THE ECONOMIC WORTH 
OF HISTORICAL THINKING

OR, 

WHY ECONOMISTS SHOULD BEHAVE 
A LITTLE MORE LIKE MATHEMATICIANS

Gonçalo L. Fonseca 

A Statement by the Editor 
of the History of Economic Thought Website

Until the 1960s or so, courses on the history of economic thought (HET) used to be a standard requirement in the training of graduate students in most economics departments in the United States and elsewhere. Since then, it has beat a steady retreat, being first relegated to an elective, and finally omitted from course offerings entirely.  In the United States today, a history of economic thought course at a research university is a rarity.  

The result is that at least two generations or so of economists have ascended into professional ranks with little or no knowledge of the history of their subject.  The average graduate student today has never read Adam Smith, or David Ricardo, or Karl Marx or even John Maynard Keynes, to say nothing of less familiar names.

Should one lament this state of affairs?  That depends. If one is concerned about the vitality of  the history of economic thought as an object of study, then all is well.  Far from being in a moribund state, the history of economic thought has become its own specialized professional discipline.   There are societies and journals dedicated to it throughout the world.  Numerous, excellent, scholarly studies in this field come out every year.  Research in the history of economic thought is thriving.

Yet this is not our real concern.  Our question is whether the absence of some general familiarity with the history of economic thought is really a disservice to the average economist or student of economics?   And, if so, what exactly can or should one do about it?

The Economic Cost of Historical Thinking

Historians of economic thought have, of course, been the first to lament the current state of affairs.  However, they have not put forth a persuasive resolution to the problem.   Some have pointed to the other social sciences, where reading the early classics is an integral part of training, as the standard that economics should follow.  If even "rational choice" political scientists are required to break their teeth, at some point or another, on Locke and Rousseau, why cannot we require students of economics to dig through Smith or Keynes? 

The reputed reply to such comparisons is that the other social sciences are supposed to pursue "scholarship", for which the history of previous thinking on a subject is of paramount importance.  Economics, it has been suggested, is inherently different: it is a "scientific inquiry", akin to some of the harder sciences, and thus can dispense with previous thinking on the subject.  Presumably, all the insights of past work are already incorporated in the corpus of modern economics, and whatever ideas might have disappeared along the way were evidently not good ones. 

This response, of course, is an extreme caricature, part of the profession's folklore -- although it is uttered distressingly often by a few serious economists. More credibly, the objection to making HET part of the standard curriculum is one of allocation of time and effort, rather than opposition in principle.  The most common argument is that historical "scholarship" is a luxury which economists cannot afford.

Applied economists see this immediately.  If economics is to be the handmaiden to "urgent" policymaking, results must be obtained quickly and be conveyed in a manner that can be understood by practitioners.  Embalming one's work in careful HET scholarship would not only delay but also obscure applied economic work.

For theoretical economists, the excuse still applies. The very mathematical sophistication of their field means that most of their spare time is invested in acquiring and honing their mathematical skills, with little time left over for perusing the old volumes.   At best, it is tolerated as an interest to be pursued on the side or in old age, when one's analytical skills are presumably no longer as sharp and one's intellect is more comfortable with the acquisition of wisdom as opposed to the exhibition of virtuosity.

In response to these protests about time and effort, one is immediately tempted to repeat Viner’s sarcastic admonition in an earlier defense of HET:

 “A verger of a church, reproved for locking the doors of the church, replied that when they were left open it often resulted in people praying all over the place.  I concede that we don't want students and faculty unrestrainedly pursuing scholarship all over our universities while they have so much more urgent business to attend to.”[1]

But, however much we may share this feeling, we believe that there are more defensible reasons for neglecting HET.   

One defense that is sometimes heard is that the mathematization of economics has effectively eliminated the historical sequence of economic thought.   Mathematics, it has been argued, brings its own logical ordering which makes much of past work superfluous for someone who is interested in economic theory.  What is gained by working through the laborious mathematics of the early economists when cleaner re-statements have been made later?  Does it help in the understanding of demand theory to work through the tortuous routes of  Vilfredo Pareto, W.E. Johnson and Eugen Slutsky?  Is it not more convenient, and efficient, to head straight into the simpler 1960s "restatements", exploiting very convenient duality theorems, etc., to reach the same conclusions?  If granted, then it seems that, at least to to some extent, mathematization has leveled history.

