Since 1901, December has been a time for Nobel Prizes. Only in 1969, as an afterthought, the Swedish Central Bank established the Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel 鈥� a decision that was met with protests by some members of the Nobel family.

Nevertheless, a scientist who used much of his time on economics was rewarded a Nobel Prize in 1921. Admittedly, Frederick Soddy (1877鈥�1956) received the prize in chemistry, for his work on radioactivity. But in the period from 1921 to 1934 Soddy wrote four books campaigning for a radical restructuring of the global monetary system.

I have been leafing through Soddy鈥檚 book entitled, 鈥楳oney versus Man鈥�, published in 1931. The book opens with a full-page quote from another English polymath, John Ruskin (1819鈥�1900). The social problems of England in the 1840s 鈥� 鈥楾he Hungry 40s鈥� 鈥� and the financial crises that followed in 1847 inspired Ruskin. The mass deaths in World War I and the crisis that started in 1929 provided new inspiration to Soddy.

For Ruskin, and later Soddy, consumption was the only purpose of the economy. 鈥楾here is no wealth but life鈥� is the basic message in Soddy鈥檚 long quote from Ruskin. It is on this basis we should read the title of Soddy鈥檚 book, placing money as a kind of enemy for humankind. Here is a new type of economics: we have standard neoclassical economics, based on the metaphor of equilibrium between supply and demand, and we have evolutionary (Schumpeterian) economics based on a metaphor from biology (innovations as mutations). Soddy offered us a third angle: economics rooted in physics, in the laws of thermodynamics.

Humans survive, he wrote, based on the use of natural resources. If these resources are exhausted, we shall be in deep trouble. At the time Soddy was not taken seriously, but he is now seen as a forerunner for ecological economics. Romanian-born economist Nicholas Georgescu-Roegen (1906鈥�1994) continued working in this tradition.

Soddy points to the fundamental difference between the biophysical resources and consumables 鈥� what he calls 鈥榬eal wealth鈥� 鈥� that are subject to the laws of thermodynamics. This wealth will rot, rust, wear out, or be consumed. Money and debt 鈥� which he calls 鈥榲irtual wealth鈥� 鈥� are only subject to the laws of mathematics. Money can grow without limits, whereas the real economy cannot. In this mismatch, says Soddy, lies the roots of most of our economic problems.

A core subject for Soddy was therefore the underlying mismatch between the real economy and the monetary economy. This problem had been recognized already in Mesopotamia under the rule of Hammurabi (1810鈥�1760 BC). Advised by his mathematicians, he solved the problem by cancelling debt with unpredictable intervals, a practice which in the Bible鈥檚 Old Testament survives under the term 鈥楯ubilee Years鈥�. In 1772 the Welsh moral philosopher and mathematician Richard Price (1723鈥�1791) formulated the problem 鈥� or opportunity 鈥� in this way: 鈥楢 shilling put out at 6% compound interest at our Saviour鈥檚 birth would鈥ave increased to a greater sum than the whole solar system could hold, supposing it a sphere equal to the diameter of Saturn鈥檚 orbit鈥�. Even if we calculate Saturn鈥檚 orbit as we know it today, this would be a considerable lump of gold. Today it serves as a proof that any system involving compound interest sooner or later will collapse, as during financial crises.

鈥淎 core subject for Soddy was the underlying mismatch between the real economy and the monetary economy鈥�

In my view Frederick Soddy was right when it comes to the mismatch between the financial economy and the real economy, but the pessimism we often find in ecological economics does not necessarily follow from his teachings. Here the US economist Erasmus Peshine Smith (1814鈥�1882) has an explanation as to why there are certain areas where we do not have to be that pessimistic.

Peshine Smith placed Man鈥檚 harnessing of Nature鈥檚 energy as the main moving force of the economy. To Peshine Smith, Nature鈥檚 resources, especially her energy resources, have an infinite potential, in contrast to Malthusianism, Soddy, and part of ecological economics. In a sense Peshine Smith kept alive the spirit of the Renaissance and of Man鈥檚 undeveloped potentials.

Peshine Smith sought to develop economics into a quantitative engineering science: 鈥榯o construct a skeleton of political economy upon the basis of purely physical laws.鈥� He believed all economic laws to have their counterparts in those of the natural sciences, and proceeded to characterize the reproduction of wealth as a vast energy-transfer system within Nature鈥檚 overall equilibrium, the basic question being the extent to which Man would proceed to exploit Nature鈥檚 latent wealth.

He wrote to Henry Carey, a fellow economist: 鈥楾he entire universe then is motion, and the only point is how much of the universal and ceaseless motion we shall utilize, and how much we shall permit to be working against us.鈥� His holistic view of the planet as described in the 鈥楲aw of Endless Circulation in Matter and Forces鈥� is decidedly both 鈥榤odern鈥� and 鈥榚cological鈥�. Solar, thermal, and wind energy are the proof.

