As something of beat reporter, I have half a dozen good stories about economics at the Massachusetts Institute of Technology in various stages of preparation. So what to make of a recent book, MIT and the Transformation of American Economics (Duke, 2014).
I love it, naturally. Not only does it contribute fundamentally to our knowledge of how Paul Samuelson and Robert Solow at MIT more or less invented the field we call macroeconomics and came to dominate the field for a time, but it illuminates the difference between history and journalism.
Transformation is the hardbound annual supplement to the journal History of Political Economy, which is published quarterly by Duke University Press. Each year a research conference assembles an array of scholars writing on a single broad topic; eighteen months later, suitably edited, their papers appear in book form. The topic of the conference to be held next month is “Economizing Mind, 1870-2015: When Economics and Psychology Met… or Didn’t.”
Each volume is in conception the creature of an organizing editor, in this case, E. Roy Weintraub, a Duke professor of economics who, one way or another has been on the trail of the MIT story for nearly forty years. He is the author of, among other books, How Economics Became a Mathematical Science, and last year, with Till Düppe, of Finding Equilibrium: Arrow, Debreu, McKenzie and the Problem of Scientific Credit (Princeton, 2015).
In an introduction, Weintraub lists six competing explanations that have been advanced to account for Tech’s rise to the top of the economics profession:
The oldest narrative and most familiar invokes a Keynesian Revolution, swift transformation in which a mimeographed version of The General Theory of Employment, Interest, and Money carried to Harvard by Canadian graduate student Robert Bryce, converted first a circle of graduate students, then Harvard professor Alvin Hansen, and finally wunderkind Paul Samuelson, who promptly decamped to the technological institute down the street. There is no better account of this version than The Coming of Keynesiaism to America: Conversations with the Founders of Keynesian Economics (Edward Elgar, 1996), edited by David Colander, of Middlebury College, and Harry Landreth, of Centre College.
A second narrative emerged in From Interwar Pluralism to Postwar Neoclassicism a HOPE conference volume from 1998 edited by Mary Morgan, of the London School of Economics, and Malcolm Rutherford, of the University of Victoria. The theories of demand, production and the firm had all been matters of contention in the 1930s, but by the mid-1950s, Weintraub writes, all were settled chapters in graduate and intermediate microeconomic textbooks. How were they thus “stabilized?” It couldn’t have been the highly literary Keynes. Instead it was the new importance that others attached to the role of models and measurement, a thesis elaborated by Morgan in The World in the Model: How Economists Work and Think (Cambridge, 2012) and further illuminated by Weintraub.
A third set of stories emphasizes the effects of World War II: the United States; post-war hegemony overwhelmed various national traditions, especially in Britain and Vienna. Only the US had the resources to educate, train and employ economists, so naturally the science came to be spoken with an American accent. Roger Backhouse, of the University of Birmingham and the University of Rotterdam, editor, with Philippe Fontaine, of The History of the Social Sciences since 1945, (Cambridge, 20120), contributes an essay to the current volume, ”MIT and the Other Cambridge,” describing the fifteen-year battle known as the “capital controversy” through which the American Cambridge took control.
A fourth interpretation contends that the Cold War turned economics and game theory into a Procrustean bed for purposes of exercising social control. None has gone further down this road than Philip Mirowski, of the University of Notre Dame, in Machine Dreams: Economics Becomes a Cyborg Science, (Cambridge, 2002), but Mirowski is not represented in the current volume. Instead essay on the history of operations research, by William Thomas, of History Associates, Rockville, Md., is said to refute Mirowski’s central claim.
Yet another version puts demand for economists; services at the heart of the story, first at MIT, where interest in the “new economics” was greatest, then at several other schools of business and engineering, especially Pittsburgh’s Carnegie Institute of Technology (today Carnegie Mellon University), as described in The Roots, Rituals and Rhetoric of Change: North American Business Schools After the Second World War (Stanford, 2011), by Mie Augier, of the Naval Post Graduate School, and James March, of Stanford University. The role of the GI Bill of Rights in re-shaping US higher education plays a central role here.
