The Romantic Economist

Richard Bronk’s new book- The Romantic Economist looks a fascinating half term read.

Larry Elliot in today’s Guardian considers some of the key issus that Bronk’s new book throws up. It has been 75 years since the world economy has experienced a real depression are we about to experience another one?

Imports into China are down 45%, unemployment is rising at 600,000 a month, the German economy shrank by 2.1% in the final quarter of 2008, factory output is dropping at a rate in the UK not seen since 1974. Elliot asks “is this the big one”?

One reason that we are in this mess is because we assumed far greater foresight than actually existed. All the fancy models purporting to show only a minuscle risk of financial blow-out were flawed.

Already the cutting edge of the profession are looking to other disciplines to find an answer- biology and psychology in particular. Step forward Richard Bronk.

Bronk notes in his book-

Standard economics assumes that economic agents are perfectly rational; that is the basis of its predictive equilibrium-based models. Modern versions generally allow for certain types of information problem and market failure, and recognise that institutions and even history play a role; but they still assume that these factors do not call into question the underlying model of agents as rational utility maximisers within those constraints.”

Bronk’s book is about the lessons economists can learn from the Romantic movement, from Wordsworth’s poetry and the philosophy of Nietzsche. We all have passions, paranoias, dreams and delusions, he says, and these shape our future. “In many cases, economic activity is as much a function of creativity, imagination and sentiment as is the act of writing a poem or painting a picture.”

There have been many economists down the years who have expressed scepticism about reducing their discipline to a mechanistic subject. Malthus told Ricardo to be wary of becoming too attached to abstract hypotheses; Schumpeter talked of creative destruction; Hayek saw the market as a voyage of discovery; Keynes stressed the importance of “animal spirits”.

Somewhere down the years, these insights have been lost. It is as if physicists still thought that the Newtonian view of the world was all that mattered, and that Einstein had never been born.

Elliot expands further on these points in his article.

I think I will be paying a visit to Amazon to order myself a copy to begin later in the week.

For further reviews of the book from the LSE click here.