As indicated, to Peshine Smith economic growth was a product of the forces of nature 鈥� harnessed by Man 鈥� substituting for manual labour. 鈥楾wenty years ago鈥�, says Smith, 鈥榓 paper box of matches sold for a shilling. Now as many matches, of superior quality, are sold for a halfpenny鈥� 鈥� i.e. the price had been reduced to 1/24. 鈥樷�n the meantime, by improved chemical and mechanical combinations, twenty-five boxes had come to be made by the same expenditure of human labour as one match required in its day.鈥� In a box with twenty-five matches, says Peshine Smith, twenty-four may be regarded as the contribution from Man鈥檚 harnessing of Nature 鈥� a Nature who gives her aid, and asks no recompense 鈥� and one as the result of muscular action.

Returning to the crisis with which we began, in a very informative  in 2009, US ecological economist Eric Zencey (1953鈥�2019) notes that Frederick Soddy had distilled his vision into five policy prescriptions, of which four since have become conventional wisdom: to abandon the gold standard, to let international exchange rates float, to use federal surpluses and deficits as macroeconomic policy tools that could counter cyclical trends, and establish bureaus of economic statistics (including a consumer price index). Soddy鈥檚 fifth proposal 鈥� the only one that remains outside today鈥檚 bounds of conventional wisdom 鈥� was to stop banks from creating money (and debt) out of nothing.

During the crisis Soddy lived through, the one that started in 1929, the imbalances between the real economy and the monetary economy were solved with Keynes鈥� theories that increased global demand. During the last crisis which started in 2008, the problem was instead solved by printing more money. In the US this was done by by Ben Bernanke 鈥� who referred to 鈥榟elicopter money鈥� 鈥� and in Europe it was done by Mario Draghi. We can only assume that if Frederick Soddy had been with us today, he would have argued that this operation made the imbalance between the real economy and the financial economy even worse. The social consequences were indeed the opposite. If we look at the crisis of the 1930s in the US, income to capital as a percentage of GDP actually sank, while wages as a percentage of GDP rose  (those who kept their jobs, kept their wages). Now the reverse has happened. In 1970 wages represented about 52% of US GDP. In 2013 that percentage was under 42%.

Reading Frederick Soddy reinforces an uneasy intuition that we may have a crack ahead of us.

Notes

 Money versus Man. A Statement of the World Problem from the Standpoint of the New Economics, London: Elkin Mathews and Marrot, 1931.

 From Ruskin鈥檚 1862 book Unto this last.

 Hudson, Michael, 鈥nd Forgive Them Their Debts: Lending, Foreclosure and Redemption from Bronze Age Finance to the Jubilee Year, Dresden: ISLET-Verlag, 2018.

 Price, Richard, Observations on reversionary payments on schemes for providing annuities for widows, and for persons in old age, London: T. Cadell, 1772. In volume 3 of Das Kapital Marx discusses his fancy scheme solving debt problems through the use of compound interest.

 Smith, Erasmus Peshine, Manual of Political Economy, New York: Putnam, 1853. Nine editions in English by 1897 and translations into French, German and Italian testify to his influence. By now he is unfortunately almost forgotten.

 On Erasmus Peshine Smith, see Michael Hudson鈥檚 1969 Ph.D. thesis: E. Peshine Smith: A Study in Protectionist Growth Theory and American Sectionalism, Ann Arbor: University Microfilm.

 Krelle, Wilhelm, Verteilungstheorie. T眉bingen: Mohr, 1962, p. 12.

Erik Reinert is Professor of Technology Governance and Development Strategies at Tallinn University of Technology.

This blog was first published on the blog. Illustration: Knut L酶v氓s (knutlvas@gmail.com).

叠测听Erik Reinert听补苍诲听Richard Itaman.

At the OECD鈥檚 origin, we find the 1947 Marshall Plan that re-industrialised a war-torn Europe. At the very core of the Marshall Plan was a profound understanding of the relationship between a nation鈥檚 economic structure and its carrying capacity in terms of population density. We argue that it is necessary to rediscover this theoretical understanding now, in the mutual interest of Africa and Europe.

In early 1947, worries grew in Washington that an impoverished Germany 鈥� where manufacturing industry had been forbidden under the Morgenthau Plan 鈥� would fall an easy prey to the Soviet Union. US President Truman therefore sent former president Herbert Hoover on a fact-finding mission to Germany. One powerful sentence in Hoover鈥檚 Report of March 18 that year zeroed in on the basic problem:

“There is the illusion that the New Germany left after the annexations can be reduced to a 鈥榩astoral state鈥�. It cannot be done unless we exterminate or move 25.000.000 out of it鈥�.”

