The bang-your-head-against-a-wall theory of economic policy

I’m in the middle of writing a paper on Classical Economic Theory which has as its central theme how near impossible for someone educated within one school of economic thought to understand another. My own belief is that one can only understand an economic theory if one actually has at some stage thought it was valid.

But on the larger question whether economic theory can help us understand what to do, it is an unambiguous yes, if it’s classical economic theory, and for the most part if it’s Austrian. Otherwise, forget it. Modern economics is basically a bang-your-head-against-a-wall-theory because it feels so good when you stop.

This book has just come to my attention. I have highlighted two bits from the ad which make me very suspicious that she might really be able to help out any of us with much of anything at all.


(1) What do the ideas of Karl Marx tell us about the likely future for the Chinese economy?

(2) With globalization in trouble, what can we learn about handling Brexit and Trumpism?


(1) The more they pay attention to Marx, the worse their economic outcomes will be.

(2) If you are wondering how to “handle” Brexit and the economics of Donald Trump, you are already demonstrably incapable of understanding their natures or how and why they will improve things.

Anyway, here is the ad for the book. History of Economics is always worth a look, and you have to start somewhere, although if you want my advice, where to start is with this one. Meanwhile, there is this:

Front Cover

Since the days of Adam Smith, economists have grappled with a series of familiar problems – but often their ideas are hard to digest, even before we try to apply them to today’s issues. Linda Yueh is renowned for her combination of erudition, as an accomplished economist herself, and accessibility, as a leading writer and broadcaster in this field. In The Great Economists she explains the key thoughts of history’s greatest economists, how our lives have been influenced by their ideas and how they could help us with the policy challenges that we face today.

In the light of current economic problems, and in particular growth, Yueh explores the thoughts of economists from Adam Smith and David Ricardo to recent academics Douglass North and Robert Solow. She asks, for example, what do the ideas of Karl Marx tell us about the likely future for the Chinese economy? How do the ideas of John Maynard Keynes, who argued for government spending to create full employment, help us think about state intervention? And with globalization in trouble, what can we learn about handling Brexit and Trumpism?

How many economists can dance on the head of a pin?

This is a letter by Hugh Goodacre to the editor at the Financial Times on 16 April which came with the heading, Bringing economics back into liberal academic life. As you read the letter, you need to appreciate that the deeper reality is that the effort to marginalise alternative ways of looking at the economy goes beyond just putting such heterodox ideas into the history of economic thought. The further aim is to fully remove the history of economic thought as even being a component of the study of economics. I wrote a book on this very subject – Defending the History of Economic Thought – but these movements have a grinding relentlessness that will not be turned back unless there is the will to do so. I can see that for an academic, it may not much matter what is taught as long as doing whatever it is can get your paper published. That the university economics we actually apply to the real world have little value in curing any of the problems that exist, seems of only minor importance. I will also note that the one economist that was left out of the list is the one I think is the most important, being John Stuart Mill. I am also curious why Keynes is on the list since “Keynesian theory” is the very core of what we do teach. Pretty well every economist I know thinks they are teaching Keynesian models of one sort or another. Here is the letter that has been posted on the history of economics website with, so far, not a single comment from any one of the more than one thousand subscribers from around the world.

Sir, The moribund orthodoxy that currently exercises such an inflexible grip on university economics departments will, as Wolfgang Münchau comments, inevitably face a challenge, and this “will come from outside the discipline and will be brutal” (“Macroeconomists need new tools to challenge consensus”, April 13). The orthodoxy has brought this dismal prospect on itself through the brutality with which it has purged those departments of any other school of thought than its own.

Indeed, in its extreme version, the orthodoxy’s doctrine holds quite simply that there are “no schools of thought in economics”, a totalitarian assertion all too true in most economics departments today, so ruthless has been the purge of alternatives. As a result, the different approaches to economic issues of Adam Smith, Bentham, Ricardo, Marshall, Keynes, Friedman and so on are all relegated to the fringe subject of the “history of economic thought”. This is indeed a 1984 situation, in which the very idea that debate could exist on how to approach economic issues is regarded as a mere historical memory, and consequently of purely antiquarian interest.

