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Famous Figures and Diagrams in Economics

Author(s):Blaug, Mark
Lloyd, Peter
Reviewer(s):Whaples, Robert

Published by EH.Net (December 2011)

Mark Blaug and Peter Lloyd, editors, Famous Figures and Diagrams in Economics.? Cheltenham, UK: Edward Elgar, 2010. xvii + 468 pp. ?112.50 (hardcover), ISBN: 978-1-84844-160-6.

Reviewed for EH.Net by Robert Whaples, Department of Economics, Wake Forest University.

As Avinash Dixit puts it, ?The only correct answer to the question whether economics is a science or an art is ?Both?? (p. 327). And perhaps our best ?art? is didactic ? the useful, but creative graphs and diagrams that we use in our articles, textbooks and classrooms. Mark Blaug (Professor Emeritus at the University of London and the University of Buckingham) and Peter Lloyd (Professor Emeritus at the University of Melbourne) have enlisted a stellar international cast of contributors to provide an account of the role and history of about sixty figures and diagrams used in economic analysis.? ?We have selected figures that have been prominent in the history of economic analysis and that are, with a few exceptions, still found in contemporary textbooks and research? (p. 1). If you use these diagrams in your research or teaching, you may learn a lot from this pithy collection.

The editors? introduction makes a compelling case that economists have shown great ingenuity in devising figures and diagrams.? While the use of these geometric diagrams ?as a device for discovery and proof has declined in recent decades? (p. 7), their effectiveness as an expository device ? especially in the classroom ? has endured.? Many of us reflexively think in terms of these diagrams, so it?s worthwhile to consider their origins and delve deeper into their assumptions and nuances.?

The volume includes 58 chapters in seven subsections ? ?Basic Tools of Demand and Supply Curve Analysis? (such as Marshall?s supply and demand graph, indifference curves and isoquants, substitution and income effects, and Engel Curves); ?Welfare Economics? (including the Harberger triangle, taxation of external costs, monopoly and price discrimination, duopoly reaction curves, and monopolistic competition); ?Special Markets and Topics? (including location theory, cobweb diagrams, and reswitching and reversing in capital theory); ?Basic Tools of General Equilibrium Analysis? (including the Edgeworth box, production possibilities frontier, and factor price frontier); ?Open Economies? (including the offer curve, the Stolper-Samuelson box; the Lerner diagram, and the four-quadrant diagram for the two-sector Heckscher-Ohlin model); ?Macroeconomic Analysis and Stabilisation? (including the IS-LM diagram, the aggregate demand aggregate supply diagram, the Phillips curve, and the Beveridge curve); and ?Growth, Income Distribution and Other Topics? (including the Solow-Swan growth model diagram, Lorenz curve, and Kuznets curve).

Among the chapters that should be singled out as worth reading are two by Yew-Kwang Ng (on the Harberger triangle and on the taxation of external costs) and especially Richard Lipsey?s on the AS-AD diagram, which will profit almost everyone who teaches an introductory macroeconomics course by reminding them about the foundations of this tool, which many textbook writers fail to convey.?

The volume has a bit of a nostalgic feeling in places.? The chapter on kinked demand curves concludes that ?despite its weaknesses, the KDC concept survives, at least in undergraduate texts in microeconomic theory? (p. 157).? I used to jokingly tell students that they should tear out and crumple up the textbook page or pages discussing kinked demand curves, but (alas?) they have disappeared from the textbooks I use.? Marc Nerlove?s chapter on cobweb diagram opens by saying ?Mordecai Ezekiel?s 1938 paper made ?The Cobweb Theorem? and his famous diagram well-known to every student of economics? (p. 184) ? surely this is not true of recent cohorts ? and concludes that ?the cobweb theorem is fatally flawed as a theory of agricultural price movements; it has little empirical relevance, nor is it supported by any empirical evidence? (p. 188).? Like the kinked demand curve, I suspect that part of the reason the cobweb diagram hung on in textbooks for so long is that getting students to work through it was simply good mental exercise for them ? even if the model had little bearing on reality. Textbooks? recent turn toward integrating both the latest news and the profession?s explosion of empirical research findings seems to have crowded out both the kinked demand curve and the cobweb model.? I see this as progress.??

Although the book is a terrific success, I spotted several errors in the diagrams themselves that the publisher needs to correct.? Figure 10.3 mislabels the horizontal axis as KL, when it should be K/L.? Figure 16.1 features an upward-sloping marginal revenue curve and a downward-sloping marginal cost curve.? In Figure 36.1 the contract curve fails to go through the origin in the lower-left corner.? Figure 50.4 is imprecisely drawn.? The AD1, SRAS1 and LRAS curves are supposed to meet at a unique point, but they don?t ? and the Phillips curve in the bottom panel slightly misses the mark too. Finally, despite explaining that ?these conditions imply that the Lorenz curve is represented in a unit square? (p. 432), Figure 57.1 (like almost every textbook illustration of the Lorenz curve) isn?t a unit square.

Robert Whaples is the editor, with Randall Parker, of The Handbook of Modern Economic History (Routledge, forthcoming).

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Subject(s):History of Economic Thought; Methodology
Geographic Area(s):General, International, or Comparative
Time Period(s):19th Century
20th Century: Pre WWII
20th Century: WWII and post-WWII