Eminent Economists: Top 17 Eminent Economists of all Times

Some of the eminent economists of the world are as follows:  1. Aristotle 2. Gandhi, Mohandas Karamchand 3. Einstein, Albert 4. Galbraith, John Kenneth 5. Davenport, Herbert J. and Others.

Eminent Economists # 1. Aristotle (384 – 322 B.C.):

Socrates, Plato and Aristotle constitute the most illustrious Greek ‘Trio’ ever regarded as perennial source of knowledge and wisdom with practical impact upon the thought and action all over the world, Socrates was the mas­ter of Plato, and Plato of Aristotle whose urge for knowledge made him join Plato’s Acad­emy.

He was, history records, the tutor, friend and counselor of Alexander the Great, came back to Athens after Alexander’s Asiatic Campaign, and founded his famous ‘Lyceum’ which he conducted for more than a decade. It was unfortunate that fate made him a victim of the ‘tragic prosecution of impiety’ and forced him into exile.

An extraordinarily creative thinker, Aristotle left few aspects of life and living un­covered by his thought and dictum, for instance philosophy, ethics, politics, economics and even scientific precision, none of which escaped his attention. It was Aristotle who distinguished between ‘being good’ and ‘feeling good’, for example, a person having an adulterous affair feels ‘good’ but is not ‘being good.’

Besides, while distinguishing between ‘two kinds of justice’, “numerical equality (equality of result) and equality based on merit”, he said, “To lay it down that equality shall be exclusively of one kind or another is a bad thing, as is shown by what happens in practice; no constitution lasts long that is constructed on such a basis.”

He conceived of the State as a product of natural growth and said that the “State origi­nates in the bare needs of life”, and “contin­ues in existence for the sake of a good life”, and that the possibility of State could not be doubtable since “man is by nature a political animal”, herding together.

Aristotle’s discussion of political arrange­ments — namely, monarchy, aristocracy and polity — and their perversions — for example, tyranny, oligarchy and extreme democracy― were the basic ingredients of whatever might be considered as appropriate in later days.

Mass participation, he held, was not unaccept­able provided it was limited by law, and more so, control was left to the ‘middle class’ for a “city ought to be composed, as far as pos­sible, of equals and similar: and these are generally the middle classes. Wherefore the city which is composed of middle class citi­zens is necessarily best constituted in respect of the elements of which, we say, the fabric of the State naturally consists.”

Aristotle restricted ‘citizenship eligibility’ to warriors, priests and rulers excluding merchants, husbandmen and artisans for “… in the State which is best gov­erned … the citizen must not lead the life of mechanics or tradesmen, for such a life was ignoble and inimical to virtue. Neither must they be husbandmen, since leisure (devotion to self-improvement) is necessary both for the development of virtue and the performance of political duties.”

His concept of State as a product of natu­ral growth as against Plato’s ‘superb idealism’, and his modification of Plato’s concept of com­munism had a remarkable feature of distinc­tion in as much as he (Aristotle) favoured pri­vate property with the facility of common use.

He said, “It is better that the property should be private, but the use of it common and the business of the legislator is to create in men the benevolent disposition.”

Aristotle’s belief in class distinction and concepts regarding inheritance, population etc., were more or less akin to Plato’s.

His probe into the character of economic activity was deeper and he ex­pressed himself accordingly. Wealth, he be­lieved, if gained through productive labour for consumption in satisfaction of wants, was true or genuine and natural, while wealth acquired for use in trade and commerce against money was unnatural and involved an uncontrolled money-making propensity.

Although he was opposed to “commerce carried on for gain”, he was not so to the “natural art of acquisi­tion” pursued by ‘household’ managers and statesmen, and, furthermore, he was emphatic in saying that pursuits which produced non-material values were far more important.

Money, he felt, might be a useful instru­ment of exchange, but when it tempted people to pile up unused gains or accumulate wealth by lending money, it was ‘sterile’ or unpro­ductive as it helped widen disparity in riches and enhance financial irregularities. He looked upon usury as the most objectionable form of unnatural wealth.

He pointed out that money had no natu­ral value but only value created by law. It was his conviction that the value of money tended to remain constant and served consumers as a standard of deferred payment. He acknowl­edged the distinction between value in ex­change and value in use.

Unlike Plato, Aristotle held that common ownership of property was impracticable and contrary to the disposition of men, hindering pride of ownership and generous impulses.

Basically a philosopher, he viewed econom­ics from an ethical viewpoint and considered that concentration of wealth in the hands of a few would lead to mass poverty, and said that “… encroachments of the rich are more de­structive to the State than those of the people.”

His Basic -Works are:

‘Politics’ and ‘Ethics’.

Eminent Economists # 2. Gandhi, Mohandas Karamchand (1869 – 1948):

Born at Porbandar, Gujarat, Mohandas K. Gandhi had his education in India and in En­gland where he studied Law. He was called to the Bar in 1891, but he left for South Africa where he stayed for more than two decades (1893-1914) to render service to the cause of racial equality by use of passive resistance against the oppressors.

He came back home in 1914 and started his ‘non-cooperation’ movement in 1920, the Salt Satyagraha (Dandi March) in 1930, the Civil Disobedience Move­ment in 1940, and finally the ‘Quit India’ Move­ment in 1942. He was called ‘Mahatma’ by no less a person than Rabindranath Tagore.

He was not an economist with any con­tribution in a ‘familiar’ manner, but his way of life, influenced by Tolstoy, Thoreau, Ruskin, Indian saints, and, last but not the least, reli­gious books, left behind a series of guidelines and practices, known as Gandhian economics, based upon the concepts of egalitarianism, sim­plicity and asceticism.

“In other words,… one has to interpret Gandhiji’s economic ideas and build up what may be described as Gandhian economic thought from what he did and said in this connection.”

“Gandhiji’s social and economic ideas,” said Aldous Huxley, “are based upon a realis­tic appraisal of man’s nature and the nature of his position in the universe … Man wants satis­faction and happiness which are mental con­ditions and attainable in a simple life, whereas industrialism, he felt, creates in man the desire to increase wants and to acquire material wealth at the cost of human value. Since, ac­cording to him, human values were more im­portant than money and wealth, economics and ethics could not be separated, and accordingly, economics could not simply be an academic discipline detached from moral and social im­plications, and furthermore, materialism devoid of spiritualism was unacceptable to him.”

Gandhiji was a socialist in his own way, having treated, for example, human beings as most important as against any ‘ideology’ which gave preference only to material prosperity without counting, as he felt, moral values as being inseparable from human well-being.

His works are:

The Conservative Programme, The Eco­nomics of Khadi, Hind Swaraj, Sarvodaya, Towards Non-violent Socialism, and various other articles in Young India, Harijan etc.

Eminent Economists # 3. Einstein, Albert (1879-1955):

Everyone knows who and what Einstein was but few people know of his interest in hu­man welfare, or he would not have pleaded for socialism as a defence for the great num­ber of “suffering humanity.”

He accused the capitalist society of be­ing the “real source of the evil” because of their ownership of almost all means of pro­duction and whatever was produced as pri­vate property, depriving the workers of the real value of what they produced.

In his words,”… what the worker receives is determined not by the real value of the goods he produces, but by his minimum needs and by the capitalists’ requirements for labour power in relation to the number of workers competing for jobs,” and “neither in practice nor in theory, is the worker paid by the value of his product.”

“Private capital,” he said, “tends to be­come concentrated in a few hands” as a re­sult of various reasons, namely, competition, technological development, formation of larger units etc., and the ‘”result of these develop­ments is an oligarchy of private capital, the enormous power of which cannot be effec­tively checked even by a democratically organized political society” since the “mem­bers of the legislative bodies are elected by political parties largely financed by or other­wise influenced by private capitalists who, for all practical purposes, separate the electorate from the legislature,” and the “consequence is that the representatives of the people do not in fact sufficiently protect the interests of the unprivileged sections of the population,” and to these might be added the capitalists’ control over the media to their interest, making it im­possible for the individual citizen to make “ob­jective and intelligent use of his political rights.”

“Production,” he said, “is carried on for profit, not for use,” and unemployment, fear of loss of jobs, restriction on production, tech­nological progress and its abuse, profit-motive, unlimited competition and waste of labour are the evils. It was with a view to eradicating such ‘evils’ that he suggested “establishment of a socialist economy, accompanied by an educa­tional system which would be oriented toward social goods,” in which the “means of pro­duction” would be “owned by society itself’ and “utilized in a planned fashion.”

