------------ EH.NET BOOK REVIEW --------------
Published by EH.NET (February 2005)
D. P. O'Brien, _The Classical Economists Revisited_. Princeton, NJ:
Princeton University Press, 2004. xviii + 423 pp. $39,95 (cloth),
ISBN: 0-691-11939-2.
Reviewed for EH.NET by Elisabeth Allgoewer, Institut f=FCr
Wirtschaftssysteme, Wirtschafts- und Theoriegeschichte, University of
Hamburg.
With _The Classical Economists Revisited_, Denis O'Brien, emeritus at
the University of Durham, has provided a revised edition of his _The
Classical Economists_ published in 1975 by Clarendon Press. The new
edition is very much welcome as it will make this -- in itself
"classic" -- text available to new generations of students and
scholars.
While the structure of the original work remains unchanged, a new
(final) chapter 11 "Classical Economics: A Retrospect" has been
added. Comparing individual chapters with the original, chapter 7 on
"International Trade" has received most of the changes. A new (short)
section on "Customs Unions" has been added. The newly created
subsections mostly cover material also contained in the original
version, extended, however, through additional graphical expositions.
To chapter 9 on "Classical Public Finance" an appendix on "Net
Present Value Taxation" has been added. Furthermore, additional
graphical expositions (e.g. figures 6.1 and 6.2) and formal
presentations (e.g. on the wages fund theory) have been included.
Most importantly, the annotated bibliographies at the end of each
chapter have been updated. As in the first edition, the "Further
Reading" is invaluable to students trying to find their way into the
field. Last but not least, the new edition makes the book even more
accessible for reference. The index is considerably more detailed,
additional keywords and further names have been included.
In the "Introduction" O'Brien characterizes the approach taken in the
book "to convey a picture of the broad range of Classical literature"
rather than to focus on "key individuals" (xvi). Accordingly, the
material is organized around themes. The first three chapters provide
a general introduction. Chapter one on "The Classical Economic Stage"
gives an overview of the authors whose contributions are discussed in
the core chapters and their educational and professional backgrounds.
Noteworthy is O'Brien's discussion of the importance of institutions,
journals, and newspapers which framed the exchange of ideas. This
allows him to discuss the extent to which their contributions can be
seen as emerging from "a scientific community."
Chapter 2 on "The Roots of Classical Economics" surveys intellectual
influences from philosophy and pre-classical economic writings and
inspiration taken from historical developments such as population
growth or industrialization. In two admirably concise sections Adam
Smith's system and David Ricardo's corn model are presented,
highlighting these contributions as providing a starting point or
point of reference for "later" Classical economists. Their
contributions are characterized in some detail for John Stuart Mill
and in shorter paragraphs on Robert Torrens, Nassau Senior, John
Ramsay McCulloch, Thomas Robert Malthus and Thomas Tooke.
The last of the introductory chapters is on "The Characteristics and
Preconceptions of Classical Economics." It underlines the Classical
focus on dynamics and shows how issues of allocation arise in the
context of the concern with growth. The occupation with population is
traced back to Hume in the following section which continues with a
succinct discussion of Malthus's _Essay on Population_ and its
reception by Classical economists. The ensuing section on method is
similarly outstanding by providing a dense and accessible overview
without simplifying the issues at hand.
Chapter 4 opens the more detailed discussion of Classical analysis to
be pursued in the following chapters. The survey of "Classical Value
Theory" is subdivided into four sections. Smith's rejection of
subjective value theory and his development of a cost-of-production
theory are motivated by his interest in the analysis of macroeconomic
distribution. The analysis of market vs. long-run equilibria is
discussed and Smith's concern with labor as a measure of welfare.
Ricardo's contribution to the labor theory of value is the next
topic, followed by a discussion of "Cost-of-Production Theories of
Value after Ricardo." The chapter is complemented by a presentation
of the contributions of individual authors to subjective value theory
in the Classical era substantiating O'Brien's claim that there was a
noteworthy stream of pre-neoclassical subjective-value arguments.
The analysis of "The Classical Theory of Distribution" in chapter 5
treats wages, profits and rents separately before turning to
"Relative Shares." In the section on wages, the analysis of the
problems of the wage fund theories deserves mentioning. The
discussion of profits is another example of O'Brien's mastery of
exposition when it comes to intricate subject matters. Graphical
analysis and Ricardo's numerical examples are used to contrast
Smith's and Ricardo's contributions on relative shares.
