I recall my economic history professor, David S. Landes, frequently mentioning Joel Mokyr, who recently received the Nobel Prize in economics. They seemed to share a close bond. Professor Landes had a sharp wit and often recounted amusing anecdotes about his experiences with fellow economists. One story involved a trip to Germany, where he playfully convinced his delighted daughter that their family was as wealthy as the Rothschilds—joking about how many institutions bore the family name in ornate Gothic script, a nod to their historical philanthropy, such as the Landesmuseum. n nOver the years, I’ve used Mokyr’s insightful writings in my teaching, just as I’ve assigned Landes’s seminal work on the industrial revolution, The Unbound Prometheus (which I honored in a 2013 obituary for Professor Landes). A striking observation from studying that era is how little formal economics contributed to one of history’s most transformative economic periods—the industrial revolution between 1750 and 1910, particularly in its epicenter, Great Britain. Thinkers like Smith, Ricardo, Mill, and Marshall were active, yet their influence appears marginal compared to the powerful, self-driven momentum of industrialization. n nAt best, the study of economics during that time offered a framework for a small group of intellectually curious individuals to discuss abstract concepts like “supply and demand” or “marginal cost.” This may represent the discipline’s most practical contribution: helping students and professionals engage thoughtfully with the principles behind commerce and resource allocation. In academic settings, economics can cultivate a deeper understanding of how societies generate and distribute wealth. n nIn 19th-century British Parliament, only about two percent of members identified as economists—a label then less formal than in later decades. Modern American economics largely emerged from 19th-century anti-tariff intellectual circles, which had little real-world impact. Yet, the U.S. experienced extraordinary economic expansion during that century without relying on academic economic theory. n nThe 20th century saw economics rise as a dominant social science, central to expanding research universities. However, economic performance lagged behind the previous century’s pace. In the U.S., 1913 marked a turning point: growth averaged four percent before, dropping to three percent afterward, with recent decades seeing even lower rates. Over time, this one-percentage-point decline has had profound consequences. n nGeneral equilibrium theory does not deceive: prior to the institutionalization of economics, economies thrived. As the field gained prominence, growth slowed. Either economics was irrelevant—or its influence was detrimental. Where it did exert power, the outcomes were often negative. The idea that conditions would have been worse without economics lacks credibility. The discipline offered no resistance to the introduction of progressive income taxation after 1913. During the Great Depression, it criticized the Smoot-Hawley tariff but remained silent on steep income tax hikes. Claudia Goldin, the 2023 Nobel laureate, overlooked the role of property taxes in the economic collapse. At times, economics has proven not just ineffective, but actively harmful. n nIn the 1960s, academic economists championed the end of the gold standard—and achieved it. When stagflation followed, they shifted focus, blaming the Federal Reserve and external factors. Some claimed monetary theory guided Paul Volcker’s policies and ended inflation. In reality, much of the credit belongs to supply-side economists operating outside mainstream academia, whose ideas fueled the Reagan-era reforms. n nTheoretically, it makes sense why economics must remain peripheral for robust economic performance. In the 1800s, basic economic truths were part of common knowledge. When a society requires an entire profession to explain fundamental principles, those insights are no longer embedded in the public consciousness—diminishing the conditions for widespread prosperity. n nMid-20th-century economics paralleled Freudian psychology in its assumption that economies needed expert intervention. Keynesians, monetarists, and behavioral economists all argued that economic therapy was essential. Yet, as their influence grew, economic vitality declined. The profession’s failure to acknowledge its role in dismantling the gold standard—a cornerstone of global finance for centuries—remains baffling. This is a significant oversight, and the economics establishment remains indifferent. I once wrote a book on the subject. n nJoel Mokyr’s Nobel recognition is fitting. As a historian at Northwestern University, he authored accessible, engaging works on historical innovation and progress—works suited for leisurely reading. There’s something classical, even Homeric, about recounting great achievements of the past. Such storytelling is foundational to civilization. This, perhaps, is economics at its most valuable: not as a predictive science, but as a narrative art that inspires future generations. Did we experience a monumental industrial transformation? Then tell the story by the fire, in the cave. Those who hear it may go forth, strengthened and motivated. n
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Economics Is At Its Best A Leisure Activity
