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Roger Backhouse discusses a history of economic thought through the ages.

In some countries, including Europe, the book is titled: The Penguin History of Economics (New and Revised Edition), published by Penguin Books, https://www.penguin.co.uk/books/23148/the-penguin-history-of-economics-by-roger-e-backhouse/9781802063011.

Image courtesy of interviewee. February 15, 2024

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This video video is a transcription of an interview discussing the evolution of economic thought and the author's motivations for writing a comprehensive history of economics. The author reveals that he was invited by a publisher to undertake a project that integrates modern economics into a broader historical context. He emphasizes the originality of his work lies in how he presents and organizes existing ideas rather than in the ideas themselves.

The author describes his rigorous research process, highlighting the importance of both primary sources (like works by Adam Smith and Keynes) and secondary literature from specialists to gain a deeper understanding of economic history. He notes the complexity and gradual emergence of economics as a discipline, arguing that it is influenced by earlier ideas that can be traced back to ancient civilizations and not solely by figures like Adam Smith.

As the conversation progresses, the author addresses the transition of economics into a more formal academic discipline, particularly in the late 19th century, when technical and mathematical approaches became prevalent. He discusses significant historical events, such as the Great Depression and the Second World War, which prompted shifts in economic thought and methodology.

Moreover, the interview highlights how modern economics has become heterogeneous, incorporating a variety of techniques from experiments to big data analysis, contrasting with the primarily textual and theoretical basis of earlier economic thought. The author concludes by stressing the interconnectedness of economics with other disciplines and the impact of political and social events on economic theories. Throughout, he emphasizes that economic ideas have deep historical roots and that their evolution is complex and multifaceted.

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The simple answer is that I was invited to do it

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by a pub, by a publisher.

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And when I thought about that invitation,

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it appealed to me

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because I'd recently been working on the history

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of economics since the Second World War, trying

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to bring the history of economics more up

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to date than was conventional at the time.

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And the idea of writing a general history

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in which I placed very modern economics in the context

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of a much longer timeframe, was exciting.

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And so I decided I wanted to have a go at it.

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The originality of the book, if any, lies in the packaging

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and presentation of the material.

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It draws on work by other other people.

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And so there is a sense in which nothing is original in the

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book, apart from the way it is organized,

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the way I've selected things and the way I've packaged it.

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So what did I do?

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I obviously read the originals

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or many of the original sources, the texts

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by people like Adam Smith, Alfred Marshall,

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John Maynard Keynes, and so on.

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But most of the time I was guided by secondary literature,

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which was written by specialists, specialists on Adam Smith,

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specialists on Marshall, specialists on Keynes,

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because there's no way in which one person

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can be an expert on everything from,

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the ancient world to the present day.

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That's just, it's just impossible.

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So I had to do, I had to re read a lot

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of the secondary literature as well as original sources,

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especially the main, the main ones.

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I also spent quite a lot of time reading about the economic

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and political history

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because I wanted to construct the background

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to the Economist about which I was talking.

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And there were several areas where when I started,

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my knowledge was rather limited.

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For example, I had to rely on advice from

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historian friends of mine on what I should read

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to understand enough of

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what was going on in the medieval period,

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because that's not a period I've, I've specialized in.

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So that was the first edition for the second edition.

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The reason I did this revised edition,

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which has prompted this interview, is that I,

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when I thought about it, there were,

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there was an enormous amount of fascinating work

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that had been published in the last 20 years

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since the first edition.

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So it was a matter of thinking back over

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what had been published during that last 20 years,

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working out how the,

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this new material changed the story I told and

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Weaving that into the story, into the story.

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The problem is that wherever we decide economics begins,

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we can almost always find earlier ideas.

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For example, it has been traditional in a lot of writing

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to regard Adam Smith as the beginning of economics.

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And yet it's also been claimed

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that nothing in Adam Smith was original.

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For example, he talks about the division of labor.

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The division of labor is central to a Smith's argument.

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This can be found in ancient Greek writing.

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What he says about the division

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of labor would not have been novel to his contemporaries.

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So how can we say economics began

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completely new with Adam Smith?

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We can't, there were things before Adam Smith.

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So economics, I would suggest, emerged,

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emerges very gradually.

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Where do I start? In the book, I start with the Greek poet.

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He, and the reason for that is this is where

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the wr in a sense, I'm going back

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to the beginning of the written record.

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We don't have any information on Hess's predecessors simply

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because we don't have any recorded sources.

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We could go back to other ancient civilizations, to Babylon.

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And a lot of stuff has been written in, interestingly,

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on Babylonian ideas recently.

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Um, I've just been reading about Babylonian ideas about the

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theory of interest or in Persia, India,

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China, Egypt, Japan.

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But aside from my ignorance of

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these other parts of the world, I don't see the evidence

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that they, these cultures fed

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directly into modern economics in the way

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that ancient Greek ideas fed into modern economics.

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Now with pe, people studying global history, maybe

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in due course we will discover links

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to some other ancient civilizations,

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and I should take the story back further

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or in different directions.

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But at the moment, the scholarship just isn't there,

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I don't think to write such an account.

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So when, if we look at Hesed,

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he was unquestionably not an economist.

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So what we can do though is pull out

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rudimentary economic ideas.

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He didn't think of them as economic ideas.

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It's, and it would be ridiculous to suggest that.

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But nonetheless, we can see certain ideas there.

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When we go further forward towards the present, we turn to

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Aristotle, other Greek writers,

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and also the early church fathers, the theologians

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of the early Christian Church.

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And there we find more sophisticated

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chains of reasoning.

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They draw on the whole culture, which goes back

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to Hesed, but they're taking things forward.

