1. The Bank of England’s “Millennium of macroeconomic data” dataset is an invaluable resource, containing information on everything from wages, to prices, to GDP growth, to trade-union membership and agricultural production. The products of the Maddison Historical Statistics Project at the University of Groningen are also extremely useful.
2. Sewall cites someone else in this quotation; I have removed the speech marks.
3. True, around Aquinas’s time so-called “fairs” sprouted across western Europe, where merchants would exchange wares sourced from across the world. But these were special occasions, rather than the normal course of day-to-day life.
4. Historians disagree over why this happened. The simplest explanation is the discovery of silver mines in the “new world” from about 1500; precious metals were brought back to the “old world” and acted to increase the supply of money. Others look at questions such as the progress of science and the growth of the population. There is no simple consensus, however.
5. The American economy became bigger than Britain’s for the first time in the 1870s.
6. It is also worth noting that almost all the people in this book underplayed issues of great importance to economists today: gender relations, theories of why businesses form and the public finances are just three examples.
1. The term appears over 25 times in the Wealth of Nations.
2. This lovely detail is provided by Murray Rothbard.
3. Colbert, of course, was not in charge of the economy for the whole of the 17th century, but figures are only available for 1600 and 1700. There is some suggestion that Colbert actually stopped things from getting even worse than they actually did. In a lecture given in 1897 Henry Higgs of the London School of Economics argued that under Louis XIV, “[c]ostly campaigns abroad, ruinous extravagance at home, left the kingdom at his death, in 1715, with a debt of 3460 million francs, of which over 3300 had been contracted since the death of Colbert in 1683.”
4. I have calculated this from looking at Boisguillebert’s Le Détail de la France (1695) in Eugène Daire, Economistes Financiers du 18e Siècle (Paris: Chez Guillaumin et Cie, Libraries, 1851).
5. In the short run, at least, the supply of gold and silver is fixed, though of course both metals can be mined, thus adding to their supply.
6. I am grateful to Simon Cox for suggesting this argument.
7. Some historians have suggested that the “bullionist” maxim was in fact around for hundreds of years before the mercantilists made it theirs. Coleman, however, points out that “the idea of the ‘balance’ of trade… probably derived from Italian double-entry book-keeping practices… marked advances in the analytical treatment of the subject|”. Coleman’s paper on mercantilist thinking is the best attempt to explain why mercantilist ideas emerged, though he largely focuses on England.
8. Quoted in Murray Rothbard, An Austrian Perspective on the History of Economic Thought, vol. 1.
9. Translation from the French by the author.
10. The question of what mercantilism “was” is a subject of fierce debate among historians.
11. It is not clear whom Eli Heckscher is quoting here.
12. For this sentence I have adapted Keynes’s phraseology.
13. As we will see in Chapter 6, David Hume was later to attack the economic theory behind this argument vigorously. Foreign purchases of domestic production (exports) are themselves a source of spending, demand, and employment.
14. This quotation speaks to a wider issue with mercantilists. When they talk about “trade”, they do not always mean “foreign trade”, but economic activity broadly.
1. Hobbes composed much of his famous work, Leviathan, in Paris.
2. Adam Fox notes that these figures “were probably too low”.
3. In the 1670s, members of parliament debating tax reform could do little but guess at the country’s taxable capacity, points out Paul Slack.
4. Of course, with this calculation Petty began the longstanding practice of ignoring the sort of work usually done by women–cooking, cleaning, caring and the like.
5. Nicholas Rodger makes the convincing argument that the success of the Dutch navy at the time largely explains why the Netherlands was so rich. Once the Dutch navy lost its pre-eminence during the 18th century, however, the Netherlands as a whole became considerably poorer relative to other European countries.
6. These ideas would preoccupy John Maynard Keynes; indeed the notion of “labour scarring” is generally thought to be a Keynesian idea.