This problem is compounded, of course, by the "professional" nature of academia.  As Viner notes, the human intellect, as a rule, is curious, and part of the process of becoming a professional academic is  precisely to discipline that curiosity and channel it into a narrow, specialized groove.  Scholarship, by definition, defies those boundaries: it asks the professional to stand back and view his work from a different perspective, whether historical or cross-disciplinary.  While the profession commends such habits in its teachers, it condemns it at the same time in its researchers. The standard belief, of course, is that sacrificing an inch of depth to acquire a mile of breadth is too costly a proposition -- for, in the modern professional academic environment, it is precisely with this inch of depth that a career is made.

Hand-in-hand with this development has been the professionalization of HET which has reinforced the situation.    Research in HET tends to be itself dense and forbidding -- and not only because past work in economics is difficult to understand.  We must not forget that modern HET scholars are intellectual historians themselves. Their work must meet the standards set out by that discipline.  As a result, the output of HET is usually directed to specialists.   This may be as it should be, but the skills and standards of intellectual historians are quite different than those present in active economists.  

 Consequently, we find that HET scholars are not too welcoming of intrusions by non-specialists into their field.  When modern economists attempt to ornament their own research with a (usually superficial) foray into doctrinal history, HET specialists are usually the first to decry it.  Accusing him or her of misinterpreting the "classics", HET theorists can bring reams of obscure pages and footnotes to bear against the poor intruder.  The professionalization of HET has, in its own way, helped disconnect the past and the present in economics by intimidating the merely curious active researcher and refusing to forge that connection themselves.

From this tentative catalogue, it seems that the average economist would gain little and pay much if he or she tries to direct some amount of attention to the historical development of economics.  If this were the whole story, then HET faces an uphill fight to re-enter the standard curriculum.  Even with the strongest will, historical knowledge is hard to justify in the reality of modern academia.

Yet it is our contention that a depth-breadth trade-off does not exist and that,  in fact, there is much economic worth in historical thinking. However, and perhaps somewhat strangely, we believe that to recognize this, it might be more useful for economists to think more like mathematicians than political scientists.  This sounds more paradoxical than it is.

The Extended Present Defense

The political scientists approach their intellectual history in terms of what Kenneth Boulding called "the extended present".[2]  The peculiarity of this defense of historical study is not that it necessarily helps the modern economist to construct his arguments, but rather simply serves as a backdrop for them.

The "extended present" argument is effectively that the debates of today can be regarded as merely the latest salvoes of debates that have been running over the centuries.   The political scientists defend their study of the Locke v. Rousseau in that it set the parameters of the modern debates of, say, the Capitalist West v. Socialist East, or analyze modern internal Russian developments in terms of the 19th Century conflict between Slavophile and Westernized Russians, etc.

 In many ways, economists can do the same with their economic policy debates.  Modern debates on free trade versus protectionism, price flexibility versus effective demand, market-based versus government-based development policy, etc. are debates that are clearly traceable to those fought out by Adam Smith, David Ricardo, Thomas Malthus and company.  Indeed, the positions and arguments have changed very little.

Yet a modern anti-historical economist would find in this the very justification to ignore the "wrong ideas of dead economists": if modern debates resurrect the old, then surely the modern arguments, with centuries of honing, are more acute, precise and better-founded than those of the dead.  If it is historical acknowledgement that is sought, he might say, let us merely give a general nod towards our predecessors and carry on.  That modern debates have been staged earlier in history hardly justifies the amount of investment that is being asked for.

A second argument political scientists use in their defense is that the insights of the ancients are not quite exhausted -- provided we look hard enough.  For economics, this is no less true.  Pioneering economists like Adam Smith and Karl Marx still have much in their numerous writings that has not made its way into modern economics -- insights about money, for instance, in both these writers, can still be extracted with some profit today.  

Granted, but this is difficult. With so many HET scholars (and, for Marx and Keynes, legions of them) mining extensively through these works, it is doubtful whether an average economist can locate a hidden thesis that has not already been located and exploited by specialists.

 The Scientific Discovery Defense

 What about the mathematician?  Mathematics has the peculiarity among all academic disciplines to be the "purest" in the sense that it is composed entirely of ideas and nothing else.  "God made the integers",  Leopold Kronecker tells us,  "all else is the work of man". 

If mathematics is a human construction, then the edifice we identify as the body of modern mathematics is nothing else but an outcome of the history of human discovery.  The form and content of mathematics is thus historically-conditioned.  Mathematics, without history, is empty. 

