Why Read the Classics in Economics?

Why hold such a collection of old books in economics? Perhaps one could infer that this reflects a passion for antiquarian books. But I am not a book collector. I do not look for first-editions in pristine condition. I prefer paperbacks to cloth and my idea of a good used book “find” is one that has been used and I can thus purchase for a dollar or two. The inexpensive Liberty Fund and Augustus M. Kelley reprints are perfectly fine with me. The purpose of my collection is for production, not aesthetics. Also, while I think the history of ideas discipline is important in its own right, I do not consider myself primarily a historian of thought. In fact, if I could use my own words to describe what I do I would say I was an economic and political economy theorist who has done some work in applied political economy and economic history of former socialist economies. But by the commonly accepted terms of my profession, I am anything but a theorist. To the extent I take these detours down the memory lane of political economy I must be a historian of thought.

Perhaps I have simply deluded myself. If you read old books, talk about old books, comment and write on authors long dead, then aren’t you doing history of thought no matter what you tell yourself? Well, yes and no. It all depends on the purpose to which you put your reading in the history of ideas in economics and political economy. Of course, the answer is unequivocal that you are doing history of thought if you believe that all that is good in the ancients can readily be found in the moderns, but what if you believe that knowledge that was once held in our possession has been lost due to intellectual error or insufficient memory?

In the history of economic thought there are various types of readings that can be offered. They can be divided along the following lines—antiquarian and instrumental, Whig and Contra-Whig. The following matrix of history of economic thought readings summarizes the positions:

I define the terms as follows: (1) Whig—history as written by those perceived to have been the intellectual victors of key debates; (2) Contra-Whig—history as written by those perceived to have been the intellectual losers of those key debates; (3) Antiquarian—primary concern is the original intent of the author; and (4) Instrumental—primary concern is the intent of the reader. Of course, these readings rarely appear in pure form. In order for an instrumental reading to retain scholarly credibility, for example, it must meet some minimum standard of antiquarian accuracy whether it is whig or contra-whig in spirit. For my purpose, however, all that matters is the claim that all four cells in the matrix represent the contributions to the scholarly literature made in the history of economic thought.

Purists in intellectual history will have a problem with my argument for instrumental readings. But an antiquarian-based intellectual history whose sole purpose is either to establish the intent of the author, or highlight the forgotten contributions of some ancient intellectual hero, will be subject to the charge that while it may be an interesting hobby, it does not possess a legitimate claim to the education of young economists. Just like it might be nice if aspiring scholars learned Latin, or were knowledgeable of European history, given the technical demands of modern economics training the opportunity cost of learning the history of thought is simply too high. This was precisely the argument offered in department after department at the leading research universities as the history of economic thought was systematically eliminated from the core requirements for the Ph.D. in economics during the last quarter of the 20th century.

The opportunity cost argument now has a long history, and probably originated with Frank Knight and his student George Stigler. Knight argued that all one could learn from the study of the history of thought was the past errors that were made by earlier thinkers. The discovery of error was not considered a waste of time, however, to Knight. In Stigler’s hands, though, the argument took on a different edge. He argued that all truly important contributions of the past were incorporated in the present. Whatever was not already incorporated, could be rightfully ignored. This argument was consistent with Stigler’s basic presumption toward efficiency in “marketplace competition”—in this instance the efficiency of the market for ideas. There simply were no intellectual profits to be had by reading old authors—whatever profit opportunity might have existed had already been exploited. Stigler’s argument, like all Whig arguments, in the end reduces intellectual history to an interesting pastime for some, but certainly not a worthy vocation for an aspiring economist.

It seems natural that Stigler would stress the efficiency in the intellectual marketplace and thus invoke the “survivorship principle” in Whig fashion. It is less clear why Paul Samuelson, a major innovator in the theory of market failure, would be so sanguine about the efficient evolution of economic thought. Just as Stigler, Samuelson is a prime defender of the Whig perspective. Anything that was important in the past writers, can be found in the current body of mainstream thought. There are no lost gems—no $20 bills lying on the sidewalk of intellectual life. In fact, Samuelson (it could be legitimately interpreted) actually went so far as to postulate that basically anything worth discussing in economics can be found in his body of work.

But there is a case for reading the classics in political economy as a productive use of one’s time in training to be an active research economist, and in fact, in engaging in the production of economic thought. Kenneth Boulding (1971)1 countered Samuelson’s claims brilliantly in his essay “After Samuelson Who Needs Smith?” Boulding, in classic Contra-Whig fashion, argued that we all need Smith because Smith is part of our “extended present.” There are arguments and insights in Smith which remain unincorporated in our contemporary theory that once incorporated will improve our understanding of matters. The body of thought found in the classics retains intellectual evolutionary potential until the insights within are fully exploited. The “market” for ideas is not perfectly efficient—mistakes are made, intellectual resources are wasted, and as a consequence there are indeed intellectual gems laying unexploited waiting for someone to grasp.

The use of intellectual history instrumentally follows both from the idea that all that is important in the past is not necessarily contained in the present, and the idea that mining the past might offer concepts which point the way to more productive theory construction today. Following this path we may find dead-ends in current trends of thought which force us to reconsider the earlier moment of choice and then imagine the path that could have been followed instead.

Why, indeed, read the classics in economics? There are antiquarian reasons—reading the works of the great political economists of the past does give us a glimpse of the genius of an earlier age. But reading an old work in economics is not unlike watching a silent film or news clips of an old baseball game. It is quaint and romantic to look in on the past, but it is useful to remember that this world we sometimes worship from afar was a world without indoor plumbing, without modern transportation, without talking movies let alone decent special effects, and without night games, a good slider and relief pitchers (though I would vote to get rid of the Designated Hitter rule). The present isn’t always better than the past, but if we could time travel I wouldn’t buy a ticket to go back unless I could come back just as easily (and quickly). So how can it be that books from the past can still ignite a utilitarian imagination? Simple. There are works in the past from which we can still learn important ideas which are useful for addressing the problems we find pressing today. Intellectual errors are made all the time, knowledge gained in one period can be lost due to the fads and fashion which govern the world of ideas, and as such there are genuine intellectual entrepreneurial profit opportunities for readers to discovery and exploit in the works of a Hume, Smith, Mises, Hayek and Buchanan.