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So if we look at Plato

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or Aristotle, we can find

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not econo, not modern economics,

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but we can find it's, sorry.

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It's easier to find

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economic reasoning in the Aristotle than it is in hes in

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Heid throughout the Middle Ages.

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The writing we have is mostly done by theologians,

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and this means they're concerned with morality.

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However, economics comes in, even though they,

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you can't call them economists.

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So what we are getting is more

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and more thinking that looks like economics.

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Economics is evolving gradually.

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For example, there was a date,

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and I'm afraid, I've forgotten the precise date,

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when the church required people to go

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to confession regularly to confess their sins.

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So if a priest was confronted with a merchant coming to him

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for confession, confessing

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that he had engaged in certain business practices,

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the priest had to be able to

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pronounce on whether is this sinful or is it not sinful?

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And so for example, you do have manuals published for,

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for priests to look at in order to understand.

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And in order to understand whether these practices were

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sinful, in order to form a judgment on that, you have

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to understand something about those practices.

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So people writing about those practices,

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business practices were inevitably writing a

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bit about economics.

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They weren't economists,

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but they had to confront economic issues.

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For example, what is the just price for a commodity?

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If someone charges, puts up the price of wheat,

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which they happen to have a stock of in a time

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of famine, is that just, or is it ripping people off?

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So you are getting gradually towards writing where

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economic ideas are easier

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and easier to pull out of the, the text.

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Over the centuries, commerce becomes more important

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and other economic issues arise.

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For example, in the 16th century, in the time of

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Elizabeth first inflation, as we would now call it,

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became a big problem.

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People were concerned that prices were rising not very fast

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by modern standards.

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I think it was sort of two, 3% a year,

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but over a whole century in a way

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that hadn't happened before.

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And people were concerned about this.

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Why had it happened in Elizabeth in England,

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people were also concerned about vagrancy and poverty.

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Poverty, I suppose vagrancy, you could think of it as

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what we would now call unemployment.

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Um, these were things people wanted to explain

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and to understand.

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Also, you had debates over the enclosure of common land so

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that people could no longer graze their animals on it

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because it had been enclosed and was used to grow crops,

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or common land was taken over by large landowners,

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to grow sheep on it, to, to graze sheep on it.

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So these were issues which raised,

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which raised economic questions.

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If we turn to the 17th century,

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we get even more like economic arguments

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because we have a lot of merchants who are

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debating economic questions.

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They're trying to get policy changed in their own interest.

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For example, there was someone called Josiah Child

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who argued vehemently

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for a reduction in the rate of interest.

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So the question arose, and this this is in the, 1660s.

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The question arose, is this a good thing?

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Child's argument was by modern standards, somewhat naive.

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It was if the Netherlands has a very low rate of interest,

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so if we can have a low rate of interest,

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we can be prosperous.

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Like the Dutch other people said, well, you've got cause

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and effect muddled up.

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There were also debates over protection of tr of industry

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debates over whether you should allow the export of bullion.

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So what you get is a vigorous pamphlet literature

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in which merchants are trying to influence the authorities

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to get policies changed, usually to their own advantage.

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Some people stand back

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and reflect in ways that we now think of as

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interesting economic argument.

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Other people were putting arguments

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that they thought were good,

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and which no doubt some

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of their contemporaries thought were good,

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but we don't see them very much, so much

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as decent economic arguments now.

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So you get these debates and in England,

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because censorship was much less significant than in France.

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You get, you get, you get, you get a lot

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of this literature in France.

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On the other hand, censorship is much stronger.

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The monarchy is much, more powerful.

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But there was still economic issues arising.

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Colbert under Louis Catto in the 17th century,

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towards the end of the 17th century promoted industries,

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he imported, industries from abroad

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and he imposed many regulations in order to

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achieve the goals that he wanted

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with regard to the French economy.

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So this led to debates.

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It also led to the debate that I've referred

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to earlier on about luxury spending.

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Because if you think of the Louis of the, of Louis,

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the 14th, you probably think of Versailles

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and you think of what luxury spending

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was, what was that?

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And you compare that with the burgers of the Dutch Republic

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who were, it's, I'm not saying they didn't have luxuries,

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but compared with Louis the 14th court,

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they lived much more, shall we say simpler

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or more, not aus, more austere lives.

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So you get these debates on luxury spending

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and when you discuss luxury spending,

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you are discussing an economic problem.

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Is this luxury spending?

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What keeps the wheels of commerce running

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or is luxury spending, something

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that we are so that should be associated with absolutism

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and is to be viewed rather than badly?

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Well, I'll start a little bit before Adam Smith

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because what you find in the 18th

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century is a change.

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Up to now I've been talking about people who

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we prob we might not regard as economists.

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The nearest to being an economist is merchants who are

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advocating policies that they want, who inevitably have

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to use economic arguments.

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But in the 18, in the 18th century, we find people trying

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to construct more gen talk more generally

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about what's going on.

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In the eight, in the 1730s,

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we have the writing of someone called Richard, I dunno how

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to pronounce him, Canon, an Irish banker

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who worked in France,

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hence my uncertainty about the pronunciation of his name,

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whether I should pretend to be Irish or French.

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And he published,

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or he, he wrote a pamphlet called an Essay on the nature

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of Commerce in general.

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And those words in general, I think Mark a change with

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or if not a break, with what has gone before.

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He is trying to abstract

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and think in general terms about commerce.

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We find French economists

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as censorship was gradually relaxed, writing more

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and more sort of general theories.

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They were still concerned with policy problems in France,

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but they are writing more general theories.

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And you have the people who were known as the economists,

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in mid 18th century France.

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And their work forms the background to the person most

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of us think of as associated with early economics,

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namely Adam Smith.