However, economics students are increasingly demanding a pluralistic curriculum, as discussed by Martin Wolf in “Aim for enlightenment, technicalities can wait” (April 11). Similarly, the “fossilised habits of thought” entrenched in much of the economics professions are facing increasing criticism from within the academic world (see, for example, “The world no longer listens to the deaf prophets of the west”, Mark Mazower, April 14). Let us hope that all this pressure from students, from the worlds of journalism and of interdisciplinary debate, will combine to bring university economics departments back into the world of liberal academic life from which they have for so long isolated themselves.

An email on Say’s Law

On Friday, I received the following email.

Dear Professor Kates,

As perhaps the only lay person in the United States to have read the two books by Sowell and Hutt, as well as Anderson’s book and some of the articles you cited in your book, I consider myself pretty knowledgeable about the logic and rationale behind Law of Markets and I must say, yours is the best I have seen on the subject.

Your classical views pretty much line up with Austrian theory, especially in their criticism of the “lack of aggregate demand” theory accepted today as being the root cause of recessions, although it would not appear that you are totally sold on their link of recessions with “expansion of money supply” and consequential “malinvestment” in production– leading to the proverbial “cluster of errors” referred to by Robbins. You seem to believe that the malinvestment can occur without the expansion of the money supply. Austrians would agree, but they would maintain that malinvestment would not cause anything but micro level adjustments or perhaps a mild slowdown and not an outright macro-recessionary period. Dispute seems to be more about degree and semantics on how to define recessions rather than serious dispute on substance. Clearly, you and Austrians do not buy the general glut argument.

Your book was excellent overview of history of economic thought, at least from early 19th C. onward. It points out how wrong Keynes was on history of economic thought, either by ignorance, or as I believe, by design. He set up a false historical narrative in developing his straw man to make it easier to take down.

Your point that the acceptance of the “lack of aggregate demand” theory by economists since 1936 has set the science of economics on a terrible path cannot be understated. Failure to understand cause will almost always result in bad policy, as can be seen by measures taken in recent years by the “policy makers”. J.B. Say: “Thus, it is the aim of good government to stimulate production, of bad government to encourage consumption”. Contrast that with:

“Simply put, we live in a world in which there is too much supply and too little demand,” star economist Nouriel Roubini of New York University …

Ugh! That is the media’s “star”. How far the profession has fallen. Unfortunately, guys like Roubini, Stiglitz and Krugman now rule the day.

I have been working on a book for several years challenging most all of modern day macroeconomic theory, with one of the first fallacies being the lack of aggregate demand theory. (The deflation bogeyman is another.) I also bought your “Free Market Economics” and just started it last night. It looks like you beat me to the punch. Keep up the good work.

Kind Regards

So today, I wrote back.

Thank you very much for your kind and encouraging letter. We are so obviously on the same wave length that it is uncanny. I had thought that once the failure of the stimulus had become perfectly clear to everyone, there would be a groundswell of some kind to think through what had gone wrong, and that, perhaps, there would be a closer re-examination of the Keynesian macro that has ruined economic theory along with most of our economies. I must therefore confess to no little astonishment to discover that Keynesian economics is even more embedded within economics than ever. I suppose that to confess to such a massive error, as would need to be done if economists rose up and said, “come to think of it, Say’s Law seems to have been right after all and Keynesian economics wrong”, would have been a gigantic step too far. But even if not that, some kind of re-thinking about how an economy works, and whether valueless public spending really can generate growth, might have been in order. Such is not how it’s been. It is therefore not a little frightening that the cures continue to be administered from the demand side.

About the way I look at the cycle, “mal-investment” gives the impression that if entrepreneurs had been more clear-eyed about the future, that the downturn would never have occurred. For me, the recession that I grew up on was the downturn that followed the OPEC oil boycott of the 1970s which was followed by a massive inflationary pulse that led to an international wage explosion. The dislocations that rolled across the world were neither caused by nor could have been cured by monetary policy. Certain categories of investment – such as those that depended on low-cost energy – were left high and dry by these major changes in the economic environment in ways that no one could have foreseen. I also think that it helps me see these things because I live in one of the more remote provinces, where domestic monetary policy will seldom be the cause of a downturn. I therefore see recessions as a consequence of government policy generally and the effects of major international instability. The GFC started in the US, and while I think we in Australia should for the most part have ignored it so far as policy went, there was never any chance we were not going to be affected irrespective of the monetary policies we might have run, either before or after. My main point is that recessions are structural and not caused by too much saving (or supply!). My chapter 14 on the cycle is a summary of the classical view, which I have synthesised from Haberler. Chapter 15 looks at the role of government, which was not a classical perspective but it is mine.

