Thursday, January 29, 2015

Sylvia Nasar – Grand Pursuit

Sylvia Nasar’s Grand Pursuit is a history of economic ideas, as told through the lives of some of the greatest economic thinkers. Sylvia’s previous book A Beautiful Mind is a biography of game theorist John Nash, most famous to the general public for the film adaptation starring Russell Crowe (a film I will always hilariously remember for an incorrect explanation of the concept of Nash equilibrium in a hammy bar scene).

One thing I loved about Grand Pursuit is the window it gives to the unexpected sides of some great economic thinkers. It paints a portrait of Karl Marx as a leisurely spendthrift, who left the messy work of actually investigating the working conditions of factories to his friend (and often benefactor) Friedrich Engels. Marx managed to blow several inheritances from various family members in the 20 years he took to polish off Das Kapital. Similarly unexpected was the tale of a young Milton Friedman working on Keynesian policies in the US government (Friedman later became famous for the view that governments should interfere as little as possible in the economy). Another personal highlight was Irving Fisher’s views on the importance of self-control.

The book also puts into perspective how periods of economic crisis, as in the present day, are often the best catalyst for revolutions in economic theory. The present day may seem exceptional, but there have been many similar episodes. Larry Summers, for example, has recently proposed that we may be facing a period of “secular stagnation” -- potentially ending the rates of economic growth that the developed world has grown accustomed to since the industrial revolution. But similar ideas have been popular during each past economic crisis, ever since Malthus. As Keynes wrote, “Madmen in authority, who hear voices in the air, are distilling their frenzy from some academic scribbler of a few years back.”

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