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Bring back the history of economic thought

laissez faire et laissez passer

Any attempt to engage in academic discourse with students of economics or political economy will often reveal an inability for these students to intellectually contextualize their arguments. Rather than embracing flirtations with heterodox economic schools, most students will find themselves reverting to very orthodox classroom arguments, without knowing why what their professors teach them is correct. 

Perhaps some of this is because of the overwhelming pre-professional nature of Duke economics students, but that is no excuse to avoid proficiency in a field of specialization. These students would benefit from a greater understanding of the history of economic thought. I find it strange that students studying economics or cognate disciplines are able to complete their entire course of study without once consulting the original works of some of the greatest thinkers in economic history.

Reading the history of economic thought would provide economics students the opportunity to study the great arguments in economic history and more independently develop ideas as they encounter the rich tradition of vigorous and enlightening debate over the last few hundred years. In fact, up until the 1960s, it was not uncommon for degree programs in economics to require multiple courses in the history of economic thought. Earlier generations of economists appreciated the fact that research into the history of thought (and the economic history that appropriately contextualizes the debates of the past) shines light on past events and exhibits the astonishing resemblance between historical events share and current ones. This approach augments our understanding of the science, as the merits and faults of past approaches are scrutinized and distilled into novel insights into the big issues facing economists today.

It is difficult to argue that students would be less able to comprehend and analyze contemporary policy issues with a working knowledge of the writings and modern implications of the Knight-Hayek controversy regarding capital theory, the Wicksell-Davidson debate on price stability, and the infamous contest of business cycle theories between the London School of Economics and Cambridge in the 1930s, to name just a few.

Indeed, many of the most important advances in economic science were guided by understanding how different schools of thought interacted with each other. Professor Milton Friedman, for instance, made enormous headway in the Keynesian-dominated mainstream of macroeconomics by reinvigorating the ideas of Irving Fisher and the earlier advocates of the quantity theory of money in his extraordinarily thorough historical work on the American monetary system. Ludwig von Mises would never have developed his revolutionary theory of monetary institutions and their macroeconomic effects if not for his study of Wicksell, Bohm-Bawerk, and the British classical economists of old. Even Karl Marx read and wrote on Adam Smith and David Ricardo, and they no doubt shaped his thinking, be it positively or negatively.

Since the financial crisis of 2008, mainstream economists have been wracking their brains for answers, and many seemingly innovative approaches to reconstructing the profession bear remarkable similarities to the theories of yesterday. This is unsurprising. Rather than seeing economics as a series of ideas that build on top of each other and benefit from vigorous debate, it has become a field that is overly focused on adding more and more frictions to DSGE models that have abstracted so far from reality, that they could use a solid grounding in theory that can be found in the history of thought. Rather than simply having students memorize stock and flow diagrams, undergraduates who have studied the history of thought will be better equipped to think independently and present ideas in a tradition more consistent with the intellectualism is to be expected of students at an elite university.

More importantly, a sound understanding of the history of ideas has the potential to inject excitement and life into the otherwise dismal science. Putting names, personalities, and lives to theories that are often presented as lifeless graphs and equations can prove to encourage typically uninterested students to pick up economics. There’s something infinitely more fascinating about the story of the stubborn Piero Sraffa taking on future Nobel Prize winner F.A. von Hayek on the role of interest rates in business cycles, than a series of regressions suggesting a strong correlation between a dip in remittance payments and the emergence of economic recessions. The history of economic thought was what turned political economy into a full-time passion for me, and I am sure that other potential economists might find something that excites them in the field’s rich history.

Nikhil Sridhar is a Trinity senior. His column “laissez faire et laissez passer” typically runs on alternate Mondays.