History of Economic Thought
Econ 750 – Fall 2012 -- Professor Roger Frantz
Office: Adams Humanities 4196; Phone: 594-3718; Office Hours: MWF ; e-mail:
[email protected]; Home Page: www-rohan.sdsu.edu/~frantz
If you never study the history of economic thought then you might assume that economics has
always been what it is today, a lot of calculus, statistics, graphs, and more of the same. If you
assume this then you would be incorrect. There’s a saying among many economists that anything
written before 1970 is insignificant. The saying that “anything written before 1970 is
insignificant” seems to me, insignificant. In the 1970’s the saying was that anything written
before 1940 was worthless. And, in 1670 the saying was that anything written before 1640 was
worthless. If for no other reason, intellectual curiosity warrants a study of the history of
economic ideas. There was a time when economists’ arguments were expressed in sentences
without an equation to be seen, a time when they spoke openly about God. There was a time
when economists wrote books which helped shape modern Western civilization, books which
helped separate the modern world from the Middle Ages, books which helped create great social
movements. This class thus necessarily includes economic, social, and intellectual history.
Before the 1940’s most renowned economists came from Great Britain. Today they come mostly
from Boston, Chicago, and California. What did economists of the past think and write about?
Balance of trade, economic growth, distribution of income, monopoly power vs. competition,
public vs. the private sector. The issues haven’t changed much in 400 years. The tools of analysis
have changed over time.
There is a few ways of categorizing individuals and schools of thought in the history of
economic analysis. One is chronological. This makes intuitive sense. You can learn which ideas
preceded and which ideas followed other ideas. Second, some individuals and schools believed
in the idea of spontaneous order, other did not. Spontaneous order means that social and
economic institutions, for example markets, and money arise spontaneously from individual
behavior seeking their own advantage. The “invisible hand” is an expression of spontaneous
order. It also means that conscious design of institutions by government to meet specific needs is
not necessary. Bernard deMandeville, the Physiocrats, Adam Smith, Karl Menger, the Austrian
School and the Chicago School include those who believe, to various degrees, of spontaneous
order. On the other hand, the mercantilists, socialists and Marx, the German Historical school,
and the American Institutionalists to not maintain that the idea of spontaneous order is an
important idea. The same classification would occur if we divided individuals and schools by
those favoring private markets and those favoring (strict) limits on private markets. Ironically, if
you study the history of thought chronologically you would likely study a “pro-market” group
and then an “anti-market” group, and then a premarket and then an anti-market. These two
groups have almost “followed” each other since the late 18th century.
We are going to study this subject chronologically, with one large exception. We will begin the
class with topics that are, in my opinion, important for all students of economics to know. These
are, the founding of the American Economic Association, the premier organization for
economists world wide; the development of econometrics; the pioneers of the use of
mathematics in economics, and the development of marginal analysis. We will also discuss the
Nobel Prize in Economics, which is not “the” Nobel Prize, but the The Sveriges Riksbank Prize
in Economic Sciences in Memory of Alfred Nobel.
There are other important individuals an schools in the history of economic analysis including
Robert Malthus, a man who may be considered the first person to think like a modern economist,
and who developed a theory of population growth which continues to be debated today and one
advocate who is the chief science advisor for President Obama. David Ricardo who perfected the
abstract deductive method of economics and the person responsible for the term “Ricardian
vice.” John Stuart Mill, the person who first explicitly argued that economics be restricted to the
study of “economic man.” Alfred Marshall, the person who started the first independent
economics department and wrote the first micro theory textbook. These are but a few of the
economists we will read about and talk about.
Economics used to be part of moral philosophy. Some believe that it still is. Economics used to
be tied with psychology. Then the tie was broken. The tie has returned under the banner
“behavioral economics” which is revolutionizing economics.
Student Learning Outcomes. By the end of the course students will be able to:
[1] Summarize the major characteristics of the different schools of thought.
[2] Compare and contrast the economic outlook of the different schools of thought.