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Smith was familiar with everything that I've mentioned up

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to now and a and a lot more.

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And he was drawing on these to provide a general theory.

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His concern was not to writers or principles of economics.

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And here I come back to your early question about

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why context matters,

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but his concern was to talk about the nature

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and causes of the wealth of nations.

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Why are some nations wealthy and other nations not wealthy?

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And he drew on the French economists on Cantillon,

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and he was responding to some of these debates on luxury,

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but he was still a moral philosopher.

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Um, he was still a moral philosopher.

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He was at one time a professor of moral philosophy.

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And his wealth of nations was part

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of a much more general study of

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what we might now call a system of social science.

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Had he lived long enough,

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he might also have given us a volume on politics

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or on jurisprudence.

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He also, he did also in his day, he was known for his theory

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of moral sentiments, which

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as you would assume from the realize from the

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title is about morality.

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So Smith is writing more generally about economic questions,

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but it's still in the context of moral philosophy.

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Economics becomes rather more separate

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from these other things around the time

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of the Napoleonic Wars, when you find

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people engaging in chains

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of purely economic reasoning.

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So here we have people like, Robert Malus,

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David Ricardo, Jean Baptiste, the French writer.

18:07.875 --> 18:12.225
And so economics becomes

18:13.215 --> 18:14.905
more like the economics.

18:14.925 --> 18:17.625
We know, we know today in Britain,

18:18.965 --> 18:22.345
the Political economy club provides a, a focus

18:22.805 --> 18:24.945
for discussions of economics.

18:26.755 --> 18:31.685
However, economics is still something that's done by members

18:31.705 --> 18:33.045
of the educated public.

18:34.065 --> 18:37.445
You become an economist at this time by reading

18:37.545 --> 18:41.905
and discussing economics with other members of that

18:42.665 --> 18:45.745
educated middle class or upper class public.

18:48.585 --> 18:50.235
It's in the late 19th century.

18:50.375 --> 18:53.075
On the other hand that an academic discipline emerges,

18:53.705 --> 18:56.635
this is when academic disciplines were generally

18:57.515 --> 18:58.795
becoming more established,

18:58.795 --> 19:00.555
especially in the social sciences.

19:01.255 --> 19:04.995
So from the late 19th century, you begin

19:05.135 --> 19:06.755
to get an economics

19:06.755 --> 19:10.915
that is more like the economics we know today in that

19:11.455 --> 19:14.755
an economist becomes someone who is trained in the subject

19:14.855 --> 19:17.035
and has a qualification in the subject.

19:18.465 --> 19:21.115
That was not the case in the time of Malus.

19:21.115 --> 19:25.635
And Ricardo Maltus, for example, was a professor at the,

19:26.225 --> 19:27.395
east India College,

19:28.265 --> 19:31.285
but he was training people to run the Indian Empire.

19:31.625 --> 19:34.325
He wasn't training people to be economists.

19:36.685 --> 19:39.575
So you have find another big change,

19:40.275 --> 19:43.735
and this is when you have the work of people like Jevons

19:43.735 --> 19:48.255
and RAs and who are writing economics much more formally,

19:49.035 --> 19:51.415
and they're writing in a way that members

19:51.435 --> 19:55.415
of the general public would not want to read their books.

19:55.765 --> 19:58.335
They're, they're, they're eng they're doing

19:58.335 --> 19:59.495
things much more technically.

19:59.725 --> 20:01.375
They're using mathematics.

20:02.045 --> 20:03.975
Some of them are using mathematics, many

20:03.975 --> 20:05.575
of them are not, but some are.

20:06.165 --> 20:09.415
Whereas if you have someone who is writing in say,

20:09.495 --> 20:11.375
a journal like the Fortnightly Review,

20:11.945 --> 20:13.975
where an article on economics is going

20:13.975 --> 20:18.535
to appear alongside perhaps, a travel log about a visit

20:18.535 --> 20:22.255
to Egypt, an interpretation of Shakespeare

20:22.875 --> 20:25.375
and all sorts of other things

20:25.375 --> 20:28.455
that a generally educated person would be interested in,

20:28.875 --> 20:32.855
you can't get highly technical if you are publishing things

20:32.855 --> 20:35.335
that are going to be read by other people

20:35.475 --> 20:37.215
who have a training in economics.

20:37.355 --> 20:40.175
You can be more technical now.

20:40.255 --> 20:41.455
He mustn't exaggerate

20:41.555 --> 20:45.935
how quickly economics became technical, but there is not

20:45.935 --> 20:47.095
nonetheless a change.

20:47.825 --> 20:52.755
So becoming an academic subject, means that economics

20:53.295 --> 20:54.715
can change quite significantly.

20:55.995 --> 21:00.235
Economics became an academic subject in the late 19th

21:00.235 --> 21:04.275
century, and some people would look at some of the

21:05.165 --> 21:08.715
ideas people were putting forward then in particular, some

21:08.715 --> 21:11.275
of the mathematics and say, we still use

21:11.275 --> 21:14.955
that mathematics today we have modern economics.

21:16.015 --> 21:19.035
So you look at RA and his general equilibrium theory

21:19.415 --> 21:21.675
and you say, this is the forerunner

21:21.695 --> 21:23.755
of modern general equilibrium theory.

21:24.055 --> 21:26.595
We have basically got modern economics.

21:27.105 --> 21:30.435
However, I think there have been changes.

21:32.025 --> 21:33.605
One change is data.

21:35.185 --> 21:38.845
During the 20th century, we have had an increased

21:39.385 --> 21:43.245
in the amount of statistical, another data, other data.

21:44.065 --> 21:48.485
For example, it's hard to imagine a world without

21:49.085 --> 21:50.125
official national income.