Hoover understood that the population density of a country is determined by its economic structure: Industrialisation makes it possible to dramatically increase the population carrying capacity of a nation. 鈥楨xterminate鈥� was an extremely strong word to use after the horrors of World War II, and everyone understood that there was no place where 25 million Germans could be sent: Re-industrialisation was the only option.

The lesson from the Marshall Plan is that only extreme danger 鈥� in this case a communist takeover of Germany 鈥� will convince the West temporarily to give up what has been called 鈥榝ree trade imperialism鈥�. Temporarily, we argue, two events come together that may enable a rediscovery of the relationship between the economic structure and population densities of nations, and consequently benefit Africa.

At the moment 鈥� facing a situation similar to what England did after the 1929 crisis 鈥� the United States under Donald Trump is withdrawing from the ideology of free trade.听鈥樷�橠onald Trump can embed a single visceral truth in a welter of falsehoods,鈥欌��wrote Rana Foroohar in听The Financial Times听recently. The 鈥榲isceral truth鈥� is that David Ricardo鈥檚 1817 trade theory is being marginalised. Last time Ricardian trade theory collapsed 鈥� in the 1930s 鈥� this marked the start of a process of industrialisation in Latin America that lasted for decades. We argue that the current situation presents a major opportunity for Africa in a similar way.

A second event is migration. In 1947, Herbert Hoover stated the facts regarding industrialisation and population density. However, Alfred Marshall 鈥� the founder of neo-classical economics 鈥� in his 1890 textbook听Principles of Economics听听gives a framework to understand why: Activities subject to diminishing returns (agriculture, mining, fisheries) must after a point shed population, while activities subject to increasing returns attract population. Says Marshall: 鈥�鈥橳his tendency to Diminishing Returns was the cause of Abraham鈥檚 parting from Lot, and of most of the migrations of which history tells鈥欌��. This includes the present migration from Africa, we argue. In an attempt to show us the age of this fundamental insight, Marshall refers to the Bible鈥檚 Genesis xiii: 6:听鈥淎nd the land was not able to bear them that they might dwell together; for their substance was great so they could not dwell together鈥欌��(Marshall 1890: 201).

Alfred Marshall essentially rediscovered what was already old knowledge. All over Europe, development economics of the 1600s and well into the 1700s was dominated by the insights of Giovanni Botero鈥檚 work听On the Greatness of Cities(1591), a work that appeared in more than 60 editions in all the main European languages. Botero explained why the only 鈥榠slands鈥� of wealth in Europe were a few cities 鈥� like Venice, Amsterdam and Florence 鈥� where adding value to raw materials, producing manufactures, was the key to wealth. In 1613, Antonio Serraadded the basic theoretical foundation to this: The production of raw materials is subject to diminishing returns, while manufacturing was subject to increasing returns. Consequent productivity increases and barriers to entry made it possible for manufacturing cities simultaneously to raise wages and lower the cost of their goods.

Centuries of trade policy followed the principles of Botero and Serra, all over Europe and in the United States. Former World Bank Chief Economist Justin Yifu Lin put it very succinctly:听鈥樷�橢xcept for a few oil-exporting countries, no countries have ever gotten rich without industrialisation first鈥欌��.

In line with this analysis, we suggest it is time for Africa to follow Alfred Marshall鈥檚 recommendation: 鈥�鈥橭ne simple plan would be the levying of a tax by the community on their own incomes, or on the production of those goods which obey the Law of Diminishing Returns, and devoting the tax to a bounty on the production of those goods with regard to which the Law of Increasing Returns acts sharply.鈥欌��听(Marshall 1890: 452). Here Marshall describes what all presently wealthy countries have done, mostly through the protection of increasing returns activities through tariffs, ever since England in the 1400s started to tax the export of raw wool, while at the same time subsidising the local production of woollen cloth. This was the essence of import-substitution industrialisation that took some non-Western countries out of economic colonialism. For centuries, colonies were essentially areas where the production of most industrial products was prohibited, as in the United States until 1776.

The United States under Donald Trump is now ideologically and indirectly paving the way for the industrialisation of Africa. This must be an industrialisation not primarily focused on the nation-state, like Latin America鈥檚 industrialisation was. Nor can it be based primarily on supplying global markets, as East Asia鈥檚 industrialisation was. It must be focused on the African continent, producing industrial goods that rich countries take for granted, but whose production has not reached Africa to any extent.

An unintended consequence of the Apartheid boycott of Zimbabwe (Southern Rhodesia) was the rapid growth of the industrial sector, reaching more than 30% of GDP. Recently, de-industrialisation there has rapidly increased outward migration, proving the principle Herbert Hoover explained in 1947 still true.

