Economists were 1/50 of this group.
Bettmann Archive
I remember my economic history professor David S. Landes often talking about Joel Mokyr, who won the Nobel Prize in economics earlier this month. They must have been good friends. Professor Landes was hilarious and always made wry comments about the strange experiences he and his friends had in the profession. One remark had to do with how, during a trip to Germany, he had tricked his young daughter into believing, consequently, that their family was rich like the Rothschilds. Everything in the country, but also in Switzerland, had their name carved in stone in fancy Gothic letters, apparently thanks to generous family bequests over the centuries. Places like the Landesmuseum.
I’ve assigned Mokyr’s tidy work over the years in class, and I’ve certainly assigned Landes’ peerless history of the industrial revolution, Prometheus Unbound (which I wrote about in one obituary for Professor Landes in 2013 here). One of the themes of the industrial revolution, if you really study it, is that economics had almost nothing to do with it.
Yes, there is a bewildering irrelevance of economics to the greatest episode in economic history, the industrial revolution of 1750-1910, including locus classicus of the event, Great Britain. You can point to Smith, Ricardo, Mill, Marshall et al, but what a sideshow they all were collectively. The industrial revolution had an incredibly powerful dynamic that had almost nothing to do with the study of economics. It developed and developed while, very strictly on the side, people like Smith wrote things, like in The Wealth of Nations (1776).
The most you can say about the economics driving the industrial revolution is that the study of it provided, for a rather small corner of interested parties, an opportunity to practice debating abstractions of the world of affairs – ‘supply and demand’, ‘marginal cost’ and so on. This is probably the most useful economy ever. In places like colleges, finance can help young people and visitors from the business world, with the help of professors, develop the ability to discuss the principles of acquisition and spending efforts, indeed develop into such a natural and necessary activity.
In the British Parliament in the nineteenth century, at the height of the industrial revolution, over 2% of members described themselves as economists, a term with less academic significance than it acquired in the twentieth century. The modern American economy owes its existence almost entirely to the anti-tariff intellectual faction of the nineteenth century, a faction apparently without influence in the practical world. American economic growth in the nineteenth century, achieved without the services of academic economics, was spectacular.
In the twentieth century, economics became the dominant social science and the queen of a growing institution of research universities. Economic performance in the twentieth century was not as good as in the nineteenth. In the United States, 1913 was the turning point. Four percent growth (in GDP, an economic sense) before, three after (less than two has been the norm lately). The difference of one percentage point per year over long distances is huge.
The overall balance doesn’t lie. Before the economy, the economy was the best ever. When finance rose to glory, the economy went from bad to worse. Either finances were irrelevant or essential to this transition. To the extent that the economy had any influence on the economy, it was overall negative.
The argument that things would be worse without the economy strains credulity. The economy was absolutely rolling like a dog when it came to the rise of progressive income taxation after 1913. In the Depression, it made noises about the Smoot-Hawley tariffs, but was silent on the subject of massive income tax increases. Claudia Goldin, the 2023 Nobel laureate, and now newly appointed professor, pondered the connection of the estate tax to the Great Depression. Often, finances turn out to be worse than useless.
In the 1960s, academic economics cheered the end of the gold standard. He got his wish. When stagflation hit, he changed the subject. He blamed the Federal Reserve and external shocks. Academic economics even said they created the collapse of stagflation, or at least the inflation part, through monetary economics in the journals that influenced Paul Volcker. In fact, it was renegades from outside the profession—the suppliers—who created the lion’s share of the reform that came with the Reagan revolution.
As an abstract matter, it is clear why finance must be irrelevant for the economy to do well. In the nineteenth century, home truths about economics were part of common sense. If you need a huge profession of professionals to tell you how things are, you don’t have what you need ready, in the aesthetics of the masses of people in the economy, for there to be mass prosperity.
Economics especially in the mid-twentieth century was a fellow traveler with Freudianism in psychology. The economy could not reach its potential without economic therapy, said the Keynesians, said the monetarists, said the behaviorists (including twenty-first century innovators). To the extent that economists had influence, the economy weakened. How the economy has never faced its ranking responsibility for ending the centuries-old monetary system, the gold standard, is beyond me. This is a very big weakness, and high-level professional economists remain completely complacent about it. I wrote a book for this one time.
Which brings us to Mokyr’s Nobel. This Northwestern University historian wrote delightful books you could freely read about great deeds of the past. Sounds kind of classical, kind of Homeric, doesn’t it? Reading or hearing about great works of the past is a key element of true culture. This is economics at its best. Did we have an epic industrial revolution that brought greatness in a big way? Tell the tale by the fire, in the cave! The young people who hear it will go out into the world fortified.
of Landes Unbound Prometheus is this kind of text. It picks you up. I tried to write my own Housekeepers from there. Economics is relevant in the real world, sure, but at best, it’s not part of the world of affairs, of doing things in economics. It is properly part of that great legacy of the industrial revolution, leisure. You should read economics (not the pre-math stuff though) not so much because if you don’t listen to the experts you’re missing out, but because it helps you improve on what you already know, that in a free society you can seriously make bank and bring prosperity not only to yourself but to many others in business.
