Can the history of economics inspire a pluralistic approach to economics?


Pluralistic Economics and Its History, edited by Ajit Sinha of Thapar School of Liberal Arts & Sciences, Patiala (India) and Alex M. Thomas of Azim Premji University, Bengaluru (India), contains seventeen essays. This review seeks to engage with some of the principal themes that animate the essays in this volume. 

The indubitable importance of Keynesian economics

It would not be an exaggeration to argue that Keynesian economics is the pivot around which nearly a third of the essays in this book operate. Individually, these essays focus on different aspects of Keynesian economics and collectively, they offer a rounded view of the subject in question. John Maynard Keynes, arguably the most influential Anglo-Saxon economist of the twentieth century, continues to stay relevant in the domains of economic theory and policy.

In the essay, Theories of activity levels and growth before Adam Smith, Alex M. Thomas pores over the writings of four major pre-Smithian classical economists – Richard Cantillon, François Quesnay, Jacques Turgot and James Steuart, and identifies some of the building blocks of a coherent theory of aggregate demand. In pre-Smithian theories of activity levels and growth, there are precursors to a theory of demand-led growth and those theories, in important ways, anticipated Keynesian macroeconomic thinking by getting the direction of causality right – from commodity demand to commodity supply, and from commodity market to labour market. Thomas makes the following inference: “In all these accounts, it is (aggregate) demand which is the relatively autonomous variable. That is, commodity supplies adapt to commodity demand” and “they posit that labour demand determines labour supply, the reverse of the causation found in marginalist economics” (p.37). Some of these economists also recognized that positive capital accumulation alone does not guarantee growth. Growth happens only when output is validated by demand. 

That said, one of the reasons why they fell short of developing a full-fledged demand-led theory of growth was that their theories did not proceed further to address the problem of insufficient ‘effectual demand’. Pre-Smithian theories did not anticipate the crisis economies descend into when there is inadequate aggregate demand in a modern capitalist economy in which money plays a crucial role. As a result, it was impossible for those theories to imagine the role of the state in reviving demand to that level where it would not only validate the output produced, but also stimulate growth due to the operation of the ‘multiplier’. 

John King’s essay, On the origins of post Keynesian macroeconomics, neatly summarises the contributions of various post-Keynesian economists, in which the contributions of Michal Kalecki and Hyman Minsky truly stand out. Kalecki astutely recognised and drew attention to the link between the fallacy of composition and the instability of the capitalist system, but he also sensed that in a capitalist economy, what can come in the way of implementing a Keynesian demand management program is the class conflict between the capitalist and working classes. 

Highlighting the political nature of the problem, Kalecki had written in 1943 that the ‘capitalists had always relied on unemployment to maintain their power over the working class, and they would therefore see full employment in peacetime as a threat to discipline in the factories’. This insight emerged from Kalecki’s commitment to socialism.

Minsky’s ‘financial instability hypothesis’ has garnered a great deal of attention in the aftermath of the 2008 Global Financial Crisis as it explained why the system is vulnerable to financial crises. Even though Minsky reckoned “the crucial economic relationship is that between investment banker and client, not factory-owner and worker” (p.90), he offered a perceptive analysis of the ways in which financial events affect the real economy. In the process, he helped debunk the false notion of ‘neutrality of money’ propounded by (neo)classical economists. He knew the destructive potential of speculative finance.  

Marx and his method

Karl Marx and Marxism are the central themes of two essays in the book – A history of Marxian economics 1960-2010: How we did it? by Meghnad Desai and Capitalism, classical political economy and Marx’s departures by Chirashree Dasgupta. 

In the opening paragraph of her essay, Dasgupta posits that Marx’s theorization of capitalism marked a sharp methodological departure from classical political economy rather than continuity, and goes on to do a stellar job of explicating her thesis by elaborating upon the various points of departure from classical political economy that put Marx in a league of his own. At a fundamental level, Marx repudiates the approach of classical political economy that takes the various forms of wealth as ‘given’ and “takes head on the question of ‘prior’ accumulation in Adam Smith’s thesis with a detailed material historical account of the bloody history of primary accumulation and colonialism” (p.78) 

Classical political economy is unconcerned about the changes in the methods of production and it views economic development exclusively in terms of gradual quantitative changes in population, wages, capital, profits and rent. In its analysis social relations remain unaffected. Marxian view lays primary emphasis on changes in methods of production, which implies qualitative change in social organization and social relations. More importantly, the incessant drive to revolutionize production is what distinguished capitalism from all previous modes of production. One can confidently argue that Marx the institutionalist anticipated Schumpeter’s idea of ‘creative destruction’ by many decades.

Desai’s essay looks back at and reflects upon the principal lines of enquiry that animated the scholarship on Marx and his writings in the second half of the twentieth century. Desai writes: “One could say that for about two decades – the 1970s and 1980s – Marxian economics received much attention from mainstream economists” (p.57) Marx is being read with renewed interest today by students across the world, mostly of their own accord. That said, this reviewer has gleaned and experienced first hand that, in the undergraduate and postgraduate economics classrooms of Indian colleges and universities, Marx remains a marginal figure at best. The obstinacy that characterizes the unwillingness of teachers to discuss the work of Marx leaves the students with an impoverished understanding of how capitalism works. 

