Early Notices

Second only in interest to the text of a new book is the reception it receives. Knowledge and the Wealth of Nations got a terrific review in the Sunday New York Times from Princeton economist/Times columnist Paul Krugman. It received a knowledgeable plug as well from George Mason economist Tyler Cowen, who modestly understated the role he plays in the story. (In 1988, Cowen and Amihai Glazer wrote a note that goaded Paul Romer into a far-reaching reformulation of the attributes of economic goods.) Columnist Steven Pearlstein of the Washingon Post commended it to readers of the Washington Post’s business page. 

Alas, KWoN didn’t make Greg Mankiw’s list of recommended summer reading for his students. Still, the early interest was enough to keep the title in the 20s on Amazon’s Top Sellers in Books for the first few days of the week. 

KWoN is published officially on Monday, May 22.

Second only in interest to the text of a new book is the reception it receives. Knowledge and the Wealth of Nations got a terrific review in the Sunday New York Times from Princeton economist/Times columnist Paul Krugman. It received a knowledgeable plug as well from George Mason economist Tyler Cowen, who modestly understated the role he plays in the story. (In 1988, Cowen and Amihai Glazer wrote a note that goaded Paul Romer into a far-reaching reformulation of the attributes of economic goods.) Columnist Steven Pearlstein of the Washingon Post commended it to readers of the Washington Post’s business page. 

Alas, KWoN didn’t make Greg Mankiw’s list of recommended summer reading for his students. Still, the early interest was enough to keep the title in the 20s on Amazon’s Top Sellers in Books for the first few days of the week. 

KWoN is published officially on Monday, May 22.

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How Ken Galbraith Became President of the AEA

Tucked away in the first chapter of Knowledge and the Wealth of Nations is a very short account of  the circumstances in which John Kenneth Galbraith was nominated to the presidency of the American Economic Association, in December 1970.  An early passage in the book states, “Indeed, go back far enough and you’ll find John Kenneth Galbraith, a literary economist who criticized the profession in a succession of widely-read books – and who is said to have won his presidency only after the immediate past president, Milton Friedman, angered the nominating committee (of which he was a member) by asserting that Galbraith ‘wasn’t an economist at all.’”

Milton Friedman has confirmed the story, although he recalls having described Galbraith as being more of a sociologist than an economist. Also on the committee was economist Hollis Chenery, who had just begun as chief economist at the World Bank (an institution he would serve for thirteen years).  Incensed by Friedman’s attitude, Chenery led the charge for Galbraith and carried the day. (Other committee members included Irma Adelman, Andrew Brimmer, Albert Fishlow and Harold Somers.)  In due course Galbraith was elected.

And so JKG served a spirited term in the tumultuous year of 1971, anointing panels for the annual meeting in December. Among them were sessions on market power, economic equality for women, black political economy, land-use policies, the economics of the arts.  He invited his old friend Joan Robinson to give the distinguished lecture – “The Second Crisis of Economic Theory.” It was distribution, she said; you could tell there was a crisis because of the preponderance of cranks prescribing remedies for problems that mainstream economists ignored.

“Charles Reich proposes to turn America green with a spade and hoe. J.W. Forrester proves on a computer that humanity is bound to be wiped out either by poison or by famine within a hundred years.  Our distinguished Chairman [JKG] can hardly be classed with the cranks, considering the seat he occupies this year, but next year, perhaps, he will be relegated once more to the position outside the pale of those who commit lese majeste against consumer sovereignty.”

Robinson was right. Soon the man his friends called Ken was again being ignored by most technical economists. In the late 1970s, the indignity was compounded when a significant part of the public shifted its fealty to Friedman, whose television series with his wife, “Free to Choose,” crushed Galbraith’s own “The Age of Uncertainty” in the ratings. Good books continued to flow from his pen – an autobiography, a pair of novels, a history of thought, collections of essays.  But never again did he have the enormous success he had enjoyed first with The Affluent Society in 1958, then in 1967 with The New Industrial State. (Richard Parker has written an extensive biography.) 

Galbraith died on April 29, at the age of 97. The year he served as president of the AEA is a forceful reminder that, while his chief celebrity derived from his role as a public intellectual, an unflagging spokesman for big-government liberalism, he most definitely was an economist as well. It is true he did not influence the profession directly so much as hold a place for economics in many minds with literary arguments. Later, these same ideas would be explored by formal methods and find secure places in other minds.

