------ EH.NET BOOK REVIEW ------
Title: Famous Figures and Diagrams in Economics

Published by EH.NET (December 2011)

Mark Blaug and Peter Lloyd, editors, Famous Figures and Diagrams in
Economics.  Cheltenham, UK: Edward Elgar, 2010. xvii + 468 pp. £112.50
(hardcover), ISBN: 978-1-84844-160-6.

Reviewed for EH.NET by Robert Whaples, Department of Economics, Wake
Forest University.

As Avinash Dixit puts it, “The only correct answer to the question
whether economics is a science or an art is ‘Both’” (p. 327). And
perhaps our best “art” is didactic – the useful, but creative graphs
and diagrams that we use in our articles, textbooks and classrooms.
Mark Blaug (Professor Emeritus at the University of London and the
University of Buckingham) and Peter Lloyd (Professor Emeritus at the
University of Melbourne) have enlisted a stellar international cast of
contributors to provide an account of the role and history of about
sixty figures and diagrams used in economic analysis.  “We have
selected figures that have been prominent in the history of economic
analysis and that are, with a few exceptions, still found in
contemporary textbooks and research” (p. 1). If you use these diagrams
in your research or teaching, you may learn a lot from this pithy
collection.

The editors’ introduction makes a compelling case that economists have
shown great ingenuity in devising figures and diagrams.  While the use
of these geometric diagrams “as a device for discovery and proof has
declined in recent decades” (p. 7), their effectiveness as an
expository device – especially in the classroom – has endured.  Many
of us reflexively think in terms of these diagrams, so it’s worthwhile
to consider their origins and delve deeper into their assumptions and
nuances.

The volume includes 58 chapters in seven subsections – “Basic Tools of
Demand and Supply Curve Analysis” (such as Marshall’s supply and
demand graph, indifference curves and isoquants, substitution and
income effects, and Engel Curves); “Welfare Economics” (including the
Harberger triangle, taxation of external costs, monopoly and price
discrimination, duopoly reaction curves, and monopolistic
competition); “Special Markets and Topics” (including location theory,
cobweb diagrams, and reswitching and reversing in capital theory);
“Basic Tools of General Equilibrium Analysis” (including the Edgeworth
box, production possibilities frontier, and factor price frontier);
“Open Economies” (including the offer curve, the Stolper-Samuelson
box; the Lerner diagram, and the four-quadrant diagram for the
two-sector Heckscher-Ohlin model); “Macroeconomic Analysis and
Stabilisation” (including the IS-LM diagram, the aggregate demand
aggregate supply diagram, the Phillips curve, and the Beveridge
curve); and “Growth, Income Distribution and Other Topics” (including
the Solow-Swan growth model diagram, Lorenz curve, and Kuznets curve).

Among the chapters that should be singled out as worth reading are two
by Yew-Kwang Ng (on the Harberger triangle and on the taxation of
external costs) and especially Richard Lipsey’s on the AS-AD diagram,
which will profit almost everyone who teaches an introductory
macroeconomics course by reminding them about the foundations of this
tool, which many textbook writers fail to convey.

The volume has a bit of a nostalgic feeling in places.  The chapter on
kinked demand curves concludes that “despite its weaknesses, the KDC
concept survives, at least in undergraduate texts in microeconomic
theory” (p. 157).  I used to jokingly tell students that they should
tear out and crumple up the textbook page or pages discussing kinked
demand curves, but (alas?) they have disappeared from the textbooks I
use.  Marc Nerlove’s chapter on cobweb diagram opens by saying
“Mordecai Ezekiel’s 1938 paper made ‘The Cobweb Theorem’ and his
famous diagram well-known to every student of economics” (p. 184) –
surely this is not true of recent cohorts – and concludes that “the
cobweb theorem is fatally flawed as a theory of agricultural price
movements; it has little empirical relevance, nor is it supported by
any empirical evidence” (p. 188).  Like the kinked demand curve, I
suspect that part of the reason the cobweb diagram hung on in
textbooks for so long is that getting students to work through it was
simply good mental exercise for them – even if the model had little
bearing on reality. Textbooks’ recent turn toward integrating both the
latest news and the profession’s explosion of empirical research
findings seems to have crowded out both the kinked demand curve and
the cobweb model.  I see this as progress.

Although the book is a terrific success, I spotted several errors in
the diagrams themselves that the publisher needs to correct.  Figure
10.3 mislabels the horizontal axis as KL, when it should be K/L.
Figure 16.1 features an upward-sloping marginal revenue curve and a
downward-sloping marginal cost curve.  In Figure 36.1 the contract
curve fails to go through the origin in the lower-left corner.  Figure
50.4 is imprecisely drawn.  The AD1, SRAS1 and LRAS curves are
supposed to meet at a unique point, but they don’t – and the Phillips
curve in the bottom panel slightly misses the mark too. Finally,
despite explaining that “these conditions imply that the Lorenz curve
is represented in a unit square” (p. 432), Figure 57.1 (like almost
every textbook illustration of the Lorenz curve) isn’t a unit square.

Robert Whaples is the editor, with Randall Parker, of The Handbook of
Modern Economic History (Routledge, forthcoming).

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Geographic Location: General, International, or Comparative
Subject: History of Economic Thought; Methodology
Time: 19th Century, 20th Century: Pre WWII, 20th Century: WWII and post-WWII