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Audiobooks Narrated by Lois Rukyser
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Leon Walras (1834-1910) transformed economics from a literary discipline into a mathematical, deterministic science. For the first time, Walras expressed rigorously the view that all markets are related, and that their relationships can be described and analyzed mathematically. These interrelated markets tend toward a "general equilibrium" position, undergoing a constant interactive adjustment process that Walras called a "tatonnement". This conception of economics led to important new insights about the stability of markets and about the capitalist economic system. A follower of Walras, Vilfredo Pareto (1848-1923), viewed economics as part of the broader science of sociology, extending Walrasian analysis to say that society at large is an equilibrium system. This view profoundly influenced the modern course of the "social sciences", in which quantitative techniques have become standard analytical tools. Many later scholars have been awarded the Nobel Prize for developing the Walrasian analysis of capitalism.
Institutionalism is an economic point of view that emphasizes the role of social organization and structure in modern economic life. Thorstein Veblen (1857-1929), an American son of Norwegian immigrants was instrumental in creating this school of thought in the early twentieth century, and he vigorously attacked what he regarded as the privileged “leisure class” in American. To Institutionalists, the important “institutions” of economic life include customs, habits, morals, and laws. These are believed to be more important in shaping economic life than are marketplace principles. Institutionalists emphasize a historical interpretation of social life, asserting that economic generalizations should be relevant to time and place. They believe that economics has few absolute principles, and therefore that economics cannot be a rigorous science. Institutionalist ideas greatly influenced economic policies that were created in response to the Great Depression. Among the most important followers of this tradition in the late twentieth century has been John Kenneth Galbraith.
In the middle and late 1800's, a group of German university professors developed the study of economics as a historical discipline, emphasizing careful analysis of real-world circumstances rather than abstract "principles" and "laws". Led by Gustav von Schmoller (1838-1917), these professors denounced the abstract theories of classical economists and their ideas of "natural law", believing that these ideas had very little empirical foundation and offered no solutions to pressing social problems under laissez faire. These German scholars feared Marxist agitation and the socialist takeover of Germany, seeking instead a middle ground between laissez faire and possible Marxist revolution. They pressed for social welfare legislation that would relieve the misery of the underprivileged; they wanted to preserve the market economy, parliamentary democracy, and private ownership of the means of production. This welfare legislation passed in the 1880's, and has been emulated in Scandinavia, the United States, and other countries.
The classical economists pioneered a new way of thinking about the uniquely human tendency to produce, trade, consume, and accumulate. Adam Smith (1723-1790) explained how the division of labor expands productive power and argued for freedom in economic affairs; Smith attempted to explain the basis of value, prices, the role of money, and other important concepts related to prosperity and an improved standard of living for all members of society. David Ricardo (1772-1823), a London stockbroker, developed the concept of diminishing returns, the wages-fund doctrine, and classical rent theory. Another classical theorist, Thomas Malthus (1776-1834), proposed that workers are doomed to subsistence wages, because populations increase geometrically while food production increases arithmetically. Other classical economists, including James Mill, John Stuart Mill, and Nassau Senior, extended and refined classical economics to meet new controversies and ideas throughout the nineteenth century.
Ludwig von Mises (1881-1973) and Friedrich Hayek (born 1899) were perhaps the foremost defenders of the free market and limited government during the mid-twentieth century ascendancy of Keynesian economics. Mises highlighted the problem of economic calculation in non-market economics. He saw the price system as the basis of economic calculation, and emphasized the importance of sound money for it to work properly. He denounced the government manipulation of money, and saw government credit expansion as the cause of the economic boom that collapsed in the Great Depression. Mises created an all-encompassing theory of economics as a system of human action. Hayek emphasized the role of knowledge in economics, asserting that man "cannot acquire the full knowledge that would make mastery of events possible." He advocated a competitive system of privately issued currencies of a superior alternative to government control of the currency. Hayek insisted that capitalism has improved the living conditions of workers, contrary to popular conceptions. Hayek received the Nobel Prize in 1974.
John Maynard Keynes (1883-1946) was without question the most influential economist of the twentieth century. His most important work, The General Theory of Employment, Interest, and Money, was published in 1936, and it was widely perceived as offering plausible explanations and solutions for the Great Depression. Keynes' economic analysis was highly complex and subtle. It suggested that capitalism is vulnerable to instability caused by insufficient consumer demand. He emphasized the reluctance of workers to accept reductions in nominal wages, preventing free market adjustments to unemployment Keynes also suggested the possibility of a "liquidity trap," which could prevent market forces from restoring full employment. Based on these and other perceived defects in the capitalist system, Keynes suggested government intervention in the economy, and modern politicians have accepted and applied Keynesian ideas with great enthusiasm.
