The most striking thing about the Great Economists, starting with the father of economics, Adam Smith, is that they tackled the biggest challenges of the day and did not limit themselves to narrow questions that could be answered neatly. Adam Smith, for instance, weighed in on the American War of Independence when he timed the publication of his seminal work, The Wealth of Nations, to come out in 1776. In it, he urged the British government to stop fighting a ruinous war and instead trade with the former colony as equals.
His disciple, David Ricardo, similarly led efforts to promote international trade and openness through repealing the protectionist Corn Laws in the mid-19th century. Ricardo actually never met Adam Smith, but he learned his economics from The Wealth of Nations. After making a fortune as a stockbroker, Ricardo became bored and happened to pick up Smith's seminal book while on vacation and taught himself economics!
Both Smith and Ricardo were also actively engaged in making policy. All of the Great Economists were. Smith became the Commissioner of Customs for Scotland while Ricardo became a Member of the British Parliament.
When there’s a breakdown in consensus about the economy, globalization, and income inequality, that provides an opportunity for a battle of ideas to take place.
This tradition of the great thinkers playing an active role in policymaking continued with the later Great Economists of the 20th century who argued against the rise of communism and socialism. Joseph Schumpeter may be best known for coming up with the idea of 'creative destruction.' Schumpeter's concept helps us to understand how the biggest mobile phone maker just ten years ago was Nokia, which has since been out-competed by Samsung, Apple, and others. Arguably, his most influential book was Capitalism, Socialism and Democracy, which was part of the debate in the post-war period about the best system of economic organization.
Another example is the introduction of Social Security and other programs. They provided more of a social safety net, which changed the capitalism of Adam Smith's day to address the problems that were revealed by the Long Depression of the late 19th century and the 1930s Great Depression as well as the high levels of income inequality seen in the Gilded Age. The opening of markets, particularly in the 1980s under Ronald Reagan, was also influenced by Great Economists such as Milton Friedman and Friedrich Hayek, who were advocates of the free market.
All of this means that the capitalist system has undergone significant change during the past 250 years. And today, the system needs to be looked at again to make it suit the needs and challenges of the 21st century.
Tips from the Great Economists
Every age has its challenge. When there's a breakdown in consensus about the economy, globalization, and income inequality, that breakdown provides an opportunity for a battle of ideas to take place. The Great Economists didn't change the world by limiting themselves to their work. Most engaged with experts from other disciplines such as philosophy and politics as well as with the general public to put forward their ideas. Many of them also worked as policymakers and advisors. Only by engaging with the big challenges, even if there are no straightforward answers, can we all help make the economy work better.
A couple of other pointers would include this advice from the Great Economist who devised growth models, Robert Solow. He said: "Don't omit qualifications. Never claim more than you … can justify... An economist trying to talk to the general public gains respect by insisting on the qualifications, by not appearing as a pundit, as someone who knows all the answers."
And the best reason to know some economics comes from the Great Economist who helps us to understand why wages are so low, Joan Robinson. She said: "The purpose of studying economics is not to acquire a set of ready-made answers to economic questions, but to learn how to avoid being deceived by economists."
Only by engaging with the big challenges, even if there are no straightforward answers, can we all help make the economy work better.
Finally, the most pertinent tip of all perhaps comes from John Maynard Keynes. He predicted that leisure would figure prominently in our lives and proclaimed that by the 21st century that working "three hours per day is quite enough." But when people are working a 15-hour week, he pointed out a further challenge:
"Mankind will be deprived of its traditional purpose … Thus for the first time since his creation, man will be faced with his real, his permanent problem—how to use his freedom from pressing economic cares, how to occupy the leisure, which science and compound interest will have won for him, to live wisely and agreeably and well."
Post written by Linda Yueh, author of What Would The Great Economists Do? (Picador 2018)