The Wall Street Journal seems to have confused two categories in listing the top ten economists of the millennium: the "best and the brightest" and those who "made a difference."
The problem is that these are not the same individuals.
While the Austrians are not entirely excluded from the list below, the Keynesians, positivists, and socialists have an unfortunately large presence.
For responses, see the end of this text.
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Wall Street Journal
January 11, 1999
The Millennium: One Thousand Years of ... Ideas
Best & the Brightest
Economic thinkers who made a difference
By KEMBA DUNHAM
Behind every great thought is... a person who actually came up with the
idea.
So, who were the millennium's most influential economic and business
thinkers? Who were the people whose ideas fundamentally challenged the
conventional wisdom, whose perceptions changed the way millions thought and
lived? What follows, in chronological order, is a look at some of them.
St. Thomas Aquinas (1225-1274)
Occupation: Theologian and philosopher
Major contribution: Classical systematization of Latin theology
One of the most important figures from the Church during the Middle Ages,
St. Thomas tried to reconcile theology with the emerging economic conditions
of the time. St. Thomas, who was Italian, didn't believe that wealth was
natural or positive, but saw it as another of man's earthly imperfections.
He acknowledged property rights, but believed if some were without, theft
was acceptable.
St. Thomas viewed trade as unnatural but unavoidable in an
imperfect world. Trade, in his view, was justifiable if the merchant's
intent was to maintain his home life and if the traded item would benefit
the country. St. Thomas also believed that selling something for more than
it was worth was a facet of man-made laws, but he supported it if the seller
would otherwise take a loss. And he felt that it was unjust to charge
interest on a loan.
Ibn Khaldun (1332-1406)
Occupation: Historian, social scientist, political activist
Major contribution: Theories on economics and politics
Khaldun's major work espoused ideas that were decidedly different from the
mainstream Islamic thinking on economics. Some historians believe that Ibn
Khaldun, who was born in Tunis, was the first medieval thinker to recognize
the synergy between economics and politics. Eschewing idealism -- which was
prevalent at the time -- for a realistic approach, Khaldun's "Muqaddimah"
(an introduction to history) gave an in-depth and clear analysis of the
cyclical nature of the rise, maturation and decline of political regimes and
economies. He stated that a normal economy grows out of basic needs and
community solidarity, but once it becomes highly productive, solidarity
wanes and people become immoral, often driven by the pursuit of luxury.
Thus, an economy cannot sustain itself for the long term.
Adam Smith (1723-1790)
Occupation: Professor of moral philosophy, University of Glasgow, Scotland;
economist
Major contribution: Promoted laissez-faire economics
Smith's "An Inquiry into the Nature and Causes of the Wealth of Nations" is
the capitalist manifesto (though the word "capitalism" wouldn't emerge for
another century). In this groundbreaking work, Smith -- a Scot known as the
father of classical economics -- argued that guild restrictions, monopolies
and trade barriers were impediments to a flourishing, healthy economy.
Smith's theory became known as laissez faire (literally, "let [the people]
do") economics.
If governments freed people and businesses from economic
restraints and allowed them to pursue their own self-interest, Smith
maintained, an "invisible hand" would lead to a more efficient division of
labor and steer an economy toward faster growth. This doctrine contrasted
sharply with mercantilism, in which controls on industry and trade were
viewed as the most effective way to serve a country's economic interests.
David Ricardo (1772-1823)
Occupation: Stockbroker, economist
Major contribution: "Labor theory of value"
Ricardo, along with Malthus, helped change the prevailing social view from
one of optimism to one of pessimism, helping to make economics the "dismal
science." Ricardo, who was British, postulated that landlords became rich at
the expense of the society, while the workers and the industrial capitalists
were the losers. In his "Principles of Political Economy and Taxation"
(1817), Ricardo argued for a "labor theory of value." Following Smith,
Ricardo postulated that the value of most goods depended on the amount of
labor needed to produce them. For example, land with fertile soil commands a
higher rent than that with poor soil because it produces more. But as thepopulation grows, the poorer-quality land needs to be cultivated to meet the
demands of the burgeoning society.
Rent on the fecund land then rises, along
with the price of food in general. This process results in falling profits
as well as increasing use of poor-soiled land that requires ever more work
to cultivate. So, as rents rise, profits fall. Economic progress is thus
thwarted by rising rents, and the only one who benefits is the landlord.
