George Lennox Sharman Shackle (1903-1992)
George Shackle was born in Cambridge on 14 July 1903. Following his father to Perse School, he gained entrance to his father’s college, St Catherine’s, but could not take it up because he failed to win a scholarship.
Instead he became a bank clerk. This prompted a crucial change of focus: at St Catherine’s he would probably have read modern languages, but for banking the study of economics seemed more appropriate. Though subsequently moving to a tobacco company and then becoming a schoolteacher, he persisted, eventually gaining a London external degree in 1931. By then he was contemplating a lifetime commitment. Thus a distressing failure became a precondition of unimagined success, and Shackle’s own career an exemplar of his own system of thought.Private study of Keynes’s Treatise on Money (1930) and Hayek’s Prices and Production (1933) prompted an article which was published in the first issue of the Review of Economic Studies (Shackle 1933). This led to a research studentship at the London School of Economics (LSE), a PhD and his first book, published in 1938. By then he had moved to Oxford, working with Henry Phelps Brown and writing papers for which he was awarded a DPhil in 1940. Soon after the outbreak of war he was called from a lectureship at St Andrews to join Lindemann’s team working for Churchill, transferring after the war to the Economics Section of the Cabinet Secretariat. In 1950, at the age of 47, he was appointed Reader at Leeds, moving after four terms to the Brunner Chair at Liverpool, from which he retired in 1969 to Aldeburgh and a daily routine of writing. He died on 3 March 1992, and so a conference in Aldeburgh designed in his honour became a memorial. Revised versions of some papers from that conference appear in Earl and Frowen (2000).
Shackle’s life between 1920 and 1935 had demonstrated how unpredictable are the consequences of both events and decisions; and this double unpredictability provided the theme for all his work.
Shackle arrived at the LSE just in time to hear Brinley Thomas’s inspirational account of the new Swedish approach to the functioning of economic systems through a sequence analysis which incorporated the essential fallibility of expectations, and Hicks’s lectures on economic dynamics, in which the entrepreneur contemplates possible actions, soon followed by expositions of Keynes’s then forthcoming General Theory (1936). All three experiences were striking illustrations of the process of generating new ways of thinking in economics.The shared context was uncertainty, which as Knight had observed was a precondition, not only of enterprise and the firm, but even of human intelligence. Shackle’s work is a celebration of intelligence, which combines reason and creativity. Knight (1921: 348) had concluded that “a life with uncertainty eliminated... would not appeal to us”; Shackle (1966a: 133) described it as “the reverse of hope, the opposite of freedom” (see also Shackle 1953: 1). Humans are “originative, ambitious, reckless and insecure,... they do not know what they are next going to attempt” (Shackle 1974: 67); therefore “the future is not there to be discovered, but must be created” (Shackle 1969: 16). Shackle focused on the creative role of entrepreneurs - “what... is economics about, if it is not about business psychology” (Shackle 1966b: 287) - and of economists. However, the necessary complement to enterprise is the dissolution of order, both in economic systems and schools of thought.
The combination of economic depression and the emergence of exciting new theories to explain it naturally first focused his attention on the threats of unpredictability to economic order, and Shackle is likely to be primarily associated with macroeconomic theorizing in the spirit of Keynes, with particular emphasis on the necessarily fragile basis of our views about the future and the consequent possibility of their sudden transformation (most forcefully expressed in Keynes 1937), although he persisted in regretting Keynes’s refusal to incorporate ex ante/ex post reasoning - see especially Keynesian Kaleidics (Shackle 1974), lectures delivered with Brinley Thomas in the audience.
However he was no less impressed by the opportunities inherent in unpredictability for business enterprise and theoretical innovation, which provided him with more intellectual excitement than one might expect from his demeanour and his reluctance to engage in debates on policy.His first book, Expectations, Investment and Income (Shackle 1938) develops the ideas of Hicks and the Swedes and anticipates the aspiration/achievement model of Cyert and March (1963) in constructing a theory in which the divergence between expectations and outcomes for each producer (in part because of the consequences of other producers’ decisions) leads to a new set of decisions which are also not pre-reconciled; combined with a ratchet effect of experience on consumption (anticipating Duesenberry) this generates an asymmetric business cycle. His second book, Expectation in Economics (Shackle 1949) focuses on the problems of making unique decisions when there is no adequate basis for probabilistic reasoning, which assumes repeated trials within a closed system. He suggests an alternative built on the decision-maker’s judgement of the possibilities of various future events, assessed by the degree of potential surprise, which is a non-additive measure.
The underlying issue is the nature and potential of human knowledge, too often neglected in both microeconomics and macroeconomics by recourse to facile notions of “rationality” which assume the sufficiency of knowledge. In The Years of High Theory (1967) Shackle unconsciously reinvented Adam Smith’s account of the development of science (as Andrew Skinner (1979) pointed out - to Shackle’s delight) in order to explain the “landslide of invention” in economics between 1926 and 1939. We have a powerful motivation to incorporate phenomena and experience within existing schemes of order, and to create new schemes when these fail, both to set our minds at rest and to make practical life possible (Shackle 1967: 288, 286). Order is not a product of rationality, but a precondition.
