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Economic Thought: A Brief History

Author(s):Kurz, Heinz D.
Reviewer(s):Hébert, Robert F.

Published by EH.Net (June 2016)

Heinz D. Kurz, Economic Thought: A Brief History (translated by Jeremiah Riemer). New York: Columbia University Press, 2016.  ix + 208 pp. $27 (cloth), ISBN: 978-0-231-17258-5.

Reviewed for EH.Net by Robert F. Hébert, Department of Economics, Auburn University.

Writing a brief history of any subject requires its author to be organized and selective.  The former requires skill; the latter judgment.  Heinz Kurz, professor of economics at the University of Graz in Austria, displays his literary skill in this volume, a survey of economic thought from ancient times to the present, in less than 200 pages.  The author does a good job of linking various ideas scattered through time and space, weaving an abstruse narrative into a cohesive fabric.  This is no mean feat, and its accomplishment contributes in great measure to the readability of the present work.  His judgment, however, is more likely to be in the critics’ crosshairs, which is, not surprisingly the case here.

In Kurz’s literary time machine the reader reaches the sixteenth century after seven pages, and arrives at the eighteenth after another fifteen pages.  Kurz resists the temptation to anoint Adam Smith the “father of economics,” opting for the more defensible claim that “Smith permanently shaped the new field of political economy, both thematically and methodologically, and won it an important place in the circle of the venerable sciences” (p. 28).  Although he had numerous precursors, the long train of economic analysis that left the Smith station followed mainly the tracks he laid down.  Kurz takes us down those tracks in successive chapters on Marx, marginalism, Marshall, utilitarianism, welfare theory, imperfect competition, Schumpeter, Keynes, reactions to Keynes, general equilibrium and welfare theory, and developments in selected fields.

Clearly, publishing forces a tradeoff between brevity and depth.  Some things must be sacrificed in order to keep the narrative (and costs) within bounds.  Kurz provides a good compass for navigating the journey before us, but reviewers are duty-bound to pay attention to what is excluded as well as included.  I don’t quite know what to make of the statement (p. 7) that the difficulty of evading taxes on invisible wealth (e.g., money or interest) was a probable source of the long-lasting opposition to credit and interest by the Roman Catholic Church.  A more nuanced view is that the medieval Church’s outward opposition to credit and interest was curious and one-sided, i.e., the Vatican operated on both sides of the loan market, borrowing freely from its own merchant bankers while quietly making usurious loans to its prelates, all the while outwardly denouncing usury as a sin.[1]

The author’s interpretation of Mercantilism and Cameralism, a part of what Mark Blaug called “pre-Adamite” economics, follows tradition while either ignoring or rejecting the alternative interpretation based on public-choice theory[2], for which no explanation is given.  The spare mention of Richard Cantillon in mere passing (p. 17) can easily be overlooked, also in passing, and might be judged an opportunity lost, especially in light of Cantillon’s seminal influence on the theory and method of many economic thinkers who followed.  Karl Marx gets appropriate attention as the premier architect of a socialist system, but Kurz’s discussion of Marx’s impact stops at the twentieth century, which is a shame because so much of contemporary cultural politics in Europe and America has a distinctly Marxian odor.

Henry George is much misunderstood by historians of economics, and Kurz perpetuates the popular myth by unqualifiedly lumping George among the proponents of land nationalization (p. 43).  George in fact advocated a nuanced view of land value taxation not far removed from Alfred Marshall, who took George more seriously than other economists.[3]   Both George and Marshall recognized that taxing the “public value” of land did not require public ownership, which Marshall, not George, nevertheless qualifiedly endorsed (after a hundred years) in his lectures on George’s Progress and Poverty.[4]   It has somehow escaped historians of economics that by his own (public) admission Marshall would have been a de facto socialist after 1983!

