Modern economics

Two important Irish-born economists of the late nineteenth and early twentieth centuries were Charles Bastable (1855-1945) and Francis Ysidoro Edgeworth (1845-1926), both educated in Trinity College, Dublin.

Edgeworth's entire career was spent in London and Oxford. He became the first editor of the Economic Journal and made several foundational contributions to modern economics. Edgeworth is best known to students of economics as the originator of the Edgeworth box, which is commonly used in the explanation of general equilibrium theory. While Edgeworth identified the conditions in which a general equilibrium could exist, his own main interest was in the indeterminateness of contracts and not their perfect determination (Baccini, 2011). In addition to contract theory, Edgeworth also made contributions to international trade, monopoly pricing and to mathematical economics generally.

Berkeley had advocated import substitution as the only realistic option available in the absence of free trade. In the mid-nineteenth century, Butt (1846) showed that the protection of domestic industry would raise overall welfare in the conditions of widespread unemployment prevalent in Ireland. With the movement towards Irish independence in the early twentieth century, Arthur Griffith drew on Friedrich List to propose a programme of economic develop­ment based on protection of domestic producers until they were strong enough to meet inter­national competition.

Bastable had earlier argued that such a strategy could be justified only where the discounted value of future cost savings exceeded the excess costs incurred during the period of protection. Others pointed to the small size of the market, the dangers of retaliation and the impact in terms of rising costs for exporting industries such as agriculture. Nonetheless, the advent of the Great Depression and a change of government in the 1930s saw the adoption of protectionist policies which were further intensified during World War Two. These remained in place until the late 1950s when a more outward looking industrial strategy was heralded by the publication of the Economic Development (Whitaker Report) (Boylan and Prendergast, 2008).

When Ireland achieved independence in 1922, its cadre of professional economists was small. The Statistical and Social Inquiry Society of Ireland (SSISI) (founded 1847) and its journal provided the main discussion forum for academic economists and government officials. Issues debated usually reflected the public interests of the time as perceived by the intellectual elite. They included agricultural efficiency, population, emigration, and the relevance of Keynesianism in the Irish context and the role of government in the economy. There were also major debates on industrial strategy in the 1950s and again in the 1980s.

Although George Duncan and T.J. Kiernan produced early estimates of Irish National Income, expertise in quantitative analysis was limited and influential economists such as George O'Brien adopted a largely literary approach. The Economic Research Institute (ERI) (later Economic and Social Research Institute (ESRI)) was set up in 1960 funded by a grant from the Ford

Foundation to rectify this deficiency. Its first director Roy Geary used his international contacts to recruit suitably trained staff and initiate a programme of training for young researchers. Although best known as a statistician, Geary himself had made important contributions to economics particularly the field of National Income Accounting.

The present generation of Irish economists are more numerous and better trained than their predecessors in the early years of the twentieth century. Many are the products of graduate schools in the United States and in Britain. However, much of their research output relates to Irish problems and is published in Irish journals. Since the 1970s issues relating to Ireland’s relationship with the European Community — the Common Agricultural Policy, the Single European Market, Regional Policy, the ERM, the Euro and more recently debt and stabilization — have been important topics for research. Work in the field of health economics has also become increasingly prevalent. A relatively small number of Irish economists have international reputations in their specialties: John Spencer, Queen’s Belfast, for applied general equilibrium analysis; Peter Neary, University College Dublin, for his work on Dutch Disease; Kevin O’Rourke for his work on globalization and Philip Lane for his estimates of countries’ foreign assets and liabilities.

As in earlier centuries, some of the most important work by Irish-born economists continues to be carried out in the United States and in Britain. Terence Gorman (1923—2003), who was educated at Trinity but spent his entire career at English universities, sought to develop tools to facilitate an understanding of the links between individuals’ preferences and market behaviour. To this end, he carried out foundational work on the aggregation of preferences. He also explored the issue of separability in individual decision making, that is, the conditions under optimization problems can be broken into stages (Honohan and Neary, 2011). John Sutton, London School of Economics, has made important contributions on market structure. Canice Prendergast, University of Chicago, is a leading authority on incentives while Brian Arthur, Stanford and Santa Fe, has pioneered the new field of complexity.