A Short Note on Economics and the Relevance of Its History

A Rejoinder to Noah Smith

With some significant delay, I would like to offer brief reflections following Noah Smith’s controversial (?) take on the role that the writings of great economists like (Adam) Smith and Marx play in contemporary economics. I’ve been hesitating writing on this, mainly because as an economist whose long time main occupation has been to think about the nature of his discipline, I think a lot has already been said on this. By the way, a couple of years ago, I wrote on a similar topic but with a focus on philosophy rather than economics. Also, Eric Schliesser and John Quiggin offered valuable responses that covered the blind spots in Smith’s argument. Nonetheless, here is my modest contribution to the debate.

To recap, referring to one of those not properly-argued and quite often silly debates on X, Smith argues that reading the great economists is most of the time useless for contemporary economists:

“Imagine you’re an economist working for Amazon, using game theory to design online markets. Now imagine some English professor at a liberal arts college shouts at you that your whole field is “fake” because you haven’t read Marx. I imagine that experience would be a bit surreal.”

Then he notes that actually economists do study the history of their disciplines, most of the time as graduate students. They read more recent but still “old” papers of Samuelson, Arrow, or Akerlof. The key difference between the ideas developed in these articles and those found in the writings of Marx (really Smith’s main focus) is that the former but not the latter are part of the stock of knowledge on which economics continue to build, while the latter are considered as mostly irrelevant. Third, Smith nonetheless claims that economists should read Marx, but not for the reasons humanities professors have in mind:

“And in fact, I think this is the most important reason economists should read Marx. His vision of history as a grand revolutionary struggle is a cautionary tale of what can happen when pseudo-economic thought is applied too cavalierly to political and historical questions.”

“The Money Lender,” Quentin Matsys (1514)

So, is Smith right or not? If we want to take a more analytical stance, much of the answer turns out to depend on the nature of economic knowledge. To simplify matters (more than) a bit, “Popperian economists” would argue that economic knowledge is cumulative. It progresses through “conjectures and refutations.” Once a theoretical or empirical result has been validated by the community, it is added to the stock of knowledge, until it is falsified by new results. In the meantime, it can be used to elaborate further inquiries that build on previously created knowledge. “Kuhnian economists” would argue that economic knowledge is rather organized into “paradigms” that are grounded on different, contradictory, and very often incommensurable methods, principles, and assumptions. Because they don’t use the same concepts, economists belonging to different paradigms literally study a different reality. While within a paradigm, economic knowledge can eventually proceed cumulatively, in reality, what we have are competing and hardly comparable stocks of knowledge.

It is relatively clear that Smith’s first claim makes sense from a Popperian perspective. It can also be defended in Kuhnian framework, but of course here the question is why one chooses to work within one paradigm rather than another. There are answers (this is how one has learned economics, this is the most intellectually appealing approach), but here we understand why the history of economics may be relevant to have the big picture. Now, determining whether economic knowledge is mostly Popperian or Kuhnian is a tough issue and I doubt that my readers would have the patience to delve into this kind of arcane considerations. Instead, let me make a more evidence-based observation. As a matter of fact, a large majority of economists practice their disciplines as a Popperian one. That means that in their daily practice, they use and cumulatively produce knowledge. That’s why they don’t spend time on the old writing of the great economists. For fundamental knowledge, you have textbooks and handbooks that are regularly updated to keep track of the progress of the discipline. For more specialized knowledge, you have the literature at the “research frontier.” You don’t really need anything else to practice economics.

In this sense, I would go even further than Smith. You can be a very (professionally) successful economist without having read either the Great Old Economists or the contemporary ones. Honestly, it’s not really a problem if you haven’t read Arrow (1963) or Akerlof (1970). There are on the market very good intermediary and advanced textbooks that do a pretty good job presenting these contributions, very often more compactly and efficiently. It may happen that you’ve been assigned these papers during your graduate studies, but you anyway probably didn’t understand half of them and forgot the other half. Again, this is not really a big deal. You can still do a very PhD thesis with a nice job market paper on the niche topic you’re dealing with. As you specialize, you’ll only need to master the literature on your topic and the tools related to it. You can publish a lot like that, including in the highest-ranked journals. Sure, you’ll lack general expertise and that will limit your impact. But very few contemporary economists can claim to have such expertise, and again, this is not professionally required.

Of course, you could respond that while this is the way economics is actually practiced, this is not the way it should be practiced. Economists are just wrong to practice their science as if economic knowledge were Popperian. Presumably, this is what some humanities professors and other critics mean when they laugh at economists who are proud of not knowing the history of their disciplines. That sends us back to the abstract debate on the nature of economic knowledge that we don’t want to start. I can only add here that in general, the arguments for the claim economists should read the classics are pretty weak, compared for instance to the same argument in philosophy (where they may not be so strong). Here again, I side with Smith. However, John Quiggin has a good point when he notes that economists probably do not know well enough about the recent history of their disciplines. This has led to many dubious theoretical developments, especially in macroeconomics, with a lot of wasted intellectual energy and, maybe, adverse economic consequences. In general, a lack of historical knowledge leads to overconfidence and “scientific bubbles.” My guess is that this is what is happening today with behavioral economics and experimental development economics (i.e., RCT).

This leads me to my last remark. Smith claims that it is useful to read Marx to avoid repeating the same mistake of using dubious economic thinking to support misguided political projects. Modern economics, in contrast, “with all of its mathematical formulae and statistical regressions, represents academia appropriately tamed — intelligence yoked to the quotidian search for truth, hemmed in by guardrails of methodological humility.” The Aronian part of me sympathizes a lot with this. Epistemic humility is definitely something that we need, even more in these difficult times, and grand theoretical constructions that are blindly venerated by followers convinced that the Truth can only be found by keeping on doing the exegesis of the Book are a recipe for disaster. This is after all how a secular religion emerges. As Eric Schliesser notes, however, there is something odd here. Tamed or not, economics can and has been used as part of ideological endeavors to change societies, sometimes brutally and against the will of the populations (the Washington consensus, anyone?). Of course, economists who honestly do their research without any political end in mind cannot be accused of anything. Or do they? Again, this is a complicated issue. One for historians and philosophers of economics.

So, Smith is right. The history of economics is mostly useless for economists in their professional daily practice. However, economists are not only economists. They are also citizens and “members of the public.” Their civic and political role is not exhausted by their function as professional economists. Economists can also be cultivated and historically-aware citizens. Their potential social and political influence even makes this highly desirable. So, I don’t know if they should read Marx or (Adam) Smith. They should probably have an understanding of the society they live in. For that, yes, you may need to read some classics and know your history.