The planned economy, he stressed, would be such as to “adjust production to the needs of the community,” to “distribute work to be done among those able to work,” and to “guarantee a livelihood to every man, woman and child,” and ensure, “education of the individual” in order that “in addition to promoting his own innate abilities,” he would “attempt to develop in him a sense of responsibility for his fellow men in place of glorification of power and suc­cess in our present society.”

He was aware that “… a planned economy is not… socialism”, and “that “…so­cialism requires the solution of some extremely difficult socio-political problems,” for which what was needed was the complete involve­ment of the individual.

Einstein left behind the question how, in view of the far-reaching concentration of po­litical and economic power, to prevent ‘bureau­cracy’ from becoming all-powerful and how to protect the individual rights and how a “democratic counterweight to the power of bureaucracy be assured.”

Eminent Economists # 4. Galbraith, John Kenneth (1908 – ):

An economist and also a statesman, Galbraith was born in Ontario, Canada and edu­cated at Toronto and California. While work­ing as an instructor and tutor at Harvard (1934- 39), he attended the Cambridge University as a Social Research Fellow (1937), and became in 1939 an assistant professor of economics at Princeton, where-after, in the following year, he took a position with the Federal Govern­ment (USA), working as assistant administra­tor of the Office of Price Administration.

Af­ter the War, in 1946, he was appointed Direc­tor of the State Department’s Office of Economic Security Policy which controlled the eco­nomic life of the defeated countries, and this apart, he also held the editorial assignment of the Fortune Magazine (1943-48). Galbraith came back to Harvard in 1949 as Professor of Economics.

He wrote speeches for Adlai Stevenson during his cam­paign of 1952 and 1956, and, in the same year, he suggested a ‘standstill’ on price increases to fight the rising cost of living.

During the Kennedy administration, he became U.S. Ambassador to India (1961-63) after which he resumed his academic assign­ment at Harvard. Galbraith has always been a supporter of controls, direct and indirect both, over excess spending and wage-spiral.

A sharp critic of the current economic theory, preoccupied with wasteful growth, his views are “that too much of quantitative economic progress is a disgrace because of the absence of proper distribution, resulting in scarcity and affluence prevailing side by side,” and he argued for “proper con­trol and paying attention to the distribution prob­lem in a pragmatic manner, academic discus­sion being unaccustomed to the real world con­ditions,” “The greater the wealth without proper distribution,” he said, “the thicker the dirt.”

Heavy taxation on personal and corpo­rate income, cut in non-defence expenditure and increase in voluntary saving are his sug­gestions for keeping excess spending under check, and in order to negative the ‘wage-price spiral’ influence on inflation, he suggests di­rect control over prices and wages both, since he believes that such controls would keep “wages from shoving up prices and prices from shoving up wages.”

“Pricing of services,” he says, “does have a relation to the price and general wage struc­ture, and so the services, found functionally ‘non-economic,’ require to be appropriately viewed and controlled.” His recommendations include a ‘standstill’ on price increases as a remedy against rising living cost, stabilization of living cost, maintenance of a ceiling on wages and prices, and placing a ceiling price on the basic raw materials.

He believes that simple life will give more happiness than a “civilization of advanced tech­nology,” and that “production for the sake of goods produced is no longer very urgent.”

His discovery of an undersupply in public service and an imbalance between the public and pri­vate sectors in an economy, and his remark that advertising is mostly competitive and want- creating, that most wants are neither impor­tant nor spontaneous and originate from the modern process of production, and that goods are bought merely for the sake of prestige are beyond controversy. (The Affluent Society: Galbraith).

He called for more government interfer­ence in the monetary sector to provide a check on all-out inflation, has suggested in his ‘theory of capitalism’ state intervention in economic life in order to eliminate ‘vice’ and strengthen its competitive position with a socialist system.

Galbraith could not escape from Keynes’s influence but is suggestive of constructive controls, direct and indirect both, for minimizing economic imbalance and wastages for the sake of ensuring stability.

His works are:

Modern Capitalism and Business Policy (jointly with H. S. Dennison), 1938; The Eco­nomic Effects of Federal Public Works Ex­penditure, 1940; Recovery in Europe, 1946; American Capitalism: The Concept of Countervailing Power, 1952; The Theory of Price Control, 1952; Economics and the Art of Controversy, 1965; The Affluent Society, 1958; The Liberal Hour, 1960; Economic De­velopment, 1964; The Economic Discipline, 1967; The New Industrial State, 1967; and The History of Economics, 1987.

Eminent Economists # 5. Davenport, Herbert J. (1861 – 1931):

He was studious, persevering and ambi­tious, and so, not being content with a career in a rural estate business at South Dakota, he enriched his academic knowledge at the Uni­versities of Leipzig and Paris and obtained a teaching job at the University of Missouri.

A hard-core conservative, Davenport was free from the concepts of hedonism and utilitarianism, and his earnest endeavour was to de­velop a ‘new system of economics’ with real­istic interpretation. For a proper understanding of ‘price’, he highlighted the distinction between the view­points of business and economic theory, and referred to a series of causes and effects since “… prices have their setting in a great moving equilibrium, all the parts of which are related to the other parts, and are in close inter-dependence with them. As one part changes, oth­ers and then still others change.

The lines of causation are not easy to trace or even the direction of them easy to establish … we start with the entirely correct assumption that the market price of any commodity is determined by the demand for it and supply of it, and that this price is the equating point between the de­mand and supply…”

His theory was a specific equilibrium theory, concerned as it was with one commod­ity at a time, but he was attentive to point out the problem for a businessman as distinguished from an economic theorist who, he felt, ought to go beyond an entrepreneur’s function and analysis, and give weight to the entrepreneur’s activity and the resultant impact, for example, “… economists must recognize that both the price of the products and the price of the bases of the product are equally results of the under­lying and determining conditions ; that neither does cost ultimately fix price nor does price ultimately fix cost; that the outlays which the entrepreneur makes, the scarcity of the prod­ucts which he produces and the prices at which he must sell these products are equally the re­sult of the limited supply of the productive fac­tors which he employs; and thus that, with the demand for the products taken for granted, the causal sequence on the supply side of the prob­lem runs from the relative scarcity of the fac­tors to the relative scarcity of the products, thence to the relative prices of the product, then to the remuneration of the factors.”

Capitalism was to him a stage of ‘institu­tional development’ and his concept that any factor or act yielding an income could be con­sidered as productive indicated that he had an ‘acquisitive view of capital and of production.’

He was firm in his belief that develop­ment of a realistic theory, based upon private property, exchange and money was possible, and he acted accordingly. He was critical of the classical economists’ ‘interest analysis’ for their ignoring the importance of banking operation. His forecast of the breakdown of the gold-standard proved a certainty.

As regards the debatable issue of whether or not a corporation was the stock-holders’ organization or an ‘instrument’ for service to the society, he said, “There may be dangers lurking in … corporate autonomy but there is surely something unrealistic in the view that society is just an atomized collection of indi­viduals,” but added that “It is of some signifi­cance … how to alleviate if not cure the blight .. how to crack the …hardcore unemployment; how to cope with … unrest…”

‘Value and Distribution’ and ‘The Eco­nomics of Enterprise,’ are his important works.

Eminent Economists # 6. Hawtrey, Ralph George (1879 – 1971):

Hawtrey, better known as a monetary economist for his interest in the economics of money, bank money or credit in particular, was in government service for more than four de­cades (1904-45) after which he became Pro­fessor at the Royal Institute of International Affairs. He was also a guest lecturer at Harvard.

Economics, to Hawtrey, was a norma­tive science, and he was critical of the eco­nomic theory of his time for its inadequate at­tention to accumulation, profit, and, more important, for its failure to integrate convincingly money with the general theory of economics as a whole since money, he held, was an ef­fective instrument in the production of creative goods, indicating progress and social satisfac­tion.

In England, he was the exponent of the monetary explanation of business cycles, ex­plaining that the rise and fall of business activ­ity was due to consumers’ expenditure (out of income) owing principally to the quantity of money (bank money or credit in particular).