A consequence of Africa鈥檚 industrialisation could very well be reduced migration because more Africans will be able to find jobs in Africa. In 1947, a possible communist takeover of Germany was a threat big enough for the West to temporarily abandon free-trade imperialism. The threat now is the 821 million people worldwide who were undernourished in 2017 according to the FAO. Migration cannot solve their problems. Industrialisation can. We can only hope the West sees the light as it did in 1947.

Erik Reinert听颈蝉听Professor of Technology Governance and Development Strategies at听Tallinn University of Technology.

Richard Itaman听is a Lecturer in Political Economy and Development at Kings College, London.听.

This blog post was first published on the

Photo:听Simon Davis/Department for International Development.

^{听Quoted in Baade, Fritz (1955), 鈥楪ru脽 und Dank an Herbert Hoover鈥�,听Weltwirtschaftliches Archiv, 74(1), 1鈥�6.
听Marshall, Alfred,听Principles of Economics,听London, Macmillan, 1890
听Symcox, Geoffrey (ed.),听Giovanni Botero, On the Causes of the Greatness and Magnificence of Cities (1589), Toronto, University of Toronto Press, 2012.
听Reinert, Sophus A. (ed.),听Antonio Serra, A Short Treatise on the Wealth and Poverty of Nations (1613),听London, Anthem Press, 2011.
听Lin, Justin Yifu,听New Structural Economics: A Framework for Rethinking Development and Policy, Washington DC, World Bank Publications, 2012, p. 350.}

鈥楾his tendency to Diminishing Returns was the cause of Abraham鈥檚 parting from Lot, and of most of the migrations of which history tells鈥� wrote the founder of neo-classical economics, Alfred Marshall, in the first edition of his textbook (1890). In a footnote he refers to the Bible鈥檚 Genesis xiii : 6: 鈥楢nd the land was not able to bear them that they might dwell together; for their substance was great so they could not dwell together鈥�. (Marshall 1890: 201)

Marshall鈥檚 observation also applies to today鈥檚 migration patterns: from countries where most activities are subject to constant or diminishing returns to countries whose key economic activities are subject to increasing returns to scale. Diminishing returns occur when one factor of production is limited by nature, which means that it occurs in agriculture, mining, and fisheries. Normally the best land, the best ore, and the richest fishing grounds are exploited first, and 鈥� after a point 鈥� the more a country specialises in these activities, the poorer it gets. OECD () shows how this occurs in Chilean copper mining: every ton of copper is produced with a higher cost than the previous ton.

In Alfred Marshall鈥檚 theory, the 鈥楲aw of Diminishing Returns鈥� is juxtaposed with 鈥楾he Law of Increasing Returns鈥�, also called economies of scale. Here we find the opposite phenomenon; the larger the volume of production, the cheaper the next unit of production becomes. Traditionally economies of scale were mainly found in manufacturing industry, and increasing returns combined with technological change has for centuries been the main driving force of economic growth. Increasing returns creates imperfect competition, market power and large barriers to entry for challengers 鈥� companies or nations 鈥� making it difficult for them to enter these industries. In contrast to the rents produced under conditions of increasing returns, raw materials 鈥� commodities 鈥� on the other hand, are subject to perfect markets, and productivity improvements spread as lowered prices. This is the essence of the theory which explains why former World Bank Chief Economist Justin Yifu Lin was correct hen he asserted that 鈥楨xcept for a few oil-exporting countries, no countries have ever gotten rich without industrialization first鈥� ( : 350).

In line with his analysis above 鈥� recognising that 鈥榯he free play of demand and supply鈥� may produce suboptimal results 鈥� Alfred Marshall suggests 鈥極ne simple plan would be the levying of a tax by the community on their own incomes, or on the production of those goods which obey the Law of Diminishing Returns, and devoting the tax to a bounty on the production of those goods with regard to which the Law of Increasing Returns acts sharply.鈥� (Marshall 1890 : 452). Here Marshall describes what all presently wealthy countries have done, mostly through the protection of increasing returns activities through tariffs, ever since England in 1485 started to tax the export of raw wool, while at the same time subsidising the production of woollen cloth. This was the essence of import-substitution industrialisation that took some non-Western countries out of economic colonialism. For centuries colonies were essentially areas where the production of most industrial products was prohibited, as in the United States until 1776.

Last time this theory was used in the West was in Germany after World War II. A plan prohibiting industry in Germany 鈥� the so-called Morgenthau Plan 鈥� approved by the Allies in 1943, was rapidly turned to the exact opposite 鈥� to the Marshall Plan 鈥� when it was understood that a poor West Germany would become an easy prey for the Soviet Union. In March 1947 former President Herbert Hoover sent a crystal clear message back to Washington: 鈥�There is the illusion that the New Germany left after the annexations can be reduced to a 鈥榩astoral state鈥�. It cannot be done unless we exterminate or move 25.000.000 out of it鈥�. Hoover understood that the population density of a country is determined by its economic structure: industrialisation makes it possible to dramatically increase the population carrying capacity of a nation.