Chapter 6 on "Classical Monetary Theory" starts with a somewhat short
overview of the historical background. However, this would be my only
criticism of an otherwise superb discussion of a topic which has
received much attention. A fairly unanimous Classical consensus on
"The Nature of Money" focusing on money as a means of exchange based
on a monometallic standard and leading to a narrow definition of
money is developed. Nonetheless, O'Brien convincingly argues that
Classical economists appreciated the function of banking. "The Basic
Theory" founded on the quantity theory of money and the
price-specie-flow mechanism are developed and linked to the analysis
of the international distribution of precious metals. On this
background the arguments brought forward in the Bullionist
controversy and the debates between Currency and Banking Schools are
discussed in detail. Dealing with Say's law of markets in the next
section complements the analysis in the conventional way. In
contrast, the section on "Inflation" covers material usually given
little attention. O'Brien underlines the Classical awareness of real
effects of changes in the money supply, traces the analysis back to
Hume and shows how these arguments were used to warn of deflation
rather than to advocate inflation.
Chapter 7 covers "International Trade." The discussion of Smith's
contribution is followed by a detailed exposition of the analysis of
comparative advantage. O'Brien sets off the Classical argument from a
Heckscher-Ohlin type analysis, a sideline which I find welcome in
countering the stripped-down presentations of the Classical arguments
contained in many textbooks on trade. The following sections cover
Classical contributions on the determination of terms of trade
supported by graphical exposition. Free trade is further examined
under the heading "Trade Policy," where widely accepted exceptions to
the principle are expounded and the case for unilateral free trade is
discussed. The analysis of "Customs Unions" and "The Transfer
Problem" are illustrations of O'Brien's claim that much of
neoclassical trade theory emerged straight from classical principles.
However, O'Brien emphasizes that Classical authors posed the issues
in the context of growth whereas neoclassical analysis focused on
static analysis leaving much of the dynamic aspects to be
"rediscovered" in recent decades.
Chapter 8 on "The Classical Theory of Growth and Development" opens
with Smith's growth theory, a section which repeats some of the
material already covered in chapter 2. The following section surveys
"The Classical Vision of Growth after Smith" focusing on Malthus,
McCulloch and J.S. Mill, thus avoiding similar repetitions of
Ricardo's contribution. The Classical debates on the effects of
machinery and the possibility of gluts are covered in the next
section. Finally, the distinction between productive and unproductive
labor is discussed.
Chapter 9 on "Classical Public Finance" takes up an often neglected
subject. Smith's general principles of taxation serve as the starting
point. A thorough discussion of the distinction between direct and
indirect taxation and Classical economist's evaluation of both types
of taxes follows. According to Classical insights, national debt, a
topical issue in the Classical era as O'Brien shows, presents a
burden on the future. Ricardo's and Malthus's arguments are presented
as exceptions to this broad consensus, although on different grounds.
Ricardo's case is discussed in detail and confronted with the modern
version of Ricardian equivalence.
"The Policy Prescriptions of Classical Economists" are surveyed in
chapter 10 which starts with a discussion of "The Legitimate Role of
Government" aiming at the refutation of the "caricature of Classical
economists as wild-eyed laissez-faire dogmatists" (327). Instead,
O'Brien argues, the Classical writers were the earliest "fully to
appreciate the allocative mechanism of the market." At the same time
they were "clear that it could only operate within a framework of
restrictions" (328). The following sections cover aspects of the
debates on domestic policy issues: the Factory Acts, the effects of
mechanization, the Poor Laws, public provision of education and trade
unions. Classical contributions to policy controversies beyond the
domestic sphere are taken up in the sections on "Policy for Ireland"
and "Colonies and Colonial Policy."
The final chapter entitled "Classical Economics: A Retrospect" aims
at an overall evaluation. It highlights arguments developed in the
core chapters, most of which have already been mentioned. O'Brien
again underlines his case for Classical economics as a body of
thought developed by a number of contributors rather than by a few
outstanding thinkers. His emphasis on the dominance of issues of
dynamic analysis is repeated. The longevity of the Classical
contributions to monetary theory, monetary policy analysis and
international macroeconomics is reconfirmed. The concern with
pressing problems in the Classical literature on public finance is
contrasted with much less applicable twentieth-century contributions
in the field. Last but not least, the policy orientation of Classical
economics is emphasized, a characteristic certainly not accentuated
in many textbook treatments focusing on theoretical contributions.
