------------ EH.NET BOOK REVIEW --------------
Published by EH.NET (February 2007)

Thomas Sowell, _On Classical Economics_. New Haven: Yale University 
Press, 2006. ix + 304 pp. $35 (cloth), ISBN: 0-300-11316-1.

Reviewed for EH.NET by John Berdell, Department of Economics, DePaul 
University.


Thomas Sowell's _On Classical Economics_ forms a remarkably 
integrated whole given that major parts appeared independently in the 
1970's while others have been recently added. This is evidence of the 
unity and consistency of the author's view of classical economics and 
public policy broadly considered.

First, it is a page turner and quite surprisingly so. Sowell's tour 
of classical economics is usually a quick march, one that 
deliberately skirts the thickets and muddy places that have detained 
many contributions to the secondary literature. Sowell keeps his 
reader on the high ground and briskly leads our attention from one 
classical vista to the next. This renders the work admirably suited 
for readers new to classical economics, and I look forward to using 
it with undergraduates. Sowell's attention is almost entirely devoted 
to the primary texts with only occasional nods to the secondary 
literature, indeed he is more inclined to engage popular perceptions 
of the classics rather than particular interpreters. These 
perceptions seemed to this reader to be of the 1970's, even in the 
more recently written second half of the book, and this provided part 
of the work's integrative force. Additionally, there is a strong 
center of gravity around classical macroeconomics. This is not simply 
the Malthus-Ricardo debate but a far wider dispute between supporters 
and deniers of the legitimacy of an equilibrium approach to aggregate 
income determination. It is Sismondi who garners the most attention 
within the equilibrium approach while J.S. Mill's influential 
dismissal of that approach explains the novelty later attached to 
Keynes' equilibrium formulation.

Sowell's point of departure is a chapter devoted to the "social 
philosophy" of the classical economists -- a diffusely defined group 
associated with the "authoritative tradition" emanating from the 
_Wealth of Nations_. That they were "conservative" is placed in doubt 
by pointing to their anti-aristocratic attitudes and their high wage 
policies. Their hostility to the state is rightly associated with an 
aversion to war and, as James Mill put it, the imperial system of 
"outdoor relief for the upper classes" (p. 7). Rather than asserting 
the benefits of laissez-faire based on the existence of a "natural 
harmony of interests" the classical economist are portrayed as 
seeking to dismantle a politicized disharmony of interests that 
greatly favored wealth and power. These themes have found 
considerable favor since the 1970's as a long list of scholars have 
sought to undermine the conservative outer works hastily erected 
around Smith's work during the 1790's. Indeed it would be very 
interesting to have Sowell's reaction to the works of, say, Donald 
Winch, Emma Rothschild or Richard Teichgraeber, whose attempts to 
disassociate Smith from conservatism post date Smith's Reagan-era 
embrace.

Classical macroeconomics is very much the star of the show with 
chapter two tracing the "Say's" law controversy from Mercier de la 
Rivi???re onwards: "the physiocrats made Say's Law and equilibrium 
income theory mutually compatible, as they were _not_ to be for most 
of the next 200 years" (p. 25). A wide array of authors is considered 
and copious notes point to French and English primary texts. The 
opening statement on demography is decidedly uncharacteristic: "the 
whole classical school ... accepted that the long-run supply curve of 
labor ... was infinitely elastic at some conventional subsistence 
level." This obscures the presence of sensitive accounts of increases 
to "conventional subsistence" documented by Spengler among others.

The misunderstandings surrounding Say's Law lie at the heart of this 
book. The Law is presented as actually constituting six distinct 
propositions, only three of which constituted points of disagreement. 
The last proposition is that disequilibrium represents 
"disproportionality" between the current output mix and that 
preferred by consumers, a view which usually rejected the very 
possibility of "an equilibrium level of national income" (p. 27). The 
conflict between these views is brought out in many insightful ways, 
and a distinction is made between static and dynamic equilibrium 
income notions: the former is an equilibrium level of income while 
the latter is an equilibrium growth rate of income. The treatment of 
monetary theory is attentive to the possibility of hoarding, and 
whether there are demands for money other than the transactions 
demand. The notion behind Ricardian equivalence is mentioned, but not 
the term as such. Indeed, readers are not alerted to the fact that it 
has been revisited. The absence of any mention of this or other 
recent echoes of classical disputes suggests a certain determination 
on Sowell's part.