However, as neo-classical economics developed The Laws of Diminishing and Increasing Returns had to yield for another part of Alfred Marshall鈥檚 theory that made 鈥榚quilibrium鈥� to the basic metaphor of standard economic theory. Through the many editions of Marshall鈥檚 Principles we can trace how these Laws 鈥� respectfully written with a capital L 鈥� gradually became tendencies (not capitalised). During the 1930s increasing returns disappeared from economic theory because this key factor was not compatible with equilibrium. Without diminishing returns the supply curve would not slope upwards, and there would be no equilibrium. This equilibrium is the basis for the rest of the theoretical edifice of mainstream economics. Had realism been the goal, equilibrium would have disappeared from theory because it was not compatible with increasing returns.

Around 1980 Paul Krugman managed to model increasing returns in international trade. When his papers on the subject were published in book form (), the introduction revealed an important insight: 芦The long period of dominance of Ricardo鈥�. 鈥� of comparative advantage over increasing returns 鈥� was largely due to the belief that the alternative was necessarily a mess. In effect, the theory of international trade followed the perceived line of least mathematical resistance鈥� (Krugman 1990: 4 ). In other words, it was the inherent characteristics and limitations of the mathematical tools chosen 鈥� rather than the factors that were important for human wealth and poverty 鈥� that came to determine the research agenda of mainstream economics. Krugman admitting this was most welcome.

So, what did Krugman find when he started using models with increasing and diminishing returns? He came to the same conclusion Marshall did in 1890 and US economist Frank Graham later had rediscovered (): countries specialising in increasing returns activities in many ways specialise in being wealthy, while countries specialising in activities subject to diminishing returns specialise in being poor (my formulation). In this connection Krugman praises classical development economists Gunnar Myrdal and Arthur Lewis, and in his 1981 article he rediscovers the Marxist theory of uneven development, twice referring to Lenin鈥檚 theory of imperialism (: 101-102). As regards the problem of migration, Krugman sees the northern (industrialised country) workforce becoming a 鈥榣abor aristocracy鈥�: 鈥楾his might mean that in addition to exporting capital, the industrial region might, in the second stage of growth, begin importing labor 鈥� a point also noted both by Hobson and Lenin鈥�. Krugman鈥檚 references are Hobson () and Lenin ().

Paul Krugman鈥檚 articles from around 1980 provided an enormous opportunity for mainstream economics not only to catch up with insights from its pre-mathematical period, but also for bridging a widening divide with Marxism in its various forms. As I first hinted at in an article almost 25 years ago, Krugman had opened a Pandora鈥檚 Box where hope was released (the second time she opened the box), but he very soon decided to sit on the lid: hope was stopped. When, in 1996, England marked the 150th anniversary of The Repeal of the Corn Laws 鈥� the abolishing of import duty on agricultural products (by definition produced under diminishing returns 鈥撯�� Krugman had taken the classical neoclassical position of defending David Ricardo at all costs. At the time Krugman was annoyed that neither intellectual nor businessmen understood Ricardo鈥檚 idea of comparative advantage, which he saw as 鈥榰tterly true, immensely sophisticated 鈥� and extremely relevant to the modern world.鈥� ( : 35). After this, any references to the dichotomy increasing/diminishing returns are 鈥� as far as my students and I have been able to find 鈥� not to be found in Paul Krugman鈥檚 work.

The kindest explanation of why Krugman did not follow the path taken around 1980 is one of demand. There was 鈥� at the time 鈥� little demand in the West for theories that 芦proved禄 Lenin to be right. In my 1980 Ph. D thesis I had empirically tested the dichotomy increasing/diminishing returns 鈥� as found in Antonio Serra () and Frank Graham () 鈥� in three Latin American countries 鈥� bananas in Ecuador, cotton in Peru, and tin in Bolivia 鈥� all worked deeply into an area of diminishing returns: every time production was reduced, productivity increased considerably. I compared this to the combined effects of increasing returns and technological change 鈥� what Schumpeter referred to as historical increasing returns 鈥� and showed how countries producing under increasing returns got rich, while raw material producing countries remained trapped in poverty under diminishing returns and perfect competition (). My advisers praised the thesis, but I was warned that there was no demand for such ideas. The ruling ideology was to resurrect David Ricardo.