He used the term ‘consumer outlay’ to include expenditures by consumers and investors both, and the term ‘unspent margin’ to represent the means of payment in the hands of individuals, and his theory hinged on changes in the un­spent margin, or, in other words, consumers income or outlay could rise or fall only with similar changes in the unspent margin.

This margin would change, he maintained, when the banking system was capable of expanding it by lending and the borrowers (merchants) were eager to have additional funds with a view to increasing their stocks, adding thereby to con­sumers’ outlay.

He felt that it was the interest rate which would exert the greatest influence in precipitating such changes. The merchants (traders or wholesalers) would place larger orders with the producers. Increased production would mean larger incomes and, consequently, increased demand for goods generally.

The cumulative expansion of productive capacity would be pushed forward by continu­ous expansion of credit, and the rising prices and the velocity of circulation would add to the upward pressure upon business activity.

The turning point in the cycle would reach and the downswing would set in when credit could no longer be extended because of statu­tory control insisting on addition to gold reserve (in Hawtrey’s time England was on Gold Stan­dard) to maintain the prescribed cash-credit ratio, which, because of the expansion already made, would be impossible, and the result would be fall in prices, small orders, lower pro­duction, lower income and lower outlay.

It was implicit in his discussion that both the upswing and downswing would be cumulative in the sense that each part of the cycle would influ­ence and build upon itself, and that, once set in motion, the various phases of the cycle would generate their own power of movement.

Since, according to Hawtrey, the quan­tity of money (he stressed upon bank money or credit which was by far the larger compo­nent of the total money supply) was the most contributory factor in economic fluctuation, he suggested remedies through appropriate mon­etary policy, for example, dear money policy in times of prosperity and cheap money policy in times of depression, and he was sure that contraction or expansion of credit (bank money) by manipulating the Bank Rate, as the situation demanded, would ease out cyclical disturbances.

His works are:

Currency and Credit, 1919; The Art of Central Banking, 1932, etc.

Eminent Economists # 7. Keynes, John Maynard (Lord Keynes) (1883 – 1946):

Keynes was an institution by himself in the field of economics, having provided as against the classical and the neo-classical as­sumptions, diagnosis and prescription, a practi­cal and effective answer to the contemporary economic problems.

Born at Cambridge and educated at Eton and at King’s College, he secured academic Tripos in mathematics, and also studied phi­losophy and economics in which respect (economics) he was naturally influenced by earlier economists, Alfred Marshall being one of them.

He began his career as a civil servant in the India Office, and then worked on a “fel­lowship dissertation” on “Probability” which earned him a prize fellowship at the King’s Col­lege and made him the Bursar, where-after he obtained a lecturer-ship on “Money” at Cam­bridge and also a membership of the Royal Commission on Indian Currency and Finance (1913-14).

He was the editor of the Economic Journal, Chairman of the National Mutual Life Assurance Company, and, besides, a member of the Macmillan Committee on Finance and Industry and also of the Chancellor of the Exchequer’s Consultative Council, which ena­bled him to play a prominent role in the British Treasury business (1915-19). He was a paci­fist (Economic Consequence of the Peace).

Keynes was a leading participant in the British Delegation for ensuring post-War Peace and for restoration of international trade, and was the author of the ‘Keynes Plan’ at the Bretton Woods Monetary Conference (1944). He became the Governor of the IMF and also of the World Bank (1946).

He undermined the classical tradition (The End of Laissez-Faire, 1926) supported tariff on imports, and was a ‘reformer’ of the neo-classical line of thought to “bring it back,” according to Paul M. Sweezy, “into contact with the real world from which it had wan­dered further and further since the break with the classical tradition in the nineteenth century.”

According to Harrod (‘The Life of John Maynard Keynes’), Keynes, in an open letter to the New York Times (Dec. 31, 1933), told the new administration during the first year of the New Deal that he “placed overwhelming emphasis on the increase of national purchas­ing power resulting from government expen­diture, which is financed by loans.”

He was principally a monetary economist and while giving money its deserving role in its effects upon interest and employment in mod­ern economic life, he caused the emergence of radical theories on money covering the inter-relationship between income, consumption, saving and investment opportunities.

His pre­mier work ‘The General Theory of Employ­ment, Interest and Money’ (1936) established a departure from his early writings on the clas­sical tradition, considering the ‘situation dyna­mism’ with a “broader view of the economic society in general.”

He stressed upon full em­ployment as being contributory to satisfactory business conditions, which was subject to cer­tain interdependent variables, namely, employ­ment, income, propensity to consume, prospective return on new investment, and interest rate.

As National Income constitutes total earnings, part whereof is spent on Consump­tion (expenditure on consumption goods/ser­vices), the remaining part being Saving (that segment of income not spent on consumption), so the National Income also means the value of, or the prices paid for, total new output clas­sified into consumption goods/services for di­rect consumption and producer goods, not di­rectly used for consumption but used for fur­ther production (also called Investment) or, in other words, since Consumption and National Income appear in both classifications, Savings and Investment, the residual items must actu­ally always be equal.

This definitional identity of savings and investment in the aggregate may be called ‘ex-post’ (realized or actual) or in other words, ‘stock-oriented’ without any time dimension (at any point of time), but not ‘exante’ (desired or anticipated) or, in other words, ‘flow-oriented’ (expressible in terms of time units) at the point of full employment (maxi­mum level of employment of productive re­sources beyond which effective demand does not create output), which could be called the ‘equilibrium level.’

Keynes’s ‘General Theory’ provides an understanding of this ‘equilibrium’ state of affairs in saving and investment through certain analytical expressions.

National income and level of employment are highly co-related, and further, related to consumption (propensity to consume), and still further, any additional national income and con­sumption are also related to “marginal propen­sity to consume.” Consumption being, there­fore, a variable determined by the size of in­come, Keynes was not hopeful about the laissez-faire principle (The End of Laissez-Faire’, 1926), since the later day evils were confronted with risks, uncertainty and igno­rance, and, in the circumstance, Keynes pro­vided for the basis for “national accounting” and geared economic theory to policy-making since consumption growth rate would be slower than short-run income rise, for achieving the goal of full employment.

In his General Theory, he spoke of pro­pensity to save, propensity to consume, mar­ginal efficiency of capital, liquidity preference, interest theories, multiplier effects etc., having stressed upon income and employment, sup­ply and demand to a much greater extent than his predecessors.

In as much as laissez-faire could not, un­der the ‘situation dynamism,’ generate effec­tive demand, he suggested government inter­vention, even, if necessary, by taking resort to deficit spending and at a cost of slow inflation, since he felt that the resultant impact would create effective demand and pave the way for ‘full employment equilibrium.’

The solution, he held, would emanate from the operation of ‘the investment multiplier,’ representing the ratio be­tween an increase in income and an increase in investment.

Despite being influenced, as it is said, by Wicksell and Robertson as regards savings and investment, by Fisher as regards marginal ef­ficiency of capital and by Kahn as regards multiplier, there is no denying the fact that his General Theory contains some original findings, for example, the theory of interest, the income-consumption relationship, and that, be­sides, he gave a fresh approach to solution of the economic problem even if by taking some ‘old’, as it is said, but by adding nevertheless quite some ‘new’.

Keynesianism gained ground after the World War II (1939-45), establishing that nei­ther too much money causing inflation nor too little money causing depression should be the monetary authority’s function, and highlighting government action in increasing public expen­diture/investment in case of depression and suf­fering a budget surplus in booms with a view to stabilizing a ‘disturbed economy.’

His contribution in the area of interna­tional economics, for example, the proposal for a “Clearing Union Plan” (which virtually materialized in the establishment of the IMF) the IBRD (the World Bank) etc., and besides, his concept of the modern international mon­etary policies, for instance, a flexible, but not free, exchange rate mechanism, international reserve provision, gold pool for solving balance of payments problems, policies for full employ­ment and a co-operative section on overseas economic problems etc. opened up a new ho­rizon.

Whether or not his contribution was revo­lutionary or unique does no longer pose a force­ful proposition because of the fact that Keynesianism has since established itself as a landmark in the history of economics as much as classicism and neo-classicism (refined clas­sicism).

