Why Understanding the Evolution of Economic Ideas is Crucial to the Discipline
Since the 1960s, most of the discussions among economists have focused upon issues that are controversial, often because they are rooted in a different way of looking at the ‘scope and method’ of economic science. The two-Cambridge (UK versus Mass., USA) controversies on the measurement of productivity, on the theory of capital, and on profit determination and income distribution, are an eloquent example of this turn of events. Because of these debates, but also as a result of the publication of Piero Sraffa’s 1960 opera magna, Production of Commodities by Means of Commodities, one may say that there has been a revival of interest in the objects and methods of economics such has not been seen since the publication in 1890 of The Scope and Method of Political Economy of John Neville Keynes (by Macmillan), of The Nature and Significance of Economic Science by Lionel Robbins (by Macmillan) in 1935 and of The Political Element in the Development of Economic Theory by Gunnar Myrdal in 1953.
A new way of looking at the evolution of economic ideas has slowly emerged, of which the most authoritative statements are those of sir John Hicks (of All Souls’ in Oxford), and Luigi L. Pasinetti (of King’s College, Cambridge), who both pointed out that it is no longer possible to consider the development of economic theory as a linear evolutionary process, starting from Adam Smith. Two alternative ‘paradigms’ characterize the past and present of our science. Both Hicks and Pasinetti seem to agree on their nature: on the one hand, the theories centred on the analysis of production, and on the other those centred on the analysis of exchange. According to Pasinetti ‘industry is the process of augmenting wealth through a material increase in the quantity and number of products, to be achieved through the practical application of the advances of science, division and specialization of labour, better organization, invention and utilization of new sources of energy and new materials. It requires changes in the organizational structure of society’. Trade, on the other hand, concerns the problem of how to reach the best allocation of resources in a situation where a plurality of individuals (at the micro level) or of the economic system (at the macro-level) have an externally given amount of resources or goods and try to gain advantage through exchange. In this case economists do deal with the rationality problem, which is usually expressed by one or more mathematical functions to be maximized under a certain number of constraints. Hence the process of learning, which is pivotal for the theory of production, is replaced by the problem of rationality of the theory of exchange. Economic theory appears hence to be characterized by the co-existence of two distinct research lines which, from time to time, resurrect and go into oblivion with an alternative pattern.
It has been said that economic history repeats itself, just in the same way as the two theoretical paradigms come and go according to the prevailing thrusts of the scientific community. Hence economic historians and economic theorists ought to be aware that quite often, though in different framings, similar sets of events and theories tend to reproduce themselves. The political, institutional and social settings may differ, but the fundamentals tend to repeat themselves. After all, it was John Maynard Keynes who said that the memory of economists do not last an entire generation; while Joseph A. Schumpeter and Nicholai Kondriatev demonstrated the reiterations of the long term economic cycles since the first industrial revolution. For this reason, the series Palgrave Studies in the History of Economic Thought, edited by a much-distinguished committee of top scientists, is a precious instrument for theoretical and practical social scientists in order to understand the self-reproducing mechanisms of our industrial societies. And to gain precious insights in order to anticipate future trends.
The Macmillan Press, now Palgrave Macmillan, has an outstanding pedigree of first class contributions to mainstream economic science, including John Neville Keynes, Lionel Robbins, John Maynard Keynes, Joan Robinson; to which we may add the 1890 Palgrave Dictionary of Economics and its more recent The New Palgrave Dictionary of Economics (1987, 2008, 2018). An academic press that over three centuries has been more than a must reference for our profession.