Wednesday, August 1, 2012

GRAND PURSUIT: Book Review Business World 23rd July 2012

FinanceBanking Markets Personal Finance Fund Manager Speak OpinionColumnists BW Opinion Global Commentary PersonalitiesInterviews Profiles Editor's Letter Science & techHealth Medicines Tech Talk After hoursArt Fitness Gadgets Lifestyle Travel MagazineCurrent Issue Archives Subscribe BW BooksReviews Books & Guides Extracts Columns Reading Room Personalities Alerts Author's Corner Grand Pursuit: Great 20th Century Economic Thinkers And What They Discovered About The Way The World Works By Sylvia Nasar In her new book, Sylvia Nasar discusses the lives of economists —from Thomas Malthus to Amartya Sen —and how their ideologies were influenced by the environment they lived in A book on the life of economists would be considered boring by most readers, and even economists. But not Grand Pursuit by Sylvia Nasar. It discusses the lives of economists and how their ideologies were influenced by the environment they lived in. The narrative is interesting, starting with Thomas Malthus and Charles Dickens (yes, the novelist) and going right up to Paul Samuelson and Amartya Sen. The list is selective, which is understandable as it is hard to include all. Alfred Marshall termed economics the engine of analysis, while John Maynard Keynes called it the apparatus of the mind. Just how the discipline evolved is Nasar’s focus. The book has Friedrich Engels, a well-to-do gentleman, who led a double life mixing with capitalists during the day, while building his theory of a revolution in England. He also ghost wrote for his partner, Karl Marx, a lazy man who liked to drink and argue. They came from capitalist and bourgeois backgrounds and worked towards overthrowing the bourgeoisie. Interestingly, Keynes had unkind words for Das Capital. He felt it was an obsolete textbook “scientifically erroneous without interest or application for the modern world”. Malthus, who wrote on population and food, traced all our ills to sex as it brought about the undesired population explosion. Marshall was the first to introduce mathematics to the dismal science, which we all know; what we didn’t was his romance and marriage to his student Mary Paley. He liked the American society as it offered equal rights to women and there was little class distinction. He marvelled at the US dominance, which he captured by its omnipresence: an average citizen wakes up to an American clock and uses American sheets and soaps… travels by a tram made in New York, and goes up a Yankee elevator, etc. Like Marx, Marshall liked to blend history with economics. But economics was the preserve of the British until Irving Fisher came along and was taken seriously in Cambridge and accepted by Marshall and Leon Walras as a genius. He brought in concepts of physics and mathematics and was impressed by the securities market, though he failed at it finally. The author introduces us to a flamboyant Joseph Schumpeter whose theories work even today. He spoke of the use of innovation, and enunciated the theory of creative destruction, which was integral to capitalism. He was among the first to talk of economics in a dynamic sense where countries evolved and progressed through innovation and got destroyed to be rebuilt. Ironically, while he headed an investment bank, Biedermann, it went bust in 1924, taking with it his reputation as also his weakness for women. But among all these giants, Keynes commands maximum references today. He had worked on India while in the colonial office as he could not make it to the Treasury. A stock broking wiz, he helped the nation borrow from the US and was instrumental in drawing up a plan for reparations for Germany after the World War I. Keynes also loved to gamble and went long on the dollar and lost during the 1930s. At the time of the depression, he ran the King’s College endowment fund, which went bust, but he clicked with US President Franklin Roosevelt (1882-1945) and got in his idea of fiscal stimulus in 1934 to get out of the depression. The rest of the book talks about others of the Cambridge school such as Joan Robinson, Richard Kahn and Piero Sraffa. Robinson felt Keynes was a bully, and Hayek opposed and believed that low interest rates misallocated capital. Milton Friedman started surprisingly as a follower of Keynes, but took an opposite stance later. Robinson took Keynesianism to the second world, while Sen focused on welfare and poverty. The book is an easy read. Nasar has done a good job by getting into the character of the economists. And that makes the book unique and, more importantly, unputdownable.

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