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.

Can Pigou Refute the (Keynesian) Liquidity Trap?

by Jaime Bravo + (A spanish version of this article can be found here)

Keynesian economists believes that, in the presence of a liquidity trap, a competitive economy may lack automatic market mechanisms that tend to eliminate excess supplies of labor. So, in a liquidity trap, if the interest-rates are so low, there must be some public spending in order to "rebuild" the economic activity. Although Keynes made great points on this issue, the classical economists have something to say. Here enters the Pigou Effect and its relation with the Liquidity Trap. As Paul Krugman said (not exactly quoted): there might be a moment for every economy when markets cannot do anything by themselves as the interest-rates are so low - it means that there is no investment in the country - and, as you can have less than a 0% - in a negative interest rate, the Government would have to pay the investors to invest - you have to make something. The answer for Keynesians is, yes, public spending. The logic behind this asseveration is surprisingly simple: a country - say, Spain - has a lot of people with money, but they do not invest it, they save it because, for example, there's high unemployment and a big uncertainty in the future - the risk of losing all the money is here.  If a Government expands its public spending, it will raise the number of jobs. Considering that Spain - the example taken - has a lot of unemployed people (which is actually true), they will be employed and therefore, they will be less resistant to spending. So debt will increase, yes. But the problem with the debt-obsession - I'm nowadays reading to Reinhart and Rogoff on this issue - is that it is not quite relevant sometimes: if you have 7 million unemployed in a country, debt doesn't matter: the high unemployment rate does.

Famous Economist 'Interviews': An Introduction

by Viva Avasthi


As a new regular feature, I will be 'interviewing' some renowned economists to try and develop a better understanding of the various economic fields of thought, models (as in graphs used to explain theories) and problems as well as potential solutions. At the start of each 'interview', I will provide a short biography of each economist before asking some questions. 

A Visual Guide To Deflation

by Viva Avasthi

Here's the second part to the previous post: A Visual Guide to Inflation. This one's brilliant too! As with the inflation guide, this is apparently biased towards the Keynesian view. What's your opinion about this? Is this guide relevant? Which approach is the best towards deflation in your opinion?

Read on to see the guide.

A Visual Guide To Inflation

by Viva Avasthi

Check this out! It's a really entertaining guide :) I don't know much about the various economic fields of thought yet, but apparently this is heavily based on the Keynesian view. How effective do you think this guide is? Are there any changes that you would make to it?


 Read on to see the complete guide.