Joseph Schumpeter said, “A Keynesian School formed itself, not a school in that loose sense in which some historians of economics speak of French, German, Italian schools, but a genuine one which is a sociological study, a group professes allegiance to One Master and One Doctrine …. There are but two analogous cases in the whole history of economics — the physoicrats and the Marxists.” (Ten Great Economists: Schumpeter).

Keynesianism and Marxism or any other form of socialism might have similarity in views as regards the adverse effects of capitalism, but there is, nevertheless, a sharp difference in the manner of solution. Whereas, for example, Marx wanted abo­lition of capitalism which he called the breed­ing ground of ‘surplus value’ and the cause of ‘class conflict,’ Keynes, although critical of its ‘parasitic elements,’ was not opposed to capi­talism in the way as it was disliked by Marx.

His solution lay not in the abolition of capital­ism but in the curative measures through state action, for example, giving a start to effective demand by increasing its (State’s) expenditure, which would of itself bring the situation— mostly suffering from depression—to the de­sirable end through increase in investment and employment.

Although a mathematician, an economist and a philosopher, he was not a historian as such but was a “liberal” and a member of the “Establishment”. “What can we reasonably expect”, he wrote during the worldwide de­pression of the 1930s, “the level of our eco­nomic life to be a hundred years hence? What are the economic possibilities for our children,” pointing out that depression was not the “rheu­matics of old age” but the “growing-pains of over-rapid changes …. between one economic period and another” and the “disastrous mistakes” that we have made “blind us to what is going on under the surface — to the true in­terpretation of the trend of things.”

He pre­dicted that “… in the long run that mankind is solving its economic problem, I would predict that the standard of life in the progressive coun­tries one hundred years hence will be between four and eight times as high as it is today. There would be nothing surprising in this ever in the light of our present knowledge. It would not be foolish to contemplate the possibility of a, greater progress still.”

He was optimistic when he called attention to the possibility that the “problem of survival in the bare sense, free­dom from hunger and disease, would no longer exist, and that the problem would be not sub­sistence but standard of living, not biology but sociology.”

Although an epoch-making economist — having transformed the British and the Ameri­can thought on economics — Keynes had, nev­ertheless, interest in other areas as well, for example National Gallery, Music, the Arts, books, rare publications and manuscripts. He was, in brief, a devotee of all subjects of “aes­thetic value.”

His remarks, for example, “The inevitable never happens. It is the unexpected always;” “Good may result from what no wise or good man have brought himself to accomplish. Vile and dirty work can be beneficial to those who do it;” and further, his optimism, for example, “For myself, I am not yet ready to rule out the ideal peace. It may fall within our grasp in ways we cannot foresee,” and his dictum, “… one has to know all kinds of details in order to ar­rive at any decision of the slightest interest….” and “words ought to be little wild, for they are the assaults of a thought upon the unthinking,” are all outstanding. To quote Schumpeter again: “Whatever might happen to the doctrine, the memory of the man will live—outlive both Keynesianism and the reaction to it.” (Ten Great Economists: Schumpeter).

His works are:

Indian Currency and Finance, 1915; The Economic Consequences of the Peace, 1920; A Treatise on Probability, 1921; A Revision of the Treaty, 1922; A Tract on Monetary Re­form, 1924; A Short View of Russia, 1925; The Economic Consequences of the Sterling Parity (The Economic Consequences of Mr. Churchill), 1925; The End of Laissez-Faire, 1925; Laissez-Faire and Communism, 1923; A Treatise on Money (Vols. I & II), 1930; Essays in Persuasion, 1930; Essays in Biog­raphy, 1933; The General Theory of Em­ployment, Interest and Money, 1936; and How to Pay forth? War, 1940.

Eminent Economists # 8. Marshall, Alfred (1842 – 1924):

Marshall was a great economist and founder of the Neo-classical School, also known as the Cambridge School of Econom­ics. He was also instrumental in the founda­tion of the Royal Economic Society and in the publication of the Economic Journal.

His father, a Bank of England cashier, wanted him to be a clergyman, but young Marshall went to Cambridge where, in course of time, he became a wrangler, a Fellow, a teacher of mathematics and. lastly, Professor of Economics.

Although a mathematician des­tined to be a physicist, he became an econo­mist, and created, in the words of Keynes, a “whole Copernican system, by which all the elements of the economic universe are kept in their places by mutual counterpoise and inter­action.”

His neo-classicism was in fact a “re­vision and reconstruction of the classical con­cepts,” and a landmark in the history of eco­nomic science holding its way until the emer­gence of ‘Keynesianism.’

Marshall was a topmost pioneer in the area of theory and analysis, and his ‘Principles of Economics,’ a “combination of mathemati­cal precision with a leisurely and wonderfully lucid style” was a remarkable attempt to “present a modern version of old doctrines with the aid of the new work and with reference to the new problems of our age.”

His attitude to liberalism was evident in his saying that though “economic analysis and general reasoning are of wide application, yet every age and country has its own problems; and every change in social conditions is likely to require a new de­velopment of economic doctrines.”

He defined economics as a “study of mankind in the ordinary business of his life,” stressing upon human nature that”… econom­ics concerns itself with those motives which affect, most powerfully and most steadily, man’s conduct in the business part of his life …” and calling it as “an engine for the cause and cure of poverty.”

Keynes stated that his master’s passage to economics was ‘only through ethics’ for the “study of the causes of the degradation of a large part of mankind” with ‘scientific disinterestedness,’ giving im­portance to the “modes and principles of the daily business of life, by which human happi­ness and the opportunities for good life are in great measure determined.”

He also said, “The solution of economic problems was, for Marshall, not an application of hedonistic cal­culus, but a prior condition of the exercise of man’s higher faculties.”

In a paper (The Fu­ture of the Working Classes, ‘Cambridge Re­form Club’, 1875). Marshall posed the ques­tion “whether all men will ultimately be equal … by occupation at least… a gentleman,” and answered himself optimistically, “… heavy, excessive, and self-devouring labour would vanish, and the worker would then begin to value education and leisure …”

He said, “Economics is not a body of con­crete truth, but an engine for the discovery of concrete truth,” which was elaborated by Keynes as follows : “This engine … is largely Marshall’s creation, and that his ‘Principles of Economics’ was regarded, despite the estab­lished supremacy of Smith, Ricardo and even Jevons, as having recast the ‘Science of Political Economy’ as the ‘Science of Social Perfectibility’ in the sense that the ‘dismal science’ which treated the individual man as a purely ‘selfish and acquisitive animal’ and the State as a mere conglomeration of animals.”

Marshall’s treatment of consumption and demand, and his ideas on production and sup­ply were influenced by the Austrian School and by Mill, but his difference was evident in his observation that total utility represented the sum of successive marginal utility of each unit added, and in his conclusion that when a per­son would reach the margin, then only the price would come where he will be willing to pay.

His concept and definition of ‘elasticity of de­mand’ was virtually, according to Keynes, the earliest conception “without the aid of which the advanced theory of Value and Distribution could scarcely make any progress.”

Marshall’s theory of value and price de­termination combined the marginal productiv­ity and the marginal utility explanations of sup­ply and demand, and while stressing upon the supply-demand interaction, he said, “… the general theory of equilibrium of demand and supply is a ‘Fundamental Idea’ running through the frames of all the various parts of the cen­tral problem of distribution and exchange …,” and, as regards value determination, he said, “We might as reasonably dispute whether it is the upper blade or the under blade of a pair of scissors that cuts a piece of paper, as whether value is governed by utility or cost of produc­tion,” tieing up thereby the classicists’ empha­sis on cost and the ‘marginal utility’ theorists’ emphasis on utility.

His concepts of ‘quasi-rent’ (a widening of Ricardian theory), of wages with emphasis on cost of production and qualitative aspect, and of interest determination on the ‘supply- demand equilibrium’ device (point at which marginal lender’s estimate of what ought to be paid to induce him to save and marginal borrower’s estimate of productivity of capital in his business would be equal) were his other contributions to the science of economics..

As regards distribution of ‘national divi­dend’, he was candid enough to say that it was more a ‘human problem’ than a ‘mechanical problem,’ with no simple solution. According to Keynes, Marshall’s “expo­sition of the Quantity Theory of Money as a part of the General Theory of Value, distinc­tion between real and money rates of interest, … enunciation of the Purchasing Power Par­ity Theory as determining the exchange rate between countries with inconvertible curren­cies, the chain method of compiling index numbers etc.” were no less remarkable.