1. This is a quotation contained in a work by Keynes, though it is not clear whom Keynes is quoting.
1. For this biographical information I am especially indebted to the work of John Nagle.
2. Henry Higgs makes this claim.
3. This titbit is found in Antoin Murphy’s biography of Richard Cantillon.
4. Not that Cantillon had much time for Petty. He refers to his “little manuscript”, describing it as “fanciful and remote from natural laws”.
5. All economic concepts seem to originate with Sir William Petty, and indeed he did use the term “ceteris paribus” in 1662. But unlike with Cantillon, the idea is not developed very much.
6. I have corrected a typo in this sentence.
1. Other physiocrats include Anne Robert Jacques Turgot, Jean Claude Marie Vincent de Gournay and Pierre Samuel du Pont de Nemours.
2. Quesnay, of course, overplayed his hand by arguing that agriculture was in no way dependent on other sectors. The industrial sector, for one, made the machines and the tools which farmers used.
3. Some readers might be confused by this. Didn’t mercantilism prioritise exports above all else? Partly, yes, but some mercantilists made the calculation that preventing grain exports would in the long run lead to a more favourable balance of trade, because it would help to lower costs in other industries.
4. As we will see in Chapter 9 on David Ricardo, other economists shaped their theories in light of political objectives.
5. Istvan Hont and Michael Ignatieff point to a series of edicts which allowed anyone to trade in grain, as well as the freeing up of the import and export of grain up to a certain price.
6. Quesnay was not to know that with the fall of Turgot as finance minister in 1776 France would return to its old protectionist ways.
7. Historians argue over whether or not the Tableau is truly the “invention” of the physiocrats, or whether Richard Cantillon should get the credit. It seems safe to give it to Quesnay, since he was the first to express an entire economy in diagrammatic form.
8. The other three were, reportedly, Alfred Marshall, Cournot and Walras. Schumpeter said this in a lecture, and was almost certainly doing so in order to surprise his students.
9. I am indebted to Fred Gottheil’s lucid explanation in the formulation of this paragraph.
1. To be clear, Hayek is not referring to “modern monetary theory”, often shortened to “MMT”, a theory about government spending and taxation that since the financial crisis of 2008–09 has become popular among many on the political left.
2. As of 2019 Britain’s debt-to-GDP ratio was around 85%.
3. For the idea used in this example I am indebted to Robert McGee.
4. Bear in mind that in Hume’s day, currencies were exchangeable for gold and coins were made of precious metals. Until the 1930s you could go to the Bank of England and exchange pounds for gold bullion. Buying something from abroad required sending gold overseas.
5. Though the water-level analogy is Hume’s: “All water, wherever it communicates, remains always at a level.”
1. Some people argue that Scotland actually had five universities at the time. Marischal College, in Aberdeen, merged into Aberdeen University in 1860. Britain got its third university, Durham, in 1832.
2. For the description of Smith’s Glasgow I am indebted to Alan Macfarlane.
3. The Gentleman’s Magazine, however, maintains that Smith’s “classical learning… much exceeded the usual standard of Scotch universities”.
4. This is the nature of one of the enduring questions in the history of economic thought, which for some reason preoccupied German historians. It is known as “Das Adam Smith Problem”. It stemmed from confused thinking. Some people thought that the model of human behaviour outlined in Moral Sentiments was incompatible with that of the Wealth of Nations. As we shall see, Smith was actually not inconsistent.
5. The quotation is taken from Gareth Stedman Jones.
6. For this insight I am grateful to Gavin Kennedy.
7. Gavin Kennedy’s work on this question is especially illuminating.
8. The phrase “laissez-faire” also does not appear in Smith’s published output.
9. Though, of course, all countries have regions where wages are relatively high and relatively low. Certain impediments, such as high property prices, stop wage rates from evening out.
10. In “old money” there are 20 shillings in a pound.
11. Adam Smith: “The natural price, therefore, is, as it were, the central price, to which the prices of all commodities are continually gravitating.” Joseph Spengler argues that Smith took this idea from Richard Cantillon.
