This week’s theme seems to be history… The Hesitant Hand is a history of economic thought, of the government’s role in the economy to tame (the consequences of) self-interest.
It’s remarkable how the economists’ perception of government and its role in the economy changed over time (laissez-faire – only hope – the worst thing on earth – as good or bad as any other market participant). And it is also remarkable how today’s common perception of past economists is wrong, distorted, and attributing too extreme positions. Hence it is really great to have Medema giving this very instructive overview and setting the record straight.
I found it also interesting that the change within the profession can be accredited to so few individuals (of course, there is a supporting cast).
Reading The Hesitant Hand I felt that the history of economic thought should have a much larger part in today’s economics courses. Even, or especially in the introductory courses. It’s amazing what can be found in the writings of Smith, Marshall, or Robbins. So many things got lost, and so many things get re-discovered and are not attributed to the original thinkers. I certainly got a few very good quotes that I will use in class this fall. I may even add the book to the recommended readings list for the Introduction to Economics that I teach at Jacobs University.
Given that the government’s role seems now to be on par with the market institution, both market participants and government officials and bureaucrats are driven by the same motives and have the same capabilities, it will be indeed exciting to observe whether and how dropping the assumption of unconditional narrow self-interest as suggested by contemporary behavioral economics will impact the profession – and the role of government.