His principal works are:

Economics of Industry,’ 1879; Principles of Economics, 1890; and Money, Credit and Commerce, 1884.

Eminent Economists # 9. Hicks, J. R. (1904 – 89):

Educated at Oxford, Hicks started his teaching career at the London School of Eco­nomics as a lecturer in Political Science, be­coming later a Fellow of Cambridge, where-after he joined the Manchester Univer­sity as Professor of Economics, and finally settled on the Drummond Chair in Political Economy at Oxford.

His concept of economics as a science was realistic in the sense that it called for a scientific study of human conduct involving facts of living, and for this he preferred econo­metrics (use of mathematics, algebrical for­mulae and statistical information) as an instru­ment which, he held, would ensure accuracy.

The question of population did not seem to be a problem to him since, he asserted, increase in population, instead of being a prob­lem, could be fruitfully absorbed as labour for bringing economic prosperity to the society.

He was, however, particular in highlighting ‘work efficiency’ through proper distribution of work force by means of incentives and/or compul­sion, keeping in view the desirability of effi­ciency and productivity. Hicks examined wages and the forces af­fecting their determination, which, if carefully studied, would mean, summarily speaking, marginal productivity theory of wages.

He said:

The only wage which is consistent with equilibrium is one which equals the value of the marginal product of the available labour… There can be no full equilibrium unless the wages of labour equal its mar­ginal product; since, if this equality is not attained, it means that someone has opened to him an opportunity of gain which he is not taking… In the context of wage-determining fac­tors and touching the ‘Law of Marginal Pro­ductivity’ considered as the most fundamental principle of the theory of wages’, he said that if the

Marginal product of factor ‘A’ /Price of ‘A’

is greater than

Marginal product of factor ‘B’ /Price of ‘B’

then this would mean that it would be to the advantage of the entrepreneur to use a method of production which would use a little more of ‘A’ and a little less of ‘B’, since in that way he would get a larger prod­uct for the same expenditure, or, in other words, an equal product at a lower cost. It was his comment, however, that

This equality of wages and marginal prod­ucts

Would not be found in actual practice in which

… Changes in methods are continually go­ing on…

And he explained:

This ceaseless change is partly a conse­quence of changes in the ultimate deter­minants of economic activity … changes in tastes, changes in knowledge, changes in natural environments, and in the sup­ply and efficiency of the factors of pro­duction generally.

All these things change, so the marginal product of labour changes with them; and these changes in marginal productivity exert pressure, in one direc­tion or the other, upon the level of wages. (Selected Readings in Economics: ed. C. Lowell Harriss).

Hicks was an ‘equilibrium’ economist, having developed the original theory of Walras in this regard, but his analysis being concerned with general equilibrium under perfect competition, he became self-critical of his own conviction since he did not “take into account monopoly and imperfect competition; include State activity in the area of economic matters; and give deserving weight to capital, interest, investment and saving.”

The role of, and the distinction between, statics and dynamics in the science of eco­nomics was fairly explained by Hicks, and his belief that cyclical fluctuations were not ex­clusive but the combined effect of ‘multiplier and acceleration’ principles both, could not escape appreciation.

He shared the credit for improving upon the indifference curve analysis and the con­cept of marginal rate of substitution for ‘mar­ginal utility analysis.’ His analysis was based upon his study of demand from two angles: income and price changes both.

In his work on the ‘indifference curve ap­paratus’ as a substitute for ‘marginal utility’ and in his attempt to construct a ‘pure theory of choice’ independent of ‘quantitative measurement’, the concepts of total utility, mar­ginal utility and diminishing marginal utility were discarded since he believed that it was from indifference curves that he could derive a de­mand curve, free of the ‘taint of marginal utility.’

It was the consequence of considering the subjective preferences of the consumer in conjunction with his income and the price of the commodity that made him believe in the more effective use of his apparatus (indiffer­ence curves) than the ‘marginal utility’ tool in handling adequately enough the questions of substitution and complementarity.

A number of interesting questions in public finance and international trade might have also made fruit­ful use of this apparatus.

His use of production curve, defined as a relation between factors of production and output, and his ‘equilibrium analysis of produc­tion’ were other deserving contributions to the science of economics. It was, however, his mathematical exposition of his views and theo­ries which, critics pointed out, although other­wise commendable, might not always produce acceptable conclusions in general.

Pigou’s welfare economics was based on old lines, and so there developed a concept of ‘new welfare economics’, which although traced as far back as Pareto, was developed by Hicks along with other well-known econo­mists like Samuelson, Robbins, Harrod, Kaldor etc.

The old welfare economics suffered from some identified weaknesses, namely, co-relation of economic and general welfare, freely made interpersonal comparisons, identification of the aggregate consumer surpluses with the real value of the national dividend etc., and called for a comprehensive ‘reorganization’ and ‘compensation’, for example, changes in the tax structure, alteration in the tariff sched­ule and compensation to the losers by the gain­ers from tariff reduction etc., not without some difficulties in the matter of formulating the pro­posed principles into policies and implementa­tion thereof. (A History of Economic Ideas: Robert Lekachman).

Although the national income (GNP) con­cept dates back to Petty (17th century) and Quesnay (mid-eighteenth century), its devel­opment in quantitative and aggregative form came much later, through Hicks and Kuznets during the 1930s, when a shift from the firm to the national economy became conspicuous.

It was Hicks and Kuznets and other advocates of ‘macroeconomics’ doctrine who felt that a firm government framework for a national sys­tem of accounts and an aggregation of eco­nomic data as regards investment, consump­tion and other economic matters could mea­sure and ensure the appropriate policy and ac­tivity.

The works of Hicks include:

Theory of Wages (1932), Value and Capi­tal (1939), Taxation of the War Wealth (1941), Standard of Local Expenditure (1943), Inci­dence of Local Rates (1945), A Contribution to the Theory of the Trade Cycle (1950), A Revision of Demand Theory (1956), and Es­says in World Economics.

Eminent Economists # 10. Kautilya (300 B.C.):

India has a long heritage of religion and ethics, and none the less of political, social and economic ideals, as found in the various ‘Shastras’ and records. Kautilya’s ‘Arthashastra’ is one such authoritative record in which is found a picture, primarily of the social and economic system, theoretical as well as prac­tical, of our country in the remote past, more than two thousand years back.

A learned personality, a diplomat and a strategist, he was the chief architect in having enthroned Chandragupta and was his adviser in running the administration in ideal tradition. The Vedic concept of ‘Varta’, the science of national economy, was reconstructed by Kautilya as ‘Arthashastra,’ combining in it — in addition to economics — the science of poli­tics, ethics, jurisprudence and also military sci­ence as well.

His conception of wealth was wide enough to cover not only money but also com­modity, property, public or private, acquired and/or accumulated, but nevertheless transfer­able.

His definition, interpretation and elabo­ration of wealth, its production, consumption and distribution conformed, however, to the Indian heritage of moral, religious and ethical ideals, and were considered as ‘not an end in itself’ but as a means of achieving real objec­tives of life and living. The moral, philosophi­cal and social ideals and objectives were in­dicative of the development of modern wel­fare economics.

Kautilya’s priority for agriculture as the basic means of livelihood approximated the views of the later-day physiocrats. He was, nevertheless, an advocate for the dignity of labour, wage regulation, dispute settlement, co­operative production and distribution, all of which did have a definite relevance to the modern economic concept.

His ‘Arthashastra’ did make a reference to trade, its development and regulation as well, and more than that, his attempt to draw atten­tion to State intervention in the matter of pro­duction and distribution of certain commodi­ties through its own agencies depicted a con­crete picture of the present-day urge for nationalization and/or socialization.

His de­scription and prescription as regards finance— namely, tax collection, revenue and expendi­ture etc. — could be regarded as having a re­markable relevance to the later-day views on such matters.

That economic activities and other relevant matters should be aimed at en­suring public benefit with freedom and social security and that there should be interest regu­lation, price control and establishment of insti­tutions for town planning and for maintaining an ideal socio-economic activity were all recognized in the ‘Arthashastra’.

