The Legacy of The Worldly Philosophers

By Viva Avasthi

In the wake of Scotland's historic referendum on whether it should become an independent country, and the many discussions of Scotland's important contributions to the United Kingdom, now is a great time to consider the history of economic thought, which began with a Scot, Adam Smith. (Incidentally, how would Adam Smith have voted, if he were alive today? It is most likely that he would have chosen "No".)

Despite being a relatively young subject, economics has an extremely rich history of thought, and Robert Heilbroner's The Worldly Philosophers is an excellent read for anybody interested in it. It serves not only as an accessible introduction to some of the most influential economists' most important theories, but also as a fascinating and sometimes entertaining insight into their characters and the context of the formulation of their ideas.

The "worldly philosophers" were the great economists of the past who, united by their curiosity of human interaction and the complexity of the world around them, sought to understand mankind's drive for wealth. It is worth noting that the last economist the book covers (it works through them in chronological order) is Joseph Schumpeter, who died in 1950. Notably, the book does not mention Friedrich Hayek and is of no use for those interested in learning about the work of contemporary economists such as Daniel Kahneman. For such readers, I believe that Phil Thornton's The Great Economists: Ten Economists Whose Thinking Changed the Way We Live would be more helpful, though I have not read the book myself.

This article is less of a book review and more of a reflection on my part of a few of the ideas of the great economists and their implications and relevance today. For this reason, this article may be of greater interest to those readers of this blog who have already read the book or have some understanding of the great economists' ideas.

One thing which the "worldly philosophers" spent a great deal of their time considering was the future of the society they lived in and how and why society and the economy might evolve over time. Their task was an immensely difficult one, and this is partly reflected in the varying degrees of success they had. One factor which hampered thinkers such as Thomas Robert Malthus, who incorrectly argued that the human race was doomed as human population would eventually outstrip food supply, was their inability to know what circumstances and innovations might arise in the future. Unfortunately our predictions must be constrained by the limits of what is knowable and we are forced to extrapolate what we can from trends seen in the past.

In addition, as pointed out by Joseph Schumpeter, one of the "worldly philosophers", our predictions may be tainted by our inability to always see the present for what it is:

"Analytic work embodies in the picture of things as we see them, and wherever there is any possible motive for wishing to see them in a given rather than another light, the way in which we see things can hardly be distinguished from the way in which we wish to see them."

However, this certainly does not mean that making predictions about the future of society was or is a useless task. For example, as the book highlights, some of Marx's ideas on the tendencies of capitalism have been proved right a time has progressed. There is indeed a "propensity to crisis" in capitalism, as indicated by the existence of business cycles. Though few imagined that it could happen when Marx declared his views in 1867, large firms do now dominate the economy. These are just a few of his insights which have come to pass and are clearly visible in our contemporary world. It is therefore worth considering what some of the key thinkers from the book thought would happen in the future, whether their ideas have come to fruition, and to what extent their ideas might be applicable today and in the future as we can imagine it.

In the chapter on Marx, Heilbroner quotes the following passage from Engels' Anti-Dühring:

"The ultimate causes of all social changes and political revolutions are to be sought, not in the minds of men, in their increasing insight into eternal truth and justice, but in changes in the mode of production and exchange; they are not to be sought in the philosophy but in the economics of the epoch concerned."

This is an intriguing and powerful statement to make, and it would be very interesting to investigate to what extent it is true. Do material concerns affect us more now than they did in the past? Was there ever, or is there currently, a society somewhere in the world which cares more about the 'truth' than material goods? Is such a society possible? Regardless of what the answers to those questions might be, it was certainly changes in the mode of production and exchange which led to the Industrial Revolution. Through the formation and expansion of the market system famously exposed by Adam Smith in his 'Wealth of Nations', massive social and political changes occurred.

Looking to today, could it be that we are at the cusp of great social change stemming from changes in modern modes of production and exchange? As our society and economy become more digitised and as our technological capabilities develop, what might we expect for the future? Jeremy Rifkin, author of The Zero Marginal Cost Society: The Internet of Things, the Collaborative Commons, and the Eclipse of Capitalism, puts forward a fascinating idea. He argues that before the middle of this century, capitalism will be have been destroyed by a range of factors including the development of fully-automatic self-replicating machines allowing goods to be produced at virtually zero marginal cost, and the internet serving as a platform for a global "sharing economy". As explained in this article in the FT, Rifkin's book closes with the idea that people will therefore no longer need to work, largely, and so we will be able to lead more fulfilling lives and spend time developing ourselves as individuals and communities.

I have not read the book, only familiarised myself with Rifkin's ideas by watching several interviews, but I am not sure how we would make the transition from a capitalist society to a collective commons one. Surely businesses would do their best to maintain their profits and would try to restrict consumer access to self-perpetuating technologies in order to preserve demand for their products? If we did make the transition to a collective commons society, who would pay for the fixed costs of getting the machines going in the first place? I hope that the book contains answers to these questions and any others which I may come up with after this article has been published.

The future that Rifkin outlines - a future of very little work, the death of profits and a far less materialistic society than our current one - is this the future that Keynes, one of the "worldly philosophers" envisaged? In his essay published in 1930, Economic Possibilities for our Grandchildren, Keynes contemplated that by 2030 the economic problem would be solved (at least in the advanced economies) due to improvements in technology and greater productivity as a result. This, he believed, would eventually lead to people working for only a few hours each day and society moving on from capitalism because everybody's absolute needs would be fulfilled.

"When the accumulation of wealth is no longer of high social importance, there will be great changes in the code of morals. [...] We shall be able to afford to dare to address the money-motive at its true value. The love of money as a possession - as distinguished from the love of money as a means to the enjoyments and realities of life - will be recognised for what it is, a somewhat disgusting morbidity, one of those semi-criminal, semi-pathological propensities which one hands over with a shudder to the specialists in mental disease. All kinds of social customs and economic practices, affecting the distribution of wealth and of economic rewards and penalties, which we now maintain at all costs, however distasteful and unjust they may be in themselves, because they are tremendously useful in promoting the accumulation of capital, we shall then be free, at last, to discard." 

How fascinating that Keynes saw capitalism as a form of necessary evil! Perhaps he would have been pleased by a future of the kind which Rifkin expects. For further reading on Keynes' Economic Possibilities for our Grandchildren I highly recommend How Much is Enough?: Money and the Good Life by Robert and Edward Skidelsky. Their book explores how far Keynes' vision has become reality and how we might improve our lives by re-considering what it is we want and need as individuals and a society.

The Worldly Philosophers introduced me to further interesting ideas such as John A. Hobson's conclusion that capitalism must lead to imperialism (which in modern terms might perhaps be viewed in terms of China's firms and elite supposedly "buying up" Africa). For me the book also raised the question of what profits really are and where they come from. I hope to write an article on the matter soon, because the conflicting theories are intriguing, from Marx's idea of "surplus value" creating profits to Schumpeter's ideas of innovation being the source of profits and profits therefore being very short-lived and elusive. Schumpeter's ideas particularly engaged me and I aim to write several separate articles on those. I find it very exciting that two of the academics predicted to win the Nobel Prize in Economic Sciences this year are Philippe M. Aghion and Peter W. Howitt for their contributions to Schumpeterian Growth Theory.

In an ideal world I would be able to put down all my thoughts on the ideas discussed in this book, and in future articles I shall certainly explore my thoughts on particular aspects further. However, with such little time on my hands, I am limited to sharing only a few of my thoughts on a very small selection of the ideas of the "worldly philosophers". I cannot recommend the book highly enough, and welcome comments on the book, this article, or anything related to the topic of economic thought.