The twentieth century

Professionalisation

This had many drivers, all more or less directly related to nature of the market for economic knowledge, now more than usually complex with the challenge posed by burgeoning socialist thought and agitation before and after the First World War.

Thus, we should highlight Pigou’s Unemployment (1913), Hawtrey’s Good and Bad Trade (1913) and Robertson’s Study of Industrial Fluctuations (1915). The launch of the Cambridge Economic Handbooks series just after the war was also very significant, being edited by Keynes and with early volumes achieving large circulations, not least the first, Hubert Henderson’s Supply and Demand (1922). Traditional English strengths in economics, such as banking, money, national accounts (with an increasing focus on income and wealth distribution), public finance and trade, were still very much to the fore but there was also a deepening of research which would bring forth such significant contributions as Joan Robinson’s Economics of Imperfect Competition (1933) and, of course, with Keynes’ General Theory (1936), the birth of what has come to be called macroeconomics.

Nonetheless, Cambridge dominance should not be overstated, and certainly not in terms of the production of economics graduates (Birmingham and Manchester were more important, though the majority took commerce degrees).

that economists should acquire an attribute, that of training in a body of theory which was rigorous and inaccessible to the uninitiated; be imbued with an attitude, an impartiality in politics which was buttressed by the scientific possibilities of applied welfare economics; and seek a consequent reward, that of a privileged position and voice in policy-making.

(Middleton, 1998, 106)

Marshall’s Organon is a tough test for 1914, but nonetheless English economists and university economics in particular had made significant steps towards professionalisation. Arguably, less than 25 individuals comprised the British economics profession by that date, of which half had English university posts (though not necessarily in economics or even political economy), with the remainder freelance writers and lecturers, MPs and civil servants. Almost all had written a monograph and more than a quarter a textbook; again almost all were involved in journalism, and approximately one half policy advocacy (especially the tariff reform campaign of the early 1900s) and a lesser number policy advice (Middleton, 1998, table 4.2).

In her comparative study of professionalisation in France, the US and UK, Fourcade (2009, 9-10) argued that:

In Britain, the identity of economists has been historically shaped by a political culture centred on small, tightly knit elite societies that traditionally enjoyed great authority in producing public discourse and conducting the affairs of the nation, and by the nonprofessional, gentry tradition of the public service. This has produced a scientific field that is organized around the authority of elite institutions and personalities, but where the ability to communicate economic ideas in plain and eloquent language (through personal networks and contributions oriented towards the general public...) is also highly valued.

This public-minded elite, concentrated in the golden triangle of Oxbridge and London, would dominate English academic economics and the public policy activities of those economists until the 1970s, reaching its high point during the period from the 1930s to the 1960s, the Keynesian era.

On the one hand, there is the Shackle (1967, 4-5) characterisation of the marginal revolution having produced a dominant neoclassical economics, a ‘Great Theory or Grand System of Economics [of ‘general, perfectly competitive, full-employment stationary (or better, timeless) equilibrium’], in one sense complete and self-sufficient, able, on its own terms, to answer all questions which those terms allowed’ (see also Hutchison, 1953, ch. 25). On the other, there is the political economy that, for Britain, the First World War and its aftermath created on the demand side a major spur to English economists to be even more involved in solving con­temporaneous economic problems, including assisting the political class on how to respond to the clamour for an increased welfare effort (and wider government intervention) borne of the rise of labour and modern democratic political competition. Incentives were thereby created for a discipline to become predisposed towards identifying market failures as endemic.

The rise and fall of Keynesian economics

In an influential assessment, Shackle (1967, 5—6) opined ‘At the opening of the 1930s economic theory still rested on the assumption of a basically orderly and tranquil world. At their end it had come to terms with the relentless anarchy and disorder of the world of fact'. For him, as for many others, the long 1930s (his started with Sraffa 1926 and the state of value theory) represent the years of ‘high theory'.

The foremost rival institution, however, was the London School of Economics (LSE) which developed rapidly in size and reputation under Lionel Robbins (1898-1984) who, appointed as a professor in 1929, was famously against Keynes in the 1930s on many policy and theoretical grounds, and was instrumental in bringing Friedrich Hayek (1899-1992) and thus Austrian economics to the school in 1931. Additionally, Robbins (1932, 15) gave economics its most enduring definition as ‘the science which studies human behaviour as a relationship between ends and scarce means which have alternative uses'.

