Economics and the Historian

Some Advice to the Reader

Some Advice to the Reader As you deepen your acquaintance with economics, some advice about ways of approaching the "dismal science" may be useful. Economics is above all a way of thinking. It comes complete with its own assumptions and language. Indeed, learning economics has much in common with studying a foreign language. So, especially as you set out, 1. DON'T ASKTOO MANY QUESTIONS AT FIRST. CONCENTRATE ON SOAKING UP NEW IDEAS. Just as beginningstudents of German smooth their progress by avoiding the puzzle of why apples are masculine and pears are feminine,the economic novice must learn to play by the rules. Even if the eventual objective is to challenge and perhaps reject the rules,it is essential to understand their structure and implications. The chief tenets of economics are not the creation of contemporary social science , but are firmly rooted in the writings of practical Englishmen:Adam Smith, who observed Britain's eighteenth-century economy from his post as a Scottish customs official; David Ricardo, a stockbroker; and John Stuart Mill, who had little patience with "purely abstract investigations." The central ideas of modern economics came not from academic treatises, but from "contributions to public debate on the burning issues of the day . . . food prices, the causes of poverty, taxation, monetary instability" (Winch 1973, 561, 52.9—530). The economist's mission is to identify "the burning issues of the day," develop logical structures that permit a deep and searching analysis of trends and structures surrounding these issues, and use the resulting body of theory as a vehicle for more comprehensive investigations of the initial (and subsequent) "burning issues" than would be possible from an unstructured, purely empirical inquiry. 2.45 246 Some Advice to the Reader This approach, with its emphasis on abstract analysis, is not a contemporary innovation , but was present from the beginning. Adam Smith wrote that it is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own interest. We address ourselves, not to their humanity but to their self-love, and never talk to them of our own necessities but of their advantages. (14) Smith's observations on butchers and bakers thinly conceal an abstract conception of the economy as an arena for the pursuit of material self-interest by independent, well informed, and selfish individuals whose activities are bounded only by the laws and institutions of society and by their own preferences, abilities , and resources. His conclusion that the self-serving individualis "led by an invisible hand to promote an end which was no part of his intention," namely the wealth of nations and the general social good, is deservedlyrecognized as an intellectual landmark of vast historical significance (413). The ideas embodied inthese passages—the logic of self-interest, the interdependence among the myriad agents in a single economy, the possibility that government intervention may be confounded by the complexity of economic arrangements, the underlying harmony of conflicting interests—retain their centrality in economic thinking to this day. Anyone listening to discussions among economists will soon recognize that while the commentary may focus on concrete issues, for instance the consequences of cheaper ocean shipping for the nineteenth-century Atlantic economy, the participants, following the intellectual footsteps of Adam Smith, constantly draw on a shared background of abstractions about the market mechanism. One of the high points of the initial seminar that produced this book came when a historian suddenly interrupted the economists' colloquy by observing that "you seem to be talking about the Chinese rice market, but you're really talking about a model of the market mechanism!" Exactly. Economic discourse is loaded with logical deductions based on assumptions seemingly far removed from the case at hand. Therefore, the historian must 2. DECONSTRUCT THE CONVERSATION AMONG ECONOMISTS; FOLLOW THEIR MENTAL LEAPS FROM REALITY TO THEORY AND BACK. Historians often balk at the abstraction of homo economicus motivated exclusively by material advantage. After all, we do not live by bread alone. True enough. But admit that most people devote a considerable proportion of their energies to seeking material gain, especiallyin the realm of activity that deals with producing, earning, buying, and selling, and you open the intellectual door to homo economicus. Let's temporarily ignore non-pecuniary motivations, construct a model featuring economic man, take it for a ride, and see whether the results (in terms of predictive power) justify such an extreme assumption. Furthermore , don't forget...