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Chapter 5. Swedish economics:

2. Neoclassical economics and interwar pluralism

This leaves us with two seemingly opposing definitions of the economic. One is the “materialist” conception of the economists of the period of classical political economy like Adam Smith and David Ricardo, but also of Marx and later Alfred Marshall. The materialist conception studies the production, distribution and consumption of use-values. Against this stands what Robbins called the “scarcity”

conception, which sees economics as the science of the logical relation between scarce means and ends. This is the science of rationally choosing and calculating actors, portrayed in the “heroic abstraction” of the homo economicus. But the two definitions do not only map onto the historical shift from political economy to marginal economics, they also seem to map onto the divide between economics and economic sociology represented by Swedberg. But there are very strong affinities with elements in economic sociology and heterodox economics, where both define themselves oppositionally and draw strong boundaries with mainstream neoclassical economics. There are also links between economic sociology and heterodox economics in an emphasis on culture, institutions and historicism.

Morgan and Malcolm Rutherford (1998:23) claim that the long controversy between these two parties was in no way predetermined (as in Whiggish accounts) to be a victory for the neoclassicals: “the decline of pluralism in US economics was neither a simple nor an obvious result of the development of neoclassical economics and vice versa. No logical relation says that this must have been so, nor does the evidence support such a direct causal story.”

Early twentieth century US economics was characterised by a genuine pluralism of positions on economic analysis, as well as on policy advice. Morgan and Rutherford further point out that this was fundamentally married to a view of science that did not exclude advocacy from the role of the scientist, and it was fundamentally field- or problem-oriented. What was changing was the general conception of science and objectivity towards a view where advocacy became increasingly suspect and objectivity less connected to personal trust and character, and instead became a question of proper tools and methodology. This observation, in line with historian of science Lorraine Daston’s work on the history of conceptions of objectivity, was connected to the rise of a new type of economist:

Economists who could rely on such technical methods no longer had to be so scrupulously evenhanded or to depend so entirely on their virtues. These technical approaches created a new kind of professional expertise that enabled economists to offer “objective” policy advice, for they could argue that the objectivity of their methods warranted the objectivity of the results of the analysis and of the associated policy advice. (Morgan and Rutherford 1998:9)

Furthermore, the set of “objective” methodological equipment rather than the earlier personal virtues would come to function as a defence system for the economist against attacks by political opponents: “the turn to technical expertise (rules of calculation, mathematical formulas, and statistical data) provided economists with a defense of their analysis against attacks by those promoting political agendas or those with strong opposing values” (Morgan and Rutherford 1998:9). This is also evident as an important mechanism in later periods, as in the case of Paul Samuelson’s consolidation of a very technical type of economics.

However, there are also other, more external, factors that played important roles in the transformation. Among these are, first, the gradual but steady shift in general societal values towards positive views of free market solutions: “The moment at which society’s values line up with those of economists is a point to watch” (Morgan and Rutherford 1998:14). Furthermore, an important historical event in the transformation of economics is the role played by economists in the US war effort, where many were drafted to work alongside engineers and

mathematicians to solve the practical problems of warfare, and did so well when they

turned their techniques to any number of wartime questions, using simple mathematical optimising models, linear programming techniques, and statistical measurement devices. Economists were brought in to fight the war directly, planning the optimum bombing-raid design and statistically analysing firing patterns. Economists found that by using tool-kit economics and the developing neoclassical technical expertise they could answer questions in very different fields.

Economics emerged from the war covered in glory, perhaps launching the

“economic imperialism” in social sciences over the last half century. (Morgan and Rutherford 1998:13)

The post-war outcome was not simply on a direct continuum with the neoclassicals, but a new breed of formalist economics. From a slightly different approach, Yuval Yonay (1994:42) also directs a searchlight onto the methodological character of the interwar disputes. He has studied the controversy between neoclassicals and institutionalists as a rare case of scientific controversy that revolves not around the interpretation of a particular phenomenon or a specific theory, but rather about the soul of economics itself— “What should economics be like?”. What this controversy in a rather unique period of intellectual pluralism in the history of economics shows, is that the principles of scientific judgement are themselves at stake, a notion that aligns nicely with the notion of self-authenticating styles. Yonay explains that:

previous writers have often shown how rival approaches claimed allegiance to the same scientific ideals of objectivity, rigour, empirical grounding and so forth. But too often the analyses assumed that there was a way to determine whose pledge was a “genuine” one, and whose was “false”. [. . .] “Scientific method” cannot be viewed as the arbitrator between the conflicting paradigms in economics, because both paradigms claimed to have spoken in its name. Like Nature, “the Scientific Method” cannot speak for itself. (Yonay 1994:67)

The mathematisation of economics that took definitive shape has several aspects.

The historian of science Roy Porter (2001) warns not to think that the history of measurement has been connected to developments in pure theory, whether in the natural sciences or in economics. Rather, quantitative measurement has always been a practical matter, connected to the world of practice, commerce, and government. The integration of empirical quantitative measurement (as opposed to deductive mathematical modelling) was integrated simultaneously into

economics and government during the 1930s and 1940s, not least with the development of econometrics on the one hand and, on the other, systems of national accounting that produced empirical data. But in sum, measurement in economics was a tie between the universities and the practical world of government:

Notwithstanding the prominence of university social science and basic research, the modern history of economic measurement remains in important ways a practical one, a history of bureaucratic devices as well as scientific ambitions.

Increasing technicality is not necessarily a mark of disciplinary autonomy; often it is an adaptation to this world of applications. [. . .] [T]he process might best be characterized as one of mutual adjustment, of the reshaping of economics and government through reciprocal interactions. (Porter 2001:19)

3. The stabilisation of the discipline after 1945 and the