The idea that humanity could turn tables on economic necessity--mastering rather than being enslaved by material circumstances--is so new that Jane Austen never entertained it.
With an opening sentence like that, I thought, Sylvia Nasar's Grand Pursuit: The Story of Economic Genius will be, well, grand.
But it's not. It goes downhill from there. A few months ago, I highlighted a paragraph from Bob Solow's critical review of her book. It was pretty negative. Surely, I thought, he exaggerated and we'll learn a lot about the grand pursuit of the idea of constant improvement in economic well-being. Well, I was wrong and he was right. The economics gets short shrift: it's almost an afterthought.
Moreover, she sometimes gets the history wrong, in important ways. As early as page 4, I got a little nervous. On that page, Nasar writes:
An Essay on the Principle of Population, published first in 1798 and five more times before his [Malthus's] death in 1834, inspired Charles Darwin and the other founders of evolutionary theory and prompted Carlyle to dismiss economics as the "dismal science."
Like Nasar, I had always thought that it was Malthus's essay that led to Carlyle's coining of the term, "dismal science." But that's wrong. And not just wrong, but spectacularly wrong. Here's a paragraph from David M. Levy and Sandra J. Peart that sets the record straight:
While this story [essentially the one Nasar told] is well-known, it is also wrong, so wrong that it is hard to imagine a story that is farther from the truth. At the most trivial level, Carlyle's target was not Malthus, but economists such as John Stuart Mill, who argued that it was institutions, not race, that explained why some nations were rich and others poor. Carlyle attacked Mill, not for supporting Malthus's predictions about the dire consequences of population growth, but for supporting the emancipation of slaves. It was this fact--that economics assumed that people were basically all the same, and thus all entitled to liberty--that led Carlyle to label economics "the dismal science." [bold mine]
What a party animal that Thomas Carlyle was. If opposition to slavery is "dismal," what was Carlyle's idea of "cheerful?"
Still, a lot of people still get the Carlyle point wrong, and so I read on.
I did learn a lot I hadn't known about Marx. Part of the reason is that she discusses Marx's economic views more than those of any of the other people she highlights [at least up to page 136, when I finally quit.] One shocker, on page 47, was that Marx lied about what British Prime Minister William Gladstone had said about the astonishing increase in income between 1853 and 1863. Gladstone had said that the incomes of British laborers had increased by an "extraordinary" amount. Marx, desperately seeking evidence for his idea that the working class was doing badly, claimed that Gladstone had said that the increase in income was "entirely confined to classes of property." A slight difference, that.
Where I started to have real doubts was when I hit the section on Alfred Marshall. There is one passage in particular, a section where Nasar discusses Marshall's support of unions. Nasar writes:
In fact, he [Marshall] had successfully demonstrated why labor markets do not always produce fair wages, and why unions can lead to greater efficiency as well as equity. [I wrote in the margin, "how?" Will Marshall make a "worker monopoly to offset an employer monopsony" argument? I wondered.] He'd "been asked to speak of the laws of supply and demand," Marshall began. He poured scorn on the union's opponents who held wages were at their "natural level" because, if they weren't, other employers would have offered the workers more, and if a worker's "wages be raised artificially they will come down again." This was Ricardo's iron law of wages, accepted even by many who sympathized with the plight of the workers. The argument was "excellent," Marshall admitted, but the assumptions false. No farmer would offer a neighbor's hired hands more to come and work for him. What's more, higher wages would make the workers more productive by allowing them to be better fed.
But wait. Anyone who has read much of Marshall knows what a sharp economist he was. Didn't he realize that if paying workers higher wages makes them more productive, and if the increase in wages were even slightly less than the increase in productivity, the employer would have an incentive to pay more, with or without the union? Now, it's true that Marshall wrote the quoted passages when he was 31. He had 50 years of being a good economist ahead of him. So, later in life, did Marshall understand my rather elementary point? Or is it possible that Nasar is inserting her own views, since the passage I quoted about workers being more productive is not in quotation marks? Inquiring minds want to know. Unfortunately, she doesn't tell us.