He taught development economics by example, serving as John F. Kennedy’s ambassador to India instead of writing a text. He illustrated monopolistic competition by writing about the “technostructure.” At a time when economists such as Chenery, Karl Shell, Richard Nelson, Edmund Phelps, Nathan Rosenberg and Burton Klein were unable to catch and hold the attention of the profession, Galbraith succeeded, at least for outsiders, in making economics more like real life, happily trading away precision and professional influence for popularity. If his grasp exceeded their reach, he was only too happy to pocket the difference. 

In time, insiders learned to capture the considerations at which Galbraith had merely hinted. Most of his issues have been overtaken by technical work. Avinash Dixit and Joseph Stiglitz were working on a Galbraithian problem of brand-proliferation – were there too many kinds of breakfast cereal? – when in 1977 they devised the model of monopolistic competition that has proven to be the workhorse of a revolution in the way in which we understand industrial organization. Jean Tirole codified the new learning in The Theory of Industrial Organization in 1988. Robert Lucas’ famous 40-page lecture “On the Mechanics of Economic Development,” first presented in 1986, probably did more to stimulate professional interest in the growth of newly-industrial countries around the world than anything Galbraith ever wrote. Yet before there was Lucas there was Galbraith, preaching the gospel that the lot of the world’s poor surely somehow could be improved by policy. Never mind that it was a very different policy than the one he advocated. He was a prophet of endogenous growth. 

Other economists have proved willing to take up the burden of going beyond their tools to engage in moral instruction:  Milton Friedman, for example. The most prominent representative of this type today probably is Jeffrey Sachs, the Harvard exile now presiding at Columbia University’s Earth Institute.

What is it that these people do for us?  They create the future. As William James wrote, in “The Moral Philosopher and the Moral Life,”  “We all help to determine the content of ethical philosophy so far as we contribute to the race’s moral life….    [T]here can be no final truth in ethics, and more than in physics, until the last man had had his experience and said his say.”  Yet some men and women, more than others, influence the course of events, most often by their demonstration of James called “the strenuous mood” — the capacity for “living hard, and getting out of the game of existence its keenest possibilities of zest.”  William James was one of these, Milton Friedman and John Kenneth Galbraith two others: not so much psychologist and economists, respectively, as moral philosophers. Almost all the copies of James’ The Will to Believe were borrowed from the two main Harvard libraries when I checked. Capitalism and Freedom and The Affluent Society will be similarly read by undergraduates throughout the 21st century.

 

Tucked away in the first chapter of Knowledge and the Wealth of Nations is a very short account of  the circumstances in which John Kenneth Galbraith was nominated to the presidency of the American Economic Association, in December 1970.  An early passage in the book states, “Indeed, go back far enough and you’ll find John Kenneth Galbraith, a literary economist who criticized the profession in a succession of widely-read books – and who is said to have won his presidency only after the immediate past president, Milton Friedman, angered the nominating committee (of which he was a member) by asserting that Galbraith ‘wasn’t an economist at all.’”

Milton Friedman has confirmed the story, although he recalls having described Galbraith as being more of a sociologist than an economist. Also on the committee was economist Hollis Chenery, who had just begun as chief economist at the World Bank (an institution he would serve for thirteen years).  Incensed by Friedman’s attitude, Chenery led the charge for Galbraith and carried the day. (Other committee members included Irma Adelman, Andrew Brimmer, Albert Fishlow and Harold Somers.)  In due course Galbraith was elected.

And so JKG served a spirited term in the tumultuous year of 1971, anointing panels for the annual meeting in December. Among them were sessions on market power, economic equality for women, black political economy, land-use policies, the economics of the arts.  He invited his old friend Joan Robinson to give the distinguished lecture – “The Second Crisis of Economic Theory.” It was distribution, she said; you could tell there was a crisis because of the preponderance of cranks prescribing remedies for problems that mainstream economists ignored.

“Charles Reich proposes to turn America green with a spade and hoe. J.W. Forrester proves on a computer that humanity is bound to be wiped out either by poison or by famine within a hundred years.  Our distinguished Chairman [JKG] can hardly be classed with the cranks, considering the seat he occupies this year, but next year, perhaps, he will be relegated once more to the position outside the pale of those who commit lese majeste against consumer sovereignty.”

Robinson was right. Soon the man his friends called Ken was again being ignored by most technical economists. In the late 1970s, the indignity was compounded when a significant part of the public shifted its fealty to Friedman, whose television series with his wife, “Free to Choose,” crushed Galbraith’s own “The Age of Uncertainty” in the ratings. Good books continued to flow from his pen – an autobiography, a pair of novels, a history of thought, collections of essays.  But never again did he have the enormous success he had enjoyed first with The Affluent Society in 1958, then in 1967 with The New Industrial State. (Richard Parker has written an extensive biography.) 