A chapter on classical microeconomics follows in which a 
consideration of longer term growth is placed within the context of 
diminishing agricultural returns, rent determination and value. 
Foreshadowing a major theme of the work, J.S. Mill is found holding 
to the proposition that the subsistence level of consumption had 
remained constant in the face of accumulating evidence to the 
contrary.

The chapter on classical methodology draws out several themes running 
through the preceding chapters. Ricardo's terminology and method of 
abstraction is alternately critiqued and defended. Richard Jones 
provides the critique: Ricardo's terms were so specific to his 
theoretical system that his "rent" could never correspond to the rent 
that anyone anywhere understood in "the ordinary and vulgar sense of 
the word" --thus Ricardo had generated "general principles" devoid of 
"any generality"(p. 85). An unusual team speaks for the defense as 
J.S. Mill and Marx successively assert the need for abstractions that 
cut across the multiplicity of causes active in any particular case. 
Only then is it possible to start the "return journey" to a specific 
case which will appear as a rich composite of individual relations 
(p. 86). The use of such thoroughgoing abstractions was the source of 
long running confusions and misunderstandings between those authors 
(such as Malthus and Jones) who sought to explain a given state of 
affairs and those (such and Ricardo and Marx) who sought to establish 
the laws governing the system's direction of change.

Schumpeter's injunction to the effect that to understand Marx one 
must understand Ricardo and Hegel provides the point of departure for 
the penultimate chapter. The Marx-Engels dialectical method is 
described as one of "successive approximation." This method confused 
some of his readers into constructing elaborate critiques of his "law 
of value." In contrast Sowell depicts Marx as pragmatically employing 
a particular definition of value to extend Ricardo's consideration of 
distribution and resource allocation. Three themes in Marx's 
treatment of crisis are carefully balanced against one another. As 
far as the preceding debate between "disproportionality" and 
insufficient demand is concerned, Marx is found to be essentially in 
the former camp, but expectational errors and ensuing overproduction 
in the "principal articles of trade" may cause a general glut of 
commodities through an interruption of the credit system (p. 177). 
The expectational errors which lie at the heart of crises are 
alternatively presented as expressions of the "unconscious" or 
uncoordinated actions of humans under capitalism. Lastly, 
considerable emphasis is placed on capitalism's tendency to undermine 
itself by crippling, estranging and mutilating the worker (p. 162).

In the closing chapter Sowell reflects upon the history of economic 
thought. J.S. Mill carries the most painful lesson: even brilliant 
well meaning people can be elitist and ignorant. An egalitarian theme 
heard throughout Sowell's writings is sounded to good effect here: 
free markets are "one of the most revolutionary concepts to emerge in 
the long history of ideas" and their adherents are contrasted to 
those "who have not been able to accept the humbling thought that 
their own presumably superior wisdom and virtue might be superfluous, 
if not damaging" (p. 189). The distinction between a classical 
"tradition" as opposed to a classical "era" is revisited as Sowell 
suggests that Cournot and Sismondi's intellectual innovations failed 
to become part of that tradition because "they both wrote within a 
framework too unfamiliar to their contemporaries" (p. 200). The 
growing use of mathematics and statistics in economics is approvingly 
mentioned: it has reduced linguistic wiggle room and speeded the 
empirical rejection of poorly performing theories.

Sowell's choice not to have inquired into the recent literature on 
the authors examined here may prove off-putting for some readers, 
especially in light of the criticisms he advances against J.S. Mill. 
Yet this has produced an exciting and fresh look at a wide range of 
classical texts, and despite -- or perhaps because of -- this 
characteristic the policy relevance of the issues and personalities 
considered is always kept clearly in view.

References:

Rothschild, E. (2001). _Economic Sentiments: Adam Smith, Condorcet, 
and the Enlightenment_, Cambridge: Harvard University Press.

Spengler, J. J. (1942). _French Predecessors of Malthus; A Study in 
Eighteenth-century Wage and Population Theory_, Durham: Duke 
University Press.

Teichgraeber, R. F. (1986). _"Free Trade" and Moral Philosophy: 
Rethinking the Sources of Adam Smith's Wealth of Nations_, Durham: 
Duke University Press.

Winch, D. (1978). _Adam Smith's Politics: An Essay in Historiographic 
Revision_, Cambridge: Cambridge University Press.


John Berdell is the author of _International Trade and Economic 
Growth in Open Economies: The Classical Dynamics of Hume, Smith, 
Ricardo and Malthus_ (Edward Elgar, 2002). He is currently working on 
Richard Cantillon.

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