The essence of the ‘Arthashastra’ is that of the four legitimate ends of men, namely, ‘dharma’ (right), ‘artha’ (wealth or material gain), ‘kama’ (love) and ‘moksha’ (salvation), the second one is the most important because the other ends depend upon it (‘artha’ or wealth) for their realization.

Eminent Economists # 11. Nicholson, J. Shield (1850-1927):

A Trinity College (Cambridge) scholar and Professor of Political Economy at Edinburgh, Nicholson was a distinguished editor of Smith’s ‘Wealth of Nations’ and the author of a worth-noting ‘Introduction’ to List’s ‘National System,’ an English translation republished by Lloyd in 1909. (A History of Economic Doctrines: Gide and Rist).

He presents in his ‘Principles of Political Economy,’ a survey of Economic principles based on Mill, adapting the classical doctrines in the light of historical criticism and of mathematical analysis, and his treatment of prices, profits and wages is noteworthy. (History of Economic Thought: Haney). As regards the “business of the economist,” he gives an admirable defence of an “idealized classical position.”

He justified discrimination in taxation policy, stating that income from tangible wealth, say land, should be taxed at a higher rate than income from a man’s services, for example, exercise of skill since in the latter case saving was more important for protection of self and family.

“Capital,” he said, “is the wealth set aside for the satisfaction – or indirectly – of future needs.” (Groundwork of Economics: R. D. Richards). This implied that saving was the “nucleus of capital” and the latter, as the modern economists worked out, the nucleus of investment and of employment, creating “effective demand.”

It was Nicholson who brought out the importance of economic studies of the investigations of relative prices in the present and in the past. (The Progress of Capitalism in England: W. Cunningham).

“When we speak of the appreciation of gold,” he said in the context of gold standard with gold as the circulating media, “what we mean is that in the countries using gold as the standard money, the general level of prices has become lower; in other words, that a given gold coin or a certain weight of gold will purchase more commodities — or conversely, the commodities will bring fewer pieces of gold.” (Money and Monetary Problems).

His works are:

Treatises on Money and Essays on Monetary Production, 1888; Money and Monetary Problems; Principles of Political Economy, Vol. I, 1888; Vol. II, 1897 and Vol. Ill, 1901, Project of Empire; and Effects of Machinery on Wages.

Eminent Economists # 12. Plato (428-348 B.C.):

Henry Jackson, Professor of Greek at Cambridge, said, “If Socrates is the master of those who teach and Aristotle is the master of those who learn, Plato is the master of those who think.” Born in Athens and essentially an aristocrat, Plato was a disciple of Socrates and teacher of Aristotle.

His thoughts and ideas on life and living do have an “everlasting bearing.” He was a versatile genius and the founder of the Academy (School of Philosophers).

Plato conceived of an ethically formative and realistic approach to economic life in an ideal state, “essentially an economic entity” and an “assemblage of the various occupations and professions necessary for civilized life” with philosophical nicety, and could not overlook the economic considerations like value of economic analysis, wants, efforts (production), exchange and satisfaction, money and interest, industry and agriculture, riches and poverty.

It was his belief that”… great riches and happiness are incompatible, for a rich man cannot be a perfectly good man, as part of his wealth must necessarily be acquired and expanded unjustly.” His communistic ideas in earlier writings were probably the “start” of later manifestations of the ideology of communism in various forms and degrees.

Division of labour (and other economic activities) constituted an integral part of his ideal state since “Diversities of nature among us … are adapted to different occupations… all things are produced more plentifully and easily and of a better quality when one man does one thing which is natural to him and does it at the right time, and leaves other things …” Plato viewed division of labour more from a moral and utilitarian outlook than from that of an increase in output.

In his categorization of the inhabitants in a state, philosophers were at the top because of their knowledge, auxiliaries or soldiers in the middle, and farmers and artisans, forming the pyramid, at the bottom. He prescribed that those who would preside over, guide and protect the state should live ascetically with income rigorously limited to need.

“Should they ever acquire homes or lands or money of their own, they will become housekeepers instead of guardians, enemies and tyrants instead of allies of the other citizens.”

He did not object to free enterprise at the bottom, but insisted that the power must vest in those at the top, who would “avow a pure communistic ethic,” but the contingency of “class conflict” since “Any city, however small, is in fact divided into two, one, the city of the poor, and the other, of the rich ; these are at war with one another…” did not escape his notice, and he suggested ways and means in such a manner as not to arouse envy and/or antagonism among them.

Plato favoured that administration should be entrusted with the “natural elite” for their functional specialization, owing to their belonging to the “gold” category (philosophers), since, he felt, democracy, a quantitative arithmetical majority, would not suit in the functional discharge of the administrative machinery of the state in conformity with the philosophical, ethical and desirable justice in as much as such administration would, more often than not, fall victim to “self-interest” motive.

Even for the “gold” category administrative machinery, he prescribed a comprehensive training scheme covering exact sciences and ethical principles as well. Of his numerous works, ‘Republic’ tops the list.

Eminent Economists # 13. Ricardo, David (1772 – 1823):

An outstanding English economist, Ricardo made singular contributions to the classical ideas of economics. Classicism in economic thought was in fact a blend of the thoughts and ideas of Adam Smith, James Mill, Malthus, and Ricardo, in particular.

Born in London and son of a Jewish-Dutch stockbroker, he had to attend his father’s business for such training as would enable him to succeed his father, but the situation turned otherwise because of a rift between the father and the son over the latter’s marriage with a Christian girl and embracing Christianity.

He had little formal education, but was nevertheless inquisitive, studious and kept himself abreast of the then literature on economics, and besides, his intellect, understanding and demeanour helped him set up a business of his own, where-after his attention was turned to intellectual pursuits, mostly scientific but with particular reference to economics in which his interest was aroused by Smith’s ‘Wealth of Nations.’

Smith’s work seemed to have generated in him a lot of interest, thought and ideas, but he obtained nevertheless encouragement from others as well, for example, James Mill (philosophical ideas), Bentham (hedonistic calculus), Malthus (principle of population), Say (Say’s Law) and others. His correspondence with Malthus sowed the seed of his initial ideas on currency, foreign exchange, rent, profits, price of ‘corn’ and measures of value, all of which were unique contributions to the history of economic thought.

Well-informed and public spirited, he was gentle by nature and a kindly person, which, according to J. S. Mill, drew admirable attraction from the then younger generation. He became an M.P. and argued for ‘Parliamentary Reform and Vote by Ballot…’

While endorsing Smith’s laissez-faire policy, he said (The High Price of Bullion) that “Where there is free competition, the interest of the individual and that of the community are never at variance…”, and in one of his letters to Malthus, he remarked, in the context of value determination, that “…nothing can be a measure of value which does not itself possess value,” which stood as a pointer to his later principles and theories.

He defined rent as “that portion of produce of the earth, which is paid to the landlord for the use of the original and indestructible powers of the soil,” and since rent arose from the difference between higher productivity of better class of soil and marginal production, he concluded that rent was no element of cost but was, instead, the difference between cost and market price, and said, “Corn is not high because a rent is paid, but a rent is paid because corn is high”, and further, “With every step in the population, which shall oblige a country to have recourse to land of worse quality, to enable it to raise its supply of food, rent on all the more fertile land will rise.”

Ricardo’s theory of rent was the logical outcome of his ‘reasoning and views’ of the then circumstances, and although those circumstances could not be treated as always valid and existing and although further, he did not foresee the economic innovation and the changes resulting from development of new technology, it was not devoid of, even later, a ‘fundamental truth’.

Sir William Petty said “Labour is the father and active principle of Wealth”, and so did Benjamin Franklin when he said, as quoted by Marx himself, “Trade in general being nothing else but the exchange of labour for labour, the value of all things is justly measured by labour,” and economists drew their inferences in varying degrees from these statements.

It was Ricardo who stressed that it was labour and labour alone which, in the end, was the determining factor in exchangeable value of all goods, and by labour, he meant not only the labour “applied immediately to commodities,” but also the labour “bestowed on the implements, tools and. buildings, with which such labour is assisted,” reconciling thereby the old doctrine and the new facts.

In his letter to McCulloch (1820), he expressed that “there are two causes which occasion variations in the relative value of commodities: (i) The relative quantity of labour required to produce them; and (ii) The relative time that elapses before the result of such labour can be brought to market. All these questions of fixed capital come under the second rule.”

