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Economics
on Trial -- THE FREEMAN June 1998
Great
Turnabouts in Economics, Part II
by Mark Skousen
"I
used to love hedgehogs but those were 'my salad days when
I was green in judgement'. Now I prefer foxes--Smith
over Ricardo, Mill over Senior, Marshall over Walras." --
MARK BLAUG 1
Last
November, I reported on three economists who courageously
reversed their published views. Now, I'd like to add
a fourth: Mark Blaug. He is a prolific and intense writer,
and most famous for his arduous textbook, Economic
Theory in Retrospect (Cambridge University Press,
1997), now in its fifth edition. Blaug is primarily
a historian of economic ideas and as such, he is, to borrow
from Peter Drucker, a "bystander," an unbiased reporter
and critic of economic ideas. And my, does Mark Blaug
write with profundity and wit. His latest work, Not
Only an Economist: Recent Essays by Mark Blaug,
is one of the most delightful books I've read in a long time.
I found myself making notes and exclamation points on practically
every page.
As
perhaps the most profound keeper of economic thought since
Joseph Schumpeter, Blaug has made remarkable progress.
His unrelenting search for truth has led him along the intellectual
road from Karl Marx to Adam Smith, and even now shows increasing
sympathy with Joseph Schumpeter, Friedrich Hayek, and the
Austrian school.
Blaug's intellectual odyssey is curiously broad: like Whittaker
Chambers, he started out a Marxist and a card-carrying member
of the American Communist Party, then became disillusioned
and betrayed. He flirted with Freud, but now recognizes Freudian
psychology to be a "tissue of mumbo-jumbo."
Regarding religion, Blaug "was brought up an orthodox
Jew, achieved pantheism by the age of 12, agnosticism by the
age of 15, and militant atheism by the age of 17." 2
He has shifted ground as frequently as he has transferred
allegiance: born in the Netherlands, educated in the United
States, and now a resident of Great Britain.
The
Perversity of Ricardo, Marx, and Sraffa
Blaug's sojourn in economics is equally diverse. Leaving
Marx, he became a convert to the British economist David Ricardo,
wrote his Ph.D. dissertation on Ricardian economics, and even
named his first son after him. But eventually he concluded
that Ricardian economics is flawed and too formalistic.
Blaug is especially disturbed by the development of a perverse
version of Ricardian economics known as Sraffian economics.
Sraffian economics is named after Piero Sraffa, author of
the obscure theoretical work Production
of Commodities by Means of Commodities (Cambridge
University Press, 1960), which has highly influenced Marxists
and post-Keynesians. Essentially, Sraffa uses a Ricardian
model to claim that national output is completely independent
of wages, prices, or consumer demand. Accordingly, governments
can pursue their grandest redistributive schemes without damaging
economic growth in the least.
In a scathing critique of The New
Palgrave Dictionary of Economics, Blaug lambastes
Sraffian economics as mathematically obtuse and irrelevant
to the real world, and assails the editors for citing Marx
and Sraffa "more frequently, indeed, much more frequently,
than Adam Smith, Alfred Marshall, Leon Walras, Maynard Keynes,
Kenneth Arrow, Milton Friedman, Paul Samuelson or whomever
you care to name." 3
Recently, Blaug has criticized modern economics for the "noxious
influence" of Swiss economist Leon Walras in creating
the "perfectly competitive general equilibrium model,"
or GE for short. Most of the textbook writers, including
Paul Samuelson, are enamored with GE, because of its mathematical
precision. For example, the perfect competition model
focuses on the final end-state of competition, rather than
the competitive process itself. Blaug labels perfect competition
a "grossly misleading concept" that ignores the
role of the entrepreneur. He urges economists to "rewrite
the textbooks" and replace the current Walrasian GE model
with the dynamic Austrian view of the competitive process.
4
Blaug
on Anstrian Economics
Joseph Schumpeter, FA. Hayek, and Israel Kirzner have
been in the forefront of developing the Austrian view of competition.
Blaug writes favorably about them all. Although belittling
Mises's methodology ("cranky and idiosyncratic")
and his business-cycle theory ("empty"), he grants
Mises and Hayek "the better case" in the socialist
calculation debate. He rates Schumpeter's The
Theory of Economic Development (1911) one of the
three most important books ever written by an economist.
Ultimately he prefers Hayek: "In short, it is Hayek,
not Mises, who deserves to be patron saint of Austrian economics."
5
Incomplete
Conversion
Blaug's conversion toward free-market capitalism is on the
right track. He has gradually shifted toward Adam Smith
and Hayek, though he is still enamored with John Maynard Keynes,
who he says caused a "permanent revolution."
Keynes divides the time line between Blaug's two biographical
works, Great Economists Before Keynes
and Great Economists Since
Keynes. His current attitude is summed
up as "capitalism tempered by Keynesian demand management
and quasi-socialist welfarism." 6
Hopefully, that's not the final word on his economic philosophy.
One last note. Regarding Blaug's intolerance of religion,
I'm reminded of G.K. Chesterton's response to H.G. Wells's
atheism: "H.G. suffers from the disadvantage that if
he's right he'll never know. He'll only know if he's wrong."
7 And the last thing
that Mark Blaug wants to find out is that he is wrong.
1. Mark Blaug, Economic Theory in
Retrospect, 5th ed. (Cambridge University
Press, 1997), preface. According to the Greek poet Archilochus
(c. 680 B.C.), "The fox knows many things, but the hedgehog
knows one great thing."
2. Mark Blaug, Not Only an Economist:
Recent Essays by Mark Blaug (Edward Elgar, 1997),
preface.
3. Mark Blaug, Economics Through
the Looking Glass: The Distorted Perspective of The New Palgrave
Dictionary of Economics (Institute of Economic
Affairs, 1988), p. 15.
4. Mark Blaug, "Competition as an end-state and a process,"
Not Only an Economist,
pp. 78-81.
5. Ibid., pp. 9-91.
6. Ibid., p. 9.
7. Quoted in Joseph Pearce, Wisdom
and Innocence: A Life of G. K. Chesterton (Ignatius
Press)
Reprinted
with permission
Economics
on Trial
The Freeman
Foundation for Economic Education
30 South Broadway
Irving-on-Hudson, NY 10533
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