12. As we will see, this same question animated Adam Smith. Smith thought lots about why diamonds had high value but water low, even though water is more obviously useful than diamonds.
13. Historians debate the extent to which Adam Smith’s labour theory of value applied only to a very rudimentary economy–say, a hunter-gatherer society. “If among a nation of hunters,” he says, “it usually costs twice the labour to kill a beaver which it does to kill a deer, one beaver should naturally exchange for or be worth two deer.” In a “commercial society”, however, he entertains the notion that other factors of production, including rent and capital, must also be compensated (ie, rather than only labour).
14. The chapter on Marx explains in detail why this is true. In a word, though, if you believe that labour is the sole creator of economic value, it follows that if the capitalist takes any of that value for themselves in the form of profits, exploitation takes place.
15. The 1870 date is important. It is at this point that theories of marginality, associated with the writings of Jevons and others, take centre stage in economic debates (see Chapter 17). Even today, economists remain “marginalists”.
16. At first glance this appears to contradict the labour theory of value. Yet supporters of that theory make an important qualification. Labour only “counts” as labour insofar as it is “socially necessary” or “normal”. G. A. Cohen, a philosopher, says the following about Marx’s labour theory of value: “The worker creates value if, and only insofar as, his labour is socially necessary.” Adam Smith may have had something similar in mind.
17. Terence Hutchison is just one scholar to point this out.
18. It is also worth bearing in mind that scholars of the 18th century were far less diligent in the citation of their sources than they are today. Back then plagiarism was not really a “thing”.
19. Why “thirty times the expense”? We can assume only that this number is used more rhetorically than literally.
20. Here we are measuring the number of books that mention “Adam Smith” and “William Petty”, by year of publication, from Google data.
21. Martyn argued that cotton imports freed up resources that could be deployed better elsewhere in the economy.
22. Salim Rashid qualifies this slightly. Tucker and Decker, he says, “were not complete free-traders because they were ready to make exceptions in the case of infant industries or of commodities in which England was supposed to have a monopoly, such as wool”.
23. Pietro Verri (1728–97).
24. Another name for Josiah Tucker (1713–99).
25. For this neat summary I am grateful to Gavin Kennedy.
1. I am grateful to Simon Cox of The Economist for this insight.
2. For this insight I am grateful to Emma Rothschild.
3. Mill was a great admirer of Condorcet, and would read him when he felt low.
4. Why does Condorcet refer only to “grains”, by which he really means “bread”, rather than food as a whole? David Williams suggests that Condorcet “follows the familiar pattern of emphasis on bread common to most 18th-century writers on the political economy of food. Bread was the staple food of the poor, and regular supplies were essential to their survival in a way that the supply of luxuries to Parisian elites was not.”
5. I explore these themes in more detail in a paper for the Scottish Journal of Political Economy.
6. Rothschild provides a detailed account of precisely which policies were implemented.
7. This sounds remarkably similar to Dadabhai Naoroji’s understanding of famines, which was to appear in its most sophisticated form in the work of Amartya Sen.
1. That sounds so ridiculous that you may wonder whether I am misrepresenting Ricardo’s position. Not really. John Elliott Cairnes, a devotee of Ricardo, discussed in 1875 whether the available evidence contradicted Malthus’s theory of population (which it most certainly did). “[I]t is not inconsistent with this doctrine that subsistence should in fact be increased much faster than population,” he argued. In other words, whatever reality may tell you, the theory is still true.
2. As we will see, William Stanley Jevons took completely the opposite approach.
3. Patrick O’Brien sees the wage-fund theory applying in the short run, and the subsistence “iron law” theory applying in the long run.
4. Actually the ideas behind “Ricardo’s” theory of rent were laid out many years before by James Anderson in his Enquiry into the Nature of the Corn Laws (1777). It is not known whether Ricardo read this book. Who knows why Anderson is not more famous today?