As we can observe in the n-gram below, the references to David Ricardo skyrocketed at the start of the Cold War, when Samuelson鈥檚 鈥榩roof鈥� that 鈥� under the standard assumptions of neo-classical economics global free trade would create 鈥榝actor price equalization鈥�, the prices for capital and labour would tend to be equalised under free world trade. This came to form an ideological response to the communist promise of 鈥榝rom each according to his ability, and to each according to his needs鈥�. In the words of Lionel Robbins, economics had become a Harmonielehre, a science predicting universal economic harmony.

Figure 1. N-Gram for 鈥楧avid Ricardo鈥� 1817-2008.
Most economists are not aware of how recent his universal popularity is.

We find a steep increase number of references to David Ricardo starting around the 1917 Russian revolution. At the time the new Soviet Union embarked on a protectionist industrial policy inspired by Sergei Witte, a former Minister of Finance under two Tsars and the Russian translator of Friedrich List.

The spike in the academic interest in David Ricardo starting in the late 1940s is somewhat surprising. This was the time when in 鈥榯he real world鈥� the Marshall Plan was extremely successful, but 鈥� seemingly 鈥� at the same time the science of economics was busy building a theory that proved the same Marshall Plan 鈥� creating wealth by having all nations specialise in increasing returns activities 鈥� utterly wrong. This conflict was to have a profound impact on the OECD in the decades to come. The positive experiences from practice faded.

Figure 2 shows the increase in the frequency of the term 鈥榗omparative advantage鈥� from the publication of Ricardo鈥檚 theory on the subject in 1817. Again, we see that the start of the Cold War represents a steep increase in the use of this term, just as with the name of its originator David Ricardo (Figure 1). The frequency of the use of the term 鈥榗omparative advantage鈥� is significantly reduced shortly after the collapse of the Soviet Union.

Figure 2. N-gram for 鈥榗omparative advantage鈥�, 1817-2008.
鈥楥omparative advantage鈥� as a Cold War term.

When Europe today faces mass migrations that are 鈥� at least regarding the number of people involved 鈥� of biblical proportions, the time is due to rediscover the insights from the young Alfred Marshall and from Herbert Hoover in 1947. In the context of poor countries they represent the opposite view of that of David Ricardo and the idea of comparative advantage. But their insights did not reach the Washington Institutions 鈥� the World Bank and the IMF 鈥� which, in spite of formal independence in Africa, through their conditionalities continued to push the agenda of 鈥榗omparative advantage鈥� preserving a de-facto colonial status.

From a Third World point of view it is important to observe that the only time in the 20th century the West left the ideology of comparative advantage was when it was politically necessary in order to stop communism, and it is unlikely that it will be done again unless it is in the acute interest of the West itself. Stopping 鈥� or reducing 鈥� migration is now of an urgency similar to that of stopping communism in 1947. This gives Africa a chance to exploit this window of opportunity. Here we can learn from the experience of Zimbabwe, which managed to turn the blockade into a very successful industrialisation programme, with manufacturing industry exceeding 30 per cent of GDP at one point.

Today around 900 million people on the planet do not have enough food. Some of these will try to move to other countries where they can find work and better possibilities for feeding their children. The only meaningful way to 芦help the migrants where they are禄 is to change the world trade policy, making it possible for African nations to follow the same path to industrialisation that all wealthy nations have followed. The wave of migration creates new demand for a theory that has been there from 1613 (with Antonio Serra), but which was neglected during the Cold War ideological fights. Trade agreements should no longer make it impossible to create jobs in increasing returns industries in Africa. At a recent OECD meeting in Paris Morocco presented an ambitious industrial plan. Hopefully others will follow.

In 1947 the insights of Alfred Marshall and former president Herbert Hoover on the importance of manufacturing industry stopped the advances of communism. They were assisted by George Marshall, the first 5-Star general of the United States and Secretary of State at the time. They were all practical men. Alfred Marshall, the theorist, had many 鈥榳andering years鈥� of experience working around factories behind him (he himself used the German term Wanderjahre). Herbert Hoover was a mining engineer by education and had led the US relief programme to Germany after World War I. George Marshall had the astonishing task of being in charge of US military logistics during World War II. They were all persons with broad practical experience who 鈥� when they were unhindered by the restrictive assumptions of neo-classical economics 鈥� understood these processes.

Now the insights of Antonio Serra (1613), Alfred Marshall (1890), and Herbert Hoover (1947) may make it possible for Africans to find a decent living where they were born. The metaphor of 鈥榚quilibrium鈥� 鈥� doing away with the importance of increasing returns and consequent imperfect competition 鈥� has become a deadly one in the Mediterranean.

