For nearly ten years, readers of the "Sunday Boston Globe" and newspapers around America have delighted in David Warsh's column, "Economic Principals." This collection shows why. Taken as a whole, Warsh's writings amount to a vast and colorful group portrait of the personalities who dominate modem economics -- from the luminaries to unknown soldiers to eccentrics who add sparkle to the tapestry.
Partly a history of controversies in economics, partly an essay on the evolution of the field, "Economic Principals" offers a glimpse of one of the most important stories of our time: the metamorphosis of a priestly class of moral philosophers into the mathematical mandarins of today, whose ideas are reshaping society even as they reveal its workings in ever more subtle detail.
Warsh first recounts the rise of the economic paradigm, deftly treating the rediscovery of Adam Smith and the centrality of markets. He then turns to the generation of economists for whom the Nobel Prize was created in 1969, the men who forged the modern field in a few years during and after World War II. Some, like Paul Samuelson and Milton Friedman, are well known to the public; others, like Trygvie Haavelmo and George Dantzig, are less quickly recognized. But all have interesting stories which Warsh brings to light.
Tracing the high tech revolution to the current generation, he sketches younger scholars such as Jeffrey Sachs, Martin Feldstein, and others less popularly known, who rule the field today. Marking the most powerful applications of modern economics, Warsh explains how the ingenious "rocket scientists" of Wall Street are creating new markets and the business school wizards and leadingcorporate executives are reinventing the organization.
Finally, in exploring the implications of modern economics, Warsh introduces us to scholars operating on the boundaries of the field, from Jane Jacobs to Noam Chomsky, and to the critics, like Donald McCloskey and Robert Reich, who have brought a bit of moral philosophy back into the economist's brave new world.
At every step, Warsh maps the field with the journalist's eye for detail. Readers will see why he is considered one of the most consistently stimulating economic journalists in America today.
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David Warsh covers economics for the Boston Globe.Excerpt. © Reprinted by permission. All rights reserved.:
The Sex Lives of Great Economists
One of the cardinal rules of science is, "Thou shalt not get personal," and scientific etiquette is designed to remove controversy from the sphere of the individual. Hence the impersonal tone and passive voice of technical papers, the complete absence of resort to anecdote and personal experience. Even first names are omitted; initials are enough. "Ad hominem" arguments-those that respond not to the merits of a claim, but rather to the fact that it comes from such-and-such a person -- are strictly out of bounds. This principle is especially important in economics, where arguments can get personal all too easily.
So it is unusual, to say the least, that two major biographies of John Maynard Keynes have appeared recently, and both dwell at some length on his bisexuality. This is partly in reaction to Sir Roy Harrod's lengthy hagiography of his friend, published in 1951, which omitted any mention of it. Dozens of books on Keynes have rolled off the presses since then without so much as hinting at the fact.
But mostly, today's attention to Keynes' sexual makeup represents a determined attempt to come to grips with the man, to finally figure him out, to assign him to his proper place in the intellectual firmament of the century.
To be sure, Keynes is not exactly yesterday's child. He was born 101 years ago, the son of a prominent economist father and a mother who would eventually become mayor of Cambridge, England. It was nearly half a century ago, in 1936, that he launched -- with the publication of his General Theory of Money, Interest and Employment -- the intellectual "revolution" that bears his name. And it was just 10 years after the publication of that difficult book that he died. Yet his claim on our attention has hardly relaxed over the years; if anything, it has grown. All the talk about "needing a new Keynes" notwithstanding, the old one is all we've got.
Charles H. Hession's book -- John Maynard Keynes: A Personal Biography of the Man Who Revolutionized Capitalism and the Way We Live, -- is "addressed to the very question" of his bisexuality, the author says. It is a workmanlike job in which Hession occasionally lays aside the biographer's mantle to speculate on the relationship among homosexuality, androgyny and creativity.
The first volume of Robert Skidelsky's biography, John Maynard Keynes: Hopes Betrayed 1883-1920, is by far the more painstaking effort, though. It was published last year in England, and when the second volume (The Economist as Prince) is completed next year, the two will be published as one in the United States by The Viking Press. The picture it paints of the young Keynes is of a fairly promiscuous, always intense denizen of a hothouse society in which homosexuality was far from shocking or even uncommon.
