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October 6, 2002
David Warsh, Proprietor

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“Theory is the Root of Peace”

Years ago, when I was first coming to grips with economics, one of my favorite books was a collection of essays, “The Nature of Economic Thought” by G.L.S. Shackle.

Life is complicated, Shackle wrote, and a person needs a system of explanation to cope with it. Since he was a thorough-going Englishman, born in 1903, his thoughts turned immediately to cricket.

“When I am watching a game of cricket,” Shackle wrote, “I do not know what will happen next, but I know the sorts of things that can arise as a sequel to this or that event or situation which has just come into being, for I know the rules and purpose of the game.

“Looking back on the course of a morning’s play, I can see a pattern in it. I can trace the successive re-appraisals made by each captain, see the point of his shifts in policy and of his detailed tactics, perceive how the course of play was affected by his decisions, how the effect of these decisions depended on the other side’s reactions and responses, and how, in general, the sequence of events ‘makes sense.’

“Were I watching a game of billiards, or an Eastern ritual dance, or an abstract painter at work, I should by no means have the sense of familiarity with the strictly unprecedented. No two events on a cricket field are ever exactly alike, yet to a follower of cricket every event on any cricket field, at any time, anywhere, is understandable, and can be seen in some degree the upshot of recognizable endeavours and constraints.”


Shackle’s point was that economic theory served as a guide to a good deal of what could happen in the world. To the extent that it was good theory (meaning that it accurately reflected how the world worked), and to the extent that it was widely shared, it would be an irresistible force for human betterment, for harmony among nations “depends partly on their all interpreting any given event in one and the same basic fashion.”

Economic theory was “not abstract, remote, unreal, negligible,” wrote Shackle, but rather “practical, immediate, insistent and the very essence of action.” He concluded with a sentence that seems as wise and fundamentally correct today as when I read it first.

“Theory is the root of peace.”

Shackle’s book is long since out of print. Nor would you likely want to read it now. Things have moved on since then. Much has been learned since it appeared in 1966. But there are always people trying to do what Shackle did so well — translate, question, amplify, summarize, synthesize and explain economic theory to outsiders, in hopes that their labors will not only educate lay readers, but perhaps help economists to better understand themselves. These writers recognize that textbooks alone are not enough. They aim to place economic knowledge in context.

Earlier this year I called attention to Reinventing the Bazaar, a particularly good introduction to what we know now about markets, by Stanford University professor John McMillan. Here are six more surveys of where economic theory has come from and where it may be goingrecent books about what economics has to offer (and what it doesn’t have). Each has something to recommend it.

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1. In A Brief History of Economic Genius, Paul Stathern has grabbed for the big brass ring that is the replacement market forĀ The Worldly Philosophers, Robert Heilbroner’s classic gloss on the history of economic thought which first appeared in 1953. Strathern thus is taking up where Todd Buchholz left off in 1989 with his useful New Ideas from Dead Economists. He starts his story with the neglected Luco Paciola (who taught double-entry bookkeeping to Leonardo da Vinci), Sir William Petty and John Law. He goes on all the way through to John von Neumann and John Nash.

This is a beguiling book. Strathern can write, and his capacity for focus is occasionally astonishing. The seven-page distillation of the story of Nash, for example, surpasses by far the movie “A Beautiful Mind” and undoes its mischief. But as a whole, “Brief Histtory” is undercooked. This might be expected of a man who not only won a Maugham prize for his impersonation of the novelist in “A Season in Abyssinia,” but wrote a history of the discovery of periodic table called “Mendelyev’s Dream ” — not to mention “Plato in 90 Minutes,” “Leibniz in 90 Minutes,” “Kierkegaard in 90 Minutes,” “Hegel in 90 Minutes,” (for goodness sakes!) and thirty or so other similar brief guides to virtually all the Big Ideas, as well as travel guides to Florida, Turkey, Greece and Australia.

But what’s the point of 90 minutes with Condorcet and the Comte de Saint-Simon if Augustin Cournot is not mentioned and the story culminates, as it does here, in 90 minutes with Milton Friedman? John Hicks, Paul Samuelson, Tjalling Koopmans, Kenneth Arrow and Robert Lucas barely appear. The book’s architecture is little different from that of Heilbroner. Keynes is still at the center of the account, though he has been joined by von Neumann. There are some wonderful concise explanations, of mathematical concepts in particular. But unless you are a real aficionado, you may prefer to wait another couple years for Sylvia Nasar, the biographer of Nash, to deliver a book on 20th century economic thinkers.