Bibliography:

• Graham, Frank, 1923. 芦.鈥� Quarterly Journal of Economics 37: 199-227.
• Hobson, John A., . London, Nisbet, 1902.
• Krugman, Paul, 鈥溾�� (1981), in Krugman, Paul (ed.), Rethinking International Trade. Boston MA, MIT Press, 1990, pp. 93-105.
• Krugman, Paul, 鈥溾��, in Cook, Gary (red.), The Economics and Politics of Free Trade. Freedom of Trade, Volume II, London, Routledge, 1998, pp. 22-36.
• Lenin, Vladimir, , New York, International Publishers, 1939.
• Lin, Justin Yifu, , Washington DC, World Bank Publications, 2012.
• Marshall, Alfred, , London, Macmillan, 1890.
• OECD, , Paris, 2018.
• Reinert, Erik, , Ph. D. thesis, Cornell University, 1980.
• Reinert, Erik, , Constable, 2007.

Erik Reinert听is Professor of Technology Governance and Development Strategies, Tallinn University of Technology听

By Erik Reinert (Talinn University of Technology) and (Universitat Oberta de Catalunya)

On the occasion of the 500th anniversary of Martin Luther鈥檚 Reformation, were formulated by Rethinking Economics and the New Weather Institute. The document was symbolically nailed to the door of the London School of Economics In December 2017 and , and was supported by an impressive list of over 60 leading academics and policy experts. The initiative offers a rare and most welcome refreshing message from the House of Economics.

Several elements in the theses are long overdue 鈥� for example, the existence of planetary limits, the superiority of political deliberation over economic logic, the appreciation of the role of uncertainty in economic predictions, the non-independence of facts and values when economic thoughts are formulated, the warning against over-reliance on modelling, econometrics and formal methods. Also important is the indication that both growth and innovation need to be conceived with a desirable end in sight, one which can be associated with material and spiritual progress 鈥� rather than with misery, inequity and inequality. It is finally all important that in the teaching of economics itself the history and philosophy of economics should be taught, together with all economic theories: not just the family tree of mainstream economics.

Three omissions

While the 鈥�33 Theses鈥� are a much needed initiative, three absences are nevertheless noticeable:

While the problems of financialisation are discussed, by going back to Martin Luther himself, in his 1524 book , we find an older tradition that more clearly separates unproductive hoarding from productive finance. In his 1355 , Nicolas Oresme contrasts the negative effects of hoarding with the positive effect of investments in the real economy:

鈥淚t was this consideration that led Theodoric, King of Italy (493-526), to order the gold and silver deposited according to pagan custom in the tombs to be removed and used for coining for the public profit, saying: 鈥業t was a crime to leave hidden among the dead, and useless, what would keep the living alive鈥�.鈥�

The religious term for unproductive money is mammon. If we combine Oresme鈥檚 insight with as an occasion to clean out failed investments from the global portfolio, we find that in the name of 鈥渟aving鈥� investments we have made the mistake of saving bad projects and poor nations that should have been allowed to go bankrupt. We have helped accumulating mammon at the expense of real investments and consumption that would have 鈥渟erved the purpose of life鈥� as Luther would have put it. Seeing the present world through the eyes of King Theodoric, we have printed mammon 鈥� unproductive capital 鈥� which is useless to keep the living alive, but which promotes speculative bubbles. By doing this we have made the perfect conditions for vulture funds, but failed the poor.

The second is the absence from the list of theories to be taught of Erfahrungswissenschaft, economics as a science of experience. This is in essence what most economics has been about until fairly recently. How influential this experience-based historical school was can be seen in a working paper, 鈥�80 Economic Bestsellers before 1850: A Fresh Look at the History of Economic Thought鈥�. On the list is Adam Smith鈥檚 Wealth of Nations, chronologically No. 53 of 80 bestsellers before 1850, reflecting the fact that capitalism and industrialization were already long in existence when Smith wrote what today鈥檚 students are misled to think was the beginning of economics.

The third missing element is the word trade. Neoclassical trade theory 鈥� based on the theories of (1817) 鈥� presents trade as a harmony-producing mechanism. Ricardo achieved this by basing his model of international trade on the barter of qualitatively identical labour hours.

How Ricardo saw it

Ricardo鈥檚 trick of making every labour hour qualitatively identical is at the core of the problems of globalisation. At the intuitive level, economists understand this: no economist would ever advise his or her children to specialize in an apparent comparative advantage in washing dishes in restaurants. Intuitively, we all understand that there is a hierarchy of skills out there, and from that follows that it is entirely possible for a nation to specialise in a comparative advantage in being poor.

During the decades after Ricardo published his theory, US economists specifically referred to skill differences using a quote from the Bible that describes the cursed tribe that cuts wood and carries water for other tribes (Joshua 9:23). The United States did not want to specialize at the bottom of the skills ladder, and only wanted free trade when it had become an industrial power. Now, when the United States is no longer the world leader, US politicians from Trump to Sanders intuitively wish to go back to their own country鈥檚 long-forgotten theories.

