Grand Pursuit provides great insight into economics

One day I walked into my office and found a copy of Sylvia Nasar's Grand Pursuit on my desk. There was no note, so I have no idea who left it for me. And I can't thank them, so if anyone wants to claim credit, please let me know.

In Grand Pursuit, Nasar provides us with a history of modern economics. She covers a broad spectrum, going far beyond the usual suspects. As she says, she specifically chose protagonists "who were instrumental in turning economics into an instrument of mastery." She then tried "to picture what each of them saw when they looked at their world, and to understand what moved, intrigued and inspired them."

Nasar begins her tale with Charles Dickens and Henry Mayhew observing and publishing the condition of the poor majority in mid-1800s London. She then moves onto Karl Marx, Friedrich Engels, Alfred Marshall and Beatrice and Sidney Webb. She then covers Irving Fisher, John Maynard Keynes, Joseph Schumpeter, Friedrich Hayek, Joan Robinson, Paul Samuelson, Milton Friedman and Amartya Sen.

As a student of history, I thoroughly enjoyed the book. I wish Nasar had spent more time on the economics and less on the characters themselves and what motivated them, but she does an excellent job of providing insights into each thinker and what drove them, so that is just my personal preference.

One of the key insights from the book is that the concept of  "economic intelligence" was far more critical to a system's success than territory, population, natural resources or even technological leadership. In other words, ideas matter. Indeed, as Keynes famously said of ideas during the Great Depression, "The world is ruled by little else." Economic truths might be less permanent than mathematical truths, but economic theory was essential for discovering what worked, what didn't, what mattered and what didn't. Some key examples:

-- Inflation could lift output in the short run, but not in the long run
-- Gains in productivity drive wages and living standards
-- Education and social safety nets could reduce poverty without producing economic stagnation
-- A stable currency was necessary for economic stability
-- A healthy financial system was essential for innovation

As American economist Robert Solow once observed: "The questions keep changing and the answers to even old questions keep changing as society evolves. That doesn't mean we don't know quite a bit that is useful, at any given moment."

I recommend the book to those who are interested both in the history of economic thought and the characters who played the leading roles.

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    Larry Swedroe is director of research for The BAM Alliance. He has authored or co-authored 13 books, including his most recent, Think, Act, and Invest Like Warren Buffett. His opinions and comments expressed on this site are his own and may not accurately reflect those of the firm.