After John Maynard Keynes revolutionized economic thought in 1936, there began a keen struggle in the economics profession to digest and refine Keynes' new system. The heart of this debate over Keynes' radical ideas has been whether they could or should be reconciled with the older, neoclassical economic theory. The two main branches of thinkers in the Keynesian tradition are the Post Keynesians and the Neoclassical Synthesists. Post Keynesians believe that Keynesian ideas have overthrown the neoclassical belief in efficient, free markets. Neoclassical Synthesists accept Keynesian arguments for short-term economic consequences, but they believe that free markets achieve the best long-term results. Two famous economists discussed in this audiotape presentation are Joan Robinson and Paul Samuelson. Central to this debate are questions about how long the market can or should take to correct undesirable circumstances; whether the free market is a collection of individuals, or a competitive arena for powerful economic groups that overwhelm individuals; and what is (or should be) the influence of money on production and exchange.
In his monumental work, Das Kapital, Karl Marx (1818-1883), tried to show that capitalism was both inefficient and immoral. His key to explaining capitalism is his labor theory of value, which he developed from ideas of Adam Smith and David Ricardo. Marx argued that all profit, rent, and interest are "surplus-value", obtained by paying workers less than the value of their products. He maintained that the living conditions of the workers always tend to deteriorate that competition automatically creates monopoly, and that the business cycle demonstrates the wastefulness of capitalism.
Monetarism emerged in the 1960's under the leadership of Milton Friedman, who received the Nobel Prize in 1976. Friedman taught at the University of Chicago during this period, developing monetarism as a branch of Frank Knights' famous "Chicago School" of economics. Monetarists emphasize the role of money and the government's monetary policy in economic affairs; they vigorously defend the free market in their work. Supply side economics, another modern branch of free market economics, emphasizes the harmful role of impediments to production (such as taxes). Robert A. Mundell is often considered the father of this modern school of economic thought. He explained his basis of supply-side thinking between 1962 and 1971 and influenced another, now famous economist -- Arthur Laffer (one of his former students). This school of thought advocates government policies that would stimulate increased overall economic production, rather than to redistribute existing production. Supply-side economists emphasize the role of property rights and of sound currencies in encouraging the growth of production and an improved standard of living.
Joseph Schumpeter (1883-1950) viewed capitalism as a dynamic engine of progress. In his view, mature economic systems find a regular and stable routine of supply, demand, and exchange; Schumpeter called this the "circular flow". Entrepreneurs interrupt this circular flow with new ideas and visions about the economic future, recombining existing resources to create new and more valuable products and services. Schumpeter saw the freedom of innovation and exchange as the foundation of material progress in capitalist economies. Schumpeter called capitalism a process of "creative destruction" because it overthrows old routines and methods of production. But he recognized that this process is unstable, and therefore unsettling, for those who have become accustomed to established ways. Schumpeter predicted growing political opposition to capitalism and a corresponding growth in socialism, in the 20th century.
Frank Knight (1885-1972) disliked the idea of a "school of thought" associated with his work. Ironically, however, he is usually considered one of the founders of the "Chicago School of Economics", a group of economists whose members are among the most honored and decorated in history. Many have speculated that Knight himself would have received the Nobel Prize had he lived longer; the prize is awarded only to living persons. Knight was concerned with a wide range of subjects, including such philosophical topics as means vs. ends, economics as a study of human nature and human communication (including "lying"). As an abstract theorist, Frank Knight emphasized the role of risk and uncertainty in economic affairs. Knight also was heavily involved in one of the popular economic topics of his day: is economics a philosophical and behavioral study, or is it an empirical science? Although Knight did not create a systematic economic theory, his keen critical eye and his biting wit make him one of the most colorful and provocative of all the great economists.
Carl Menger (1840-1921), and Eugen von Bohm-Bawerk (1851-1914), working in Vienna in the late nineteenth century, rejected the classical and Marxian ideas that value can be measured objectively. They insisted that the subjective preferences of consumers determine value; this shifted the attention of economic analysis from productive power to consumer demand. This shift led to keen new insights, including the idea that the marginal utility of goods, i.e., the usefulness to a consumer of one more (or less) unit of an item, determines its price. Other insights of the early Austrians include an explanation of why interest is necessary; how the price system allocates economic resources; how to determine cause vs. effect in economic affairs; and how to distinguish between the means (activities) and ends (goals) of economic activity.