The patterns on which we rely are generated by our imagination (as, Smith noted, was Newton’s great theory); they are unrefuted conjectures, which set bounds to our perceived uncertainty and allow decisions to be made (Shackle 1969: 224.) However each “will exist by sufferance of the things which it has excluded” (Shackle 1972: 354) and is consequently subject to disruption by forces outside our probability sets, but which may be the product of someone else’s imagination.Shackle shared Marshall’s (1920: 1) view that economics is both a study of wealth and “on the... more important side, a part of the study of man”. It is a theory of change which, in the tradition of Adam Smith, is driven by the differential imagination of new connections, facilitated by variation both between and within forms of organization. Shackle (1965: 36) recognized that Marshall used his concept of equilibrium to describe a process of adjustment which revealed new possibilities and created new resources, thus facilitating further change. This conception provided the basis for Shackle’s own exposition of the theory of the firm, Expectation, Enterprise and Profit (1970), which, while respecting the constraints of the short run, makes - like Marshall - no attempt to present a long-run equilibrium of an individual firm but explores, in detail which Keynes never attempted, the problem for every agent of deciding, according to their conceptions of particular circumstances, what durable commitments to make for use in future situations which (as Keynes insisted) cannot be foreseen.
There are striking affinities, still unexplored, with Penrose’s (1959) account of how firms grow, including the crucial role of imagination. For Shackle, as for Marshall - and for the outstanding analyst of management Peter Drucker, who commended Shackle’s approach (Drucker 1969: 210) - the role of the firm is to make “committed conjectures” (Shackle 1974: 5), and to take the losses if, for whatever reason, their conjectures are falsified (Drucker 1969: 293).
Equilibrium as a set of pre-reconciled choices does not describe either a possible or an ideal economy. In Epistemics and Economics (1972) Shackle’s extensive “critique of economic doctrines” makes a powerful case for a proper recognition of uncertainty, which would allow us to explore how locally sufficient organizations and institutions frame the evolution of knowledge by imaginative conjectures.Brian J. Loasby
See also:
Friedrich August von Hayek (I); John Maynard Keynes (I); Frank H. Knight (I); Alfred Marshall (I); Adam Smith (I).
References and further reading
Cyert, R.M. and J.G. March (1963), A Behavioral Theory of the Firm, Englewood Cliffs, NJ: Prentice-Hall. Drucker, P.F. (1969), The Age of Discontinuity, London: Heinemann.
Earl, P.E. and S.F. Frowen (eds) (2000), Economics as an Art of Thought, London and New York: Routledge. Hayek, F.A. (1933), Prices and Production, London: Routledge and Kegan Paul.
Keynes, J.M. (1930), A Treatise on Money, London: Macmillan.
Keynes, J.M. (1936), The General Theory of Employment, Interest and Money, London: Macmillan.
Keynes, J.M. (1937), ‘The general theory of employment’, Quarterly Journal of Economics, 51 (February), 209-23.
Knight, F.H. (1921), Risk, Uncertainty and Profit, Boston, MA: Houghton Mifflin. Marshall, Alfred (1920), Principles of Economics, 8th edn, London: Macmillan.
Penrose, E.T. (1959), The Theory of the Growth of the Firm, Oxford: Basil Blackwell.
Shackle, G.L.S. (1933), ‘Some notes on monetary theories of the trade cycle’, Review of Economic Studies, 1 (1), 27-38.
Shackle, G.L.S. (1938), Expectations, Investment and Income, Oxford: Oxford University Press.
Shackle, G.L.S. (1949), Expectation in Economics, Cambridge: Cambridge University Press. Shackle, G.L.S. (1953), ‘Economics and sincerity’, Oxford Economic Papers, 1 (1), 1-19.
Shackle, G.L.S. (1965), A Scheme of Economic Theory, Cambridge: Cambridge University Press.
Shackle, G.L.S. (1966a), ‘Theory and the business man’, in G.L.S, Shackle, The Nature of Economic Thought:
Selected Papers 1955-1964, Cambridge: Cambridge University Press, pp. 131-43.
Shackle, G.L.S. (1966b), ‘Battles long ago’, in G.L.S, Shackle, The Nature of Economic Thought: Selected Papers 1955-64, Cambridge: Cambridge University Press, pp. 285-90.
Shackle, G.L.S. (1967), The Years of High Theory, Cambridge: Cambridge University Press.
Shackle, G.L.S. (1969), Decision, Order and Time in Human Affairs, Cambridge: Cambridge University Press. Shackle, G.L.S. (1970), Expectation, Enterprise and Profit, London: Allen and Unwin.
Shackle, G.L.S. (1972), Epistemics and Economics, Cambridge: Cambridge University Press.
Shackle, G.L.S. (1974), Keynesian Kaleidics, Edinburgh: Edinburgh University Press.
Skinner, A.S. (1979), Scottish Journal of Political Economy, 26 (2), 109-24.