I do hope you write your own book. The one thing I know from having written what I have is that you only truly understand what you think yourself by trying to write it all down. The things that end up on the page often surprise even you. Please let me know how you go. And if I may, I will attach a paper I did on the origins of the Keynesian Revolution. Just to be able to mention Fred Manville Taylor and Harlan McCracken is often a showstopper for someone trying to argue with a Keynesian. Try it out and see how you go.

With kind regards and many thanks again.

Keynes and Keynesian Economics in Light of the Financial Crisis

The economic societies of the United States meet over the first few days of the year, with the meeting this year in Boston. This is the full conference program which is gigantic. My interest is what is being said about the sad state of economic theory and its inability to provide guidance on how to find our way out of the present low state of our economies. This was the part of the conference I was most interested in myself:

Keynes and Keynesian Economics in Light of the Financial Crisis

So in its own way, you might say that these issues were on the agenda. However, not only was this the sole manifestation across the hundreds of papers given during the conference, but this was also not in any way part of the mainstream program, only tucked away as part of the program devoted to the history of economic thought. Clearly, none of this is of any genuine interest to virtually the entire profession. Nevertheless, all credit to Robert Dimand for putting the session together, and for treating this as the serious contemporary issue it is. These were the papers found in this session.

Keynes and Financial Crises
ROBERT DIMAND (Brock University)

The global economic and financial crisis that began in 2007 has renewed interest in Keynes’s analysis of whether the economic system is self-adjusting and of his proposals for ending depression. This analysis is complemented by Keynes’s more specific accounts of financial crisis, notably in his incisive “The Consequences to the Banks of the Collapse in Money Values” (in his Essays in Persuasion, 1931) and his Harris Foundation Lectures, a body of work that is much less well-known.

Keynes, Wages and Employment in Light of the Great Depression
HARALD HAGEMANN (Universität Hohenheim)

The wage-employment relationship is one of the central and most controversial issues in the General Theory. . . . and etc for another 200 or so words.

James Meade and Keynesian Economics
SUE HOWSON (University of Toronto)

James Meade (1907-1995), although Oxford-educated, was one of the very first Keynesians, a member of the Cambridge “circus” which met to analyze and criticize Keynes’s just published Treatise on Money in the early months of 1931. Not only did he use Keynesian ideas in his writings throughout his long career; he was a major player in the implementation of Keynesian policies in Britain during and immediately after World War II. My paper will discuss his encounters with Keynes and his use and development of Keynesian economics in his own academic and policy work.

Not that you should think that Keynesian economics was mentioned nowhere else. It showed up one more time, under “Heterodox Macroeconomics”, a session put on by the Union for Radical Political Economics. But I do love his first line, which is something the rest of the profession would prefer to forget. I’ve put it in bold just because, and left the rest in just to see how tedious this stuff can be.

Keynes is Dead — Long Live Marx

Many liberal/progressive economists envisioned a new dawn of Keynesianism in the 2008 financial meltdown. More than five years later, it is clear that the much-hoped-for Keynesian prescriptions are completely ignored. Why? Keynesian economists’ answer: “neoliberal ideology,” which they trace back to President Reagan. Using a Marxian method of inquiry, this study argues, by contrast, that the rise/dominance of neoliberalism has much deeper roots than pure ideology, that the transition from Keynesian to neoliberal economics started long before Reagan was elected President and that the Keynesian reliance on the ability of the government to re-regulate and revive the economy through policies of demand management rests on an optimistic perception that the state can control capitalism. Contrary to such hopeful perceptions, public policies are more than simply administrative or technical matters of choice. More importantly, they are class policies—hence, continuation/escalation of neoliberal policies under the Obama administration, and frustration of Keynesian/liberal economists. The study further argues that the Marxian theory of unemployment, based on his theory of the reserve army of labor, provides a much robust explanation of the protracted high levels of unemployment than the Keynesian view, which attributes the plague of unemployment to the “misguided policies of neoliberalism.” Likewise, the Marxian theory of subsistence or near-poverty wages provides a more cogent account of how or why such poverty levels of wages, as well as a generalized predominance of misery, can go hand-in-hand with high levels of profits and concentrated wealth than the Keynesian perceptions, which view high levels of employment and wages as necessary conditions for an expansionary economic cycle.