The praise that _The Classical Economists_ received in the reviews of
the 1975 edition pertains to the revised version. Even though much
has been published since on the subject matter, none of the many
monographs and textbooks "can hope to compete with the comprehensive
range, the firm grasp of detail and the lucid expository style of
Professor O'Brien's work" as Marc Blaug put it in his review of 1976.
Andrew Skinner stated in 1976 that the book "should appeal to
students of economics ... and especially to those who do not have an
extensive knowledge of the classical period -- an audience which the
author has constantly in mind." His verdict, that when measured
against O'Brien's aims, the book "is not markedly unconventional" can
also be extended to the revised edition. I would, however, add that
given the stated intention of providing an introduction to the broad
literature "by" Classical economists and "on" Classical economics, a
conventional design does serve this purpose best -- especially if it
is so masterfully executed as in this case.
I particularly enjoyed reading the three introductory chapters which
provide the framework to the more detailed discussions following in
the thematic chapters on theory and policy issues. As I tried to show
above, the chapter on monetary policy is outstanding. The chapters on
trade and public finance represent areas covered in passing in
comparable monographs. Finally, the chapter on policy draws together
a wide range of material which allows O'Brien to circumscribe a
"Classical approach" to economic policy issues. This does not imply
the uncovering of straight-forward common principles. Rather, it
assembles evidence against the frequent allegation of randomness in
Classical policy advice. Finally, I find it worth emphasizing that
although Smith, Ricardo, and J.S. Mill clearly receive most of the
coverage, O'Brien succeeds in presenting Classical economics as
"essentially a communal effort" (356). The profiles of many of the
less known figures emerge clearly.
There is one count on which I was disappointed with the revised
edition. Given the outpouring of publications since the first
edition, I had hoped to find an explicit discussion of some of the
more fervent debates concerning the interpretation of Classical
economics. O'Brien briefly mentions the issue in the introduction
(xv) just to refer the reader to the controversial literature which
he lists in three large notes. O'Brien's mastery in presenting
complicated matters in a form accessible to students, his skill in
clarifying contentious issues in the historical sources and his
ability to do justice to authors with opposing views would make him
an ideal authority to present these "variant readings" (362, n.1) in
an even-handed account.
Finally, O'Brien's occasional references to a Keynesian mainstream
survived the revision. To a younger generation of economists they
must seem anachronistic. A similar point can be made about the
direction of the argument in the section on economic policy. The text
explicitly disputes a perception of Classical economists as overly
laissez-faire. However, in between the lines a further case seems to
be developed criticizing an over-optimistic belief in the
effectiveness of government intervention. This belief might have been
widespread at the time when the book was originally written but is no
longer today, especially not in economics departments. In short, in
view of younger readers these implicit arguments seem to reduce some
of the potential of the chapter. I find many students who attend
history of thought classes to be disappointed by the little modern
economic theory seems to offer on economic policy issues. They
dislike the "narrow technical focus of modern literature" (362) and
the aloofness of its policy conclusions. However, many of them
subscribe to a basically liberal outlook also contained in Classical
economics. On this background Classical economists developed -- if
controversial -- positions on pressing policy issues which go beyond
the demand for reduced government intervention so popular today.
Notwithstanding these minor points of criticism _The Classical
Economists Revisited_ is an asset to any university or private
library. Even though O'Brien designed the book "to be read as a
continuous text" (xv), I would highly recommend it to students
wishing to work on individual aspects of Classical economics. The
chapters provide concise introductions to issues and topics, the
bibliographies lead the way to the secondary literature and stress
over and again the importance of reading the original texts.
O'Brien's book is a proof as to how enlightening the Classical
literature is and to how fascinating it becomes.
References:
D.P. O'Brien, _The Classical Economists_ (Oxford: Clarendon Press, 1975).
Reviewed by Andrew S. Skinner, _The Economic Journal_, Vol. 86, No.
342 (Jun,. 1976), 373-75.
Reviewed by Mark Blaug, _Economica_, New Series, Vol. 43, No. 171
(Aug., 1976), 325-6.
Elisabeth Allgoewer is Professor of Economics at the University of
Hamburg. She is currently working on aspects of the reception of
classical economic thought by German-language authors.
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