5. Everyone gets confused on this bit. Didn’t I just say that wages cannot rise? The point is that the cost of living has gone up. So the amount of money paid to workers goes up, but what that will actually buy is no higher.
6. In this paragraph I have drawn on Robert Heilbroner’s summary of Ricardo’s theory.
7. Smith did worry about matters like population growth wiping out gains in living standards. But at the very least we can say that he was considerably less pessimistic than Ricardo.
8. Cheryl Schonhardt-Bailey’s From the Corn Laws to Free Trade: Interests, Ideas, and Institutions in Historical Perspective is a great introduction to the Corn Laws.
9. Donald Winch writes that Karl Marx considered Malthus to be “a hired lackey of the landowning classes”.
10. Douglas Irwin points out that the agricultural protectionists used Ricardo’s own theories against him. According to Irwin, “the subsistence-wage doctrine of political economists had, if anything, removed from the arsenal of free traders the potent argument that the Corn Laws harmed real wages and that their repeal would therefore benefit the labouring classes”.
11. There is a longstanding historical debate over the question of how much influence political economy really had on the decision to repeal the Corn Laws.
12. Ricardo’s contemporaries would have found it odd that his example assumed that Portugal was generally more efficient than England at producing stuff. At the time the average Portuguese person was about half as rich as the average English person.
13. Daniel Bernhofen and John Brown’s discussion of Ricardian comparative advantage is particularly useful.
14. As Alfred Marshall points out, German socialists in particular latched on to Ricardo’s “iron” law of wages. Those theorists, according to Marshall, “believe that this law is in operation now even in the western world; and that it will continue to be so, as long as the plan on which production is organised remains ‘capitalistic’”.
15. Thompson did accept, according to Warren Benjamin Catlin, that “there should be a fund for the replacement of capital and the equivalent of a wage for supervision”. But Thompson also believed strongly in cooperatives. Under the cooperative system the workers would own the capital that they worked with, rather than working on someone else’s capital. So all the value created in the production process would end up accruing to the workers in their joint role as labourers and owners.
1. This is an estimate from Kenneth Rogoff and Carmen Reinhart’s database.
2. For this biographical information I am grateful to William Baumol’s research.
3. No relation to David, unfortunately.
4. As Joseph Schumpeter points out, in the United States a professorship of Moral Philosophy and Political Economy was founded at Columbia in 1818.
5. The figures for France are an estimate compiled from different sources, which may affect comparability.
6. Simonde de Sismondi made visits to Britain, with a similar purpose in mind, in 1817, 1819 and 1824. Say’s son, Horace, came in 1828.
7. One of Say’s most treasured possessions was an annotated copy of the fifth edition of the Wealth of Nations.
8. I am grateful to Schoorl’s research for this insight.
9. I am indebted to Simon Cox for the pithy formulation of this point.
10. Say, indeed, seemed to prefer it when people saved their money, since by reducing interest rates this helped boost investment spending and thus supply.
1. I am grateful to Robert Dorfman for this insight.
2. Simplifying to an enormous extent, what we have here is an example of the opposition of utilitarian ethics (exemplified by Mill, Jevons etc) and deontological ethics (exemplified by Malthus, Kant, Condorcet etc). Essentially the split concerns what produces the best results versus what is inherently a better act.
3. Malthus seemed to accept that if men were to have any chance of resisting the urge to have lots of children with their wives, they would have to use prostitutes: “This restraint almost necessarily, though not absolutely so, produces vice,” Malthus said, including but not limited to “[p]romiscuous intercourse, unnatural passions, violations of the marriage bed, and improper arts to conceal the consequences of irregular connections.”
4. Whether Senior believed this himself or was characterising the view of “political economists” is not clear. Senior may also have meant “good” in the sense of solving the food problem for the remaining population.
5. George Boyer’s analysis of the Old Poor Law is particularly interesting.
6. “Gradual abolition” is Jensen’s phrase.
