Tales of beautiful economic minds.
The author of A Beautiful Mind, Sylvia Nasar, has written another fascinating book Grand Pursuit: The Story of Economic Genius. This is not an Economics textbook, but it is beautiful reading for those who are interested in economics but are not necessarily experts in that field. In today's world, economics and economists have become front page materials. Most issues that impact the world and the daily lives of people are developed and debated in the field of economics - inflation, interest rates, trade wars, tax policies, currency rates and many more. While people are familiar with the names of politicians, artists, actors and even generals, there is very little public knowledge about the men and women who shaped the economic thoughts and theories that now determine the economic actions and government policies that impact our daily lives. Even ideologies like capitalism and socialism are rooted in economic theories.
Nasar's book is a sweeping narrative that takes its readers on a journey through modern history with the men and women who she says changed the lives of every single person on the planet. It is the story of the making of 'modern economics' and, she says '...how economics rescued mankind from squalor and deprivation by placing its material fate in its own hands than Fate.' This is the narrative that introduces the book to its readers:
'Nasar's account begins with Charles Dickens and Henry Mayhew observing and publishing the conditions of the poor majority in mid-19th century London, the richest and most glittering place in the world. This was a new pursuit. She describes the often heroic efforts of Marx, Engels, Alfred Marshall, Beatrice and Sydney Webb and the American Irving Fisher to put those insights into actions - with revolutionary consequences for the world.
From the great John Maynard Keynes to Schumpeter, Hayek, Keynes' disciple Joan Robinson, the influential economists Paul Samuelson and Milton Friedman and India's Nobel Prize winner Amartya Sen, she shows how the insights of those activist thinkers transformed the world - from one city London to the developed nations in Europe and America and now to the entire planet.
In Nasar's dramatic narrative of these discoverers, we witness men and women responding to personal crises, world wars, revolutions, economic upheavals and each other's ideas to turn back Malthus and transform the dismal science into a triumph over mankind's hitherto age old destiny of misery and early death. The idea unimaginable, less than 200 years ago, is a story of trial and error, but ultimately transcendent, as it is rendered here in a stunning and moving narrative.'
What is Economics?
Among the many great economists Nasar writes about, two names stand out - Alfred Marshall and John Maynard Keynes. These two individuals, in the book have defined modern economics. Nasar calls Alfred Marshall :...the father of modern economics.' He also wrote: 'The desire to put mankind into the saddle is the mainspring of most economic study.' This was written at a time when man's destiny or fate was considered fixed or predetermined. In that world, everybody knew his or her place and no one questioned it.
The notion that man was a creature of his or her circumstances and that these circumstances were not predetermined, immutable or utterly impervious to human intervention, is one of the most radical discoveries of all time. It questioned the then widely accepted belief that humanity was totally subject to the dictates of God and nature. There was this new belief that given new tools - like economics - humanity would be able to take charge of its own destiny.
The power of ideas
In the Epilogue to her book, Nasar writes: 'These economic thinkers were driven not only by intellectual curiosity and a hunger for theory but also by the desire to put mankind in the saddle. They were searching for instruments of mastery: ideas that could be used to foster societies characterized by individual freedom and abundance instead of moral and material collapse.'
Economic intelligence, they learned, was far more critical to success than territory, population, natural resources, or even technological leadership. Ideas matter. Indeed, as Keynes famously put it during the Great Depression. 'the world is ruled by little else.' Keynes was convinced that economic ideas had done more to transform the world than the steam engine.
There were several other ideas that economists have discovered that have transformed the world we live in. Economic truths might be less permanent than mathematical truths but economic theory was essential for learning what worked, what didn't, what mattered, what did not. Inflation could lift output in the short run but not in the long run. Gains in productivity are the primary drivers of wages and living standards. Education and safety net could reduce poverty without producing economic stagnation. A stable currency was necessary for economic stability, a healthy financial system is essential for innovation.
In the final analysis Nasar writes: 'Madmen in authority from Kaiser to Hitler, Stalin and Mao have repeatedly tried - still try - to ignore or even suppress economic truths. But the more nations escape poverty and make their own economic destinies, the less compelling the rationalizations of dictators become.'
The proponents of 'modern economics' have rightfully believed that economic improvement has been their major triumph. The next frontier of economics, however, has not been covered in this book. Hopefully we will see a new breed of economists who will tackle the world's greatest economic challenge today - the ever growing crisis of income inequaity.
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