21:50.525 --> 21:55.355
Statistics, statistics of gross domestic product

21:56.055 --> 21:59.915
or of inflation or other, other, other,

22:00.685 --> 22:03.235
other related concepts.

22:03.895 --> 22:05.955
And yet this is the world as it existed

22:06.165 --> 22:08.515
until the 1930s and 1940s.

22:09.375 --> 22:11.035
It was only in the 1930s

22:11.135 --> 22:12.155
and 1940s

22:13.185 --> 22:17.795
that governments started producing systematic data on

22:18.075 --> 22:22.035
national income without which macroeconomics, the study

22:22.035 --> 22:24.675
of the economy as a whole could not have developed.

22:26.405 --> 22:29.275
Other data was developed in the 1930s.

22:30.565 --> 22:32.495
Data on inequality, wealth

22:32.515 --> 22:34.895
and poverty is even perhaps even more recent.

22:36.395 --> 22:40.615
So one of the stories that I think makes modern

22:41.135 --> 22:43.895
economics different from economics at the beginning

22:43.955 --> 22:48.095
of the 20th century is the vast quantity

22:48.235 --> 22:50.695
of statistical data we now have.

22:53.555 --> 22:58.125
Another reason why economics has changed is world events.

22:58.545 --> 23:01.125
And here I come back to this question of context,

23:02.265 --> 23:04.525
the Great Depression of the 1930s.

23:06.225 --> 23:10.285
In a sense, it's obvious why this prompted

23:10.995 --> 23:12.445
changes in economics

23:12.635 --> 23:15.525
because you have this massive economic event.

23:16.225 --> 23:19.845
And well, it's an exaggeration to say everyone,

23:19.945 --> 23:23.275
but I'll say everyone wanted

23:23.335 --> 23:25.355
to understand the Great Depression.

23:25.945 --> 23:28.475
Some people of course thought they already understood it.

23:30.565 --> 23:33.665
So the Great Depression stimulated a lot of thinking.

23:33.695 --> 23:38.025
This is the, this is what Keynesian economics, which is

23:38.665 --> 23:43.025
a ma major part of post-war Post-Second World War economics

23:43.715 --> 23:46.845
comes from Keynes in economics, is a response

23:46.845 --> 23:47.925
to the Great Depression.

23:49.275 --> 23:53.515
However, perhaps it would illustrate my point about context.

23:53.975 --> 23:56.635
If I give another example, which is the Second World War.

23:56.695 --> 23:58.595
My book has a chapter which is focused

23:58.615 --> 23:59.755
on the Second World War.

24:01.635 --> 24:03.535
Why is the second World war important?

24:04.685 --> 24:06.695
Well, at the end of the Second World War,

24:08.025 --> 24:10.045
if you look at the non-communist world,

24:10.185 --> 24:14.885
the United States was dominant to an extent not true

24:15.305 --> 24:18.045
of the twenties and thirties in the twenties,

24:18.425 --> 24:20.165
and to some extent the 1930s.

24:21.395 --> 24:24.885
Germany was still very important in economics.

24:27.595 --> 24:30.855
By 1945, that situation has changed.

24:32.285 --> 24:34.655
British economics is still important,

24:35.825 --> 24:39.525
but the resources available to British economics, especially

24:39.525 --> 24:43.765
after the war in 19 four, late 1940s were very limited.

24:46.885 --> 24:49.455
Also during this time, you've had a lot of migration.

24:50.355 --> 24:53.615
The number of academics, in particular, the number

24:53.615 --> 24:58.235
of economists who migrated from eastern and Western

24:58.335 --> 25:02.515
and central and western Europe during the 1930s

25:02.655 --> 25:05.075
and 1940s was enormous.

25:06.495 --> 25:11.405
There is a, a directory of such economists

25:12.285 --> 25:14.525
emigres from German speaking countries,

25:15.585 --> 25:18.485
and it is a very thick volume.

25:19.155 --> 25:22.785
With one page per economist, an enormous number

25:22.805 --> 25:24.185
of economists migrated.

25:26.265 --> 25:30.045
So this migration was very important for the way

25:30.565 --> 25:34.325
economics developed, because economics is

25:34.655 --> 25:39.365
after 1945 undoubtedly centered on the United States,

25:41.535 --> 25:44.435
but you also have the policy demands of war,

25:45.305 --> 25:49.685
things like linear programming, the way of sort of,

25:50.385 --> 25:54.805
mathematical technique for Mac optimizing

25:55.305 --> 25:57.605
and for solving prob solving problems,

25:57.935 --> 26:01.685
which would was developed in response to sort of wartime,

26:03.035 --> 26:06.055
wartime policy problems.

26:06.715 --> 26:08.575
The national accounts that I've mentioned

26:08.575 --> 26:12.455
before were also developed extensively during wartime

26:12.455 --> 26:14.575
because there were economic problems that needed

26:14.595 --> 26:15.855
to be solved.

26:17.195 --> 26:20.095
But also quite a number of economists

26:21.115 --> 26:24.175
worked alongside engineers, physicists,

26:24.955 --> 26:27.215
mathematicians during the war.

26:27.915 --> 26:30.135
For example, Paul Samuels Nonna,

26:30.135 --> 26:33.695
whom I've written quite a lot, worked in the

26:34.325 --> 26:38.135
radiation laboratory at MIT as a mathematician,

26:38.525 --> 26:40.535
working not on economic problems,

26:40.635 --> 26:43.125
but on using radar

26:43.995 --> 26:46.295
to control naval artillery.