7. Rising mortality in urban areas may have been one reason why.
8. Malthus did mention this notion in the first edition, but only in a roundabout way.
9. Like Adam Smith, Malthus praised the “little schools” movement of Scotland.
10. Suggested by analysis of Google Books data.
1. Henryk Grossman, indeed, claims that Sismondi actually fell into obscurity as early as the 1860s.
2. For these biographical details I am grateful to Helmut Pappe.
3. As Marx, the great copier of Sismondi, was later to argue, “Ricardo considers the capitalist form of labour as the eternal, natural form of social labour.”
1. See The Economist’s briefing on Mill, published in 2018. I am indebted to that article both for the reference to Adams, and for the analysis of Mill’s early support of Benthamism.
2. For this detail I am grateful to The Economist’s recent briefing on Mill.
3. Harriet would later write about the use of prostitutes by “3/4 of our adult male population”. Jo Ellen Jacobs, a historian, reckons that John Taylor’s guilt over what he did may explain why, despite being separated from Harriet for 20 years, he decided to leave his entire estate to her.
4. For this insight I am grateful to The Economist’s analysis of Mill’s ideas.
5. In order to allow for the free exchange of ideas, Mill proposed his famous “harm principle”, which is outlined in On Liberty, his most famous work. The harm principle says that society has no right to interfere with someone, other than to prevent him or her from hurting someone else. There should be pretty much no restrictions on free speech (with the obvious exception of the incitement to violence).
1. For biographical information on Martineau, I am grateful to the Martineau Society.
2. It is an odd accident of history that Ayn Rand’s family fortune was also lost, to the Bolsheviks.
3. For insights into “Demerara” I am indebted to the work of Margaret O’Donnell.
4. For insights into “Cousin Marshall”, I am indebted to the work of Elaine Freedgood.
1. The parallels with Engels’s account of the “withering away of the state” (see Chapter 16) are clear here.
2. In this regard, Mill is a clear exception.
3. To be fair to Smith, he does conceptualise society as moving in a series of stages: from hunting, to pasturage, to farming, and finally to commerce. But the sense from Smith is that, at this point, society has reached its final stage of development. A further point is that Marx is given way too much credit for this insight. Some historians point to the “Copernican significance” of Marx’s philosophy of history, when in fact all of the important ideas were found long before Marx, for example in the works of Sismondi.
4. You might say that Marx was a Hegelian for as long as it suited him.
5. Historians squabble over the extent to which Marx agreed with the iron law of wages. Marx did not like the Malthusian notion that workers erode any temporary wage rises by having too many children. Such a notion was “a libel on the human race”. He also believed in the power of trade unions to raise wages. What is clear is that he thought that workers were being underpaid.
6. Neither did Adam Smith, by the way, as his love of the division of labour clearly demonstrates.
7. Emphasis added.
8. So, for instance, whereas at the beginning you had £10 of surplus value (profit) for £100 worth of capital, implying a profit rate of 10%, you now have £10 of surplus value (profit) of £200 of capital, implying a profit rate of 5%.
9. Marxist economists have developed a whole new set of economic terms, none of which is used by mainstream economists. This makes it almost impossible for Marxist and non-Marxist economists to discuss the use of empirical data.
10. The problem, of course, with this counter-argument is that it reveals the “unfalsifiability” of the Marxist theory of declining profits. A scientific theory is only good if it can be disproved. That is not the case with this theory. If profits are falling, then the theory still holds. But if profits are rising, then capitalists are staving off declining profits–but only temporarily.
11. Marxist scholars, unsurprisingly, dispute this assertion.
12. I am absolutely not saying that workers cannot be exploited under capitalism. Obviously they can. But the crucial point about Marxism is that it argues that capitalism is necessarily exploitative.