Nowhere is this more evident then in the recurrent failures to make the entire corpus of mathematics stand on a few axioms, as an upside-down pyramid unfolding by logical deduction from the tiny base to the massively wide top.  In spite of the fact that everything in mathematics is logically related to something else, one cannot rebuild it entirely on the basis of logical deduction alone. 

To see this, suppose a completely ignorant but very intelligent person were to try his hand at learning all of mathematics in a logically-systematic, ahistorical sense.   Where would he begin?  Set theory, perhaps. And how would he proceed?  When would he, for instance, finally come across something as simple as numbers?  After studying the separation axioms in topology?  But then would he not have to know something about "countability" in order to understand those and how could countability be explained without already having come across numbers before that? 

Of course, mathematicians have come up with numerous devices to circumvent such problems.  The whole Bourbaki enterprise, erecting superstructures upon superstructures, was designed precisely with this in mind.  Yet the Bourbakist exercise has already been undermined by numerous modern concepts which do not fit very nicely within their system and yet remain undoubtedly part of mathematics, e.g. the hyperreals. 

Naturally, countability can be explained by intuition, but then so can integers -- and triangles, and continuous functions and compact sets and the continuum, etc. -- and thus the entire exercise becomes superfluous.   Are we to say, then, that all of mathematics is but a very acute intuition, attended only incidentally by logic?  Not quite.  As Henri Poincaré laid out in his Science and Hypothesis long ago, science is merely a historical sequence of human ideas, not a logical or empirical one (although that matters too).

 “Mathematical discoveries, small or great are never born of spontaneous generation They always presuppose a soil seeded with preliminary knowledge and well prepared by labour, both conscious and subconscious.”[3]

In short, it does not matter that everything is logically connected to everything else.  Most mathematicians have long given up the dream of a logically-sequenced, ahistorical science and are willing to recognize much more the historical process that gave rise to the complex interconnections between mathematical ideas.  Indeed, mathematicians take an unusual relish in tracing this evolution. 

Economics, no less than mathematics or the other sciences, is a collection of human ideas, yet economists are far less willing to recognize the importance of the history of human discovery in forming what we call modern economics.   On one extreme, economic theorists believe that they can perform a Bourbakist feat.  They believe they can, on the basis of a few axioms, erect the entire structure of modern economics as a logical consequence. 

This is evident in the very manner in which we teach economics.  Even the youngest students begin with indifference curves before they know clearly why they may be important or even interesting.  This has led some modern commentators to define economics as the theory of “rational action”, clearly quite far from the concept of commodity exchange which inspired the early Marginalists.

Utility and all that only begins to make sense when, midway through the semester, one finally derives demand-and-supply from it.  Of course, when students begin to nod off in the middle of substitution and income effects, their teachers are quick to remind them that these tedious tools are necessary, that one cannot hope to comprehend supply-and-demand without knowing what, say, the marginal rate of substitution is. 

 Of course, they are wrong.  Economists knew perfectly well what supply-and-demand was long before Hicks and Allen performed their famous 1934 exercise.  Indeed, would Hicks and Allen have even begun such an exercise if they had not some idea (provided by their predecessors) of where they were going? 

The process of scientific discovery, as every mathematician knows (and every economist pretends he doesn't), is not pure logical deduction or empirical induction, but the tracing of a path towards a goal that is clearly foreseen and suggested by the work of one’s predecessors, attended by a good degree of intuition and experience.  The idea of a continuous function or a compact set came first; topologies came after -- and no mathematician would claim that one cannot understand what "continuity" and "compactness" are without knowing what a topology is first. 

At the other extreme, are those who believe that every proposition in economics is derived from reflection on the facts -- whether provided by a data set or by casual observation.  The role of empirical induction in the forming economics is, of course, undeniably important.  But let us not fool ourselves into believing that economic propositions are derived wholly from facts.  “Facts do not speak”, as Poincaré noted.

"Science is built up with facts, as a house is with stones. But a collection of facts is no more a science than a heap of stones is a house.”

Whatever the case, economists seem to resist the notion that economics is a set of human ideas which are not completely implied by facts, nor are completely logically deduced from axioms.  Yet, and this should not sound surprising, the entire body of modern economics can be completely traced from the history of economics.   It is not that “everything is in Adam Smith”, far from it, but rather that everything can be traced from a historical evolution of ideas that sprouted “from Adam Smith”.  

