Thursday, 22 June 2017

Review of Murphy's 'The Genesis of Macroeconomics'

Today I’m going to cheat slightly: I’m reviewing a book that I haven’t yet finished – an otherwise fairly strict rule for my book reviews. However, thanks to Antoin Murphy’s great outline and the four chapters I have read (introduction, conclusion and the chapters on Henry Thornton and Adam Smith), I feel confident and impatient enough to discuss its content. Moreover, I have it on authority of Dr. David Colander and his review that Murphy’s creation is both “interesting and important”; I trust his judgment and my own intuition in professing that Murphy's book is right down my alley. The full title, The Genesis of Macroeconomics: New Ideas From Sir William Petty to Henry Thornton is enough for me to put down whatever I'm doing and start reading.

The outline of this brilliant, easy-read 225-page book is simple: 8 short chapters (Colander calls them "brief vignettes") each targetting a particular economist of centuries past, with an introduction and conclusion briefly commenting and summarising Murphy's approach, the arguments, the evidence, theories and lives of those very same economists.
We get a run-through of eight of the most influencial British and French economic writers before the 19th century: William Petty, John Law, Richard Cantillon, David Hume, Francois Quesnay, Anne Robert Jacques Turgot, Adam Smith and Henry Thornton. Thanks to my amazing course in the history of economic thought by Sydney professor Tony Aspromourgos I happen to have a rudimental familiarity with all of them. Murphy does a splendid job of tying them all into one another; how Cantillon “made a very great fortune out of Law’s System” (p. 11); how Quesnay further improving Cantillon’s attempt at circular flow theory into his ‘Tableau économique’ (p. 13); Henry Thornton well-known explicit attack on Adam Smith’s adapting views on banking. “Good stuff for interesting lectures”, Colander concludes.

In the Thornton chapter, Murphy showed me something I was completely unaware of: not only the two different interpretations of Thornton, but the three Thorntons (pp. 190-191)  the proto-Keynesian anti-deflation Thornton; the "hard currency man" (which Hicks apparently called him; and the paper credit emancipator "struggling to push monetary economics away from the accepted orthodoxy of the gold standard system" (p. 191). I suppose a fairly good case can be made that the third one is a special case of the first Thornton. 

Every chapter (20-30 pages) begins with a brief description of that economist's life, tracing the context and environment in which his important ideas grew. In Murphy's brilliant prose, those stories are among the most enjoyable ones; I fondly remembered the sections on Adam Smith's travels through France with the young Duke of Buccleauch in the 1760s, where Murphy cites letters to Smith's friend David Hume indicating his progress of Wealth of Nation. Then the chapters naturally move into substance: the very different ideas of the young Adam Smith seen in his lectures as a professor at the University of Glasgow in the 1750s, the author of Theory of Moral Sentiments and his 1776 book (What's known in the Adam Smith literature as "The Adam Smith Problem"); the much-abused concept of the invisible hand; his connection to banking and the Ayr Crisis of 1772. On an interesting side note, Murphy illustrates the matriarchal devotion that seemed to have governed both Smith and Hume:
like his great friend David Hume, whose father died when he was 2, Smith would bereared by a dedicated and selfless mother. This mutually strong matriarchal devotion and filial affection may explain in part why neither man married. (p. 157)
Or the story of an "archetypal absent-minded professor, apparently sleepwalking around Glasgow and putting his toast in the teapot and complaining about the taste of the tea." (p. 157).

Being a book about macroeconomics, it often concerns itself with ideas of banking, finance, money and macroeconomic fluctuations. Next time somebody utters the nonsensical opinion that macroeconomics began with Keynes, I have much extra ammunition kindly provided by Murphy, as well as a great table to illustrate their mistake (p. 215):

The concluding chapter (~10 pages) is a humble and succinct summary of Murphy's phenomenal book, probably quite useful as an introduction to general  topics in any course on the history of economic thought. As a give-away for first-year students in search of context, this book is crucial. Murphy's final introductory words are spot-on, not only as a description of his lifelong dedication to history of economic thinking, but he also takes the opportunity to pot-shot to the rest of our dismal science:
There has been a tendency on the part of some economists to take an absolutist approach to the history of economic thought. This approach identifies and highlights the ‘correct’ contributions of writers to the development of economic theory, a progression from error to truth. This book, while it presents the writers in a chronological format, will, it is hoped, force readers to rethink the absolutist approach. It will show enormous progress in the evolution of economic ideas through time, but it will also illustrate that this progress has not been linear. Sometimes ideas have lain forgotten, awaiting discovery many years later; other times ideas have been deemed to be the new orthodoxy only to become obsolete when a new paradigm appeared. History should encourage reflection and teach caution. It should convince today’s macroeconomic thinkers that modesty should be the hallmark of the profession, for in many cases they are only repackaging ideas that have long since been discovered, and in other cases they are presenting ideas that will end up in historical dustbins. (pp. 18-19)
In what seems like an effortless account, Murphy greatly surpasses his purpose: "Show the very considerable legacy that the selected seventeenth- to early nineteenth-century writers left to macroeconomics" and their "impressive contributions to the formation of macroeconomics" (p. 6). He successfully "demonstrate[d] the filiation of ideas from these fascinating people to the subject that would be retrospectively defined as macroeconomics in the 1930s." (p. 215). In summary, a great book for every student of economics, hammering in the point that macroeconomics did not start with Keynes and the 1930s. If that's all that people take away from Murphy, that'd still be quite a success. 

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