BOOK OF THE DAY: The Genesis of MacroeconomicsBy Antoin E. Murphy, Oxford University Press, 234pp, £18.99 - IMAGINE A world in which the acronyms GDP and GNP were never invoked, the concept of "the economy" was unheard of and the word "economist" did not exist.
Consider how much of what animates public discourse today would be missing from such a world: the economy’s growth rate; the latest set of macroeconomic forecasts; the pronouncements of a Lee or a McWilliams.
This is exactly the type of world in which the dramatis personaeof Antoin Murphy's The Genesis of Macroeconomicslived. The lives of the book's eight subjects (William Petty, John Law, Richard Cantillon, David Hume, Francois Quesnay, Anne Robert Jacques Turgot, Adam Smith and Henry Thornton) spanned the period from the late 17th to the early 19th century, before any systematic measurement of economic aggregates took place. Indeed, it was a time when there was no obvious need to conduct such measurement. Until about 1800, average living standards in most western countries rose imperceptibly from generation to generation. Men and women enjoyed approximately the same quality of material welfare as their great-grandparents.
This was the background against which the early theorists reflected on economic phenomena. They had to organise their thoughts without the benefit of an established corpus of knowledge. These early thinkers were intellectual pioneers who “faced the great blank spaces of economics, and creatively imagined ways of filling parts of them”, to use Murphy’s arresting image. It is almost impossible for us to appreciate the challenge they faced, but this book conveys a powerful sense of uncharted territory and its exploration.
The book also impresses on the reader a strong sense of the intellectual debt we owe these pioneers. They created ideas that we now take for granted but were nothing short of revolutionary: Law’s belief a monetary system could be based on inherently worthless paper money; Thornton’s idea of a central bank as a lender of last resort; Quesnay’s notion economic activity was not a zero-sum game but held out the possibility of increasing output per capita; and Hume’s proposition increasing money supply has no long-term effect of real magnitude.
It is hard not to notice an unhappy contemporary resonance in the life experience of at least some of the book’s subjects – several were touched by bank failure or financial crisis. Law was the principal architect of a financial system (the Mississippi System) that ended in catastrophic collapse from which Cantillon made a fortune that may have sown the seeds of his own violent death. Smith’s benefactor, the Duke of Buccleuch, was a partner in the Ayr Bank which collapsed with calamitous consequences in 1772, an event that profoundly shaped Smith’s views on money and banking. Further contemporary resonance (with an obvious Irish application) is to be found in Hume’s prediction that the accumulation of public debt would inevitably lead to bankruptcy of the state.
Finally, Antoin Murphy’s engaging and scholarly book dispels the tired notion that economists are a dismal and colourless lot. We discover Petty, a noted teacher of anatomy, once resuscitated a corpse, and that Law finished off another man in a duel in what may have been a contract killing.
Jim O'Leary lectures in macroeconomics at NUI-Maynooth and is a regular Irish Timescolumnist