The largest single problem with economic theory today is that economists do not even know they have a problem. But the second most important problem is that what ought to have been the most important part of the entire program was relegated to students of the history of economic thought, which is the one area of economic theory economists are trying to rid themselves of. It’s as if these are issues so completely settled that no one any longer has to waste their time thinking about any of it at all.

AND LET ME JUST ADD THIS: From the Wall Street Journal, The Depression That Was Fixed by Doing Nothing. Before Keynes, there was no such thing as a Keynesian stimulus, but recessions got fixed anyway:

Beginning in January 1920, something much worse than a recession blighted the world. The U.S. suffered the steepest plunge in wholesale prices in its history (not even eclipsed by the Great Depression), as well as a 31.6% drop in industrial production and a 46.6% fall in the Dow Jones Industrial Average. Unemployment spiked, and corporate profits plunged.

What to do? “Nothing” was the substantive response of the successive administrations of Woodrow Wilson and Warren G. Harding. Well, not quite nothing. Rather, they did what few 21st-century policy makers would have dared: They balanced the federal budget and—via the still wet-behind-the-ears Federal Reserve—raised interest rates rather than lowering them. Curiously, the depression ran its course. Eighteen months elapsed from business-cycle peak to business-cycle trough—following which the 1920s roared.

That was what they did, but with the low state of economic knowledge today, there is little likelihood anyone will understand why it worked.

Dealing with the inflexible grip of an intolerant orthodoxy

This was a note posted to the Societies for the History of Economics three days ago.

The Guardian, Tuesday 21 October 2014

Ha-Joon Chang powerfully argues the case that it was “an economic fairytale” which “led Britain to stagnation” (Opinion, 20 October). It may be added that our universities bear a heavy responsibility for this situation. Certainly, it cannot be denied that the fairytale paradigm (“supply-and-demand”, competition in the market, and all the rest of it) can be applied to any economic issue. The point, however, is that the currently dominant adherents of this approach deny that any other approach can even claim to be economics at all; indeed, adherents of other schools of thought have very largely been purged from our university economics departments.

Proponents of the fairytale justify this stranglehold by claiming that all former insights into the economy that have stood the test of time have now been incorporated into their own – narrowly quantitative – “modelling” framework: thus, Keynes’s discussions of uncertainty are reduced to “models” of expectations, Hayek’s alternative to neoclassicism into models of “price messages”, Marx’s heritage into models of inequality, Ricardo’s into “rent-seeking”, and so on. Consequently, so the argument goes, there is no longer any basis for the claim that there are different schools of thought in economics. There is only one.

It is the inflexible grip of this intolerant orthodoxy on university economics departments which has so signally distanced academic economics from engagement in discussion and debate outside the academic arena, much of which is directed towards questioning its fairytales. It is, by the same token, very encouraging that students who reject their approach have in the past year or more been reintroducing into university economics departments the kind of vibrant debate which ought to lie at the heart of academic life.

Dr Hugh Goodacre

Member of the academic board, University College London

I could not have agreed more so this was the reply I posted today:

I left Hugh Goodacre’s interesting post alone for the last few days to see if anyone else were interested. Apparently not, but I am. He made two points. First that the monopoly position of the economic mainstream, which he described as “this intolerant orthodoxy”, needs to be confronted so that other approaches to thinking about economic theory are brought into the curriculum. And then second, he notes that there has been the start of a kind of uprising amongst economic students who believe they have been deprived of the kind of broader education they would prefer but do not know how university departments can be encouraged to teach it.