John Stuart Mill (1806-1873)
Occupation: Economist and philosopher
Major contribution: Promoted utilitarianism
Known as the last great economist of the classical school, Mill advocated
policies that he felt were most consistent with individual liberty. Liberty,
he wrote, could be threatened by both social and political tyranny. Mill's
seminal "Principles of Political Economy" theorized that the real basis for
economic law was production, not distribution. Mill, a Briton, strayed from
the classical economists, however, on the issue of the inevitability of the
distribution of income produced by the market system. He felt that the
market was capable of allocating resources, but not of distributing income,
so society had to intervene. He didn't like capitalism, but recognized its
vitality. At the same time, he wasn't a socialist, either, but studied
pre-Marxian socialist dogma and sought to improve the conditions of working
people.
Karl Marx (1818-1883)
Occupation: Social philosopher and revolutionary
Major contribution: "Communist Manifesto" and ideas on socialism
"Workers of the world, unite! You have nothing to lose but your chains,"
urges the final phrase of the "Communist Manifesto," which Marx wrote along
with Friedrich Engels in 1848. This work contained the Marx/Engels
prediction that capitalism would lead to revolution. The German-born Marx
believed that the emerging capitalism and the various revolutions occurring
in Europe were one stage of history evolving into another. He argued that
history was marked by various stages of class struggles. Feudalism had given
way to capitalism, exemplified by the Industrial Revolution. The
capitalists, driven by greed and competition, would then exploit their
workers by not giving them a fair share of what they produced. Eventually
the proletariat, or the worker class, would revolt and usurp the means of
production and implement socialism. Once private property was eliminated,
true communism would exist -- an ideal, classless society.
Leon Walras (1834-1910)
Occupation: Economist
Major contribution: A founder of marginalist school of economic thought
Walras was one of the founders of the marginalists, who argued that prices
depend on the level of customer demand, and not just on the cost of
production, as the classical economists believed. Marginalist economics gave
modern-day macroeconomics the basic tools of supply and demand. Walras, who
was French, is best known for revolutionizing economics with his
mathematical formulation of the mechanics of the price system. He presented
equations that tied together theories of production, exchange, money and
capital. His general equilibrium theory has come to be called "Walrasian
general equilibrium" -- and is still very much a part of modern economic
theory.
Alfred Marshall (1842-1924)
Occupation: Professor at Cambridge University, economist
Major contribution: Chief founder of neoclassical school of economics
Marshall combined some concepts of classical economics with marginalist
thinking, which led to the term neoclassical (often used synonymously with
marginalist). Neoclassical economists study both human behavior and wealth
to understand why humans make certain choices. Marshall's influential
"Principles of Economics" (1890), considered the bible of British economics,
stressed that the output and price of a good are determined by supply as
well as demand. He also introduced several key economic concepts, including
consumer's surplus (the difference between the actual value of what the
consumer bought and what he actually paid for it), quasi-rent, elasticity of
demand and the representative firm. His work shed light on the importance of
supply and demand curves, as well as on the importance of time in the
equilibrium process, distinguishing between the short run and the long run.
Thorstein Veblen (1857-1929)
Occupation: Political economist and social critic
Major contribution: Laid groundwork for school of institutionalist economics
Veblen analyzed American social and economic institutions and their
psychological bases. He was catapulted to fame with the publication of his
first and best-known work, "The Theory of the Leisure Class" (1899), in
which he attacks the influence of laissez faire economics and big business
on society. In this work, he coined the phrase "conspicuous consumption,"
denigrating the flamboyance of the leisure class. Veblen set out to apply
Darwin's theory of evolution to the study of modern economic life, looking
at how economies evolve -- for instance, from a fishing economy to a farming
one. Veblen's reputation reached its apex in the 1930s, when the Depression
seemed to validate his views about the business economy. His concepts ledthe way to increased governmental involvement in the economy.
Irving Fisher (1867-1947)
Occupation: Professor at Yale University, economist
Major contribution: Principles on monetary theory
Fisher is widely regarded as America's first mathematical economist and was
instrumental in making economics a more exact science. He developed the
modern concept of the relationship between the quantity of money and changes
in the general level of prices. His equation of exchange is perhaps the most
successful attempt to explain the causes of inflation. Fisher maintained
that the overall price level could be stabilized, which would lead to the
stabilization of the economy.
In 1923, Fisher established the Number
Institute, a company that would develop and sell index numbers -- an
important means of measuring general price levels -- in addition to other
economic data. The institute was the first organization to offer systematic
index-number information in data form to the general public. Fisher was a
leader in the development of econometrics, a new field that made statistical
methods a larger part of economic theory.
