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Taxonomy in History of Economics 
 
J.  Daniel Hammond 
Department of Economics 
Wake Forest University 
 
One of the themes in previous HES editorials is the importance for 
history of economics of doing good history. This is presented in 
different guises, from the less formal ("sociologise," "contextualise," 
"historicise") to the more formal (Sociology of Scientific Knowledge), 
and with "whig history" in the background as an example of bad history. 
Continuing the theme of historiographic standards, I would like to 
address the role that taxonomy plays in intellectual history. 
 
Taxonomy is useful to the historical enterprise in much the same way that 
theory is useful to economics. By placing ideas, methods, and people who 
comprise the historical record into categories, we isolate the essential 
and exclude the extraneous. The abstraction and simplification that occur 
with the creation of taxonomic categories, like the abstraction and 
simplification of economic theory, allow analysis and understanding. 
 
My concern, however, is not with the benefits of taxonomy. It is with the 
danger that careless taxonomy presents for the practice of good history. 
In working on the history of monetary economics and of Milton Friedman's 
contributions to economics I have noticed instances of careless taxonomy 
that historians should be especially capable of avoiding. I suspect that 
these practices are found elsewhere, and that they are not more or less 
pervasive where I have found them than in other areas. Generally, the 
problem is taking an insufficiently historical approach to the definition 
and use of the categories into which we place economists and their ideas. 
 
One of the practices, which I will mention without documentation, is a 
tendency on the part of historians writing about Friedman's work to 
present a composite picture of Friedman's ideas that is made from bits 
and pieces of his writings from disparate points in his career. At best 
this portrayal of Friedman's ideas, say on monetary economics, is a sort 
of "average" observation over the course of his career. At worst, it 
gives a misleading picture of what he believed at any particular time. 
The practice is ahistorical in the sense that it strips away the 
historical/biographical development of Friedman's thought. 
 
The second practice is much the same thing, except that it involves 
fixing the definition of doctrinal categories, rather than fixing the 
content of an economist's ideas. I will illustrate this with a concrete 
example, the quantity theory of money. I have treated this more fully in 
a review of Mark Blaug, et. al., _The Quantity Theory of Money: From Locke 
to Keynes and Friedman_. [The review is available at 
http://www.wfu.edu/%7Ehammond/SEJreview.htm through the kind 
permission of the _Southern Economic Journal_.] 
 
One task Blaug and the other authors undertake in the book is to 
determine if various figures from the history of economics were quantity 
theorists. In doing so they use a definition of the quantity theory 
proposed by Blaug, by which the quantity theory is three propositions: 
 
(a)  the causal arrow runs from money M to prices P, and not from 
prices to money, which is to say that the initiating change in the 
supply of money must be assumed to be exogenous; (b) there is a 
stable demand for nominal money-balances-to-hold, sometimes 
known as the velocity of circulation of money V, meaning that the 
demand for money changes slowly if at all and, in particular, that 
it changes independently of changes in the money supply; and (c) 
the volume of transactions T, or the volume of output Y _ is 
determined independently of the quantity of money or the level of 
prices but rather by real variables such as endowments, 
preferences and technology (Blaug, 1995, p. 29). 
 
This three-part definition will no doubt look familiar and reasonable to 
most readers, but let's consider the foremost (self-identified) quantity 
theorist of the 1950s, Milton Friedman. In 1958 Congressional testimony 
Friedman summarized his tentative findings on the role of money: 
 
The direction of influence between the money stock and income and prices 
is less clear-cut and more complex for the business cycle than for the 
longer movements. _ Thus changes in the money stock are a consequence as 
well as an independent cause of changes in income and prices, though once 
they occur they will in their turn produce still further effects on 
income and prices. This consideration blurs the relation between money 
and prices but does not reverse it. For there is much evidence _ that 
even during business cycles the money stock plays a largely independent 
role. This evidence is particularly direct and clear for the deep 
depression periods (Friedman, 1958, p. 179). Friedman's statement is 
incompatible with parts (a) and (c) of Blaug's definition, for he states 
flatly that he finds causation running in both directions and money 
influencing output. Therefore, we must conclude either that in the late 
1950s Milton Friedman was not a quantity theorist, or that the definition 
is not fully adequate for the historical period in question. 
 