I am in complete agreement with the need to bring these various other traditions into mainstream debate and am also working with the student movement, the so-called “Post-Crash Economics Society”, which coincidentally just last week had its first meeting in Australia.

There are many more ways to approach economic questions than those found in the confines of the mainstream. There has also been such a failure of the economic theory to provide much guidance in getting our economies out of the problems we are now in, that I find it a scandal how little effort has been made to have a post mortem on what went wrong. And when I think of what it is that went wrong, I am not referring to the frequently raised question about why was no one able to foresee the GFC, but the more significant question, which is, why are the policies that have been introduced to restore our economies to health not working?

The Post-Crash Economics approach is one way of going about it. But given my first experience here I have doubts about whether this is much of an answer even though the right questions were being asked.

The main speaker had come all the way from Manchester to discuss what they had in mind. And while there were various moments when his own underlying agenda was all-too-obvious to me as a long-ago member of the left, his final slide had the words “It’s time to challenge the orthodoxy” and showed a woman with a “power to the people” fist in the air.

I therefore asked the first of the questions from the floor, which was more of a comment than a question. And what I said was something like this

“If you would like to set up a group that widens the study of economics and introduces the full range of the various schools of thought to the education of economics students, then I am with you. But if you are going to just use this grouping as another version of the ratbag left, then you will do nothing other than create one more meaningless structure which someone such as myself will have nothing to do with. Your presentation was not neutral. You are a person of the left, which is all right since many people are. But you will only succeed if what you do really is neutral between all of the various groups that find neo-classical economics wrong in important respects. Economics, however, is not an easy subject that someone without formal training can choose amongst theoretical perspectives without serious study. If this is just one more self-indulgent anti-capitalist rant, then this will go nowhere. You cannot ‘democratise’ the study of economics as you described your ambition as if economics can be some kind of all-in enterprise where everyone’s opinion counts for one and no one’s counts for more than one. If you are genuinely interested in broadening the perspectives students receive, then, but only then, will you have the support of those of us from a more market-oriented perspective, or indeed, from anyone with an interest in the fullest development of economic theory.”

To be quite blunt about it, economic students are in no position to suggest how economic theory ought to be taught or what the content of their courses ought to be. And even while I agree with them that there is a large problem with mainstream economic theory, and I am pleased to find they are curious about other approaches, I cannot see how they can have much to say about which economic theories are the most appropriate. It is an issue to be decided within departments of economics and amongst economists themselves. They are absolutely right to seek a wider set of perspectives but I am not sure they are going about it in the right sort of way.

My own version of what these students have sought was proposed in my Defending the History of Economic Thought (Elgar 2013). In my view, the ideal place for debates among the various economic traditions is within the study of the history of economic thought. This is where it should be. Such discussions should be found on our websites, in our journals and as an important part of our conferences. Every one of these heterodox traditions has a history of its own that is an essential element in understanding these theories. Whether Austrian or Marxist or anything else between, each focuses on its own historical development as a way of understanding its own core concepts. It is, sadly, only the mainstream that ignores its history, which is why HET has almost disappeared from within most schools of economics.

I not only think this is part of the means to save the history of economic thought from extinction, but it would also be a valuable addition to the education of economists. The most important ability an historian of economic thought must have may be an ability to make sense of the views of others. It is why HET should be a forum for discussing the widest range of perspectives so that we can all learn new things from each other.

Defending the History of Economic Thought on e-books

You can get my Defending the History of Economic Thought as an e-book at this link. It is the first ever book length defence of HET and was written because the History of Economic Thought was, and still is, under threat of exile from amongst economists to the History and Philosophy of Science. It thus is not just an examination of why economists must study HET to become better economists, but why economists must preserve HET if economics is itself to become a better study of how economies work. This is from the link to the e-book:

This book explains the importance of the history of economic thought in the curriculum of economists, whereas most discussions of this kind are devoted only to explaining why such study is of value simply to the individual economist. Steven Kates reaches out past the individual to explain the crucial importance of the history of economic thought in the study of economics itself; without its history at the core of the curriculum, he contends, economics is a lesser subject, less penetrating, less interesting and of much less social value.