Galbraith died on April 29, at the age of 97. The year he served as president of the AEA is a forceful reminder that, while his chief celebrity derived from his role as a public intellectual, an unflagging spokesman for big-government liberalism, he most definitely was an economist as well. It is true he did not influence the profession directly so much as hold a place for economics in many minds with literary arguments. Later, these same ideas would be explored by formal methods and find secure places in other minds.

He taught development economics by example, serving as John F. Kennedy’s ambassador to India instead of writing a text. He illustrated monopolistic competition by writing about the “technostructure.” At a time when economists such as Chenery, Karl Shell, Richard Nelson, Edmund Phelps, Nathan Rosenberg and Burton Klein were unable to catch and hold the attention of the profession, Galbraith succeeded, at least for outsiders, in making economics more like real life, happily trading away precision and professional influence for popularity. If his grasp exceeded their reach, he was only too happy to pocket the difference. 

In time, insiders learned to capture the considerations at which Galbraith had merely hinted. Most of his issues have been overtaken by technical work. Avinash Dixit and Joseph Stiglitz were working on a Galbraithian problem of brand-proliferation – were there too many kinds of breakfast cereal? – when in 1977 they devised the model of monopolistic competition that has proven to be the workhorse of a revolution in the way in which we understand industrial organization. Jean Tirole codified the new learning in The Theory of Industrial Organization in 1988. Robert Lucas’ famous 40-page lecture “On the Mechanics of Economic Development,” first presented in 1986, probably did more to stimulate professional interest in the growth of newly-industrial countries around the world than anything Galbraith ever wrote. Yet before there was Lucas there was Galbraith, preaching the gospel that the lot of the world’s poor surely somehow could be improved by policy. Never mind that it was a very different policy than the one he advocated. He was a prophet of endogenous growth. 

Other economists have proved willing to take up the burden of going beyond their tools to engage in moral instruction:  Milton Friedman, for example. The most prominent representative of this type today probably is Jeffrey Sachs, the Harvard exile now presiding at Columbia University’s Earth Institute.

What is it that these people do for us?  They create the future. As William James wrote, in “The Moral Philosopher and the Moral Life,”  “We all help to determine the content of ethical philosophy so far as we contribute to the race’s moral life….    [T]here can be no final truth in ethics, and more than in physics, until the last man had had his experience and said his say.”  Yet some men and women, more than others, influence the course of events, most often by their demonstration of James called “the strenuous mood” — the capacity for “living hard, and getting out of the game of existence its keenest possibilities of zest.”  William James was one of these, Milton Friedman and John Kenneth Galbraith two others: not so much psychologist and economists, respectively, as moral philosophers. Almost all the copies of James’ The Will to Believe were borrowed from the two main Harvard libraries when I checked. Capitalism and Freedom and The Affluent Society will be similarly read by undergraduates throughout the 21st century.

 

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By Way of Introduction

When a book takes a long time to appear, especially a book on an intrinsically controversial subject, it wants a word of explanation as to why it took so long. Knowledge and the Wealth of Nations: A Story of Economic Discovery is scheduled to be published by W.W. Norton & Co. on May 22, a little less than twelve years after it was formally begun.

It had its beginnings in a newspaper series in The Boston Globe in 1994, which in turn stemmed from a still-earlier attempt to tell the story of the “new” growth economics in a book.

The early 1990s, however, turned out to be a very busy time. In those days, newspapering had the senior claim. Rather than sit any longer on what seemed an important and exciting story, I decided to put it in the paper in a lengthy series of Sunday columns.

Exactly how lengthy? That’s what the editor of paper wanted to know, one afternoon when he stopped by for a chat with my section editor and me, in the vicinity of week seven.  Oh, forty, probably, no more than forty-two. 

Sigh. Then I suppose we’d better put a logo on it.  And so we did — “The More Worldly Philosophers.”

I blush to look back on those columns now.  They were unmistakably a work in progress, a thoroughly provisional kind of truth. And yet the broad outlines stand up well enough.   

“The Fall and Rise of Technical Economics” announced the headline of the first column. It began, “There’s a widespread feeling among the general public that economics somehow has failed to make enough sense of the world. Markets as a social system have triumphed everywhere in the last few years, but informed laymen make jokes, disparage Adam Smith, invoke forgotten prophets, mock the mathemaical formalization of modern, university-based economics. Even many of its prominent defenders say that economics needs to be more practical, empirical, policy-oriented, if is to be persuasive.” 

