How we got here: Adam Smith minus Karl Marx; Keynes tortured by Samuelson
September 13, 2014
from Neva Goodwin
Adam Smith, generally regarded as the begetter of modern economic theory, stressed issues of growth and distribution, based on an image of smoothly functioning markets. The pieces of Smith’s legacy that remained significant for what I will refer to as 20th century economics (though I will focus especially on the second half of the past century) were the emphasis on growth, and admiration for markets. This truncated legacy greatly reduced the emphasis on distribution, while also missing Smith’s concern that markets might not always function optimally. He especially pointed to monopolistic behavior as a problem, and supported various kinds of government intervention to keep the market on track. Ignoring these caveats, 20thcentury economists pursued the optimistic program of modeling a world in which perfect markets lead to optimum social outcomes.
The classical economists – those holding the stage approximately until Marshall’s time – also included Karl Marx, whose concerns for inequality and class conflict were shared by Smith (though they expressed themselves very differently).
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