Knowledge, Social Institutions, and the Division of Labour (review)

This is a collection of papers originally presented at an ESHET conference on institutions, markets, and the division of labor, held at the University of Bologna in 1998. All but two of the twenty contributors are Europeans (if the Britons among them are prepared to accept that designation). The book is more coherent than the usual conference volume; better than half of the papers concern Scottish Enlightenment thinkers, and there is a common thread of dissatisfaction with the current state of mainstream economic theory.

Three essays stand out from the usual fare on offer at HET conferences. Carlo Poni compares the long-term economic fortunes of the silk industries in Bologna and Lyons. The moral (that competition is superior to monopoly) is less interesting than the detailed account of the institutions by which the two silk centers were organized. Gloria Vivenza examines Adam Smith's attitudes toward several key Roman institutions: the principle of equal land allocations; slavery; and suffrage for all citizens. She finds that Smith and his contemporaries did not understand these institutions thoroughly. She also shows us a side of Smith that is uncomfortably unmodern; from Rome's example he concluded that Britain's poor ought to be provided with jobs—not land and certainly not political equality. Jean Cartelier explores two contending conceptions of money. In the mainstream tradition, descended from Smith, all trade is ultimately barter and money serves as nothing more than a numéraire. In Cartelier's own heterodox account, purportedly of James Steuart's lineage, money is a very special good required for the purchase and sale of all goods and services and a key social institution coordinating otherwise independent activities. One corollary of the heterodox view is that prices do not have to be equilibrium phenomena, since some individuals might not hold as much money as they need and others could choose to build up their holdings of money rather than of other commodities.

The book offers seven other essays on the Scottish Enlightenment. Most of them cover familiar territory; I confine my attention to two relatively novel pieces. Sheila Dow makes a fairly convincing case that David Hume's principal intellectual goal was to undermine a rationalist scientific paradigm in favor of one open to the roles of imagination and other extra-rational factors. For Dow this means Hume would not have advocated the techniques of modern economics, but would rather have favored a historical approach that paid serious attention to the details of the specific subject under investigation. According to Dominique Caboret, Steuart emphasized that under certain sociohistorical conditions societies might fail to achieve economic takeoff. Caboret believes that economic theory took a wrong turn with Smith when it moved to a more Newtonian approach in which the progress of opulence was “natural.” On Steuart's understanding, the statesman has an important role to play in economic growth—by preparing the spirit of the people for a transition to market production.

The book is rounded out by the obligatory editorial introduction (emphasizing the social dimension of Smith's conception of economic development), two essays on the revolutionary intentions with which Oskar Morgenstern forged a game-theoretic approach to economics, two brief overviews (from a dissenter's point of view) of the history of economics, a comparison of Friedrich Hayek and John Maynard Keynes on the role of individual knowledge in modern economies (from which it emerges paradoxically that Keynes was more of an individualist than Hayek), and a computerized study of recent economic literature (suggesting that economists use their writings to construct the values that will be shared by other scientists working in their field and to define who is in and who is outside their field).

A few of the essays are poorly written and conceived. But on the whole the book...