[3] Illustrate the various “revolutions” and “forks in the road” which have occurred in the
history of economic thought.
[4] Profile the lives of 3 or 4 economists studied in the class.
[5] Appraise which economists made the largest contribution to economic thought.
Required Text: Development of Economic Analysis, 7th ed., by Ingrid Rima. Routledge pub.
Suggested Books on the History of Economic Thought:
Thinking, Fast and Slow, by Daniel Kahneman.
A Beautiful Mind, by Sylvia Nasar.
Grand Pursuit, by Sylvia Nasar.
New Ideas from Dead Economists, by Todd Buchholz;
Dr. Strangelove’s Game. A Brief History of Economic Genius, by Paul Strathern.
The Making of Modern Economics, by Mark Skousen
The Mind and the Market. Capitalism in Western Thought, by Jerry Muller.
Economics and Religion, by Robert Nelson.
Suggested Web Sites on the History of Economic Thought:
Nobel Prize Winners in Economics. http://almaz.com/nobel/nobel.html
History of Economics Society. http://www.eh.net/HE/; http://www.eh.net/HE/hes_list;
http://www.eh.net/HE/he_resources/
Japanese History of Economics Society http://society.cpm.ehime-u.ac.jp/shet/shet.html
European History of Economics Society http://www.ecn.bris.ac.uk/het1/links.htm
Topics and Readings
I. What Every Graduate Student Should Know.
1. The Beginnings of the American Economic Association.
(a) A. W. Coats. “The First Two Decades of the American Economic Association.”
American Economic Review, Sept. 1960. OR
(b) Michael Bernstein. “A brief history of the American Economic Association.” The
American Journal of Economics and Sociology 2008 67(5): 1007- 1023.
(c) Robert Diman. Clare De Graffenreid and the Art of Controversy: A PrizeWinning Woman Economist in the First Decade of the American Economic
Association. Journal of the History of Economic Thought, Julky 2012.
2. The Development of Econometrics, and Pioneers in Math. - Econ.
(a) Text, Ch. 22.
(b) Text, Pgs. 212-214.
(c) Deirdre McCloskey. “The Bankruptcy of Statistical Significance.” (Eastern Economic
Journal, Summer 1992.) OR
(d) Deirdre McCloskey, “Econowannabes.” (http.deirdremccloskey.com) OR
(e) Stephen Ziliak and Deirdre McCloskey. “The Cult of Statistical Significance.”
http://www.deirdremccloskey.com/articles/stats/preface_ziliak.php
(f) Stephen Stigler. “Statisticians and the History of Economics.” Journal of the History of
Economic Thought, Volume 24, Number 2, 2002. (O)
(g) Ragnar Frisch. “From Utopian Theory to Practical Applications: The Case of
Econometrics.” (O)
3. Marginalism. Its Origins. Text, Ch10, pp. 210-224, Ch. 12.
4. The Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel.
(a) http://almaz.com/nobel/nobel.html
(b) Sir John Hicks. “Revolutions in Economics.”
II. The First Modern Contributions to Economics.
1. Mercantilism: Practical and “Empirical” Economics. Text, Chs. 2-3
2. The French Physiocrats: the First Economic Model. Text, Ch. 4.
3. Adam Smith: 18th Century Revolution in Economics. Text, Ch. 5.
(a) Vernon L. Smith." The Two Faces of Adam Smith." Southern Economic Journal, Vol. 65 OR
(b) Amartya Sen. “Uses and Abuses of Adam Smith.” History of Political Economy, vol 43, # 2,
2011 OR
(c) Amartya Sen. “Adam Smith’s Capitalism.” www.ft.com/capitalismblog. March 11, 2009
(d) Adam Smith’s Daughters. Chs 1-2. “Jane Marcet,” and “Harriet Martineau. (O)
4. Thomas R. Malthus: Theory of Population Inspired Charles Darwin. Text, Ch. 6.
(a) Ed Regis. “The Doomslayer.” Wired.com, Feb 1997. (Julian Simon vs Paul Ehrlich on
Limits to Available Resources.)