His concept of wages partook of the ‘subsistence’ theory of Law of Wages but not without an emphasis on the possibility of changes in the ‘habits and customs’ by deliberate action, and his theory was a simple set of propositions that labour was a commodity like other commodities and that its price (wages) reflected the forces of supply and demand.

As regards profit, his idea was that since “in the progress of society and wealth, the additional quantity of food required is obtained by sacrifice of more and more labour,” profits would exhibit a “natural tendency” to “fall.”

Ricardo had his contributions in other areas as well, for example, monetary economics and international trade covering Banks of Issue, paper currency, theory of comparative cost, purchasing power parity theory, natural rate of interest etc.

His early writings were interesting, but his ‘Principles’ represented his mature convictions in the context of the then problems of England, and even though his critics might regard his ‘Principles’ as a collection of essays instead of a single ‘exposition’, containing ‘some new wine into some new bottles’, he demonstrated, nevertheless, a great intelligence in bringing out ‘new truth out of old problems.’

Ricardo’s ‘economics’ — like that of other Classicists — was subject to criticism for non- realistic assumptions, rigidity in approach, dependence upon abstract reasoning, neglect of effective demand, non-recognition of the ‘store of value’ function of money etc., but his concepts did nevertheless pave the way for later economists to develop their ideas on those of his.

It was Marshall who, by the end of the 19th century, combined after a conscious re- interpretation, his predecessors’ doctrines into a new form.

While Smith found exchange value in the reward and quantity of labour, Ricardo in the quantity of labour, and Marx in the ‘socially necessary’ quantity of labour, Marx’s theory of profit (the theory of surplus value) was not unlikely a conclusion of Ricardian premises.

According to Eric Roll, Ricardo, although placed next to Smith, surpassed the latter, having isolated the categories of the economic system and left behind to his successors many unsolved problems, with indications for possible solutions, and it might not be an exaggeration to say that he gave rise to many schools of economic thought, namely, Historical, Austrian, Socialist, Marxist, etc.

His works are:

The High Price of Bullion, A Proof of the Depreciation of Bank Notes, 1810; Essay on the Influence of the Low Price of Corn on the Profits of Stock, 1815; and Principles of Political Economy and Taxation 1817.

Eminent Economists # 14. Slutsky, Eugen (1880 – 1948):

Slutsky was an academician, a professor at Kiev University for almost a decade, and then at the Mathematics Institute of the Academy of Science, the then U.S.S.R., from 1934 until his death. His views on consumer behaviour were published in an Italian journal (‘Giornale degle Economiste’) as early as 1915, but remained unnoticed until rediscovered by Hicks and Allen.

He showed that in the matter of formulating a theory of consumer behaviour, the concept of “ordinal utility could be used more appropriately than, the neo-classical “cardinal utility” concept, without the “underlying assumption of the measurability of utility.”

The “cardinal utility” concept, he said, involved the postulates of a “numerical scale” to measure the psychological content of a consumer’s feeling of satisfaction and his preference for one commodity over another, but this could be hardly possible without encountering serious difficulties which could be overcome by the ‘ordinal’ approach, for example, levels of satisfaction could be ordered or ranked first, second, third and so on without assigning any numerical magnitude.

Hicks and Allen used Slutsky’s ‘ordinal’ approach in preference to the neo-classical ‘cardinal’ approach, in their ‘indifference curve’ analysis as regards consumer behaviour. Slutsky had other contributions as well in the areas of statistics and probability theory in the study of economics and also in the study of social correlation.”

Eminent Economists # 15. Smith, Adam (1723 – 90):

Smith established ‘political economy’ as a ‘concrete’ social science. He was the ‘Father’ of the Classical School for his “pioneering contribution, comprehensive treatment, flexible ideas and reversion to intellectual absolutism.” Born at Kirkcaldy, Scotland, he studied at the University of Glasgow under Francis Hutcheson, the philosopher, from 1737 to 1740, and thereafter at Oxford from 1740 to 1746.

Returning to Scotland, he delivered lectures at Edinburgh on English literature and political economy, defending the principles of commercial liberty, and it was in 1751 that he became Professor of Logic at Glasgow. By the end of the same year, he was appointed to the chair of Moral Philosophy inclusive of four divisions, namely, Natural Theology, Ethics, Jurisprudence and Politics within its curriculum.

His first work ‘Theory of Moral Sentiments’ was published in 1759, which brought him a great reputation.

Smith gave up his professional chair at Glasgow in 1764 and set out for travels abroad. His life did, in fact, cover travels, professional activities and records of his friendships. He had intimacy with Hume, and, while at Geneva, he met Voltaire. In Paris, he became acquainted with the Physiocrats, Turgot in particular.

It was in Toulouse that he began his ‘Wealth of Nations,’ and on his return to Scotland in 1767, he devoted himself to this work. It was almost complete by 1773 and finally published in 1776. He became a great celebrity, and apart from being given already a life-long pension, he was appointed Commissioner of Customs at Edinburgh, a distinguished position which he held until death.

Smith was critical of Mercantilism as a means of wealth in the form of money or gold and silver, since wealth, according to him, consisted of goods, not money which was simply an instrument of commerce and a measure of value. “Goods can serve many other purposes besides purchasing money, but money can serve no other purpose besides purchasing goods.”

He was equally opposed to Physiocracy which, he thought, “… must be considered as a reaction against Mercantilism,” and further, “It seems … altogether improper to consider artificers, manufacturers and merchants in the same light as ‘menial servants’ since if they were nothing but ‘menial servants,’ they would belong among the ‘barren and unproductive’.

His ‘An Enquiry into the Nature and Causes of the Wealth of Nations,’ commonly known as ‘Wealth of Nations’, was the “outpouring not only of a great mind, but of a whole epoch,” following, presumably, a long line of predecessors, for instance, Locke, Stewart, Law, Petty, Cantillon, Quesnay, Hume and others.

Whereas, however, his predecessors “fished here and there,” Smith spread his ‘net’ wide, illuminating the “entire landscape” and making it an “unquestionable master-piece” and an outstanding work of “unsurpassable import.”

Smith’s ‘system of natural liberty,’ a prototype of ‘laissez-faire,’ spreading within the framework of reason and moral law, meant “self-regulated self-interest” agreeable to the “interest of the whole society,” and must not be “confused with selfishness,”-since he never abandoned his ideas as expressed in his earlier work ‘The Theory of Moral Sentiments’ which conveyed that a prudent man would always follow ‘fair way’ without injustice to others, and, this apart, felt that non-interference in economic activities, that is, free competition, would safeguard the consumers’ interest, since he believed that powers of reason, moral sentiments and competition were integral parts of the system of natural liberty, without possibly foreseeing the “degeneration of his expected fair competition into dishonest monopoly.”

The “social and economic conditions in Britain, the requirements of commerce and industry… as observed since the end of his studies at Oxford (1746) made him believe in ‘laissez-faire’ and free trade.”

Smith’s preference for governmental non­interference, except in an attitude of helpful cooperation, permitting economic liberty in economic activities originated from the “idea of system and the system of ideas of the order natural,” motivating individuals to serve their own “interests and thereby to promote common wealth.”

“The uniform, constant and uninterrupted effort of every man to better his condition,” he said,” is the principle from which public and national as well as private opulence is derived.”

His views of “economic liberalism” (laissez-faire principle and policy) gave start to the formulation of what came to be known as the “classical doctrine” of economics, summarily covering “a laissez-faire school, maximum economic growth and development, a macroeconomic approach, a provision for the method of analyzing the economy and the laws operating within it, emphasis upon economic activity, particularly industry, and individuals seeking individual interests as the best way to serve interests of society.”

It was more than three decades later, that Ricardo, while endorsing this principle and policy, said, “Where there is free competition, the interests of the individual and that of the country are never at variance.”

As against the mercantilist principles of his time, Smith asserted that liberty and freedom from restriction and regulation, or, in other words, unrestrained competition among individuals, would lead each man to “follow that course of life which would be to his own maximum advantage,” subject to such degree of control as would not prejudice other’s liberty, nation’s security and moral character.

He seemed to have politely cautioned against any indulgence to monopoly when he said, “… though the law cannot hinder people of the same trade from sometimes assembling together, it ought to do nothing to facilitate such assemblies, much less to tender than necessary.”