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2. Charles Wheelan for some years was Midwest correspondent for London’s Economist magazine. Recently he has become director of policy and communications for Chicago Metropolis 2020, a blue-ribbon civic betterment group. Before he put journalism aside, he had the idea to set out all the subject matter of a course in Economics 101 — without a single chart or graph or diagram. The result is Naked Economics: Undressing the Dismal Science, a guidebook to matters global and mundane, all viewed through the lenses of the University of Chicago, where Wheelan got his PhD in public policy.

If G.L.S Shackle affected the tone of a commentator at a five-day test cricket match as he went about explaining things, Wheelan resembles a color commentator on Monday night football — witty, to the point and quick to change the subject. His enthusiasm is contagious.

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3. Likewise, Peter Dougherty, long-time economics editor at Princeton University Press and, before that, at, The Free Press, Blackwell Publishing and Harcourt Brace Jovanovich. He has published a wide array of authors over twenty-five years, high and low, including even the writer of this column. He probably talks to more economists than any other non-economist around, including, again, the present writer. Now Dougherty has taken a turn at the inkstand himself, and the result is Who’s Afraid of Adam Smith: How The Market Got its Soul!

As you would expect, Dougherty is in touch with many of the latest developments. The ideas come tumbling out in no particular order, in the form of sketches of many of the most interesting economists of the present day. His title reflects his enthusiasm for Adam Smith’s first book, The Theory of Moral Sentiments, the one that begins, “Howsoever selfish man may be supposed, there are evidently some principles in his nature, which interest him in the fortune of others, and render their happiness necessary to him, though he derives nothing from it except the pleasure of seeing it.”

Dougherty shows how succeeding generations of economists have taken what they liked from Smith while leaving a good deal of valuable insight in the attic. Today’s economists at last are performing an inventory, in the name of building a better understanding of the nature of the complicated civil society that undergirds our economic system.

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4. A somewhat more systematic overview, geared to the level of interest of a first-year student, is Dollars and Change, by Louis Putterman, a professor of economics at Brown University. Putterman has been influential in the rising community of economists who study the role of social norms and values in economic life, asking hard-to-answer but deeply important questions about how the tastes and preferences that constitute our character come to be what they are.

Here he tackles the question of where the economy and our understanding of it “come from” — their historical., cultural and ethical contexts. “Over the years,” he writes, “as more and more students come to me looking for guidance on how to fill in the pieces that are missing in their courses in both economics and related fields, I have often wished there was something I could recommend to help them along the way.” Hence his book.

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5. Almost the opposite approach has been taken by Todd Sandler, a professor at the University of San Diego, in Economic Concepts for the Social Sciences. He is interested in exporting economic ideas by showing how they may be applied in other disciplines — political science, anthropology, law, ecology, ethics, history, philosophy and sociology. Sandler is an expert in the theory of externalities and public goods, the apparatus that economists devised in the 19th century to describe market failures of various sorts, and in club theory, its 20th century counterpart, which deals mainly with congestion.

As such he finds himself at the interersection of the recent controversy about the nature of economic growth. There is much to be learned from the way Sandler fits the new perspectives into the economics he learned as a graduate student present at the creation of the theory of clubs.

His fifteen surveys of current work, of everything from the latest approaches to political economy to the new experimental economics, of asymmetric information and rational expectations, of game theory and public and social choice, of intergenerational accounting and the new enthusiasm for endogeneity (meaning the ambition to bring more and more phenomena under the economists’ lens), are the most disciplined and coherent of any of the tours d’horizon that I have listed here.

If Sandler’s essays are not a wholly dependable guide to what to expect next, it is because he was born in 1946. He is on the backside of a generational divide among economists that can be expected to take on more and more significance as time goes by. The 1970s were the watershed years. It was then the topic of the wealth of nations once again shouldered aside distribution as the central preoccupation of economics, a development which insures that yet another round of books like these will be written in the years to come.

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