26:47.265 --> 26:49.245
So he is working just as a mathematician,

26:49.345 --> 26:53.285
or Milton Friedman worked as a statistician on, again,

26:53.305 --> 26:56.125
on military problems, no economics,

26:58.155 --> 27:02.935
but well, Milton Friedman in particular has testified

27:03.525 --> 27:05.895
that his experiences during

27:05.925 --> 27:09.135
that time shaped his outlook on science

27:09.275 --> 27:10.655
and how to do economics.

27:12.835 --> 27:14.855
So world events mean

27:14.855 --> 27:16.895
that economics has changed, is different.

27:19.645 --> 27:22.655
Also, economics has changed

27:23.005 --> 27:25.495
because it's become much more heterogeneous.

27:26.475 --> 27:31.175
If we look at the 1970s, the toolkit used

27:31.235 --> 27:34.615
by economists comprise mathematical theory,

27:35.685 --> 27:40.175
statistical techniques, econometrics, verbal analysis.

27:41.795 --> 27:44.165
But by the 2020s,

27:44.945 --> 27:47.405
we now have experiments.

27:47.585 --> 27:50.645
People were doing some experiments in the 1970s,

27:51.145 --> 27:52.845
but they weren't taken seriously.

27:53.465 --> 27:55.475
Now, whether you like them

27:55.475 --> 27:59.195
or not, experiments are being used very widely

28:00.485 --> 28:05.235
randomized control trials are also being used in economics.

28:05.245 --> 28:07.035
Again, you don't have to like them.

28:07.535 --> 28:08.835
I'm just saying this is a,

28:08.985 --> 28:11.595
this is a fact about modern economics

28:11.975 --> 28:13.195
or the use of big data.

28:13.375 --> 28:15.075
Now, you may say this is just statistics,

28:15.655 --> 28:18.955
but I think the type of data you can get

28:19.665 --> 28:21.835
from the internet is

28:22.895 --> 28:25.155
so different from the data which was there

28:25.745 --> 28:29.975
even in the 1970s, that it is, it amounts

28:29.975 --> 28:31.415
to a qualitative change.

28:32.635 --> 28:37.185
So economics, I would say has changed in many ways.

28:39.515 --> 28:40.685
Data is crucial.

28:41.695 --> 28:43.565
World events have caused changes

28:44.465 --> 28:49.405
and economics has become quite hetero, heterogeneous,

28:49.405 --> 28:51.725
maybe it was all, it's always been heterogeneous.

28:52.785 --> 28:55.125
Um, but you've got techniques now

28:55.125 --> 28:59.785
that you just did not have even, even

29:00.405 --> 29:01.905
30, 40 years ago.

29:02.745 --> 29:03.905
I hope they take from it.

29:04.055 --> 29:06.945
Many of the points that I have mentioned earlier on in

29:06.945 --> 29:11.105
answer to your previous question, the idea that

29:11.625 --> 29:15.745
economic ideas have very, very deep roots.

29:17.305 --> 29:19.845
And even when there were no economists

29:20.665 --> 29:24.805
and people were not thinking like economists, they,

29:24.935 --> 29:27.125
there were economic ideas present.

29:27.985 --> 29:32.005
So if I go, if we go back to let's say the 17th century

29:32.265 --> 29:33.485
or the 16th century,

29:34.745 --> 29:37.085
people were thinking about political ideas

29:37.185 --> 29:40.205
and economic ideas were tangled up with poli

29:40.205 --> 29:41.365
with political ideas.

29:42.245 --> 29:45.085
I hope that they would get the idea that the evolution

29:45.085 --> 29:47.245
of economics is a complex process.

29:48.675 --> 29:51.565
It's, it's not just a simple process where

29:52.385 --> 29:57.285
we have some vague theories and those theories are refined

29:57.385 --> 30:00.005
and they become better and better and better.

30:02.105 --> 30:04.065
Economics does respond to

30:04.815 --> 30:06.945
what you might call internal factors.

30:07.965 --> 30:09.705
The refinement of theories

30:09.705 --> 30:13.265
and methods, responding to anomalies, correcting errors,

30:13.595 --> 30:14.745
these things all happen.

30:15.645 --> 30:19.345
But also external factors have shaped the way

30:19.785 --> 30:20.905
economics has evolved.

30:21.725 --> 30:23.145
The rise of communism

30:23.205 --> 30:25.265
and national socialism in different ways

30:27.145 --> 30:29.045
was significant for economics.

30:30.115 --> 30:33.605
Wars were significant for the organization of economics.

30:33.605 --> 30:34.645
And in the,

30:34.645 --> 30:38.925
and as I explained earlier on the, in the Second World War,

30:39.375 --> 30:43.365
economists working alongside engineers must surely have

30:43.755 --> 30:47.005
changed their perspective, political changes.

30:47.945 --> 30:50.765
I'm not saying that economists

30:51.305 --> 30:55.965
follow political trends moving in one generation to the left

30:56.225 --> 30:58.045
and another to the right, but,

30:59.225 --> 31:02.845
but economists no more than anywhere else can be

31:03.445 --> 31:05.405
isolated from political developments.

31:05.825 --> 31:07.165
And what seems important

31:07.265 --> 31:08.405
and what's not important,

31:09.125 --> 31:11.365
developments in other disciplines have been,

31:11.635 --> 31:12.765
have been important.

31:13.825 --> 31:18.625
Um, economists like to think of themselves as

31:19.305 --> 31:20.785
isolated from other disciplines.

31:23.055 --> 31:24.075
That's not the case.

31:24.715 --> 31:29.505
I could think of example, many examples of people who,

31:30.445 --> 31:33.305
cha who just simply challenge disciplinary boundaries.

31:33.305 --> 31:37.745
For example, one major post-war example was Herbert Simon,

31:38.045 --> 31:39.105
was he an economist?

