Tuesday, September 9, 2008

An Explanation for Economics as a New Science

For me the most interesting part of The Worldly Philosophers was the opening section that attempted to explain why economics basically did not exist before the 1700s. I never really thought about this question before myself. I just kind of accepted, that, yes, economics was a fairly new social science. However, as soon as Heilbroner brought the topic up I found myself intrigued. I think I also found this part the most interesting because this is one of the only parts of the book that exhibits Heilbroner's own ideas, as opposed to just summarizing the ideas and life stories of various economists.
Heilbroner's basic thesis--that prior to the 1700s economics was controlled by command and tradition, and thus there was no need for economic theory to explain things--seems simultaneously acceptable but lacking. As I said, I had never really thought about this issue before, and when Heilbroner presented this explanation, I found it plausible enough, but in more careful consideration I felt that it had a few holes. Sure, economies was controlled by command and tradition prior to the 1700s, but that does not mean that there was a lack of need for economic theory. I recall in learning about the history of Rome that there were massive problems with inflation and economic policy in general... how is it possible that the Romans never had the need to explore economic theory in explaining these phenomenon? For example, Soviet Russia had a command economy, but that does not mean they lacked economic study. They developed 5-year plans to expand their economic production to the greatest extent. These plans were not just political theory, but economic theory; even though they took place in a command economy.
Simply having economic decisions primarily decided by command and tradition does not mean that there is no need for economic theory. If anything, it seems to me it is the opposite. In a market system, "the invisible hand" guides things, and no one needs much knowledge of how the system works to make it work. It just works. Sure, it is cool to figure out why, but it is not necessary to understand why it works for it to function. However, in a command economy, exactly the opposite is true. If someone is specifying how economic decisions should be made, there is absolutely no guarantee that those decisions will turn out well. It seems as if there is a far greater need for the study of economics in that case.
In conclusion, Heilbroner's observation that prior to the 1700s, most economic decisions were made by command and tradition does appear to be true. However, his conclusion that this shift away from these modes of economic decision-making created the need for the discipline of economics seems dubious at best.

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