Grand Pursuit: The Story of Economic Genius
Fourth Estate, 554pp
Reviewed by Christopher Silvester
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The grand pursuit of the title refers to the desire of economists from the second half of the 19th century onwards, in the phrase of Alfred Mar- shall, ‘to put mankind in the saddle’ of its economic destiny. Sylvia Nasar, who wrote A Beautiful Mind, the bestselling biography of game theorist John Nash, here follows the lives and careers of around a dozen economists ‘whose temperaments, experiences and genius led them, in response to their own times and places, to ask new questions and propose new answers’.
She starts with Charles Dickens’s plea for political economists to inject ‘a little human warmth’ into their dis- cipline. Karl Marx may have chal- lenged the iron law of wages, but he was unprepared for the growing prosperity of the British labourer. In 1890 Alfred Marshall, the Cambridge math- ematician whose idea of a holiday was tramping around factory districts collecting data, identified the raising of productivity as the key to increased prosperity for all.
During the decade that followed, Beatrice Webb (with husband and helpmeet Sidney) founded the London School of Economics and practically invented the welfare state, while across the Atlantic Irving Fisher proposed control of the money supply as a way of managing inflation and deflation.
Joseph Schumpeter broke from Marshall’s theory that economic devel- opment was incremental and argued instead that it proceeded by leaps and bounds, with the creative-destructive entrepreneur as his hero. As Austria’s post-First World War finance minister, he advocated the equivalent of a mansion tax to pay off the nation’s postwar debt as well as the creation of an independent central bank so as to prevent the government from inflating its way out of its difficulties, but he never got to implement his plans.
John Maynard Keynes’s innovation was not deficit spending, but the realisation that monetary policy was not enough to combat unemployment in severe depressions. As a Keynesian and a New Deal government planner, the young Milton Friedman invented tax withholding at source (the equivalent of our PAYE). The increased tax take this engendered meant that gov- ernments could now stabilise the economy by manipulating taxes. He repented later, of course.
The most peculiar economist in the book is Joan Robinson, one of Keynes’s disciples in Britain. An intense, driven personality from a radical patrician background, she tumbled headlong towards Marxism. ‘Imperious, intellectually intimidating, and seductive,’ writes Nasar, ‘she combined Olympian certitude with a fine sarcasm.’ She switched heroes from Keynes to Stalin, ignored mathematics and economic history, was scornful of democracy, enjoyed being lionised in Moscow and Beijing, and, as her one-time pupil Amartya Sen put it, ‘failed utterly to detect the biggest famine in modern history’ when Mao’s Great Leap Forward caused millions to starve to death.
The book ends with Sen, who sought to integrate individual rights and ec nomic welfare. His particular bugbear was how authoritarian regimes permitted famines to occur.
Nasar attempts to do for her chosen economists what Liaquat Ahamed did for central bankers in his bestselling Lords of Finance, that is, to humanise them and make them interesting for the general reader. In this she most certainly succeeds. Nasar’s portraits of economists are vivid and spiced with quirky personal observations. The motivations for their insights were dif- ferent in every case: Sen was spurred by intimations of mortality after contracting oral cancer; Robinson was spurred, in part, by what her fellow economist Frank Hahn described as her ‘upper-class refusal to go with the herd’. Schumpeter relished and briefly enjoyed a plutocratic lifestyle and ‘often had a call girl or two on his arm or sitting beside him in his carriage’. Depression, lovesickness, illness, academic jealousy, and awareness of their impending obsolescence — all were factors in the intellectual development of these thinkers.
One of this book’s great virtues is that it slays the myth of a fundamental ideological divide between Keynesians and free marketeers. One of its vices is that Nasar allows the storylines of some of her characters to peter out. Why does Friedman’s later monetarism only merit a half-page of her attention? And why does she end her coverage of Paul Samuelson with JFK’s recession-busting 1963 tax cut yet fail to mention that he was a major promoter of the efficient-market hypothesis that is now partially blamed for the recent global financial crisis? It is inconvenient if you are seeking to claim that Samuelson and his fellow professionals were ‘instrumental in turning economics into an instrument of mastery’.
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