31:39.105 --> 31:40.905
He got the Nobel Prize in economics.

31:41.645 --> 31:43.465
He was trained in political science.

31:44.905 --> 31:48.485
Uh, he was concerned with information management. Science.

31:49.765 --> 31:51.625
He was concerned with psychology.

31:52.005 --> 31:55.065
Is he a psychologist, an economist, a sociologist,

31:55.665 --> 31:56.825
a management scientist?

31:57.255 --> 31:59.145
He's all of them. And

31:59.295 --> 32:02.665
that he is perhaps an a particularly outstanding example,

32:03.485 --> 32:04.985
but he's not the only one.

32:04.985 --> 32:08.745
There are others. So economics has never been isolated.

32:09.365 --> 32:11.025
Go back into history

32:11.085 --> 32:14.425
and you find economics was even less isolated than it is

32:14.425 --> 32:14.745
today.

Evolution of Economic Thought and Context

00:00:00 - The simple answer is that I was invited to do it by a pub, by a publisher. And when I thought about that invitation, it appealed to me because I'd recently been working on the history of economics since the Second World War, trying to bring the history of economics more up to date than was conventional at the time. And the idea of writing a general history in which I placed very modern economics in the context
00:00:38 - And so I decided I wanted to have a go at it. The originality of the book, if any, lies in the packaging and presentation of the material. It draws on work by other other people. And so there is a sense in which nothing is original in the book, apart from the way it is organized, the way I've selected things and the way I've packaged it. So what did I do?
00:01:06 - or many of the original sources, the texts by people like Adam Smith, Alfred Marshall, John Maynard Keynes, and so on. But most of the time I was guided by secondary literature, which was written by specialists, specialists on Adam Smith, specialists on Marshall, specialists on Keynes, because there's no way in which one person can be an expert on everything from,
00:01:37 - That's just, it's just impossible. So I had to do, I had to re read a lot of the secondary literature as well as original sources, especially the main, the main ones. I also spent quite a lot of time reading about the economic and political history because I wanted to construct the background to the Economist about which I was talking. And there were several areas where when I started,
00:02:08 - For example, I had to rely on advice from historian friends of mine on what I should read to understand enough of what was going on in the medieval period, because that's not a period I've, I've specialized in. So that was the first edition for the second edition. The reason I did this revised edition, which has prompted this interview, is that I, when I thought about it, there were,
00:02:42 - that had been published in the last 20 years since the first edition. So it was a matter of thinking back over what had been published during that last 20 years, working out how the, this new material changed the story I told and Weaving that into the story, into the story. The problem is that wherever we decide economics begins, we can almost always find earlier ideas.

Tracing Economics Before Adam Smith's Influence

00:03:16 - to regard Adam Smith as the beginning of economics. And yet it's also been claimed that nothing in Adam Smith was original. For example, he talks about the division of labor. The division of labor is central to a Smith's argument. This can be found in ancient Greek writing. What he says about the division
00:03:46 - So how can we say economics began completely new with Adam Smith? We can't, there were things before Adam Smith. So economics, I would suggest, emerged, emerges very gradually. Where do I start? In the book, I start with the Greek poet. He, and the reason for that is this is where
00:04:15 - to the beginning of the written record. We don't have any information on Hess's predecessors simply because we don't have any recorded sources. We could go back to other ancient civilizations, to Babylon. And a lot of stuff has been written in, interestingly, on Babylonian ideas recently. I've just been reading about Babylonian ideas about the theory of interest or in Persia, India, China, Egypt, Japan.
00:04:52 - these other parts of the world, I don't see the evidence that they, these cultures fed directly into modern economics in the way that ancient Greek ideas fed into modern economics. Now with pe, people studying global history, maybe in due course we will discover links to some other ancient civilizations,
00:05:21 - or in different directions. But at the moment, the scholarship just isn't there, I don't think to write such an account. So when, if we look at Hesed, he was unquestionably not an economist. So what we can do though is pull out rudimentary economic ideas. He didn't think of them as economic ideas. It's, and it would be ridiculous to suggest that.
00:05:53 - When we go further forward towards the present, we turn to Aristotle, other Greek writers, and also the early church fathers, the theologians of the early Christian Church. And there we find more sophisticated chains of reasoning. They draw on the whole culture, which goes back

Gradual Evolution of Economic Thought Through History

00:06:24 - So if we look at Plato or Aristotle, we can find not econo, not modern economics, but we can find it's, sorry. It's easier to find economic reasoning in the Aristotle than it is in hes in Heid throughout the Middle Ages. The writing we have is mostly done by theologians,
00:06:54 - However, economics comes in, even though they, you can't call them economists. So what we are getting is more and more thinking that looks like economics. Economics is evolving gradually. For example, there was a date, and I'm afraid, I've forgotten the precise date, when the church required people to go to confession regularly to confess their sins.
00:07:28 - for confession, confessing that he had engaged in certain business practices, the priest had to be able to pronounce on whether is this sinful or is it not sinful? And so for example, you do have manuals published for, for priests to look at in order to understand. And in order to understand whether these practices were
00:07:58 - to understand something about those practices. So people writing about those practices, business practices were inevitably writing a bit about economics. They weren't economists, but they had to confront economic issues. For example, what is the just price for a commodity? If someone charges, puts up the price of wheat,
00:08:27 - of famine, is that just, or is it ripping people off? So you are getting gradually towards writing where economic ideas are easier and easier to pull out of the, the text. Over the centuries, commerce becomes more important and other economic issues arise.
00:09:00 - Elizabeth first inflation, as we would now call it, became a big problem. People were concerned that prices were rising not very fast by modern standards. I think it was sort of two, 3% a year, but over a whole century in a way that hadn't happened before. And people were concerned about this. Why had it happened in Elizabeth in England, people were also concerned about vagrancy and poverty.

