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Thursday, July 15, 2010

Roger Backhouse's Penguin History of Economics

Roger Backhouse's The Penguin History of Economics

I have just finished reading this book, The Penguin History of Economics, and found that it was a very well written and interesting book on economic history. Necessarily brief, the author has convered most of the possible ground and has done it most wonderfully.

In short: Economics started as a nebulous and amorphous subject that spanned moral philosophy and law, and it evolved over time to become political economy, a practical application of economic ideas, and then finally became the mathematical monster that we view with fear and apprehension today. As Krugman once said, as an economist in good standing, he is perfectly capable of writing things that nobody can read.

Backhouse argues that with the increase in numbers of Russian, and some German, mathematicians going to the USA in the late 19th and early 20th centuries, economics slowly became more mathematical. Losing the historical and psychological components came about slowly not just because of the influx of what we Singaporeans would call "foreign talent", but also because of the wish of economists to make their subject more like the natural sciences, like physics.

However, and this isn't just my opinion, there have been arguments against the mathematisation of economics. One is that the mathematics require a vast simplification of economic ideas so that they are amenable to mathematical treatment. Another is the fact that General Equilibrium models, which are deductive and general in nature, are no more than mathematical edifices which have really little to do with empirical reality. In other words, while deductive reasoning aims to show that the conclusions really flow from the premisses, some DGE models are so general as to be useless in the real world. Yet another argument is the fact that institutions are largely ignored in mathematical models, and yet the structure and institutions of society are key features - historical and sociological features, I might add - that affect economies.

Overall, this is a very interesting book that appeals probably to those with plenty of time on their hands, or a MSc of Economic History to study for, or people like me who are boring - I mean, academically inclined. Roger Backhouse writes beautifully and the key examples are short, sharp and to the point. I've learnt that economics is actually a very diverse and colossal subject - and that as my thesis supervisor once said, even the greatest geniuses among you will never be able to learn everything there is to learn.

This is a humbling book which points out future areas of research and reading. A 8/10 for laymen and a 9.5/10 for people in this field, economic history.

Anything that interests me~