Structural dynamics and institutional economics

Roberto Scazzieri’s essay, Between theory and history: The structural dynamics tradition, carefully examines the writings of economic thinkers beginning from the pre-classical era on the subject of structural change. In undertaking that exercise, Scazzieri looks at how economic development has been analysed in terms of structural change in the composition of output, the shift of workers from agriculture to manufacturing and the processes that drive these structural transformations in an economy. 

It is interesting to note that the early thinkers, while identifying the ‘natural’ conditions necessary for bringing about changes in the structure of the economy, also recognize the “particular circumstances which may influence the working of the fundamental mechanism depending on the context” (p.141). That different economies might take different pathways to structural transformation, given the structural constraints they face, is a confirmation that historical dynamics is generated through the interplay of different and diverse causal mechanisms, and this helps in understanding their context-dependent growth paths. 

Scazzieri’s essay has to be read alongside Philip Anthony O’Hara’s essay, History of institutional economics, for both essays explain the context-specific nature of structural dynamics and institutional change, and they do so by adopting an analytical approach that gives primacy to history. O’ Hara defines the guiding philosophy of the institutional school quite categorically: “The philosophy of science that institutionalists employ is realistic, materialistic, pragmatic and policy-oriented” (p.172). He then takes us on a whirlwind tour of the ‘core principles’ of institutional and evolutionary political economy [IEPE]. 

Reviewing Binyamin Applebaum’s engagingly written book The Economists’ Hour, Marshall Steinbaum writes in Boston Review that the ‘old’ institutionalists ‘eschewed the one-size-fits-all epistemology of rational behaviour, constrained optimization, and market-clearing that is characteristic of what we now think of as economic methodology’. Their empirical focus led them to come up with ‘prescriptions that were highly contingent.’  

In contrast, ‘new’ institutional economics is firmly rooted in the neoclassical theoretical framework. Indeed, as O’Hara puts it, “many new institutionalists are far removed from Veblen since they have as a basic theory the protection of private property rights, as they support the basic power structure of neoliberal capitalism” (p.185). A detailed history of the marginalization of ‘old’ institutionalism by the ‘new’ institutionalists can help us understand the breakdown of the New Deal consensus that paved the way for neoliberal takeover. 

Understanding imperialism through heterodox economic thinking

Tirthankar Roy’s essay, Writings of Indian economic history since independence, traces the trajectory traversed by Indian economic history scholarship since the late nineteenth century and fleshes out some of the contentious debates that have punctuated its journey. In some ways, it is a rehash of the heated scholarly exchanges Roy has been personally involved in with the economic historians belonging to the Nationalist and Marxist schools on this vexed question – was British rule singularly responsible for India’s economic decline and the poverty of the Indian masses? 

For the purpose of this review, suffice it to say that British imperialism, like all other imperial projects, was guided by economic interests, and the economic policies of colonial governments all over the world immiserised and impoverished millions in the colonised countries. The brutal history of systematic transfer of wealth from the colonies to the home country has been well-documented. Many ‘mature’ market economies of today were built on a variety of ‘unfreedoms’, slavery and colonialism being the most pernicious among such unfreedoms. The ‘black radical tradition’ of historiography has meticulously recorded such histories of accumulation through exploitation and expropriation marked by profoundly racist prejudices. 

Sunanda Sen’s essay, On the evolution of heterodox thinking in India, presents the readers with a historical and technical account of the ways in which the critique of the extractive economic policies of the British Raj by Indian nationalists was imbued with sound macroeconomic reasoning. Such macroeconomic reasoning “anticipated the Keynesian frame of analysis, a theory to be developed later in the context of the Great Depression of 1929-30” (p.257). In this context, it would not be wholly misplaced to suggest that Gandhian economic thought deserves a place under the rubric of heterodox economic ideas. Gandhi was able to establish a direct link between technology, unemployment and poverty, an issue that mainstream economics does not engage with because of its flawed assumption of full employment in the economy under all conditions. Moreover, deep ethical and ecological considerations underpinned Gandhi’s economic vision. 

Two sides of the colonial coin: British and Indian women’s engagements with colonialism and patriarchy by Sheetal Bharat brings the gender dimension to the study of economic history. By comparing and contrasting the roles played by British women who lived in India and the Indian women who participated in the freedom struggle, Sheetal Bharat brings into sharp focus the much-neglected subjects of domesticity and participation of women in public life. Writing about Indian women taking on both patriarchy and oppressive colonial rule, Bharat reminds us that they were fighting for both gender and economic justice.  

Her essay is evocative of Katrine Marçal’s superb take-down of mainstream economics, Who Cooked Adam Smith’s Dinner?: A Story About Women and Economics. The provocative title of the book is a scathing indictment of the economics profession that, for a very long time, did not bother to enquire into the unrecognised but massive contribution of women in socio-economic reproduction and when it finally did, employed economic tools to justify gender discrimination in the name of ‘market rationality’. 

Pluralistic Economics and Its History tells us that there is no one right way of doing economics, and the message it sends out is quite clear: let a hundred flowers bloom; let a hundred schools of thought contend. 

Raghunath Nageswaran has an M.A. in Economics from the University of Madras, India. His principal area of research interest is the political economy and economic history of post-independence India. He is a freelance writer and can be contacted at You can follow him on Twitter at @raghunageswaran 

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