A sixth factor, advanced by Weintraub in the Transformation volume, argues that the rise of MIT stemmed from its willingness to appoint Jewish economists to senior positions, starting with Samuelson himself. Anti-Semitism was common in American universities on the eve of World War II, and while most of the best universities had one Jew or even two on their faculties of arts and sciences, to demonstrate that they were free of prejudice, none showed any willingness to appoint significant numbers until the flood of European émigrés after World War I began to open their doors. MIT was able to recruit its charter faculty – Maurice Adelman, Max Millikan, Walt Rostow, Paul Rosenstein-Rodin, Solow, Evsey Domar and Franco Modigliani were Jews – “not only because of Samuelson’s growing renown,” writes Weintraub, “…but because the department and university were remarkably open to the hiring of Jewish faculty at a time when such hiring was just beginning to be possible at Ivy League Universities,”.
Many essays stand out. Backhouse nails down the details of Samuelson’s decision to sign on at MIT. Harro Maas, of Utrecht University, describes the efforts of the University of Chicago to lure Samuelson in the later 1940s. Perry Mehrling, of Barnard College, contributes a perspicacious essay describing the difficulty the MIT tradition, with its emphasis on the general equilibrium of a system of prices, had in coming to grips with the role of money, which the tradition customarily has abstracted away. And Beatrice Cherrier, of the University of Caen, provides a lively overview of the history of the department, 1940-1972, to begin the volume.
At one point Cherrier quotes a 1967 letter Solow wrote to his colleague Franklin Fisher, who had reported from Israel the view there that the MIT department is too committed to the orthodoxy that Samuelson and Solow had devised to be able to recognize promising future developments, especially in theory. Solow replied, “Peter Diamond and Peter Temin will help a lot. Miguel Sidrauski may develop very well…. The department has agreed to go for another econometrician, if we can find a young star. .. I think the prospects are good that we can remain the Duffy’s Tavern of economics, where the elite meet to eat.” The reference is to a popular radio show of the 1940s, an adumbration of the sentimental 1980s television series Cheers.
Fisher was right; Solow was wrong (though Cherrier doesn’t exactly say so). Leadership in theory was about to pass from MIT, though its preeminence in applied economics would soon become apparent. But Solow’s metaphor is especially well chosen, and not just because of the gemütlichkeit of the customary table upstairs at the MIT faculty club, where the economists met most days for lunch.
The broadcast of Duffy’s Tavern always began the same way: a rendition of “When Irish Eyes are Smiling interrupted by the ringing of a phone: “Hello, Duffy’s Tavern, where the elite meet to eat. Archie the manager speakin’. Duffy ain’t here—oh, hello, Duffy.”
The centerpierce of Transformation is an appreciation of Solow by Verena Halsmayer, a graduate student at the University of Vienna. In “From Exploratory Modeling to Technical Expertise: Solow’s Growth Model as a Multipurpose Design,” Halsmayer makes a serious attempt to rescue Solow – the manager of the MIT department for thirty years – from the shadow of the brilliant Samuelson and to evaluate the younger man’s principal contribution, the Solow model of economic growth.
It was a farther-reaching development than is generally understood, she argues, nothing less than a replicable “design” for a specific way of doing economics. a relatively unencumbered means of combining theory with measurement so as to interrogate the real world with “high hopes of producing useful and practical knowledge for economic governance.” As his student George Akerlof once put it, Solow began the process of turning the word “model” into a verb. But what about the aggravation when Nobel laureates Edward Prescott and Finn Kydland used his engine, with its more or less automatic 2 percent trend of growth, to animate their model of “real business cycles” andd harness it to the data? Regret, Solow tells Halsmayer, at having enabled what at he calls “a standing temptation to sound like Dr. Pangloss.”
Transformation is the latest draft of history, a promising start on what promises to be a very complicated process. More will follow relatively quickly: Michael Weinstein, an MIT PhD who for many years was a member of the editorial board of The New York Times, is completing has put aside for the moment a book-length essay on Samuelson. But Backhouse has begun a full-scale biography — a draft first volume takes Samuelson through 1948. Much more remains to be done, including a proper biography of Solow.
Yet for all the value of careful history, it remains, by definition, a rear-view mirror That is why we have journalism, too.