Book Review: Economic Thought
A History of Economic Thought by William J. Barber, Pelican. 5s.
Socialists, who have all at least had a go at reading Marx, are familiar with big names in economic thought—Sir William Petty, the Physiocrats, Adam Smith, Ricardo—and even with lesser names now long forgotten like Nassau Senior and his last hour. Marx saw his work as in the tradition of the classical economists like Smith and Ricardo who had set out to study the processes of economic growth and the distribution of income among social classes. Later economic writers turned to the study of prices and the market. Marx called them ‘vulgar’ economists as they tended to take a businessman’s view of economic life. In his discussion of Adam Smith. Barber brings out the different approaches of classical and modern economics:
“Smith’s analytical categories contrast sharply with those widely used in much current economic analysis. A prevalent modern approach to income distribution is entirely ‘functional’ in orientation; that is to say, various income payments are treated as rewards to the ‘factors’ contributing to production… In such a ‘functional’ system all class lines are hidden. Smith, on the other hand, began with a social class division and built the greater part of his analytical structure around it.”
Barber briefly surveys the contribution to economic thought of Adam Smith, Malthus, Ricardo, John Stuart Mill, Marx, Alfred Marshall and Keynes. Malthus is obviously out of place since his contribution was next to nothing. He did open a discussion on population, it is true, but, and Barber notices this too, he contradicted himself in different editions of his main work. He was also a shameless defender of an idle and wealthy leisure class.
Barber’s treatment of Marx is reasonably intelligent though marred by a number of mistakes. He claims that Marx assumed that the rate of exploitation (the ratio of profits to wages) would remain constant over time. Yet Marx devoted much space to describing the means capitalists used to increase it like the lengthening of the working day and the intensification of work. Barber also states that Marx “eliminated the classical concept of rent from his analysis”. Yet Marx discusses this too in some detail. Marx is often wrongly seen as an underconsumptionist so it is odd to read that Marx
“was too closely wedded to the classical tradition of Say’s Law to provide a systematic demonstration of cyclical fluctuations. Within his system there could be no deficiency in total demand; only capitalists were in a position to save; and what they saved went into investment expenditure.”
Say, a minor French economist, argued that general overproduction or underconsumption was impossible as supply created its own demand; what was not spent was all invested. ‘This conclusion’, as Barber points out, ‘rested on an important, though implicit, assumption: that all income was spent and none hoarded’. Marx never held this view. In fact he was one of the first to see through Say’s Law. He explicity rejected Say’s views, arguing that the possibility of a crisis arises if the capitalists hoard and don’t re-invest their profits, which they will do if they think there’s no prospect of making any more.
Barber would seem to be taking on the whole of sociology in his criticism of Marx’s ‘social determinism’. To suggest that human action in society can be explained in a scientific way, i.e. in terms of cause and effect, does not commit you to a fatalist view of human behaviour.
Despite these limitations A History of Economic Thought is a useful guide and introduction to the theories of both pre-and post-Marxian economists.
A.L.B.