Economic Debates of the 17th Century

00:09:32 - what we would now call unemployment. these were things people wanted to explain and to understand. Also, you had debates over the enclosure of common land so that people could no longer graze their animals on it because it had been enclosed and was used to grow crops, or common land was taken over by large landowners,
00:10:05 - So these were issues which raised, which raised economic questions. If we turn to the 17th century, we get even more like economic arguments because we have a lot of merchants who are debating economic questions. They're trying to get policy changed in their own interest. For example, there was someone called Josiah Child
00:10:35 - for a reduction in the rate of interest. So the question arose, and this this is in the, 1660s. The question arose, is this a good thing? Child's argument was by modern standards, somewhat naive. It was if the Netherlands has a very low rate of interest, so if we can have a low rate of interest, we can be prosperous. Like the Dutch other people said, well, you've got cause
00:11:08 - There were also debates over protection of tr of industry debates over whether you should allow the export of bullion. So what you get is a vigorous pamphlet literature in which merchants are trying to influence the authorities to get policies changed, usually to their own advantage. Some people stand back and reflect in ways that we now think of as
00:11:39 - Other people were putting arguments that they thought were good, and which no doubt some of their contemporaries thought were good, but we don't see them very much, so much as decent economic arguments now. So you get these debates and in England, because censorship was much less significant than in France. You get, you get, you get, you get a lot of this literature in France.
00:12:13 - The monarchy is much, more powerful. But there was still economic issues arising. Colbert under Louis Catto in the 17th century, towards the end of the 17th century promoted industries, he imported, industries from abroad and he imposed many regulations in order to

Luxury Spending and Early Economic Thought

00:12:43 - with regard to the French economy. So this led to debates. It also led to the debate that I've referred to earlier on about luxury spending. Because if you think of the Louis of the, of Louis, the 14th, you probably think of Versailles and you think of what luxury spending was, what was that? And you compare that with the burgers of the Dutch Republic who were, it's, I'm not saying they didn't have luxuries,
00:13:18 - they lived much more, shall we say simpler or more, not aus, more austere lives. So you get these debates on luxury spending and when you discuss luxury spending, you are discussing an economic problem. Is this luxury spending? What keeps the wheels of commerce running or is luxury spending, something
00:13:53 - and is to be viewed rather than badly? Well, I'll start a little bit before Adam Smith because what you find in the 18th century is a change. Up to now I've been talking about people who we prob we might not regard as economists. The nearest to being an economist is merchants who are
00:14:27 - to use economic arguments. But in the 18, in the 18th century, we find people trying to construct more gen talk more generally about what's going on. In the eight, in the 1730s, we have the writing of someone called Richard, I dunno how to pronounce him, Canon, an Irish banker
00:14:56 - hence my uncertainty about the pronunciation of his name, whether I should pretend to be Irish or French. And he published, or he, he wrote a pamphlet called an Essay on the nature of Commerce in general. And those words in general, I think Mark a change with or if not a break, with what has gone before. He is trying to abstract and think in general terms about commerce.
00:15:28 - as censorship was gradually relaxed, writing more and more sort of general theories. They were still concerned with policy problems in France, but they are writing more general theories. And you have the people who were known as the economists, in mid 18th century France. And their work forms the background to the person most of us think of as associated with early economics,

Adam Smith: Economics and Moral Philosophy

00:16:01 - Smith was familiar with everything that I've mentioned up to now and a and a lot more. And he was drawing on these to provide a general theory. His concern was not to writers or principles of economics. And here I come back to your early question about why context matters, but his concern was to talk about the nature
00:16:33 - Why are some nations wealthy and other nations not wealthy? And he drew on the French economists on Cantillon, and he was responding to some of these debates on luxury, but he was still a moral philosopher. he was still a moral philosopher. He was at one time a professor of moral philosophy. And his wealth of nations was part
00:17:05 - what we might now call a system of social science. Had he lived long enough, he might also have given us a volume on politics or on jurisprudence. He also, he did also in his day, he was known for his theory of moral sentiments, which as you would assume from the realize from the title is about morality. So Smith is writing more generally about economic questions,
00:17:40 - Economics becomes rather more separate from these other things around the time of the Napoleonic Wars, when you find people engaging in chains of purely economic reasoning. So here we have people like, Robert Malus, David Ricardo, Jean Baptiste, the French writer.
00:18:13 - more like the economics. We know, we know today in Britain, the Political economy club provides a, a focus for discussions of economics. However, economics is still something that's done by members of the educated public. You become an economist at this time by reading and discussing economics with other members of that
00:18:48 - It's in the late 19th century. On the other hand that an academic discipline emerges, this is when academic disciplines were generally becoming more established, especially in the social sciences. So from the late 19th century, you begin to get an economics that is more like the economics we know today in that an economist becomes someone who is trained in the subject