The earlier, Cambridge-centred focus on the development of macroeconomic theory and policy has also been diluted in recent research; indeed, the breadth of contributions by English economists can be gauged from the nine British — here defined by nationality at date of award, with the problem thereby entailed of omitting ‘non-British', who made significant contributions whilst employed in England — recipients (out of 74 individuals so awarded) to date of the Nobel Prize in economics:

• John Hicks for ‘pioneering contributions to general economic equilibrium theory and welfare theory' in 1972 (Oxford);

• Hayek ‘for pioneering work in the theory of money and economic fluctuations and for... penetrating analysis of the interdependence of economic, social and institutional phenomena' in 1974 (Freiburg);

• James Meade ‘for...

• W. Arthur Lewis (1915—91) ‘for... pioneering research into development, with particular consideration of the problems of developing countries' in 1979 (Princeton);

• Richard Stone ‘for having made fundamental contributions to the development of systems of national accounts and hence greatly improved the basis for empirical economic analysis' in 1984 (Cambridge);

• Ronald Coase (1910—2013) ‘for his discovery and clarification of the significance of transaction costs and property rights for the institutional structure and functioning of the economy' in 1991 (Chicago);

• James Mirrlees (b. 1936) ‘for... fundamental contribution to the economic theory of incentives under asymmetric information' in 1996 (Cambridge);

• Clive Granger (1934—2009) ‘for methods of analyzing economic time series with common trends (cointegration)' in 2003 (UC San Diego);

• Christopher Pissarides (b. 1948) ‘for... analysis of markets with search frictions' in 2010 (LSE).

English economics between the 1930s and the 1970s developed according to local factors and in response to the broader internationalisation (‘Americanisation' for some, especially critics) of the discipline (Middleton, 1998, ch. 6). Academic economists were highly prominent in the policy debates of the 1930s, but it was during the Second World War that the demand schedule for economic knowledge rose significantly and economists were located right at the heart of government, not least Keynes, who was the intellectual father of the subsequent full employment policy and, with an American, joint architect of the Bretton Woods monetary system. University economics was somewhat disrupted as a consequence, but recovery was underway by the late 1940s and, from the 1960s, with the new universities was a significant growth subject. This was a time of innovation, with power and authority shifting from the golden triangle as Essex (which pioneered American-style postgraduate education) and other centres for economic research (for example, York) rose to the fore, with a number of departments (especially Essex and Warwick) aiming deliberately to Americanise, to be mid-Atlantic in their orientation (Backhouse, 1997, 36).

Whilst American influences were undoubtedly strong, there was also resistance to Americanisation, with much of this manifest in the development of British textbooks to rival Paul Samuelson's Economics: an Introductory Analysis (1948). At the national level, Richard Lipsey's Introduction to Positive Economics (1963) was pre-eminent but there were also interesting local experiments, including, at Cambridge, Joan Robinson and John Eatwell's Introduction to Modern Economics (1973) which sought to rescue Keynesianism and also radical political economy (King and Millmow, 2003). As it was, by the 1990s Backhouse (1997, 33) was to conclude:

Though it retained many distinctive features, British economics is now undeniably international, exhibiting many of the features of what has been called American-style professional economics: students learn substantially the same theory as their counterparts in other countries, often using the same textbooks; graduate coursework is regarded as necessary preparation for research; university teachers are expected to have doctorates; frequent publication is essential to professional advancement; the journals in which people publish are essentially international; and there is an emphasis on mathematical theory and econometric technique.

This is to jump ahead somewhat, though it shows the destination of contemporary English economics. We can agree with Hicks (1963, 312) that with the end of the Second World War disciplinary leadership transferred from Britain to America, with the subsequent story told typically in terms of the British assimilation of the neoclassical synthesis associated with Samuelson: of American-style Keynesianism and of a particular analytical technique — general equilibrium — which drew inspiration from the natural sciences, and especially physics.

In Britain, as elsewhere, the charge was made that the neoclassical synthesis led to the empty formalism of an economics that had been incapacitated as a ‘social science' (for example, Blaug, 1999a). However, the charge has also been made that it was the delayed Americanisation of English economics that hampered its scientific advancement (and produced poor policy advice). Foremost here was Harry Johnson (1923—77), a Canadian but with considerable experience of Cambridge, the LSE and other English universities (Moggridge, 2008). Johnson (1968) was scathing about the lack of professionalism in English economics, with particular ire directed at Cambridge and Keynes — ‘an exceptional economist when he lived, but... a malevolent myth since he died' (1975, 226) — and at the British obsession with declinism, resulting in an ‘economics... converted from a scientific subject into a species of political necromancy' (1973, 70). This last complaint followed on from the experience of a number of failed growth experiments in which leading British economists, notably Harrod and Nicholas Kaldor (1908—86), had been highly prominent, these failures undermining the reputation of academic economists vis-a-vis more sceptical economic journalists (now more prominent in an economic knowledge market grown even more competitive) and in the process compromising the Keynesian consensus of macro- and microeconomic policy activism (Middleton, 2004).