The book has had a number of reviews which reminded me just how useful this book is, not because they agreed with me, but because they didn’t. Not that any of them disagreed with me over the importance of the subject itself, only about whether my approach to teaching HET was a sensible one or whether I had overstated the opposition to HET amongst the profession in general. But twice in five years, major societies were faced by attempts to remove HET from within the economics classification and only rearguard action by a handful of historians of economics was able to reverse these already taken decisions.

I will be speaking about the book at the History of Economic Society meeting in Montreal in June and then, at the Australian Society meeting in Auckland, there will be a symposium on the book and its message. Economists have shifted away from being part of the humanities into becoming, not just a social science but social-physics. It is mathematics and pseudo-rigour that now drive the way in which economic theory is designed. Economics cannot be mathematical since there are no data for most of the important questions economics tries to answer. One of the reasons Keynesian economics will not die is that there is a belief that you can measure the things that need to be measured since the national accounts – a set of identities, for heaven’s sake – can be used as a proxy for economic relations. The History of Economic Thought at least reminds economists that their subject once was part of the humanities and some even begin to realise it still needs to be if it is to be any use to society.

A reply to a reviewer of my DHT

My comment to a friend who sent me his forthcoming review of Defending the History of Economic Thought. The Feyerabend quote I refer to below is “the history of a science becomes an inseparable part of the science itself . . . essential for its further development a well as giving content to the theories it contains at any particular moment” (Against Method p 21).

Dear Anthony

It’s good to see the book being reviewed and it could not be in better hands than yours. And I have learned quite a number of things about my own book by reading your review. But perhaps because of the battles I have been through I see this differently from you and in the end you do not answer the one question that matters: should HET remain within the economics classification and be counted as a social science or should it be removed to the history and philosophy of science and become part of the humanities? And I also do not know whether you think I have made a useful case for studying HET by an individual or for ensuring that there are historians of economics dotted throughout the discipline to keep the others on their toes.

Economics as we teach it is the shifting outcomes of research agenda with the latest manifestations rising to mainstream textbook level, with all of its history embedded in even these answers, but with many other answers given over the entire history of economic thought still in contention amongst some blocs of economists. You cannot make a physicist or a chemist a better physicist or chemist by teaching them the history of their subject but as your own testimony of your own students shows, you can with economics. The sentence you quote on p viii, for example – that HET is economics in and of itself – is a sentence that is explained in the rest of the para which seems perfectly true to me. Having watched the failure of the stimulus over the past five years, and especially in the United States, you may be sure that every aspect of John Stuart Mill’s statement, that “demand for commodities is not demand for labour”, has been more than confirmed for me. Mill to me is not HET but live theory with genuine real world implications you cannot find in your average textbook although you will find it in mine (Free Market Economics: an Introduction for the General Reader whose title I took from Henry Clay (1916) – have you seen it?).

That HET is both history of economic ideas (HEA) and intellectual history (IH) is clear enough to me but Winch’s example, which I haven’t read so don’t know, would be part of that history and philosophy aspect which is no more than half of HET and probably less. But it is the other half and more – which you capture with the lovely Feyerabend quote which I’d never come across but will use ever after – is also HET and it is that that needs to be preserved and recognised for what it is. So in your terms, I am trying to preserve HEA as a subset of economics but recognise that IH is also part of HET. And if you think Samuelson is part of IH, then what to do with that killer quote, that to be an academic success “you must read the works of the great economists”. This seems completely to be making the point I am making. Indeed, your conclusion on Heyne, which you state that my view is “not incompatible” with his, but what difference does it make for me here since the book is aimed at another issue, which is the need to study HET if one is to be a better economist and the need to keep HET within the economics curriculum if the economic theory itself is to thrive.

In trying to deal with this issue, a major problem I have found with the academic world is that for all the departmental politics that goes on, academics are politically in the wilderness. My days as a lobbyist really did matter. I am trying to put together a book that defends the position of HET which will wither and die if it is relegated to history and philosophy of science. We have the disdain of the mainstream to contend with while even some of our own stellar lights – Margaret Schabas and Roy Weintraub for example – are trying to remove HET in just that direction. What your review has said is that there are two kinds of HET, this one and that one, and that I did not make this distinction well enough. But since you agree that HET is important to the study of economics, which is the first sentence of the intro, why are you not supporting this? Why are you not saying somewhere that Kates is onto something important and even while it might have been better if it had been done in some other way, at least it has been done, and imperfect though it may be, is a welcome addition to the literature. In real politics, finding agreement is the most important part of what we do. In the academic world, unfortunately, finding disagreement is our bread and butter.