This is so self-evident that it hardly seems worth saying.  Yet, to their detriment, economists somehow built their folklore on something else. As long as they believe that economics is one great logical deduction or one great empirical truth, they will fail to see why certain economic concepts exist.   The great advantage of historical knowledge is not only that it explains the road a discipline has taken, but above everything, it helps us realize which roads were not taken and perhaps can and still should be taken.  Ahistorical thinking prevents us from realizing where economics went wrong, and there are laurels and glories awaiting those who find and are willing to trace a different route.

This last point, we believe, is of greatest importance.  What Adam Smith said matters less than what he did not say.  We are still battling over the concepts he introduced, such as natural price or returns to scale or capital.  A modern researcher might still profit from a dip into the Wealth of Nations to relive the birth of these concepts in order to understand them better.  But of even greater profit to that researcher would be if he kept a keen eye out for why Smith took this road instead of that road.  And to then ask what would have been the consequences for economics had he taken that road?  And then to ponder as to what will happen if we do so now?  And then, perhaps, to take it.

Let us not overstate our case.  These different routes can be pursued by modern economists quite oblivious of Smith and his work and, in some cases, this has been done.  But it is precisely at the birthplace of a concept where we find it is at its most vulnerable stage.  It is at the fork in the road where Smith introduces "capital" or Walras introduces his "auctioneer", that we also find the concepts at their clearest.  They'll qualify it, mention some drawbacks, consider and drop alternatives, make hypothetical jumps, etc., all in the process of rallying arguments to prove the usefulness or necessity of the concept.  And when we read these argument carefully, with a modern critical eye, we can see the reasons for the road taken and begin to think of reasons not to take it and what other roads there might be.

Mathematics grew from such a process.  Non-Euclidian geometry, Lebesgue integration, non-standard analysis, etc. were roads-not-taken by the original masters and yet are still traceable to them in their absence.   How many of these concepts would have been invented had not the ancient masters avoided them? 

And with what great profit!  Leibniz considered infinitesimals, those who followed dropped it in favor of e-d arguments and mathematics took that road.  When Abraham Robinson resurrected the infinitesimal in 1966, he and his followers began answering, with incredible ease, questions that e-d arguments had been unable to unlock for a century.

This, then, is the great practical advantage of historical knowledge. This indicates, if anything, that the depth-breadth trade-off economists usually refer to is,  or can be, largely illusory.  An inch of breadth can sometimes yield a mile of depth. 

 A Plea for Historical Recreation

To profitably benefit from such a process, the discipline needs to perhaps knock down a few of its Bourbakist illusions, or at least to recognize that economics is a collection of ideas that emerged in good part out of historical-human accident and creativity, as opposed to a set of logically necessary or empirically-verified propositions.  If economists believe they are exceptions to Poincaré's rule, they nurture a quite naïve delusion not only about their field, but about the entire process of scientific discovery.

But to achieve this end, we must also appeal for tolerance on the part of the HET scholars.  This too we can learn from the mathematicians.  Unlike economists, the average mathematician has actually a pretty good grounding in the history of his discipline.  They have achieved this by treating their history somewhat recreationally.  Certainly, there are those who have pursued history of mathematics in great depth, but it is not uncommon to find that active researchers in mathematics take part in the historical discussion and delve back and forth in it.  Indeed, the American Mathematical Society, unlike its counterpart in economics, encourages such activity explicitly.

In economics, active researchers have been driven away from HET, both because of their lack of exposure to it, because of the professional pitfalls of “exposing” one’s self,  but also because the HET scholars do not seem to want to make it accessible to them.  They denounce attempts by some authors, such as Niehans, Negishi and Brems, to present modernized, mathematized versions of old theories.  There is no substitute, the HET scholars claim, for reading the original from cover to cover.

This does not mean, of course, that HET scholars are averse to combining modern research with historical research.  Rather, it is their standards that are too high.  As ideals, the HET scholars point to Jacob Viner's Studies in International Trade (1937) or Don Patinkin's Money, Interest and Prices (1956) or Axel Leijonhufvud's On Keynesian Economics and the Economics of Keynes (1968).  These are indeed monuments to both historical scholarship and active modern research.  But one cannot expect active economists to plunge into such high degrees of scholarship these days.  Books are out, journals are in.  One cannot write a historically-embedded argument within the confines of a JET article.  Journal articles are long enough as they are. 

 But let us reiterate our main point.  We are not recommending that active researchers write more "historically-minded" work, but rather that they read more "historically-minded" work and perhaps occasionally -- and just occasionally -- write up the results of their research from a historical perspective, ideally in a treatise-like book, but other means will do.  We are merely suggesting that active economists, like mathematicians, take an interest, a merely recreational interest, in the history of their subject. 