I remember my professor of economic history 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 he was always making wry remarks about weird experiences he and his buddies in the profession were having. One remark had something to do with how, during a trip to Germany, he had conned his consequently beaming young daughter into thinking their family was rich as the Rothschilds. Everything in the country, and in Switzerland too, bore their name set in stone in fancy gothic lettering, thanks obviously to generous bequests from the family over the ages. Places like the Landesmuseum. n nI have assigned Mokyr’s neat work over the years in class, and I certainly have assigned Landes’s unparalleled history of the industrial revolution, The Unbound Prometheus (which I wrote about in an obituary for Professor Landes in 2013 here). One of the themes of the industrial revolution, if you really study it, is that economics had next to nothing to do with it. n nYes, there is a baffling irrelevance of economics in the greatest episode of economic history, the industrial revolution of 1750-1910, including in the locus classicus of the event, Great Britain. You can point to Smith, Ricardo, Mill, Marshall, et al., but what a sideshow all of these collectively were. The industrial revolution had an unbelievably powerful dynamic that had approximately nothing to do with the study of economics. It developed and developed while, quite strictly on the side, people like Smith wrote stuff up, as in The Wealth of Nations (1776). n nAbout the most you can say for economics propelling the industrial revolution is that its study provided, to a rather small corner of interested parties, an opportunity to practice talking about abstractions of the world of affairs—“supply and demand,” “marginal cost,” and so forth. This is probably the most useful economics has ever been. In places like colleges, economics can help youngsters, and visitors from the world of business, with the assistance of professors, develop a capacity to discuss principles of the efforts of getting and spending, indeed to become sophisticated about such natural and necessary activity. n nIn the British parliament in the nineteenth century, the heyday of the industrial revolution, upwards of two percent of members described themselves as economists, a term of less academic meaning than it came to acquire in the twentieth century. Modern American economics owes its existence almost wholly to the anti-tariff intellectual faction of the nineteenth century, a faction manifestly without influence in the practical world. American economic growth in the nineteenth century, achieved without the services of academic economics, was spectacular. n nMORE FOR YOU n nIn the twentieth century, economics became the dominant social science and a queen of a waxing establishment of research universities. Economic performance in the twentieth century was nowhere near as good as in the nineteenth. In the United States, 1913 was the inflection point. Four percent growth (in GDP, an economics concept) before, three after (less than two has been the norm lately). The difference of a percentage point per year over the long haul is massive. n nGeneral equilibrium does not lie. Before economics, the economy was the best ever. When economics came on in glory, the economy got worse. Either economics was irrelevant or material to this transition. To the extent that economics has had any influence at all on the economy, it has been negative, in total. n nThe argument that things would have been worse without economics strains credulity. Economics utterly rolled over 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 tariff but was silent on the matter of massive income tax increases. Claudia Goldin, the 2023 Nobel laureate, and now newly a top-ranked professor, whiffed on contemplating the property tax connection to the Great Depression. Often, economics has proven worse than useless. n nIn the 1960s, academic economics cheer-led for ending the gold standard. It got its wish. When stagflation came, it changed the subject. It blamed the Federal Reserve and external shocks. Academic economics even said that it engineered the demise of stagflation, or at least the inflation part, via monetary economics in the journals that influenced Paul Volcker. In fact it was renegades from outside the profession—the supply-siders—who engineered the lion’s share of reform that came with the Reagan revolution. n nAs an abstract mater, it is clear why economics has to 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 vast profession of professionals telling you how things are, you do not have what you need at the ready, in sensoria of the masses of personae in the economy, for there to be mass prosperity. n nEconomics 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 the novel ones in the twenty-first century). To the extent economists had influence, the economy waned. How economics has never come to grips with its rank culpability in ending the monetary system of the ages, the gold standard, is beyond me. That is a very big miss, and professional top-level economics remains completely complacent about it. I wrote a book about it once. n nWhich brings us to Mokyr’s Nobel. This Northwestern University historian wrote pleasant books that you could read at leisure about great deeds of the past. Sounds kind of classical, kind of Homeric, does it not? Reading or hearing about great deeds of the past is a base element of real civilization. This is economics at its best. Did we have an epic industrial revolution that brought greatness writ large? Tell the tale by the campfire, in the cave! The youngsters who hear about it will go out into the world, fortified.