedded in it the progression of all ideas -- each better than the last -- each more "truthful" than the last.

Yes - ideas do matter, they make their way into the decision-making process at the societal level.

Comparison Three: State or Government Forces vs. Social or Voluntary Forces

The history of ideas (and history itself) progresses as a struggle between these two forces.

When people are free to pursue their own interests - a different set of ideas emerge.

We will look at how (and when and sometimes why) thinkers addressed the economic problems that economists address today:

Of course, what we find very early on is that the thinkers understood that the rules of the game (or institutions) are what influence these two issues.

For example, property rights in some form or another have been discussed for some time.

But much of the discussion prior to the formalization (mathematics) of economics was not only as to which institutions led to less scarcity in society or better coordination, but whether or not the outcomes (and the institutions that led to them) were moral or just.