Since production of wealth originated from labour, he recommended division of labour and specialization for larger production, necessitating invariably exchange as a corollary at the individual and national level, and, while suggesting production of such as were best suitable to the nation, he favoured exchanging the surplus production with other nations’ goods without restriction, resulting in an increase of world’s wealth.

While differentiating between money and wealth, and admitting the former’s function in the exchange mechanism, he viewed that an increase in the quantity of money, other things remaining unchanged, would cause inflation, a topic of everlasting discussion in the science of economics.

Smith had pioneering contributions in almost every area of economic activities, for example, use value and exchange value, natural price and market price, saving and capital, interest and even labour.

Eighteenth-century liberalism differed from nineteenth-century socialism, and, whereas, for example, the eighteenth-century workman was his own master, his nineteenth-century counterpart was the “un-free” servant of another man’s factory, the industrial revolution having transformed the relation between capital and labour, causing class struggles between the capitalists and the proletarians and making them irreconcilable opponents of each other.

Smith’s social philosophy was based on the conditions of pre- industrial revolution period, but his value theory that in early society value was fixed by labour served as the foundation of Ricardo’s work, more than three decades later, that it was labour, and labour alone, which in the end was the determining factor of the exchange value of all goods.

On a close examination of the Smithian views of economics, known as Classical Economics, it appears, not very unlikely, that Marx derived his labour theory of value from Ricardo and Ricardo from Smith. Whereas, for example, Smith saw the exchange value in the “reward and quantity” of labour, Ricardo emphasized that it was the “amount, not the reward” of labour which determined value.

Marx used the phrase “socially necessary” quantity of labour and his doctrine of “surplus value” might be considered as a logical development of the classical concept starting from Smith, given a shape by Ricardo and indicated by Mill who said that the “cause of profit is that labour produces more than is required for its support … If labourers of the country collectively produce twenty per cent more than their wages, profit will be twenty per cent…” The classical doctrine was related to a “given framework of conditions” without referring to the “historical” movement behind it.

Marx’s contribution was rather in its manifestation as a “master of historicism” than as a “disciple of classical economics,” but, still, the classical concept might be regarded as the “source of inspiration.”

Whatever, however, might be said against Smith’s “Wealth of Nations”, for example, a “series of reflections of his predecessors,” full of “deductive reasoning’s”, victim of “rationalism” and “abstraction” etc., it is nevertheless still “reverenced” as the “Bible of Political Economy,” and he (Smith) is “by universal consent regarded,” because of his greater “powers of observation, of systematization, and of exposition,” as the real founder of the science of political economy.

Apart from “Wealth of Nations”, 1776, his premier work, his other publication is ‘Theory of Moral Sentiments,’ 1759.

Eminent Economists # 16. Weber, Max (1864 – 1920):

Born in Berlin and son of a wealthy political magnate, Max Weber was an eminent social scientist. He was a professor of economics at a number of universities, for example, Freiburg, Heidelberg, Berlin, Gottingen and Munich, and it was he who illustrated how historical approach in its broad “social setting” could produce meaningful generalizations in economics.

Weber traced the origin of capitalism in the Calvinistic Theology, a Protestant Ethic from which commercial leaders, Protestant in faith, learnt the lessons of vocation or business on the same footing as that of “religious calling” and developed the facilities of “enthusiasm, inventiveness, and total commitment to their jobs” to prove genuine faith, irrespective of the nature of their business.

That Protestantism— or, in a way, Calvinist asceticism— paved the way for the triumph of capitalism in Europe was also developed by R. H. Tawney in England.

Weber defined capitalism as a rational activity in the pursuit of profit, which other cultures have little scope to influence, for example, it was mostly the social forces in England, which brought in Industrial Revolution, but not in other areas, say, China, India etc. despite their rich resources and older civilization.

The mechanism of relief from ‘damnation’ was the belief that “idleness was the deadliest of all sins” and that “work was the chief good,” all diversions being waste or worse, and what this meant for capitalism was summarized in Weber’s conclusion: “A specifically bourgeois economic ethic had grown up.”

With the consciousness of standing the fullness of God’s grace and being visibly blessed by Him, the bourgeois business man, as long as he remained within the bounds of formal correctness, as long as his moral conduct was spotless and the use to which he put his wealth was not objectionable, could follow his pecuniary interests as he would and feel that he was fulfilling a duty in doing so.”(The Protestant Ethic and the Spirit of Capitalism).

Weber held that bureaucracy, a mechanism based on discipline, was an indispensable feature of capitalism and socialism both. “The primary source of bureaucratic administration,” he said, “lies in the role of technical knowledge which, through the development of modern technology and business methods in the production of goods, has become completely indispensable… makes no difference whether the economic system is organized on a capitalistic or a socialistic basis. Indeed if in the latter case a comparable level of technical efficiency were to be achieved, it would mean a tremendous increase in the importance of professional bureaucrats … capitalism in its modern stage of development requires bureaucracy, though both have arisen from different historical sources… a socialistic form of organization would not alter this fact…”

He wrote in his ‘Economy and Society’ that “Superior to bureaucracy in the knowledge of technique and facts is only the (individual) capitalist entrepreneur, within his own sphere of interest… In large organizations, all others are inevitably subject to bureaucratic control, just as they have fallen under the dominance of precision machinery in the mass production of goods.”

For Weber, capitalism and socialism were not two contradictory systems (as might be conceived of if one used property as the axis of difference) but “two faces” of a common type — bureaucracy, which, as viewed by Weber, were identical with “rationalized administration,” and the class on which it was built, the clerical and managerial stratum in politics as well as in the economy.

The future, then, belonged, according to Weber, not as much to the working class as to the bureaucracy. (The Coming of Post-Industrial Society — A Venture in Social Forecasting: Daniel Bell).

Thus, neither in a capitalist economy nor in a socialist one could there be an alternative to the bureaucrat.

Weber’s works are:

The Protestant Ethic and the Spirit of Capitalism, 1904-5; the Theory of Social and Economic Organization; General Economic History, 1927; and Economy and Society.

Eminent Economists # 17. Robertson, Dennis Holme (1890 – 1963):

An eminent English economist, mostly an academician, Denis Robertson began his career as a Reader at Cambridge, and then held the ‘Sir Earnest Cassel Chair’ at the London School of Economics. In 1944, he became Professor of Economics at Cambridge, succeeding Pigou.

During World War II period (1939-45), he also served as adviser to the. Treasury, and was, further, a Member of the Council of Prices, Productivity and Income. His concept of economics was mostly in keeping with those of Marshall and Pigou, both his teachers, except in the case of ‘money’ concerning which he seemed to have followed the line of Hawtrey.

Robertson explained that “money is only one of many economic things. Its value, therefore, is primarily determined by exactly the same two factors as determine the value of any other thing, namely, the conditions of demand for it, and the quantity of it available,” and after explaining the meanings of ‘increase’ or ‘decrease’ in the demand for money, he added that not only the total quantity of money, but also its average velocity of circulation, and further, not only the volume of goods to be disposed within a given time, but also the frequency with which each of them changes hands require to be taken into account.

By velocity of circulation of money, he meant “not the average number of times each piece of money is spent for any purpose whatsoever, but the average number of times it is spent in purchase of goods and services which form part of income or output during the week or other period of time in question,” which he called “income velocity of circulation of money”, and which “is naturally much smaller than its transactions velocity.”

He believed in “consumer’s surplus,” which, he said, would naturally differ from man to man, depending upon taste, capacity and income. In his definition of capital, he included commodities on their journey through the process of production.

Robertson was not a blind follower of the Classicists. He joined Keynes in the rejection of Say’s law, but was otherwise a critic of Keynes, although acknowledging his theory of a relationship between capital and investment.

He viewed that although trade or business cycle was a complicated phenomenon, not easily explainable, it was the result of, to an extent, psychological and industrial factors, and suggested appropriate monetary and fiscal measures as remedies.

He left behind a number of works, a few of which are:

A Study of Industrial Foundation, 1915; The Control of Industry, 1923; The Ebb and Flow of Unemployment, 1923; Banking Policy and Practice Level, 1925 ; Essays in Monetary Theory, 1940; Utility and All That, 1952; Economic Commentaries, 1956; and Lectures in Economic Principles, 3 Vols., 1957-59