According to Skidelsky, Keynes loved boys at first from highest principles, then turned during World War I to dating girls (all the young men were away at the front), and eventually married the ballerina Lydia Lopokova -- which led John Vincent to crack in the Sunday London Times that "the Higher Sodomy turned out not to be the ultimate truth but a matter of supply and demand."
Meanwhile, the disagreement over what Keynes really meant continues in full flower. For 15 years, economists have argued about whether his message was fundamentally mistaken by those neoclassical economists who were eager to bend Keynes' insights about government to their more conventional analytic purposes.
Recently, Meier Kohn, a Dartmouth theorist, has made a strong argument that the portion of the General Theory that was quickly assimilated was mostly methodological -- and that a lengthy attempt must be made now to restore his analytic approach to the financial system. Economists are in no danger of agreeing on the real Keynes, at least any time soon.
When making ad hominem judgments about Keynes, the broader context of Cambridge university life may have been far more to the point than his bisexuality, according an essay by the late Harry Johnson, a scholar who went back and forth between England and Chicago with ease. Johnson maintained that it was crucial to understand the influence that English college life had as an economic institution on Keynes' worldview.
For one thing, the sense that the world was somehow like a college colored Keynes' attitude toward the working class, whom he thought of in terms of jolly servants deserving of plenty of fringe benefits, according to Johnson. For another, it meant he viewed entrepreneurs and businessmen as failed undergraduates. "These were people for whom some reputable non-academic, non-governmental employment should be found, but who should not be rewarded on an inordinate scale for success in their second-rate activities," he wrote.
"It would also be natural for such academics [as Keynes] to believe that the messes that the practical world of business and politics got itself into resulted from the defect of inferior intelligence or, alternatively, the lack of a system of corporate decision-taking comparable to that of a college fellowship body and its council."
Is the sex life of great economists ever relevant? Well, yes and no. Certainly not in any everyday sense, but overall, there may be an element of sexual style involved in theory choice. At least Joseph Schumpeter thought so. He never remarked on Keynes' habits, at least not publicly, but in his great history of economic analysis, published posthumously, he observed of Adam Smith, "a fact I cannot help considering relevant, not for his pure economics, of course, but more for his understanding of human nature that no woman, excepting his mother, ever played a role in his existence. In this, as in other respects, the glamors and passions of life were just literature to him." And indeed, there is something about general equilibrium analysis, which Smith can be said to have founded, that is, well, ultimately unconsummated.
And can it be entirely beside the point that Schumpeter admired the theorizing of the highly transitive Karl Marx, a fine husband and loving father who at a certain point in his trials impregnated the family maid -- and then permitted Friedrich Engels (the "Lieber Fred" of later days) to take the blame?
After all, Schumpeter himself liked to brag enigmatically that he had entertained three great ambitions in his youth -- to be a great horseman, a great lover and a great economist -- and that he had achieved two of them.
Keynes, too, scored on two of the three counts, then -- and since he had no interest in horses, perhaps he can be judged the greater man. The fundamental point about Keynes remains undoubted. It is that he changed, probably forever, the way we think about the government's responsibility for the behavior of the economy.
As Robert Skidelsky has written, he was at first "the only professional economist in Britain and the United States who grasped the point that unemployment could be seen as a technical problem in economic analysis to be solved by economic means." Or as Michael Stewart has put it, he showed that the Great Depression was the result of ignorance too deep to be borne.
May 6, 1984
Adam Smith: The Canniest Scot
When the 250th anniversary of his birth was celebrated quietly in 1973, Adam Smith was, by and large, an afterthought, at least in the public realm of newspapers and magazines. OPEC was in the saddle and rode mankind. Twenty years of extraordinary worldwide growth were abruptly ending, for reasons that are still not well understood today. Economics, at least as Smith had framed it, was widely said to have somehow lost its explanatory snap.
This month the 200th anniversary of Smith's death is being celebrated in Scotland with a good deal more ballyho
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