It concluded, “In the last ten years, however, this has begun to change.  New theories have appeared with new tools to give them rigor, not unsusceptible to empirical testing, but not crucially dependent on it for rhetorical effect either. Mostly these developments have to do with new ways of thinking about institutions and technical change. They offer techniques for analyzing matters about which economics formerly had little to say. And they hold out the promise of creating (eventually) a far higher degree of consensus among experts.”

And who were these shakers? The second column offered a glimpse ahead.  “Robert Lucas, a deep-thinking Chicago iconoclast with a soft spot for economic psychology. Paul Romer, a mild-mannered Deadhead [that is, a fan of the band The Grateful Dead] with a knack for bringing ideas into unexpected juxtaposition. Paul Krugman, a high-intensity Asimov fan. Elhanan Helpman, an Israeli theorist with a knack for collaboration.  Gene Grossman, the shy representative of a famous economics family. Robert Barro, a brash Caltech whizkid with a perch on the editorial page of The Wall Street Journal. Lawrence Summers, a wunderkind with two famous uncles. Gregory Mankiw, a precocious professor who gave up competitive sailing for economics. Michael Porter, a business school hotshot who turned his insights into money and power into money and poer instead of economic fame.

“Just behind them there is a second rank of interesting and substantial figures: a donnish, peripatetic Indian.  A severe woman executive of the World Bank. A woman whose father’s own contribution to growth economics was unwisely overlooked, and her husband. A rebellious young man with a certain resentment of his Singapore childhood. An angry and isolated Irishman from Belfast. A Brazilian-French mathematician with a penchant for the farthest frontiers.  A Russian emigre to Cambridge and Chicago suddenly giving advice at the highest levels – to the Russian government. A Californian who learned his first economics managing a supermarket. They have no politics in common; they range in convictions from liberal to conservative.”

There are words I would change here and there. Grossman is not shy. The Irish scholar from Belfast – W. Brian Arthur – is no longer angry, having found a home at the Institute in Santa Fe. But for the most part, the roster is intact, though many others have been added . The telegraphic characterizations stand up well enough. The series trailed off to an uninspiring conclusion, but not before correctly predicting that 1994 would be the year that the Royal Swedish Academy of Sciences would choose to honor game theorist John Nash.

So why did it take so long to tell the story?

The answer, as near as I can tell, is that it took a long time to strip the story down to its essentials — the longer while it takes to write a shorter letter.  When economists brought knowledge into their explicit discourse, the change itself was so profound, and its consequences so pervasive, that the profession itself has only just begun to recognize its dimensions.  So many people participated in the the making of this revolution (for it is not too much to call it that), before and after, that it was difficult to know who to put in and who to leave out. Many persons tried to change economics without success. Inumerable deeply interesting stories didn’t make the cut.   

So, in establishing this page to further discussion of the book, I thought I would use it as best I could, at more or less weekly intervals, to create something of a feather-edge for the story that I have chosen to tell, among all the other important stories in the tapestry that is modern social science — not just economics, naturally, but the various fields that border it.  The “donnish, peripatetic Indian” – Amartya Sen – having played an important part in the reception of growth theory in the 1970s, has continued to soar ever since, but dropped out my story for the most part.  The “severe woman executive of the World Bank” – Anne Krueger – receded in importance in my tale, though she is still there. Barbara Spencer, daughter of the Australian economist Trevor Swan (1918-1989)  whose contribution to growth economics was sometimes “unwisely overlooked,” appears nowhere in the book (though her husband, James Brander, is briefly mentioned). Yet as a professor at the University of British Columbia, Spencer continues to continues to publish cutting-edge work in the economics of industrial networks. Spencer is a good symbol of the adventure of “normal science,” the orderly entension of the scope and precision of economics by highly-qualified professionals, that forms the indispensible background to the story in the book. There are many, many more such persons.

Let’s see how well I succeed in elaborating the story of Knowledge and the Wealth of Nations.   

 

When a book takes a long time to appear, especially a book on an intrinsically controversial subject, it wants a word of explanation as to why it took so long. Knowledge and the Wealth of Nations: A Story of Economic Discovery is scheduled to be published by W.W. Norton & Co. on May 22, a little less than twelve years after it was formally begun.

It had its beginnings in a newspaper series in The Boston Globe in 1994, which in turn stemmed from a still-earlier attempt to tell the story of the “new” growth economics in a book.

The early 1990s, however, turned out to be a very busy time. In those days, newspapering had the senior claim. Rather than sit any longer on what seemed an important and exciting story, I decided to put it in the paper in a lengthy series of Sunday columns.

Exactly how lengthy? That’s what the editor of paper wanted to know, one afternoon when he stopped by for a chat with my section editor and me, in the vicinity of week seven.  Oh, forty, probably, no more than forty-two. 