5. J. B. Say: Say’s Law. Text, Ch. 6.
6. David Ricardo: “Mr Blackboard Economics.” Text, Ch. 7.
7. John Stuart Mill: Brilliant Economist, but a Better Social Philosopher. Text, Ch. 8.
8. Classical Theory: A Summary. Text, Ch. 9.
III. Socialists and Marx
1. Karl Marx: Time May Prove Him Correct. Text, Ch. 11
(a) Sylvia Nasar. “Perfectly New: Engels and Marx in the Age of Miracles.” Grand Pursuit,
ch.1. New York: Simon and Schuster.
IV. 19th Century Revolution in Economics: Marginalism or Neoclassical Economics.
1. First Generation Marginalists. Historicists, Text, Ch10, pp. 210-224, Ch. 12.pp. 292-313.
2. Second Generation Marginalists. Text, Ch. 13.
3. Alfred Marshall and the Neoclassical Synthesis. Text, Ch. 14.
(a) Sylvia Nasar. “Must There Be a Proletariat? Marshall’s Patron Saint.” Grand Pursuit, ch.
2. New York: Simon and Schuster.
4. David Colander. “The Death of Neoclassical Economics.” Journal of the History of
Economic Thought, Volume 22, Number 2, 2000. (O)
5. “Economics and Psychology. Lessons for Our Own Day From the Early Twentieth
Century.” Journal of Economic Literature, 34 (September): 1293-1323. (O)
V. The First American Contribution to Economics.
1. The German Historical School: Text, Text, pgs. 211-212.
2. American Institutionalism and American “Progressivism.” Text, Ch. 18.
VI. 20th Century Revolution in Economics: John Maynard Keynes’ Macro Theory
1. John Maynard Keynes: “Savior” of Capitalism. Text, Chs. 20-21.
(a) Sylvia Nasar. “Webb and Robinson in the 1930’s.” Grand Pursuit, ch. 11. New York:
Simon and Schuster.
(b) Sylvia Nasar. “Instruments of Mastery. Samuelson Goes to Washington.” Grand Pursuit,
ch. 16. New York: Simon and Schuster.
VII. Austrian School of Economics. So Close and Yet So Far From Chicago.
1. Austrian Economics. Text, pgs. 295-97, 584-85.
2. Bruce Caldwell. “Hayek: Right for the Wrong Reasons.” Journal of the History of Economic
Thought, Volume 23, Number 2, 2001.
VIII. Chicago School of Economics: (Maybe) The Greatest Economics Department Ever.
1. Melvin Reder. “Chicago Economics: Permanence and Change.” The Journal of Economic
Literature. March, 1982. (O)
2. The Antithesis of Chicago: Aristotle,
IX. 21st Century Revolution in Economics: Behavioral Economics.
1. Louis Uchitelle. “Some Economists Call Behavior A Key.” New York Times, Feb 11, 2001.
3. Roger Frantz. “The Behavioral Economics of Harvey Leibenstein, and Nobel Laureate
George Akerloff.” Journal of SocioEconomics, vol. 33, March 2004: 29-44. (O)
4. Roger Frantz. "Herbert Simon: Artificial Intelligence as a Framework for
Understanding Intuition." Journal of Economic Psychology, vol. 24, 2003: 265-277. (O)
5. Roger Frantz. “Hayek’s Behavioral Economics in Historical Context.” (O)
Research Paper
Nobel Prize winners. Choose one recipient of the Nobel Prize. Choose one part of the research
work for which they were awarded the Nobel Prize. How does their research fit into and advance
the history of economic analysis? No more than 10 pages double-spaced 12 point Times New
Roman font. You will present a summary of your paper to the class. You must also submit a
copy of your paper to Turnitin which checks for plagerism. (From Plagarism.org: “Simply put,
plagiarism is the use of another's original words or ideas as though they were your own. Any
time you borrow from an original source and do not give proper credit, you have committed
plagiarism and violated U.S. copyright laws.”)
Exams. One or two 100 point exams.