Evolution of Formal Economics in Academia

00:19:18 - That was not the case in the time of Malus. And Ricardo Maltus, for example, was a professor at the, east India College, but he was training people to run the Indian Empire. He wasn't training people to be economists. So you have find another big change, and this is when you have the work of people like Jevons and RAs and who are writing economics much more formally,
00:19:51 - of the general public would not want to read their books. They're, they're, they're eng they're doing things much more technically. They're using mathematics. Some of them are using mathematics, many of them are not, but some are. Whereas if you have someone who is writing in say, a journal like the Fortnightly Review, where an article on economics is going to appear alongside perhaps, a travel log about a visit to Egypt, an interpretation of Shakespeare
00:20:25 - that a generally educated person would be interested in, you can't get highly technical if you are publishing things that are going to be read by other people who have a training in economics. You can be more technical now. He mustn't exaggerate how quickly economics became technical, but there is not nonetheless a change. So becoming an academic subject, means that economics
00:20:55 - Economics became an academic subject in the late 19th century, and some people would look at some of the ideas people were putting forward then in particular, some of the mathematics and say, we still use that mathematics today we have modern economics. So you look at RA and his general equilibrium theory and you say, this is the forerunner of modern general equilibrium theory.
00:21:27 - However, I think there have been changes. One change is data. During the 20th century, we have had an increased in the amount of statistical, another data, other data. For example, it's hard to imagine a world without official national income. Statistics, statistics of gross domestic product
00:22:00 - other related concepts. And yet this is the world as it existed until the 1930s and 1940s. It was only in the 1930s and 1940s that governments started producing systematic data on national income without which macroeconomics, the study of the economy as a whole could not have developed.

Evolution of Economics Post-Great Depression

00:22:30 - Data on inequality, wealth and poverty is even perhaps even more recent. So one of the stories that I think makes modern economics different from economics at the beginning of the 20th century is the vast quantity of statistical data we now have. Another reason why economics has changed is world events.
00:23:02 - the Great Depression of the 1930s. In a sense, it's obvious why this prompted changes in economics because you have this massive economic event. And well, it's an exaggeration to say everyone, but I'll say everyone wanted to understand the Great Depression. Some people of course thought they already understood it.
00:23:33 - This is the, this is what Keynesian economics, which is a ma major part of post-war Post-Second World War economics comes from Keynes in economics, is a response to the Great Depression. However, perhaps it would illustrate my point about context. If I give another example, which is the Second World War. My book has a chapter which is focused on the Second World War.
00:24:04 - Well, at the end of the Second World War, if you look at the non-communist world, the United States was dominant to an extent not true of the twenties and thirties in the twenties, and to some extent the 1930s. Germany was still very important in economics. By 1945, that situation has changed.
00:24:35 - but the resources available to British economics, especially after the war in 19 four, late 1940s were very limited. Also during this time, you've had a lot of migration. The number of academics, in particular, the number of economists who migrated from eastern and Western and central and western Europe during the 1930s
00:25:06 - There is a, a directory of such economists emigres from German speaking countries, and it is a very thick volume. With one page per economist, an enormous number of economists migrated. So this migration was very important for the way economics developed, because economics is

Impact of War on Economic Methodologies

00:25:41 - but you also have the policy demands of war, things like linear programming, the way of sort of, mathematical technique for Mac optimizing and for solving prob solving problems, which would was developed in response to sort of wartime, wartime policy problems.
00:26:08 - before were also developed extensively during wartime because there were economic problems that needed to be solved. But also quite a number of economists worked alongside engineers, physicists, mathematicians during the war. For example, Paul Samuels Nonna, whom I've written quite a lot, worked in the radiation laboratory at MIT as a mathematician,
00:26:40 - but on using radar to control naval artillery. So he is working just as a mathematician, or Milton Friedman worked as a statistician on, again, on military problems, no economics, but well, Milton Friedman in particular has testified that his experiences during that time shaped his outlook on science
00:27:12 - So world events mean that economics has changed, is different. Also, economics has changed because it's become much more heterogeneous. If we look at the 1970s, the toolkit used by economists comprise mathematical theory, statistical techniques, econometrics, verbal analysis.
00:27:44 - we now have experiments. People were doing some experiments in the 1970s, but they weren't taken seriously. Now, whether you like them or not, experiments are being used very widely randomized control trials are also being used in economics. Again, you don't have to like them. I'm just saying this is a, this is a fact about modern economics
00:28:13 - Now, you may say this is just statistics, but I think the type of data you can get from the internet is so different from the data which was there even in the 1970s, that it is, it amounts to a qualitative change. So economics, I would say has changed in many ways. Data is crucial. World events have caused changes

Complex Evolution of Economic Thought and Discipline

00:28:49 - maybe it was all, it's always been heterogeneous. but you've got techniques now that you just did not have even, even 30, 40 years ago. I hope they take from it. Many of the points that I have mentioned earlier on in answer to your previous question, the idea that economic ideas have very, very deep roots.
00:29:20 - and people were not thinking like economists, they, there were economic ideas present. So if I go, if we go back to let's say the 17th century or the 16th century, people were thinking about political ideas and economic ideas were tangled up with poli with political ideas. I hope that they would get the idea that the evolution of economics is a complex process.
00:29:52 - we have some vague theories and those theories are refined and they become better and better and better. Economics does respond to what you might call internal factors. The refinement of theories and methods, responding to anomalies, correcting errors, these things all happen. But also external factors have shaped the way
00:30:21 - The rise of communism and national socialism in different ways was significant for economics. Wars were significant for the organization of economics. And in the, and as I explained earlier on the, in the Second World War, economists working alongside engineers must surely have changed their perspective, political changes. I'm not saying that economists
00:30:56 - and another to the right, but, but economists no more than anywhere else can be isolated from political developments. And what seems important and what's not important, developments in other disciplines have been, have been important. economists like to think of themselves as isolated from other disciplines.
00:31:24 - I could think of example, many examples of people who, cha who just simply challenge disciplinary boundaries. For example, one major post-war example was Herbert Simon, was he an economist? He got the Nobel Prize in economics. He was trained in political science. he was concerned with information management. Science. He was concerned with psychology. Is he a psychologist, an economist, a sociologist,

Economics: A Field Interconnected with Many Disciplines

00:32:14 - He's all of them. And that he is perhaps an a particularly outstanding example, but he's not the only one. There are others. So economics has never been isolated. Go back into history and you find economics was even less isolated than it is today.

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