I’ve just written a book review for the eh.net website which I would not normally mention except that it attracted this comment from Tom Humphrey, one of the great historians of economics writing today:

A beautifully crafted and eminently fair review by Steve Kates. He takes a strong stand. But he does so in a spirit that few scholars could object to even if they disagree with him. In overall quality and readability his review rises far above the level of the average review. Wish all reviews could be so good. Nothing is as helpful and valuable as a good book review, if done right. Reviewing is an un- and under-appreciated art.

This is how my review begins:

There was a time that one might have said that economic theory was comprised of a series of concepts that help explain the way communities provision themselves and became more prosperous over time. Economic theory as it developed came in the wake of the pamphleteers of more ancient days who saw the world around them and thought there had to be a better way of getting things done. They therefore wrote polemical accounts aimed at addressing various problems as they saw them, to try to persuade others to take up the approaches they were attempting to advocate.

Meanwhile, almost from out of nowhere came the Industrial Revolution. It was not a consequence of Adam Smith having written his Wealth of Nations. The two just appeared on the scene at roughly the same time, and some — observing the world they were living in, while also reading Smith’s account of how economies worked — came to the conclusion that there was some actual theoretical knowledge that might assist in the improvement of the way in which economies grew and prospered. That is how we came to have the classical school first, and then the major critiques of the socialist writers, with Marx and Sismondi among the most significant.

The classical economists observed the world, saw the tremendous growth in output and living standards and, correctly in my view, came to the conclusion that it was the role of private entrepreneurs that had made the difference. Within the community, if it were designed in a way that allowed individuals to pursue their own best interests as they saw them, there would be a rearrangement of productive forces in response to where the greatest return on investments would occur. Output rose, innovations occurred, and as a direct result living-standards rose. It may appear to many of us looking back on those times that the social costs were immense, but many of those who were living at the time were content that England should exchange its “green and pleasant land” for a highly productive economic structure that allowed many individuals to move forward in what they could earn and in the range and quantity of the goods and services they could buy.

But the costs were high, and memories were short. Henry Mayhew’s London Labour and the London Poor, which he began in 1849 as an investigative journalist and which was finally published in 1861-62, brought the tremendous social costs into the limelight (Mayhew 1985). He was hardly the first to do so, but Mayhew’s work stands out as a depiction of the burdens that had befallen the newly formed proletariats of the industrial age. It was the appearance not just of poverty, which had till then been universal, that mattered, but the agglomeration of entire industrial suburbs that focused attention on the world as it had become. Dark satanic mills had become the way of the world.

What also was new in the world at the time was the business cycle, the periodic ebb and flow of economic activity which came at such a tremendous cost to the working classes. It was one thing to be mired in poverty. It was another thing entirely to find that the low wages upon which individuals depended would suddenly disappear, and for reasons utterly beyond the control of the workers themselves, indeed beyond the control of anyone. And while there was no denying the spectacular growth not just in the volume of output but in the assortment of goods and services that came into existence, there was also disquiet at the disruptions and harm that could be visited on individuals and their families because of the disruptions in their working lives.

And while this overview of the years of the Industrial Revolution is part of the background knowledge of every economist, the need for a means to account for how the industrial world operated was required as well as some means to control the forces that had been let loose upon the world. There was the positive side that came in terms of production. But there was the negative side that came in relation to the polluted cities that had sprung up and the uncertainties that had become embedded within the lives of so many individuals. And this is where the history of economic thought comes into the story.

Economists are the inheritors of the latest manifestations of the theory of the economy that more or less satisfies most of the profession. There are now theories of such astonishing abstraction that it is almost impossible any longer to look into what economists believe they know and truly understand how the economic world is structured or what can and should be changed to improve the operation of the productive aspects of our economies.

If you would like to read the rest, you can go here.