The Evolution of Economic Ideas PDF
Preview The Evolution of Economic Ideas
MODERN CAMBRIDGE ECONOMICS THE EVOLUTION OF ECONOMIC IDEAS MODERN CAMBRIDGE ECONOMICS Editors Phyllis Deane Gautam Mathur Joan Robinson Also in the series Michael Ellman Socialist Planning Joan Robinson Aspects of Development and Underdevelopment Amiya Kumar Bagchi The Political Economy of Underdevelopment THE EVOLUTION OF ECONOMIC IDEAS Phyllis Deane Professor of Economic History in the University of Cambridge and Fellow of Newnham College CAMBRIDGE UNIVERSITY PRESS CAMBRIDGE university press Cambridge, New York, Melbourne, Madrid, Cape Town, Singapore, São Paulo, Delhi, Dubai, Tokyo, Mexico City Cambridge University Press The Edinburgh Building, Cambridge CB2 8RU, UK Published in the United States of America by Cambridge University Press, New York www.cambridge.org Information on this title: www.cambridge.org/9780521293150 © Cambridge University Press 1978 This publication is in copyright. Subject to statutory exception and to the provisions of relevant collective licensing agreements, no reproduction of any part may take place without the written permission of Cambridge University Press. First published 1978 Reprinted 1979,1980,1982,1984,1988,1993 A catalogue record for this publication is available from the British Library Library of Congress Cataloguing in Publication Data Deane, Phyllis. The evolution of economic ideas. (Modern Cambridge economic series) Includes index. 1. Economics — History. I. Title. HB75.D29 33o'.o9 77-88674 ISBN 978-0-521-21928-0 Hardback ISBN 978-0-521-29315-0 Paperback Cambridge University Press has no responsibility for the persistence or accuracy of URLs for external or third-party internet websites referred to in this publication, and does not guarantee that any content on such websites is, or will remain, accurate or appropriate. Information regarding prices, travel timetables, and other factual information given in this work is correct at the time of first printing but Cambridge University Press does not guarantee the accuracy of such information thereafter. SERIES PREFACE The modern Cambridge Economics series, of which this book is one, is designed in the same spirit as and with similar objectives to the series of Cambridge Economic Handbooks launched by Maynard Keynes soon after the First World War. Keynes' series, as he explained in his introduction, was intended 'to convey to the ordinary reader and to the uninitiated student some con- ception of the general principles of thought which economists now apply to economic problems'. He went on to describe its authors as, generally speaking, 'orthodox members of the Cam- bridge School of Economies' drawing most of their ideas and prejudices from 'the two economists who have chiefly influenced Cambridge thought for the past fifty years, Dr Marshall and Professor Pigou' and as being 'more anxious to avoid obscure forms of expression than difficult ideas'. This series of short monographs is also aimed at the intelligent undergraduate and interested general reader, but it differs from Keynes' series in three main ways: first in that it focuses on aspects of economics which have attracted the particular interest of economists in the post Second World War era; second in that its authors, though still sharing a Cambridge tradition of ideas, would regard themselves as deriving their main inspiration from Keynes himself and his immediate successors, rather than from the neoclassical generation of the Cambridge school; and third in that it envisages a wider audience than readers in mature capitalist economies, for it is equally aimed at students in deve- loping countries whose problems and whose interactions with the rest of the world have helped to shape the economic issues which have dominated economic thinking in recent decades. Finally, it should be said that the editors and authors of this Modern Cambridge Economics series represent a wider spec- trum of economic doctrine than the Cambridge School of Economics to which Keynes referred in the 1920s. However, the object of the series is not to propagate particular doctrines. It is to stimulate students to escape from conventional theoretical ruts and to think for themselves on live and controversial issues. PHYLLIS DEANE GAUTAM MATHUR JOAN ROBINSON CONTENTS Series preface page v Introduction ix 1 Origins of modern economics i 2 Adam Smith's theory of value 19 3 Origins of modern growth theory 29 4 Classical monetary theory 44 5 Ricardo on value, distribution and growth 60 6 Scope and methodology of classical political economy 71 7 The marginal revolution and the neo-classical triumph 93 8 The neo-classical theory of value 115 9 The Marxian alternative 125 10 Neo-classical orthodoxy in the inter-war period 143 11 Monetary theory in the neo-classical era 163 12 The Keynesian revolution 175 13 Twentieth-century growth theory 190 14 Methodological divisions in economics since Keynes 205 Index of names 227 Subject index 230 INTRODUCTION There are basically two approaches to a study of the development of ideas in a discipline. The first concentrates on the dialectical sequence of change in the theories, concepts and analytical techniques which constitute the substance of the discipline; the second traces the historical process of change in the way suc- cessive generations of scientists have adapted their explanatory techniques to a solution of the problems they regarded as impor- tant and soluble. The two approaches are not mutually exclu- sive, they overlap, and most historians of economic thought have taken both into account. But they raise different sets of questions. The approach from the first aspect is primarily concerned with a rational justification and critique of the theoretical basis of economic analysis in successive epochs; the second with explain- ing the historical process of innovation and adaptation in the analytical framework which economists have typically accepted as appropriate to the pursuit of their enquiries. The predominant trend in recent histories of economic thought has been towards increasing the emphasis on the first approach. Schumpeter's History of Economic Analysis and Blaug's Economic Theory in Retrospect are among the more widely known examples of the genre. This book, mainly intended for students committed to a systematic study of economic theory, shifts the weight of its emphasis in the direction of the second approach and seeks to interpret the history of economic thought as a process of change in the ideas of successive generations of economists. A prime difficulty in pursuing this kind of socio-historical approach in a study of the evolution of economic ideas lies in specifying the relevant economic consensus, the analytical frame- work which a given generation of economists accepts as auth- oritative. It would appear that it is easier to do this for one of the natural sciences. According to Sir Karl Popper, for example, 'A scientist engaged on a piece of research in, say, physics, can
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