Anyway, I am thinking of having a session on my book at the HES in Montreal which I am going to, funding permitting. If you are going to be there as well, would you be interested in being part of a session that discusses the book? It is a funny thing that we in Australia have been so on this issue from the start, which I attribute to John Lodewijks, who has continually stirred us into action. And funny again, there have been enough genuinely politically minded people who have been able to work together to achieve common objectives on a few occasions. I will copy my reply to you to Robert Leonard who is organising the conference. I’m usually quite happy to stand at the back of the room – a speciality for lobbyists – but on the question of the preservation of HET I can see that if I don’t do it there is no one else who will. Maybe there’s no danger and I am over-reacting, but if you look at the story of the European Research Council, which was as recent as 2011, I would not be all that certain that these same troubles might not arise again.

Anyway, I thank you for the review, and specially for the Feyerabend and Samuelson quotes which are perfect for me. Had I known of them, each would have been at the front of some chapter. And I do hope to see you in Montreal.

With kindest best wishes.


DHT – a sensible review of the book

A review of Defending the History of Economic Thought by someone who is not involved in the issues and therefore sees the common sense point of the book and its arguments.

The Economic Studies Shelf
Defending The History Of Economic Thought Steven Kates
Edward Elgar Publishing
9 Dewey Court, Northampton, MA 01060-3815
9781848448209, $99.95, .com

The principle focus of “Defending the History of Economic Thought” is the crucial importance of the history of economic thought in the study of economics itself; without its history at the core of the curriculum, academician and economist Steven Kates (School of Economics, Finance and Marketing, RMIT University, Melbourne, Australia) persuasively contends that economics is “a lesser subject, less penetrating, less interesting and of much less social value” . A 160 page treatise, “Defending The History Of Economic Thought” is organized and presented in five major chapters (Preliminary thoughts; Why study the history of economic thought; Debating the role of the history of economic thought; Teaching the history of economic thought; and Defending the history of economic thought. As informed and informative as it is thoughtful and thought-provoking, “Defending The History Of Economic Thought” is enhanced with an bibliography and a comprehensive index, making it an impressive contribution to professional and academic library Economic Studies collections and supplemental reading lists.

Philistines and ignoramuses

The Australian Business Deans Council has in its preliminary report indicated that it would lower the journal ranking of History of Political Economy to a B which if it did would merely display, for all to see, what a Philistine bunch of ignoramuses they are. They are for nuts and bolts, debits and credits, tangibles and assets, not this academically philosophical, highly abstract historical economics kind of stuff, which is actually what a proper education consists of, including a business education.

For those as far from economics as a council made up of the deans of schools of business, this may seem a remote and unimportant area of study. The reality is that it is an area of study at the very forefront of economic theory. As just one example, one of the great monetary theorists in the world today, David Laidler, has just written an article on “Three Revolutions in Macroeconomics: Their Nature and Influence” going back over the historical development of three different revolutionary episodes in macroeconomics and in which he ends the abstract with these words: “some implications of this story for today’s macroeconomics are briefly discussed.” Nor is he the only major economist who has done important work in the History of Economics. Nobel Prize winners, including Paul Samuelson and George Stigler, have done extensive research in this area, not as a way to pass the time but as real and genuine contributions to our understanding of how economies work.

I have even written a book just this year on the crucial importance of this area titled, Defending the History of Economic Thought (Elgar 2013). This may be an area that is under-appreciated even amongst economists but when the moment of truth came in 2007 to remove the History of Economic Thought from within the economics classification, there was an uprising amongst economists in general, not only across the academic world but encompassing economists at every level reaching right through to the secretaries of every economics-related department in the Federal public service. It should therefore not be left to the tender mercies of the deans of schools of business to make such negative determinations about the value of journals in one of the most important areas of economics.