John Maynard Keynes (1883-1946)
Occupation: Economist, financier and journalist
Major contribution: Theories on causes of prolonged unemployment
Keynes's "The General Theory of Employment, Interest and Money" (1936)
recommended frequent government intervention in the market and, during a
recession, deficit spending and fluid fiscal policies. The British
economist's theories were instrumental during the Depression, when the
international monetary system fell apart. The governments of both the U.S.
and Britain initially decided to cut government spending and deny credit to
jump-start the economy while attempting to keep prices high -- measures
Keynes disagreed with.
In 1934 and 1935, various European nations pulled out
of the Depression after the governments increased unemployment benefits,
raised government salaries and subsidized home building, all of which lifted
consumer confidence. Keynesian economics also played a part in President
Roosevelt's New Deal, which helped to revive the U.S. economy by lending
money to banks, helping out businesses and farmers, and assisting the
unemployed via public-work programs.
Joseph Alois Schumpeter (1883-1950)
Occupation: Economist
Major contribution: Theories of capitalist development and business cycles
Schumpeter's work focused on how the interaction between individuals and the
economy brings about economic change. Schumpeter, a Moravian-born American,
emphasized the importance of entrepreneurs as the drivers of capitalist
development. He also emphasized bankers and banks as providers of created
credit that allow entrepreneurs to carry out their plans. Schumpeter was a
leader in econometrics, a new branch of theory-driven statistical inquiry
that attempted to fortify the scientific center of economic inquiry.
Friedrich August von Hayek (1899-1992)
Occupation: Economist
Major contribution: Found solutions to problems posed by Keynesian economics
Although he won a Nobel Prize for Economics Science in 1974, Hayek made
major contributions to the understanding of government intervention and the
development of social structures. An Austrian-born Briton, he first became
famous at a young age for his trade-cycle theory, which he put forth during
the 1920s and 1930s, but these views were eclipsed by Keynes's "General
Theory." Hayek asserted that only a free economy could organize an efficient
distribution of resources into productive industries, and that inflation,
unemployment or recession result from governmental interference. Hayek was
dedicated to illuminating the problems of socialism. His highly popular "The
Road to Serfdom," published in 1944, was a defense of laissez faire
economics, and theorized the immense problems of a socialist system.
Interest in Hayek's work was revived after he received the Nobel Prize, and
received even more attention with the fall of communism in Eastern Europe.
Milton Friedman (1912-)
Occupation: Economist, University of Chicago
Major contribution: Premier spokesman for monetarist school of economics
Friedman led the Chicago School of economics, which emphasized the
importance of money and free markets. Friedman, who won a Nobel Prize in
1976 for his work in monetarism, argued that changes in the money supply
precede, instead of follow, changes in overall economic conditions. Friedman
has been the leading opponent of Keynesian interventionist theory since the
1950s. He has argued that all social-welfare programs should be replaced
with a negative income tax, believing that minimum-wage laws and union
monopoly laws do nothing but exploit the poor. Friedman argues that
discretionary fiscal and monetary policies are more likely to interfere
with -- rather than improve -- economic functioning. At any given time in
the economy, he contends, a number of forces -- such as labor-market
structure and unemployment-insurance laws -- lead to a natural rate of
unemployment.
Paul A. Samuelson (1915-)
Occupation: Economist, Massachusetts Institute of Technology
Major contribution: Demonstrating the mathematical structure of economic theory
In an effort to make sense of the contradictions he found in the classical
language of economics, Samuelson turned to mathematics. His Harvard doctoral
thesis and most famous work, "Foundations of Economic Analysis" (1947),
raised the level of economic analysis and put it on a firmer, mathematical
base. He believed that mathematics was necessary to understand what
economics was about. His "Economics: An Introductory Analysis," published in
1948, is one of history's best-selling economics textbooks. Samuelson also
made significant contributions to areas including the theory of consumer
behavior, welfare economics, capital and interest, and public finance. He
was at the center of "neoclassical synthesis," a movement that melded
classical and modern economic findings.
* * * * *
Ms. Dunham, a news assistant in The Wall Street Journal's New York
bureau, was a researcher for this report.
Copyright c 1999 Dow Jones & Company, Inc. All Rights Reserved.
See, in PDF,
Murray Rothbard's critique of Schumpeter and Walras
See in text Peter Klein on F.A. Hayek and Greg Ransom's Hayek's Scholars Page.
See, in PDF, Joseph Salerno on Mises as a Social Rationalist.
See, in PDF, Salerno on Keynes's Millennialism.
See, in PDF, Rothbard on Marx.
Finally, for an overall response by an Austrian to the neoclassical tradition, see (in text) the article by Michael Prowse in the Austrian Economics Newsletter.
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