When the Dismal Science Was Brilliant

The idea that humanity could turn tables on economic necessity–mastering rather than being enslaved by material circumstances–is so new that Jane Austen never entertained it.” That’s the first line of Sylvia Nasar’s new book, Grand Pursuit The Story of Economic Genius, and it’s an impressive line, as it manages to put forward not only Nasar’s entire thesis but also the great aspiration of modern economics: to lift up the majority of human beings living in squalor.

Nasar, who also wrote the best-selling John Forbes Nash biography A Beautiful Mind, would argue that economics has done a pretty good job of that, which is worth remembering in this post-financial-crisis era, when many economists seem to have lost their credibility, or at the very least their mojo. The laissez-faire, markets-know-best school of thought advanced by Milton Friedman, who gets his due in the book, has been proved faulty. But the Keynesian bailouts that the left hoped would get us out of this mess haven’t worked so well either (both Friedman and John Maynard Keynes are well parsed in Grand Pursuit).

Still, as Nasar points out, economists–and she is one–must be doing something right, because “the lives of nine-tenths of humanity have changed more in the century in which modern economics was born than in the 20 centuries before.” While more than a billion people still live in poverty, it’s safe to say that a majority of humanity now enjoys levels of prosperity and choice–in food, living conditions and employment–undreamed of by the typical laborer in 19th century England, when Charles Dickens called for new and more generous economic thinking in A Christmas Carol.

One of the many wonderful things about Nasar’s book is that in it, economic genius isn’t limited to the usual suspects. Dickens gets his due, as do Beatrice Webb, a beautiful heiress who was the driving force behind Britain’s welfare state, and Joan Robinson, the daughter of a British general who, disenchanted with her country’s military and economic failings, became infatuated with communism and in 1956 published an influential book arguing that competition in Western capitalist societies is ultimately a zero-sum game in which poor countries get the shaft. In economics, as in fashion, everything comes back in style if you wait long enough: state-run economies are having a resurgence, and the term Marxism has been trending high on Google.

Even when exploring famous economic minds, Nasar brings out the humanity in the dismal science by showing that their ideas are nearly always rooted in formative experiences. Alfred Marshall, the father of modern economics, focused on the question of how to lift wages and offer more choice to the working classes after a loan from a rich uncle allowed him to study mathematics at Cambridge. Paul Samuelson came of age during the Great Depression, which led him to think of market forces not as an invisible hand but as a “machine without an effective steering wheel.” Amartya Sen’s upbringing amid famine and war in prepartition India turned him into a disciple of Robinson’s, though he ultimately developed his own, more nuanced worldview, including the idea that it’s not income alone but also freedom that make a prosperous society.

Grand Pursuit ends in the 1980s with Sen, in part because Nasar wants to draw a line directly from poverty alleviation in pre-1840s London to modern-day Kolkata (formerly Calcutta). But she leaves one big question unanswered: Who are the economic geniuses of our own day? The candidates are an eclectic bunch–people like Joseph Stiglitz, whose experience growing up poor in Gary, Ind., convinced him that markets don’t always work perfectly; Elinor Ostrom, who is shedding light on how humans interact with natural resources; and behavioral psychologist Daniel Kahneman, who believes in a rational man with irrational feelings. Postcrisis, economics is going through both an existential crisis and a creative ferment. Markets no longer rule, but it’s not yet clear what does. Messy biology is proving just as influential as the clean math of physics to which many economists of old aspired. But it is this messiness that may make economics a more fertile endeavor.

What hasn’t changed is the key question: how to improve our material circumstances so that we can meet every other aspiration we might have. As we enter an era of rising inequality and power shifts that promises to be just as unsettling as the Industrial Revolution was, it’s clear that economic genius is needed now more than ever.