We recognize that modern reality implies that breadth for its own sake is not a sufficient lure.  What we want economists to surrender is the illusion that there is a breadth-depth trade-off and that, in fact, the process of scientific discovery can be enhanced by historical knowledge.  It makes not only for a more honest and interesting science, but a rather deeper one as well.

Unfortunately, for some reason, many active economists deplore even the smallest incidence of historical work that may creep into the research of their students or fellow economists.  This arises perhaps from a certain insecurity about the "scientific status" of economics.  They believe that if economics grants that historical scholarship might be useful in some way, that their bid for legitimacy in the scientific pantheon is somehow instantly threatened.  The main purpose of this note is to contend that there is no such threat.  Mathematicians certainly do not feel it, and yet nobody is suggesting that this makes mathematics a field of "humanities".

Let us then turn to things of a more practical nature.  How is one to breed a doctrinal-historical consciousness in students of economics without "betraying" the scientific status of economics?  The inefficient procedure would be to simply add a history of economic thought course to a curriculum.  Not only is this impossible, given modern academic reality, but it also reinforces the strict division of labor between active and HET research that we are deploring here. 

The solution, although inevitably tricky, is to infuse courses on modern economics with some degree of historical discussion.  For example, when teaching monetary theory, one should not just jump into an overlapping generations model, but begin with a historical discussion on the the problem of money in economic theory, the Quantity Theory, the Patinkin controversy, etc. Or when discussing microeconomic theory, a few brief words ought to be given about the Classical concept of natural price, the labor theory of value, the 1871 Marginalist Revolution, the 1934 consolidation, etc. (At least until recently, macroeconomics was taught somewhat in this manner, beginning with a brief discussion of the Classical-Keynesian and Keynesian-Monetarist debates, etc.)

A short discussion is sufficient, not more than a lecture or two -- or even better, spread out in dollops throughout the course -- but enough to give a taste for why we venture where we do in modern theories.  Not too much, but a broad enough sweep of ideas to help us realize how we got where we are now.  This can be done in virtually all fields, with absolutely no cost to "scientific" character or active research.  Even fields dominated by that reputed great leveler, mathematics, such as general equilibrium theory and econometrics, would be much better understood if adorned with the often very interesting historical tales of their development.

This will be resisted, certainly, by those newly-minted economics teachers who managed to get a Ph.D without any such knowledge.  After all, nobody relishes the prospect of having one's ignorance revealed in front of a classroom.  The unkind observer might say that perhaps they have gotten away with it for too long.   At any rate, as we implied above, we believe it is precisely they who have the most to benefit from such a venture.  This procedure would help them, as well as students, acquire a deeper and more careful understanding of economics that will doubtlessly make them better researchers in the future. 

Some have claimed that this is dangerous, that if we open our historical closets, students will be so disappointed by our past errors that they will shamefacedly realize that economics is not the straight-arrow science they believed it was.  We ought not to resurrect our past and disappoint our youngsters.

Yet this is even more illusory.  Students are discouraged already, precisely because they encounter a science which seems staid and immobile. When faced with such a monolith, students are forced to judge whether it is absolutely right or not.  If the former, they are supposed to apply it without reservations; if they have any suspicion that economics is not quite right, they must drop it entirely.  Alas, far too many of our brightest do the last one, and far too many whom we should not want, we find ourselves stuck with.  The incentives are all wrong.   We make it seem as if there is nothing in economics that merits further exploration and research, but only application.  If you erase the past of economics, you erase the evolving interconnections of ideas which is economics.

Perhaps we need only remind fellow academics that a good proportion of the students which march into our offices to declare themselves economics majors do so by the encouragement of that wonderful book, Robert Heilbroner's Worldly Philosophers, which continues to this day to creep its way into the hands of undergraduates.  These are the social scientists.  The rest are wayward business majors or failed engineers and computer scientists.  It is up to the profession to decide what kind of student it wants to fill the next crop of economists (although we tremble to think of the answers we might hear).

 Let us end with the words of one prominent mathematician who proudly noted in his presidential address to an international mathematical society that the history of mathematics is mathematics, and whatever is brought up to justify the latter, serves equally to justify the former.   We take our leave in the same spirit, in the hope that economists may one day behave more like mathematicians than they have done so far.

Gonçalo L. Fonseca

The History of Economic Thought Website
http://www.hetwebsite.net/het/ 

NOTES

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