Grand Pursuit: The Story of Economic Genius

By Sylvia Nasar

(Simon & Schuster, 558 pp., $35)



I thought I knew what this book was going to be about when I started it, but by the time I came to the end I was no longer sure. There is a prologue that begins with Charles Dickens’s observations and depictions of miserable London poverty, and then moves naturally to the classical Malthusian trap as the only explanation offered by the political economy of the time: any improvement in the general standard of living will be wiped out by increased population, so nothing much can be done except perhaps exhortations of abstinence. Dickens himself entered a plea for a more humane political economy. (This was an interesting piece of news to me. Presumably he intended something more than sugarcoating the pill, but what?) That could indeed be a “Grand Pursuit”: how economics and the economy learned to adapt to sustained growth and rising living standards. Sylvia Nasar’s first chapter almost confirms this idea; it is about Marx and Engels, with more emphasis than is usually given to Engels and his powerful Condition of the Working Class in England in 1844.

But this suggested theme does not hold up. The book is not “The Story of Economic Genius” that is promised in the subtitle. It is instead the story of the public and private lives of a handful of major figures in economics, some of them pretty clearly possessed of “economic genius,” at least part of the time, and some of them pretty clearly not, unless one plays fast and loose with the notion of genius. Most surprisingly, there is not much about the evolution of economic ideas in this book, either in the way Dickens hoped or otherwise. There is a lot of quite fascinating biographical detail about a series of interesting economists, and even more about the political, financial, and economic setting in which they functioned. Nasar spends much more time on the public role of her subjects than on their thoughts about economics itself. They were indeed all public figures of one kind or another. Many of them were also important economists, but you do not hear much about that at all; and when you do, the book skimps on intellectual content.

One does not have to wait for an example of this gap. A chapter on Alfred Marshall follows immediately after Engels and Marx. Marshall was one of the founders of modern economics. His Principles of Economics, which appeared in 1890 and went through a total of eight revised editions, was the great general treatise after John Stuart Mill. When I first studied economics in 1940, we were not given Marshall to read as a textbook; it would probably have been an improvement if we had. It is not much remembered today that Marshall was not merely the man who systematized the theory of the firm and the interaction of supply and demand in a competitive market. He was also an assiduous observer of the industrial practices of his time, and the ways in which they often deviated from the neat but necessary abstractions of theory, including his own. He was interested, for example, in the role that perceptions of fairness played in the determination of wages. He knew that rising productivity was the serious answer to mass poverty. You might say that he was starting to give Dickens his wish. So it is surprising to read a forty-three-page chapter about Alfred Marshall that arrives at the Principles of Economics only in its last few pages. By contrast, Agnar Sandmo, the author of Economics Evolving: A History of Economic Thought, an excellent recent history, offers an economist’s-eye view: he devotes a twenty-five-page chapter to Marshall, almost all of which is essentially about the content and the influence of Marshall’s great work.



THIS PATTERN of downplaying intellectual content persists throughout. The rest of Nasar’s cast of characters includes Beatrice Webb (an oddball in this company), Irving Fisher, Joseph Schumpeter, John Maynard Keynes, Friedrich Hayek, Joan Robinson, Milton Friedman, Paul Samuelson, and Amartya Sen. In no case is there a serious discussion of the ideas that might earn their author a place in a history of economic thought, although some on the list are truly important figures in that story. It may be that this approach does best, almost accidentally, by Schumpeter. So far as economics, as understood by economists, is concerned, Schumpeter contributed one important and fertile idea, and he had formulated it by 1912. It was the insight that the dynamics of a capitalist economy are driven by technological and organizational innovation, and the key figure in this process is the entrepreneur who mediates between sheer invention and the market economy. He also emphasized the importance of credit creation as the mechanism that places resources in the hands of active entrepreneurs.

As part of his theory, Schumpeter developed and dramatized the central concept of “creative destruction.” Many important innovations render existing goods, methods of production, and forms of organization obsolete, or otherwise displace them. Economic value and social status are brusquely destroyed. Pre-existing expectations are overturned. But this is the way a capitalist economy has to advance if it is to advance at all. This was Schumpeter’s way, and the right way, to dispel the classical economists’ pessimistic vision of the “stationary state,” enforced by diminishing returns and the Malthusian iron law of wages. The outline of the central Schumpeterian drama is not hard to understand, once it has been seen, and it requires no technical elaboration. “Creative destruction” has achieved the status of a buzzword. It finds a proper place in the book. (It goes without saying that modern economists have elaborated on the basic idea and added bells and whistles.)