Economics - The Dismal Science

It is debatable whether economics should actually be defined as being a science. A science like Maths or Physics usually gets its satisfaction from proving something to be irrevocably true. Solve a complex equation and QED that’s the answer, there’s no argument. Economics on the other hand will rarely give us a simple answer. Ask 5 economists a question and the joke goes you’ll get 6 different answers.
Yet Economics could make claim to be a science even if only as John Ruskin disdainfully called it “The Science of getting riches”. Over the years Economics has also managed to adopt the label of “the Dismal Science” with plenty of theorists proudly claiming they do have the solution and answer to all our problems.

Economics began as soon as hunter men began to exchange their captured prey with other caveman, but generally the science of Economics did not begin to be formalised until fairly late. Economics has produced some colourful characters who have all added something to the science even if there contribution is not universally admired.

The Dismal Prophecies of Malthus
One of the first economists to proffer his theory was T.Malthus. Malthus is chiefly remembered for his essay on Population. In this essay Malthus argued the human race was doomed because the population was increasing at a faster rate than our capacity to grow food. In many ways Malthus was one of the earliest proponents of “The end is nigh” syndrome, and unsurprisingly it was Malthus who claimed for economics the label “The Dismal Science” Fortunately however Malthus displayed a trait that many economists would later share. - He was wrong. The population didn’t starve. In fact during the nineteenth century the forces of capitalism flourished creating unprecedented wealth for those who owned the means of production.

Adam Smith - The Invisible Hand
One of Capitalism strongest exponents was the economist Adam Smith. In his book “The Wealth of Nations” Smith claimed that if people follow their own self interest, then this these individual acts of selfishness have the remarkable effect of leading to the greatest overall benefit for society. This is the basic principle of the book although Adam Smith did take 1,260 pages to say it. (Unfortunately very few economists have ever learnt the art of being concise.) Adam Smith has become synonymous with support for free market economics, however many people forget he was rather a modest Scottish intellectual was also made chair of moral philosophy at Glasgow University. Smith’s other major work was about Charity and ethics but it was his articulation of free market economics for what he is chiefly remembered. Anyway his seemingly paradoxical argument about the free market has remained at the centre of all major debates in economics. Is an unbridled free market of Capitalism really the best economics system?


Nevertheless even the most ardent free market economist cannot ignore the fact capitalism creates inequality and in the nineteenth century this inequality was painfully evident. Thus many economists came along to challenge the free market ideologies of Adam Smith.

Karl Marx - The Revolutionary Economist
Whether deserving or not Karl Marx was perhaps unwittingly destined to play a major role in world history. Basically Karl Marx was of the opinion the inequality of capitalism would inevitably lead to a revolution of the oppressed workers leading to the formation of a Communist state. In fact Karl Marx went to extraordinary length to explain this principle. One of his principle works, Das Kapital could make claim to be one of the most boring books ever written. (Perhaps only beaten by Adam Smith’s Wealth of Nations and Ludwig Wittgenstein’s Tractatus Logico-Philosophicus,) However in F.Engels, Marx had a companion who was able to help romanticise the ideals of communism. Even 10 years after first reading it I can still quote verbatim several passages from the Communist Manifesto.

“A spectre is haunting Europe -- the spectre of communism”

“ The Communists disdain to conceal their views and aims. They openly declare that their ends can be attained only by the forcible overthrow of all existing social conditions. Let the ruling classes tremble at a communist revolution. The proletarians have nothing to lose but their chains. They have a world to win.”

Despite the various attractions of Marxism, it never really took hold in the US and Western Europe. Mainstream economists were fully entrenched in the free market orthodoxy of classical economics. Just to reiterate, these economists differed little from the original ideas postulated by A.Smith. Basically they argued the free market would create wealth, prosperity and any problems would be solved by the inexorable workings of the “invisible hand” of the market. However in the 1930s free market economics was to face a seemingly impossible challenge – The Great Depression with its mass unemployment, bankruptcies and falling output. In the face of such economic hardship the appeal of radical alternatives gave cause for serious political turmoil - Western democracy itself was threatened. But many economists stuck to their ideology arguing in the Long Run everything would be OK.

