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A Portrait of the Economy

Brian Hayes

GRAND PURSUIT: The Story of Economic Genius. Sylvia Nasar. xvi + 558 pp. Simon & Schuster, 2011. $35.

Histories of economics tend to start with Adam Smith and his Wealth of Nations, but Sylvia Nasar leads off with Charles Dickens and A Christmas Carol. It’s an unusual choice, but an effective and appropriate introduction to the story she wants to tell in Grand Pursuit: The Story of Economic Genius. Dickens shows us the redemption of Ebenezer Scrooge—his conversion from pinchpenny to beneficent bon vivant. Nasar aims to redeem economics from its intellectual roots as a science of scarcity and avarice and present it as a tool for improving the human condition.

Nasar is the author of A Beautiful Mind, a biography of the brilliant but troubled mathematician John Nash. Biography, rather than economics, is the true genre of this new book as well. Economic theories and principles are sketched when necessary, but economists’ lives are rendered in full color and lavish detail.

2012-09BrevHayesFA.jpgClick to Enlarge ImageThe book’s longest chapter is given to Beatrice Webb and, by extension, her husband Sidney Webb, the founders of the London School of Economics. We follow the wealthy young Beatrice from Gloucester to London for her coming out; we learn about her long and futile infatuation with Joseph Chamberlain (father of Neville) and her sparring matches with philosopher and evolutionist Herbert Spencer at the family dinner table; there’s a bit of upstairs–downstairs drama when Beatrice becomes close with a servant, Martha Jackson, whom she later learns is actually a poor relation. Then comes her blossoming interest in social justice, which leads in turn to a great adventure: a few days spent incognito working as a seamstress in an East End sweatshop. And all this comes about before Sidney Webb arrives on the scene. (“Beatrice thought Sidney looked like a cross between a London cardsharp and a German professor,” Nasar writes.)

In writing biographies of economists, Nasar inevitably invites comparison with Robert L. Heilbroner’s book The Worldly Philosophers: The Lives, Times and Ideas of the Great Economic Thinkers, first published in 1953 and still going strong after seven editions. (Heilbroner died in 2005.) For millions of readers, including me, Heilbroner provided a first introduction to economic thought. As I read Grand Pursuit, I was moved to search out my old copy of The Worldly Philosophers (fourth edition, 1972) and compare the two authors’ portraits of Alfred Marshall, a great synthesizer of 19th-century ideas and mentor to the next generation. Heilbroner wrote:

Merely to look at Alfred Marshall’s portrait is already to see the stereotype of the teacher: white moustache, white wispy hair, kind bright eyes—an eminently professorial countenance. . . . Marshall . . . was pre-eminently the product of a university. . . . His life, his point of view—and inevitably his economics—smacked of the quietude and refinement of the Cambridge setting.

And here is how Nasar brings Marshall onto the stage:

A young man with delicate features, silky blond hair, and shining blue eyes boarded the Glasgow-bound Great Northern Railway at London’s Euston Station. It was early June 1867. He was carrying only a walking stick and a rucksack crammed with books. His fellow passengers might have taken him for a curate or a schoolmaster on a mountaineering holiday. But when the train reached Manchester, the young man put his rucksack on, jumped down onto the platform, and disappeared in the crowd.
Before resuming his journey north to the Scottish highlands, Alfred Marshall, a twenty-four-year-old mathematician and fellow of St. John’s College in Cambridge, spent hours walking through factory districts and the surrounding slums “looking into the faces of the poorest people.”

2012-09BrevHayesFB.jpgClick to Enlarge ImageNasar reveals something else that Heilbroner did not mention: Marshall, the son of a bank teller and the grandson of a butcher, grew up in a London slum “in the shadow of a tannery”; he reached the quietude and refinement of Cambridge only through scholarships.

Placing the two authors’ accounts side by side, one begins to wonder if they are talking about the same Alfred Marshall. And that doubt persists when it comes to Marshall’s economic thinking. Heilbroner wrote: “One word can sum up the basic concern behind Marshall’s teaching—the word equilibrium. . . . Marshall was primarily interested in the self-adjusting, self-correcting nature of the economic world.” Nasar gives this account:

Marshall’s lectures focused on the central paradox of modern society: poverty amid plenty. He taught by posing a series of questions: Why hadn’t the Industrial Revolution freed the working class “from misery and vice”? How much improvement is possible under current social arrangements based on private property and competition? . . .
He did not doubt that the chief cause of poverty was low wages, but what caused wages to be low? Radicals claimed that it was the rapacity of employers, while Malthusians argued that it was the moral failings of the poor. Marshall proposed a different answer: low productivity.

Which portrait is truer to the facts? I am inclined to duck that question by rejoicing that we have two fine books. But I can also gripe about both of them: Neither Heilbroner nor Nasar gives even a glimpse of the mathematical reasoning at the core of Marshall’s work.

Apart from the Webbs and Marshall, the major figures in Nasar’s narrative are John Maynard Keynes (who was Marshall’s student), the American economist Irving Fisher, and Joseph Schumpeter, an Austrian emigré who eventually wound up at Harvard (where he taught Robert Heilbroner). The supporting cast includes another Austrian, Friedrich von Hayek; Keynes’s student Joan Robinson; and two more Americans, Milton Friedman and Paul Samuelson. Also, as chronological bookends, there are portraits of Karl Marx (along with Friedrich Engels) and of Amartya Sen. Marx is given the role of buffoon: The champion of the proletariat maintains a pretentious suburban home so that his daughters can “establish themselves socially.” Sen is the saint, who escapes famine and poverty in Bengal but never turns his back on the poor.

2012-09BrevHayesFC.jpgClick to Enlarge ImagePerhaps the most important character to emerge from this story is the economy itself. We’ve always had wealth and poverty, good times and hard times, but only with the industrial age did anyone think to look upon “the economy” as a distinct entity whose activities we could monitor and measure and perhaps control. It was the Great Depression that brought this notion to the fore, as Keynes and others argued for active intervention to nudge the economic system toward a different point of equilibrium. The idea is now commonplace. “It’s the economy, stupid,” was the watchword of a presidential campaign 20 years ago, and the slogan could serve just as well in the current political season. Indeed, it seems the economy is not just an entity but a personality—a rather needy, high-strung and often petulant little tyrant whose tantrums bring down governments and inflict misery on millions. We fret constantly about its health and moods; we debate its need for stimulus or restraint.

Nasar urges a much more upbeat view of this situation, arguing that progress over the past two centuries offers every reason for optimism. She deserves to have the last word:

Economic calamities—financial panics, hyperinflations, depressions, social conflicts and wars—have always triggered crises of confidence, but they have not come close to wiping out the cumulative gains in average living standards. . . . Since World War II, history has been dominated by the escape of more and more of the world’s population from abject poverty. . . .
Remarkably, even the Great Recession of 2008 to 2009, the most severe economic crisis since the 1930s, did not reverse the prior gains in productivity and income.

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