Later, Alan Walters (1926—2009), Thatcher's personal economic adviser, made the charge that British economists' professional norms were that ‘free markets will perform in an unsatisfactory way and give rise to unemployment and exploitation, externalities and social costs, inefficiency and excess', such that ‘Massive government intervention is needed in order to ensure full employment, fair rewards, and the efficient allocation of resources' (1978, 90). To this charge, O'Brien (1981, 64) then added that there was a ‘presumption that pervade[d] most of the mainstream literature on the role of government in economic life — the imposed social welfare function, and the myth of the omniscient and impartial government'. These charges were made after a decade of theoretical and policy disputes, typically portrayed as Keynesians vs. monetarists in the 1970s and early 1980s, which were projected as a ‘discipline in disarray'. In fact, for either charge to hold the British economics profession would need to have been substantially different from mainstream American economics. Yet, from survey evidence it was not: in 1971 ‘liberal economic orthodoxy' was clearly dominant in macro- and microeconomics, though Brittan (1973, 22—3) detected ‘egalitarian concern[s]... greater than among economists in most other Western countries, and greater than that of almost any other British middle class professional group outside the social services'. These characteristics of the British profession were broadly mirrored in the later survey of Ricketts and Shoesmith (1990).

A concurrent debate about whether there was a distinctive ‘European' economics yielded an unambiguous positive answer with respect to the US, but that ‘the difference is more like that separating two dialects rather than completely separate languages' and that British economics ‘can perhaps be taken to come from a home halfway, culturally, between the European and North American continents' (Baumol, 1995, 187). We might hypothesise that, during the Keynesian era, the median British economist was politically to the left of their American counterpart; there is evidence of greater British production and consumption of heterodox ideas; and that British economists have made particular contributions in such fields as the measurement of inequality and public economics (Backhouse, 1997, 58).

The hegemony of the neoclassical synthesis came under attack first in the US with the Keynesian paradigm initially questioned by a revival of monetary economics associated with Milton Friedman and associates, and then more substantially by new classical theory, with efficient market theories and the policy ineffectiveness proposition particularly significant. English economists engaged quickly with the monetarist challenge, both in terms of the defence of Keynesianism by Cambridge economists but also with emerging centres of research in monetary economics (Manchester with David Laidler and Michael Parkin) and a research network, the Money Study Group, in which Johnson played a key role, thereby linking Chicago with the LSE where he had a joint appointment (Moggridge, 2008, 308—11). Britain subsequently experienced a more extreme monetary policy experiment under the Thatcher governments than was the case in the US (Middleton, 1998, ch. 7), but in both neo-liberal ideas were in the ascendant by the 1980s in the wider market for economic knowledge. The end of the Keynesian era was marked spectacularly for British economists in March 1981 when 364 signed a letter to The Times protesting about the Thatcher government’s deflationary policies at the very point that the recovery from the recession beginning in 1979 can be dated (Middleton, 1998, 34—5).

During the Keynesian era English economists responded to, and created the conditions for, the enlarged role of the state. Whilst English economics made distinguished contributions to macroeconomic theory, the long-run emphasis on economics as a practical science was also reflected in growing expertise in forecasting, not least the National Institute for Economic and Social Research (NIESR, founded 1938) which initiated its quarterly National Institute Economic- Review in 1959; in public enterprise (for example, Ralph Turvey, 1927—2012) and tax reform (Kaldor and Meade, the latter for the Institute for Fiscal Studies (IFS) established in 1969 and by the 1980s unafraid of controversy but renowned for its objectivity). Normative egalitarian ideas were widely shared amongst English economists, though the works that were politically influential — Tawney’s Equality (1931) and then Crosland’s Future of Socialism (1956) — did not originate within academic economics. The English economics profession, however, was very far from homogenous with respect to Keynesianism. The Mont Pelerin Society, created in 1947 by Hayek and others, formed an international forum for such dissent, and with Robbins a founding member, but domestically it was the establishment in 1955 of the Institute for Economic Affairs (IEA) that would provide the rallying point for those for whom Keynesianism undermined the free market (Cockett, 1994; Mirowski and Plehwe, 2009). This would be an important vector for a range of American academic work, and neo-liberal ideas more broadly, to be transmitted to English economists and thence into wider public debate.