It was thus in the middle of the great depression that J.M.Keynes rose to prominence retorting to orthodox economists “In the Long Run we are all dead” Keynes saw no point in waiting a couple of decades for the depression to come to an end. Keynes argued for immediate government intervention and in particular the government should spend, spend, spend.

Economics has very few, what you may call heroes, but if any economists deserve such a label it would have to be Keynes.

J.M.Keynes - The Greatest Economist?
John Maynard Keynes was born in 1893 the same year that Karl Marx died. Both Marx and Keynes were to write influential critiques of the Capitalist system but here the similarities end completely. Marx was a rather angry loner, many of his enterprises failed and the majority of his life was spent in exile. Anonymously working in the British library, Marx spent many years working on his theories about the inevitable overthrow of Capitalist society. Marx never lived to see his theories proved generally wrong, although he may have been surprised at the importance attached to them.

Keynes in many respects was very different, he cut a dashing figure a brilliant economist, who could also mix with the elite of British society. Keynes attacked the inequities and insufficiencies of the free market but it didn’t stop him from making a small fortune by speculating on the foreign exchange markets. Keynes was also a visionary, while the Allies were clamouring for a victor’s peace at Versailles in 1919, Keynes resigned from the British delegation. He argued the reparations imposed on Germany would be impossible to repay and that they were a recipe for the humiliation of Germany and future problems. His book “The economic consequences of the Peace” became a best seller and in retrospect proved to be a damning indictment of the narrow mindedness of the allied victors.

Keynes was brilliant at many things and he knew it. Once he was placed second in an economics exam. His only reply was that:

“That shows I know more economics than the examiner.”

This may sound arrogant but in all honesty it was probably correct. Keynes didn’t just restrict himself to economics, he wrote a book on mathematical philosophy (highly praised by B.Russell) He was a leading figure in the Bloomsbury group of leading artists, poets and writers. Keynes later even opened his own theatre, which like most things he tried his hands at, proved a great success. Keynes may have had many human weaknesses but he was able to brush these aside with his evident genius and enormous capacity for innovation and radical ideas.
Keynes was no socialist but it didn’t stop him poking fun at free market economists. In direct challenge to the optimistic assertion of Adam Smith, Keynes took a different view.

“Capitalism is the astounding belief that the most wickedest of men will do the most wickedest of things for the greatest good of everyone.”

This shows Keynes at his best - happily attacking orthodox views with a panache and confidence that was hard to resist.

It was the effect of the great depression that led Keynes to his greatest work. He scoffed at the orthodox free market economists who said the government should do nothing in the face of mass unemployment.


Keynes’s strategy was for the government to intervene, borrowing if necessary. This would create jobs which would give income for others to spend thus creating more jobs. A deceptively simple idea but too radical for western governments who were too unwilling to borrow, (bizarrely some economists like the US Federal Reserve were too worried about the inflationary impact at a time when there was deflation.) Unfortunately it wasn’t until the second world war and governments were forced to spend on military spending that employment increased to pre 1929 levels. Thus at the end of the Second World War Keynes was now given high regard and he was put in charge of the economic planning for post war Europe. Unfortunately on achieving worldwide fame he died untimely at the early age of 62.

Unlike many radical ideas from economists such as Malthus, Owen, Marx e.t.c Keynesianism didn’t wither on the vine but became part of the economic orthodoxy influencing the creation of a whole sub section of economics (Macro Economics). Alas Keynes died in 1946 just as he had achieved world wide fame. It had been hoped he would play a key role in the economic reconstruction of Europe.

The legacy of Keynes was remarkable; post war governments in the West broadly followed Keynesian policy’s up to the 1970s. Generally these decades were seen as a time of great stability and prosperity. Full employment was maintained and many countries experienced record growth. However proving economics is a fluid science Keynesian economics has recently fallen out of favour with a recent resurgence of support for neo classical ideologies with governments once again praising the ideals of the free market. Alas (or perhaps fortunately, depending on your view) time and space prohibit a discussion of this latest development. Although it is worth noting that many governments who adopt free market ideology rarely implement their ideas fully. For example Reagan who wanted to roll back the frontiers of the State actually increased the size of the US government mainly through huge increases in military spending. The present Bush administration has also shown remarkable fiscal irresponsibility. The current budget deficit is approaching $600 billion combined with a current account deficit of approximately $665 the US economy is anything but a paradigm of classical economics.