This "test" of Blaug's definition of the quantity theory highlights two 
facts that he acknowledges in the book's introduction -- that economic 
doctrines evolve over time and that our view of their history is 
conditioned by our position in the history. To be fair, Blaug discusses 
the very problem that is my concern in this editorial. Yet, I propose in 
my review of the book that this three-part definition of the quantity 
theory is conditioned by Blaug's viewing the history of the quantity 
theory through a "neoclassical telescope." The neoclassical telescope 
transforms ideas into propositions suitable for formal mathematical 
modeling, and in so doing converts more-or-less statements into either/or 
statements. Thus Friedman's more-or-less statement to Congress does not 
fit the either/or structure of the definition. 
 
My second concrete example illustrates the danger of excessive attention 
to a figure's writings in one area, or even to one article or book, to 
the exclusion of other writings that set the context. The example is 
methodologists' and historians' interpretation of Friedman's methodology. 
I have considered this more fully in Hammond (1992, 1996). Friedman's 
essay "The Methodology of Positive Economics," is difficult to interpret; 
yet it has played an important part in methodologists' and historians' 
understanding of the nature of post-World War II economics. Most of the 
categories into which Friedman's methodology have been placed are taken 
from philosophy, e.g., several types of instrumentalisms, Popperianism, 
or specific types of realism. Much of the secondary literature on the 
essay suffers from an ahistorical approach to interpretation. 
 
This is seen first of all by the paucity of attention given to Friedman's 
published writings on methodology aside from the 1953 essay. In other 
writings contemporaneous with the essay Friedman provided a category for 
his methodology -- Marshallian methodology. It took a long time for 
interpreters to take note of this lead that Friedman had given for 
interpretation. Secondly, ahistorical interpretation is seen in the lack 
of attention to the biographical circumstances from which Friedman's 
writings were produced. This part of the historical record includes 
Friedman's published writings on economics proper and the unpublished 
record of drafts, notes, and correspondence. Together these records of 
the historical context for the 1953 essay support the conclusion that 
Friedman's taxonomy of Marshallian and Walrasian methodology is more 
appropriate for interpretation of his essay than the philosophical 
taxonomy more frequently used. 
 
When in previous HES editorials Jim Henderson exhorted us to 
"contextualise" and Tim Alborn to "historicise," their concerns were, I 
think, much the same as mine. Good intellectual history requires good 
taxonomy. Good taxonomy requires critical attention to both the 
definition and application of categories and their labels. The 
historian's contribution starts with bringing a full set of historical 
data to this task. 
 
 
References 
 
Blaug, M., Eltis, W., O'Brien, D., Patinkin, D., Skidelsky, R., and Wood, 
G.E. The Quantity Theory of Money: From Locke to Keynes and Friedman. 
Brookfield, VT: Edward Elgar, 1995. 
 
Friedman, M. "The Methodology of Positive Economics." In Essays in 
Positive Economics, pp. 3-43. Chicago: University of Chicago Press, 1953. 
 
Friedman, M. "The Supply of Money and Changes in Prices and Output, "In 
The Relationship of Prices to Economic Stability and Growth, pp. 241-56, 
85th Cong. 2nd sess., Joint Economic Committee Print, 1958. Reprinted in 
M. Friedman, The Optimum Quantity of Money. Chicago: Aldine, 1969, pp. 
171- 87. 
 
Hammond, J.D. "The Problem of Context for Friedman's Methodology," 
Research in the History of Economic Thought and Methodology, W.J. 
Samuels, ed., vol. 10. pp. 129-47. Greenwich, CT: JAI Press, 1992. 
 
Hammond, J.D. Theory and Measurement: Causality Issues in Milton 
Friedman's Monetary Economics. New York: Cambridge University Press, 
1996. 
 
Hammond, J.D. "Review of The Quantity Theory of Money: From Locke to 
Keynes and Friedman, by M. Blaug, et. al." Southern Economic Journal 63 
(October 1996): 542-4. 
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