13. Ricardo: “This restless desire on the part of all the employers of stock, to quit a less profitable for a more advantageous business, has a strong tendency to equalise the rate of profits of all.” Ricardo also tried, unsuccessfully, to reconcile the equalisation of profits with his labour theory of value. He basically argues that the amount of invested capital does not vary all that much between industries. This is where George Stigler’s characterisation of Ricardo as proposing a “93% labour theory of value” comes from.
14. Rothbard’s analysis of the Marx–Engels intellectual tangle is particularly interesting.
1. These estimates are from Carmen Reinhart and Kenneth Rogoff’s database.
2. Stalin argued that “[t]o keep on strengthening state power in order to prepare the conditions for the withering away of state power–that is the Marxist formula.”
1. It is not a settled question who was the first person to suggest “economics” in place of “political economy”. H. D. Macleod used the term in Economics for Beginners, published in 1878. Merriam Webster finds the first use of the term in the late 18th century. I have not been able to find many clear differences between “political economy” and “economics” in terms of methodology or content. It is often said that political economy has more sociological and historical elements than dry old economics. The examples of Ricardo and Say, two of the archetypal political economists, undermine that idea. In my view the clearest distinction between political economy and economics is in the use of mathematics. Jevons argued passionately in favour of the systematic incorporation of maths into economic inquiry. (Note that today the term “political economy” tends to refer either to economic analysis with a bit of politics thrown in, or to a more left-leaning sort of economic analysis. Only economists really use this term.)
2. This is another example of the political economists’ poor grasp of energy economics, as pointed out by Tony Wrigley and discussed in Chapter 9.
3. It is slightly odd that Jevons continued to use the term “political economy”, rather than “economics”, having argued so strongly against it. In the 1879 edition, however, he did replace all mentions of one with the other (with the exception of the title).
4. Cantillon was one of the few people for whom Jevons seemed to have any respect. Cantillon’s “remarkable” essay, as Jevons put it, was the “Cradle of Political Economy”. Perhaps Jevons was drawn to Cantillon’s somewhat abstract and dispassionate style, which explored the true potential of concepts such as “ceteris paribus” for the first time.
5. You may be thinking, wasn’t Sir William Petty’s “political arithmetic” mathematical? But that was more about quantification than using maths to answer questions. What about Quesnay’s Tableau Economique? Ross Robertson argues that “although the Tableau Economique could well be translated into algebra, the physiocrats did not do this”.
6. In this quotation I have corrected a small typo.
7. David Ricardo is perhaps the exception here. You get neither mathematical models nor diagrammatic illustrations of what he is arguing. Instead you get lots of numerical examples, which are almost algebraic. Paul Krugman says that comparative advantage is an idea “grounded, at base, in mathematical models–simple models that can be stated without actually writing down any equations, but mathematical models all the same”.
8. Recall Hutcheson, Pufendorf and Smith’s discussion of economic value in the chapter on Smith.
9. Wicksteed summarises the essence of the critique pithily: “Marx is”, he says, “wrong in saying that when we pass from that in which the exchangeable wares differ (value in use) to that in which they are identical (value in exchange), we must put their utility out of consideration, leaving only jellies of abstract labour. What we really have to do is to put out of consideration the concrete and specific qualitative utilities in which they differ, leaving only the abstract and general quantitative utility in which they are identical.”
10. A more charitable interpretation of Marx’s failure to engage with the marginalists is that he died (in 1883) before marginalism had been accepted by the economics mainstream. Perhaps. Measuring “acceptance” is, of course, quite difficult. But Jevons’s ideas appeared to have had a big impact quite quickly following the publication of his manifesto in 1871. Had Marx been paying sufficient attention to developments in economics, he could have engaged. Also, plenty of economists earlier in the 19th century had been attacking the labour theory of value, using quasi-marginalist concepts, as a way of attacking the Ricardian socialists. Did Marx really have no idea about any of this? Gareth Stedman Jones, as it happens, accuses Marx of “condescension towards developments in political economy”. Marx barely refers to Mill in his output, even though Principles of Political Economy was without doubt the leading treatise on economics at the time.
