Economic thought made simple

EVOLUTION OF ECONOMIC IDEAS

Smith to Sen and Beyond

Vinay Bharat Ram 

Oxford University Press

184 pages; Rs 495

Over the years, there have been many books that have attempted to trace the history of economic thought. After the financial crisis of 2008, this particular strand of work has gained even more prominence, with economists of all hues looking back to explore the ideas and the underlying assumptions that have come to form the bedrock of the profession. 

A recent such attempt that comes to mind is that of Professor Meghnad Desai. In Hubris, Mr Desai attempts to answer a simple question: Why did economists fail to foresee the crisis of 2008 that threatened to take down the world economy?

In attempting to answer this question, posed by none other than the Queen of England, Mr Desai explores the origin of economic ideas, going back to the founding fathers of the discipline — Adam Smith, David Ricardo, Alfred Marshall and so on. Peppered with philosophical inputs from Locke and Hume, among others, the book analyses in great detail the ideas propagated by the great economists of the past. The attempt was interesting but limited by the scope of the question. 

In similar vein, Vinay Bharat Ram, chairman, DCM, a PhD in economics from the University of Delhi, attempts to explore the work of economists who have greatly influenced the discipline in his new book, Evolution of Economic Ideas — Smith to Sen and Beyond.

His approach is broader because his intention is to inform the novitiate to the subject. Thus, written in the form of a free-flowing classroom discussion, the book offers useful glimpses into the lives of influential economists. It describes, albeit briefly, the social milieu that shaped the thinking of these towering figures. 

In terms of readability, the book scores because Mr Bharat Ram has chosen to write with a light hand and included bits of information and anecdotes that leaven the weighty subject matter he tackles. For example, while Karl Marx was raised in a bourgeois family, he despised the bourgeoisie. He chose to live in poverty for 15 years. Or that Friedrich Hayek divorced his wife of 20 years to marry his childhood sweetheart and cousin, Helene. 

He also shows how some of the battles for economic thought were as intense as a corporate battle for market share. For example, to rally those against the Keynesian school of thought that was increasingly gaining traction, Hayek organised a 10-day conference in 1947 at Hotel Du Parc, on the summit of Mont Pèlerin overlooking Lake Geneva in Switzerland. Among those who attended were the philosopher Karl Popper and the young economist Milton Friedman who would go on to become arguably the most prominent advocate of free markets in the 20th century.

Asides like this certainly make the book more accessible to the uninitiated; those looking for an in-depth understanding of ideas that have shaped the profession may have to search elsewhere for a more rigorous critical interrogation that books of such nature require. 

Each chapter in the book is dedicated to an economist. But each account is brief – hardly a few pages – so there is not enough “meat” to do justice to the depth and intellectual complexity of these economists who have shaped economic thinking for centuries. 

At one level, the author has presented the crux of the major ideas that have dominated the profession in a manner that makes them accessible to the lay person. And judged against the desire to make economic history more accessible to the general public, perhaps the book delivers. 

Such an approach, however, may work for those looking for a quick account of major economists and their ideas. The more serious readers would perhaps have been better served had the author chosen a handful of economists and explored their work in detail or had he chosen a particular strand in economics and then explored the work of economists in that particular field.

To examine the work of economists spanning the entire breath of the field, right from trade to monetary economics to welfare economics, may be commendable but it falls short simply by virtue of its expanse. So if the book offers little for an economics student, for whom understanding the evolution of economic thought is fundamental to the study of economics, it may be inadequate for the casual reader too.

One could also quibble over the selection of economists. If contribution to the field of economics is the criteria why not discuss Robert Solow who was awarded the Nobel Prize for his work on the theory of economic growth? 

Or if the disillusionment with the dismal science is to be explored why not examine the work of Eugene Fama, whose work on portfolio theory, asset pricing and stock market behaviour won him the Nobel Prize or that of Robert Shiller who won the prize in the same year as Mr Fama but has divergent views on the subject?