Sigh. Then I suppose we’d better put a logo on it.  And so we did — “The More Worldly Philosophers.”

I blush to look back on those columns now.  They were unmistakably a work in progress, a thoroughly provisional kind of truth. And yet the broad outlines stand up well enough.   

“The Fall and Rise of Technical Economics” announced the headline of the first column. It began, “There’s a widespread feeling among the general public that economics somehow has failed to make enough sense of the world. Markets as a social system have triumphed everywhere in the last few years, but informed laymen make jokes, disparage Adam Smith, invoke forgotten prophets, mock the mathemaical formalization of modern, university-based economics. Even many of its prominent defenders say that economics needs to be more practical, empirical, policy-oriented, if is to be persuasive.” 

It concluded, “In the last ten years, however, this has begun to change.  New theories have appeared with new tools to give them rigor, not unsusceptible to empirical testing, but not crucially dependent on it for rhetorical effect either. Mostly these developments have to do with new ways of thinking about institutions and technical change. They offer techniques for analyzing matters about which economics formerly had little to say. And they hold out the promise of creating (eventually) a far higher degree of consensus among experts.”

And who were these shakers? The second column offered a glimpse ahead.  “Robert Lucas, a deep-thinking Chicago iconoclast with a soft spot for economic psychology. Paul Romer, a mild-mannered Deadhead [that is, a fan of the band The Grateful Dead] with a knack for bringing ideas into unexpected juxtaposition. Paul Krugman, a high-intensity Asimov fan. Elhanan Helpman, an Israeli theorist with a knack for collaboration.  Gene Grossman, the shy representative of a famous economics family. Robert Barro, a brash Caltech whizkid with a perch on the editorial page of The Wall Street Journal. Lawrence Summers, a wunderkind with two famous uncles. Gregory Mankiw, a precocious professor who gave up competitive sailing for economics. Michael Porter, a business school hotshot who turned his insights into money and power into money and poer instead of economic fame.

“Just behind them there is a second rank of interesting and substantial figures: a donnish, peripatetic Indian.  A severe woman executive of the World Bank. A woman whose father’s own contribution to growth economics was unwisely overlooked, and her husband. A rebellious young man with a certain resentment of his Singapore childhood. An angry and isolated Irishman from Belfast. A Brazilian-French mathematician with a penchant for the farthest frontiers.  A Russian emigre to Cambridge and Chicago suddenly giving advice at the highest levels – to the Russian government. A Californian who learned his first economics managing a supermarket. They have no politics in common; they range in convictions from liberal to conservative.”

There are words I would change here and there. Grossman is not shy. The Irish scholar from Belfast – W. Brian Arthur – is no longer angry, having found a home at the Institute in Santa Fe. But for the most part, the roster is intact, though many others have been added . The telegraphic characterizations stand up well enough. The series trailed off to an uninspiring conclusion, but not before correctly predicting that 1994 would be the year that the Royal Swedish Academy of Sciences would choose to honor game theorist John Nash.

So why did it take so long to tell the story?

The answer, as near as I can tell, is that it took a long time to strip the story down to its essentials — the longer while it takes to write a shorter letter.  When economists brought knowledge into their explicit discourse, the change itself was so profound, and its consequences so pervasive, that the profession itself has only just begun to recognize its dimensions.  So many people participated in the the making of this revolution (for it is not too much to call it that), before and after, that it was difficult to know who to put in and who to leave out. Many persons tried to change economics without success. Inumerable deeply interesting stories didn’t make the cut.   

So, in establishing this page to further discussion of the book, I thought I would use it as best I could, at more or less weekly intervals, to create something of a feather-edge for the story that I have chosen to tell, among all the other important stories in the tapestry that is modern social science — not just economics, naturally, but the various fields that border it.  The “donnish, peripatetic Indian” – Amartya Sen – having played an important part in the reception of growth theory in the 1970s, has continued to soar ever since, but dropped out my story for the most part.  The “severe woman executive of the World Bank” – Anne Krueger – receded in importance in my tale, though she is still there. Barbara Spencer, daughter of the Australian economist Trevor Swan (1918-1989)  whose contribution to growth economics was sometimes “unwisely overlooked,” appears nowhere in the book (though her husband, James Brander, is briefly mentioned). Yet as a professor at the University of British Columbia, Spencer continues to continues to publish cutting-edge work in the economics of industrial networks. Spencer is a good symbol of the adventure of “normal science,” the orderly entension of the scope and precision of economics by highly-qualified professionals, that forms the indispensible background to the story in the book. There are many, many more such persons.

Let’s see how well I succeed in elaborating the story of Knowledge and the Wealth of Nations.   

 

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