11. Neither, as it happens, was he a particularly good mathematician.
1. This is generally agreed among historians. David Ochterlony Dyce Sombre, of mixed Indian and European descent, was elected MP for Sudbury, Suffolk in 1841. However, in 1842 he lost his seat because of discrepancies during the campaign.
2. The climatic explanation would have argued that India was poor because the hot climate made its inhabitants lazy. The Malthusian interpretation would have said that India was poor because its population was growing too quickly.
3. Though as we will see later in this chapter, that changed.
4. It is also interesting that in the course of coming up with the theory Naoroji embarked on a statistical project the likes of which Sir William Petty would have been proud of. He was the first person, in 1867, to estimate India’s GDP. I am grateful to Meghnad Desai for the insight that the drain could be put instead towards investment.
5. Desai laments the “the nationalist logic [which] saw all foreign trade and not just the classic Home Charges as a ‘drain’ of resources”. Following independence India was to embrace an autarkic style of economic management.
6. I am grateful to Carlo Cristiano for this helpful phrase.
7. Carlo Cristiano says that it is “impossible to ascertain whether or not Keynes was acquainted with writers like… Naoroji”.
8. In a recent book, Inglorious Empire: What the British Did to India, the author, Shashi Tharoor, a politician and diplomat, quotes Paul Baran, a Marxist economist, putting the annual drain at around 8% of GDP per year. This is almost certainly an overestimate.
9. The work of David Clingingsmith is particularly good here.
1. I am grateful to Stephen Rousseas for this biographical information.
2. There is an enduring historical debate as to whether Tugan-Baranovsky was Marxist or not. Lenin thought he was not, calling him “Liberal Professor Mr. Tugan-Baranovsky” and a “Marxophobe”. What we can say for sure, following Sweezy, is that Tugan-Baranovsky’s ideas became part of the Marxist tradition.
3. I am grateful to Rousseas for providing this useful way of viewing things.
1. It was a much more defensible viewpoint during the centuries before, as the work of George Boyer suggests.
2. By the time of the economic unrest that culminated in the General Strike of 1926, Marshall was dead.
3. Marshall certainly was not the first person to use charts to illustrate economic data. That honour probably goes to William Playfair (1759–1823).
4. A regression is a statistical technique which helps determine “whether the correlation between two or more variables represents a causal relationship”, according to the IMF. “Initial conceptualisations of regression date back to the 19th century, but it was really the technological revolution in the 20th century, making desktop computers a mainstay, that catapulted regression analysis into the stratosphere. In the 1950s and 1960s, economists had to calculate regressions with electromechanical desk calculators. As recently as 1970, it could take up to 24 hours just to receive the results of one regression from a central computer lab.”
5. You can see that Marshall wanted to perform statistical calculations, but was held back by the available data and computing power. “If there had been no improvement in steam-engines and the manufacture of iron during the last fifty years,” he said in 1897, “the purchasing power of Englishmen’s wages would be much less than it is now: I do not know how much less; but I guess thirty or forty per cent less.” (Emphasis added.)
6. For this insight I am indebted to the work of Geoffrey Hodgson.
7. Keynes called Ricardo “the abstract and a priori theorist”.
8. With Marshall we have, in a sense, returned to the position of the classical economists such as Smith. Despite being an accomplished mathematician, Smith did not try to meld economics and mathematics, for very similar reasons to Marshall.
9. In his review of Jevons’s Theory of Political Economy, Marshall noted that “the book would be improved if the mathematics were omitted, but the diagrams retained.”
10. Joseph Schumpeter found Marshall’s “preaching of mid-Victorian morality, seasoned by Benthamism… irritating”.
11. Even today, economists fiercely battle over theories that outsiders might have expected would have been long ago settled. There is no established consensus, for instance, on the degree to which minimum wages cause unemployment. Researchers also fundamentally disagree on what are the most important determinants of changes in house prices.