Thünen, Rau and Gossen (Chapter 4) are appropriately singled out as forerunners of marginalism, but Kurz doesn’t explain how to reconcile his claim for Rau’s primacy “in substance (not verbatim) [regarding] the concept of marginal utility” (p. 67) with Rectenwald’s judgment that Rau “was not an original thinker.”[5]   Despite better coverage of some German predecessors, the story Kurz tells about early marginalism is incomplete, especially in regards to France.  By now Kurz should be aware of the peculiar institutional and cultural dimensions of French society that gave us Dupuit and his pioneering band of ponts engineers attached to the École des ponts et chaussées.  To be sure, Cournot formulated the demand curve, a succinct treatment of monopoly and duopoly, and the neoclassical theory of profit maximization, but Dupuit gave us a neoclassical concept of surplus (later retro-fitted by Marshall), a thorough treatment of utility and demand, novel concepts of monopoly and competition, price and product differentiation, and a clear explication of the relationship between property rights and economic welfare.[6] Continuing to ignore Dupuit and his contributions to economic science merely furthers what Jevons called “the noxious influence of authority.”

Having passed through marginalism and Marshall’s “neoclassical synthesis” Kurz capably guides us next through imperfect competition, Schumpeter and Keynes, general equilibrium theory and welfare economics, concluding with developments in the selected fields of game theory, capital theory, growth theory, spatial and urban economics, development economics and the new economic geography, behavioral and experimental economics, new institutional economics, and financial market theory.  Adequately covering the significance and impact of so many selected fields in less than twenty pages is a monumental challenge, and hence, some fields get very short shrift.  For example, public choice theory and new institutional economics are each encapsulated within a single paragraph; whereas behavioral/experimental economics and financial markets theory each get three paragraphs.  Whether this tells us something about the author’s evaluative priorities or not is left for the reader to guess.

This brief history concludes with the lofty hope that knowing the history of economics should help us resist superstition, hysteria and exuberance in economic and social questions; as well as immunize us against the naive idea that it is the privilege of living economists to articulate only correct ideas (“A Final Word,” p. 185).  If it were only that easy, perhaps courses in the history of economics would not be disappearing from university curricula at such a rapid rate.

Since the author is a seasoned scholar undoubtedly aware of the tradeoff between brevity and depth, fairness dictates that this book be evaluated primarily for what it does rather than what it does not do.  As long as the limitations of books like this are understood, there is a place for them in the field of economics.  Economics is not the dismal science claimed by historian Thomas Carlyle, unless one has little understanding of and appreciation for its complexity and relevance, which can, in large measure, be gained only from a study of its history.  For those untutored in the history of economics, this little book is not a bad place to start.

Notes:

1. See Robert B. Ekelund, Jr., et al., Sacred Trust: The Medieval Church as an Economic Firm (New York: Oxford University Press, 1996), p. 120.

2. Cf., Robert B. Ekelund, Jr. and Robert D. Tollison, Mercantilism as a Rent-Seeking Society: Economic Regulation in Historical Perspective (College Station: Texas A&M University Press, 1981); and same authors, Politicized Economies: Monarchy, Monopoly and Mercantilism (College Station: Texas A&M University Press, 1997).

3.  Robert F. Hébert, “Marshall:  A Professional Economist Guards the Purity of His Discipline,” in Critics of Henry George, ed. R. V. Andelson (London: Associated University Press, 1979), pp. 47-71.

4. Ronald Coase, “Three Lectures on Progress and Poverty by Alfred Marshall,” Journal of Law and Economics, 12 (April 1969), 184-226.

5. H.C. Rectenwald, “Rau, Karl Heinrich,” in The New Palgrave: A Dictionary of Economics, ed. J. Eatwell, M. Milgate, and P. Newman (London: Macmillan Press, 1987), IV: 96.

6. See Robert B. Ekelund, Jr. and Robert F. Hébert, Secret Origins of Modern Microeconomics: Dupuit and the Engineers (Chicago: University of Chicago Press, 1999).

Robert F. Hébert is Emeritus Russell Foundation Professor of Entrepreneurship at Auburn University.  With Robert B. Ekelund, Jr., he is the author of A History of Economic Theory and Method, sixth edition, and several other books.  rfhebert@cox.net.

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Subject(s):History of Economic Thought; Methodology
Geographic Area(s):General, International, or Comparative
Time Period(s):General or Comparative