Saturday, September 08, 2007

Economists who left a lasting impact- and who didn't

There's a terrific article by John Kay in the Financial Times on the two economists who last a lasting impact on their times- Keynes and Friedman, others- Schumpeter, Galbraith- who didn't and yet others- Sen and Stiglitz- who won't. No student of economics should miss it.

In a nutshell, Kay argues that academic leadership is not just about scholarly ability, it requires sustained effort in creating a school of thought and the ability to draw followers- in other words,
perseverance as well as human qualities. Otherwise, you remain a renowned scholar, not the founder of a school of thought.

Here's Kay's take on Schumpeter and Keynes.

Schumpeter rivalled Keynes in range of experience and subtlety of thought, and surpassed him in breadth of scholarship. But his impact on intellectual life and practical affairs was slight compared with that of his English rival......

Schumpeter knew that his rival’s work had far greater influence. His critical essay on Keynes in History of Economic Analysis both displays his bitterness and identifies the reasons for Keynes’s greater success. Schumpeter expresses genuine admiration for the courageous publication of The Economic Consequences of the Peace. Keynes was, Schumpeter recognises, a natural leader who gave others confidence and inspiration.

Schumpeter would observe of himself: “I singularly lack the quality of leadership – with a fraction of my ideas a new economics could have been founded.” That new economics did not happen. There would be a Keynesian school, a Keynesian economics, but no Schumpeterian school, and really no Schumpeterian economists.

As for the contest between Friedman and Galbraith, in terms of lasting impact, there was no contest- Friedman has won hands down.

In the generation that followed Keynes and Schumpeter, John Kenneth Galbraith (born 1908) and Milton Friedman (born 1912), were the two most prominent public intellectuals among economists. If Schumpeter is more admired than read, Galbraith is more read than admired.....

Like Schumpeter, Galbraith never had time or inclination for the university and the gift for dry, academic observation which was his stock in trade was best deployed in perpetual opposition. If Schumpeter lacked qualities of leadership, Galbraith chose not to exercise them.

The method of dissemination of the Chicago school (led by Friedman) was similar to that of the Keynesians: a relatively simple ideological message for communi
cation to the world outside; a new, difficult, yet extensive theoretical framework; and a dedicated band of supporters who would entrench the doctrine in other economics departments.

What about Amartya Sen, Joseph Stiglitz and Paul Krugman, today's reigning gurus?

Sen is, in a natural sense, the Schumpeter of our times. He shows a breadth of erudition and subtlety of mind unparalleled among other economists. But, like Schumpeter, Sen is an isolated figure. There will be no Sen school. Nor, it would seem, will there be a school of Stiglitz: a generation of students looks for a counterweight to Chicago, but the school’s potential leader has not found the application to develop a coherent and comprehensive critique that such a leadership role would today require, or the aptitude or inclination for academic
politics. And the dissonance between Paul Krugman as polemical columnist at The
New York Times, and his professional work at Princeton, seems too great.


blackadder said...

Interesting article, while I am in no way qualified to comment on the academic merits of the work of any of the people mentioned in this article, I would say that Keynes and Friedman have received exceptional success more because their ideas found favour with the political establishments of their time. Keynes laid down the foundation of the welfare state which is the lifeline of most of Europe today, for all the free markets claim, the nationalised Health Service is something that has flowed directly from Keynes ideas. Similarly, Friedman found his champions across the Atlantic in the US Treasury department and the Fed. The fact that these economies have not imploded like the Soviets has made their ideas more credible than say Marx, who was failed by the Soviet model. This has interesting implications for a similar study that can be undertaken in India - was the model proposed by Mahalonobis successful because it created an indigenous asset base and skill sets that India is leveraging today? In all the criticism leveled at him and Nehru, I think people miss the point that state support is the reason why we were able to make the investments required in the economy to emerge as a nation which does more than trade natural resources. I have been to Sri Lanka and seen the business environment there, they are still stuck in the trading stage of commerce, where their ecnomy is totally dependent on hte price of tea. At least in India, we have steel plants that can convert our natural iron ore into steel and earn far more than we could as just exporters.
Just some thoughts

Abi said...

How about Paul Samuelson? Wasn't he (or, isn't he) the chief of the MIT school? Stiglitz, Krugman, et al are products of this school, aren't they?

If, as John Kay claims, Stiglitz, Krugman and others are really not upto the task of leading this school, I would like to know if the Chicago school has found a leader after Friedman.

gaddeswarup said...

Kay seems to give a clue to what is needed and what is lacking in this passage:
"Perhaps most importantly, Galbraith’s The New Industrial State (1967) saw the developed economy not as a set of interlocking competitive markets, but in terms of the power relationships in, around and between businesses. This perspective is a necessary contrast to a standard economic theory which barely recognises that the large corporation is the dominant institution in modern society. To understand the role of K Street and Wall Street in Bush’s America, we might more profitably turn to Galbraith than to Samuelson. But, as there is no Schumpeterian school, there is no Galbraithian school. Like Schumpeter, Galbraith never had time or inclination for the university and conference politics which that required."

T T Ram Mohan said...

Very interesting responses!

Blackadder, I have always been wary of the fairy-tale story of India's economic revival, namely, that we were comatose for over three decades and then woke up in 1991- and all was well thereafter. So I have no difficulty at all going along with your view that the earlier policies created the basis for a diversified industrial structure and also for a high level of manpower skills that translated into the IT boom.

Abi, Paul Samuleson is seen as an exponent of the Keynes school-as somebody who provided the mathematical basis for Keynes, not as the founder of a separate school of thought. Stiglitz is hard to fit into any mould. I think Kay is right in arguing that he has not developed a strong enough body around his critique of market imperfections, chiefly imperfect information, that would constitute a school of thought.

Gaddeswarup, the passage on Galbraith substantiates the point I am highlighting- you need leadership and man management skills, not just intellectual acument, to found a school of thought.