Ricardo鈥檚 illusion is a main mechanism of today鈥檚 centripetal economic forces. This illusion has collapsed several times before, , when the Ricardian economic paradigm was brought down through attacks from Marx and Engels on the left and the 鈥済reat liberalist鈥� on the right. Mill recognized that poor countries needed 鈥渋nfant industry protection鈥� before they could graduate into free trade.

Historically, every rich country 鈥� starting with England from 1485 to the US and South Korea 鈥� for a time has . At present, manufacturing, due both to its high productivity increases and to demand factors, tends to shrink as a percentage of GDP. However, the poor countries in the world periphery still have a huge potential national market for wealth-creating manufacturing.

We still see the destructive forces of the prevailing paradigm keeping poor countries poor, while leading to poverty and mass emigration from many former Soviet Republics. Cascading migration moves Polish construction workers to the UK and Scandinavia, Eastern Ukrainians to Poland to replace construction workers there, and Moldovans to the Ukraine to replace those who left for Poland, in the end creating lower wages in the West and a periphery without jobs and manpower. The backlash against the is happening.

Back to the future

The and the represent the last time Ricardo鈥檚 illusion collapsed. The Havana Charter wisely describes under what conditions a country could protect its industries, as well as suggesting an international tax on trade surpluses. While it was blocked by the United States at the time, were such a rule in force today it would have been possible for the US to protect itself against deficits with China, and the Southern European countries of Portugal, Italy, Greece and Spain (often referred to by the acronym PIGS) against similar deficits with Germany, while allowing the poor unindustrialised periphery of the world to use the same mechanisms that produced the 30 glorious years of development of the West after World War II.

Erik Reinert is Professor of Technology Governance and Development Strategies, Tallinn University of Technology听

is adjunct professor at the Centre for the Study of the Sciences and the Humanities (SVT) – University of Bergen (UIB), and visiting fellow at Open Evidence Research, Universitat Oberta de Catalunya, in Barcelona.

This post was originally published on .

This new working paper attempts to address some of the main problems of the European Union today. The main thesis is that the Weltanschauung and the economic narrative on which the European project has been based have changed radically since the inception of the European Project, from one conducive to convergence and cohesion to another which is conducive to divergence and, in the last instance 鈥� I shall argue 鈥� to a form of internal colonialism towards the economic periphery.

The field of Science and Technology employs the term sociotechnical imaginary [1] about the collective narratives and visions of social futures and of the common good. I shall argue that the European Union has moved away from the sociotechnical imaginary, or narrative, that dominated after World War II. I shall argue that this post WW II Marshall Plan Narrative (MPN) gave way to an equilibrium-based Neo-Classical Economics Narrative with an added innovation rhetoric, which I shall argue is based on a fairly shallow understanding of innovation (which I shall call NC+I).

Key economic features of the Marshall Plan Narrative were leftovers from the crisis of the 1930s. Important points were:

• Economic structure matters (=manufacturing matters).
• The financial sector must be strictly controlled, so that money can only be made by helping economies to grow and not by shrinking them [2]
• A strong focus on employment.

The Marshall Plan Narrative dominated in the late 1940s when the institutions appeared that were later to develop first into the European Coal and Steel Community and then into the European Economic Community. The German term Wirtschaftsgemeinschaft even more emphasizes the communal feeling which, as I see it, slowly got lost after 1992 as the Marshall Plan Narrative disappeared. I shall argue that the last time the Marshall Plan Narrative (MPN) dominated, was in the 1980s with the slow integration of Spain 鈥� gradually lowering tariffs 鈥� in order to save its manufacturing sector. The change in the European socio-economic narrative was accentuated by the 1989 fall of the Berlin Wall, so the European Union鈥檚 birth in 1992 to a large extent coincided with the change in economic narrative.

The present EU narrative and the so-called evidence-based policy backing it up suffer from some basic weaknesses. First of all most of the underlying theories all suffer from what economics Nobel Laureate James Buchanan called the equality assumption: 鈥楢ny generalized prediction in social science implies at its basis a theoretical model that embodies elements of an equality assumption鈥�听摆3闭. Since the time of David Ricardo (1817) international trade has been based on the barter of qualitatively identical labor hours. Common sense tells us that if a neighboring country has moved from the Stone Age into the Bronze Age, maybe it would be a good idea for your own country to follow? But no, the economics profession will almost unanimously insist that the backward country should stick to its 鈥渃omparative advantage鈥� in the Stone Age. The meaninglessness of this theory was fully understood in the Marshall Plan Narrative until the 1980s, but was subsequently lost to the European Union. David Ricardo鈥檚 comparative advantage was once used by England to defend the prohibition of manufactures in the colonies. Now the same theory impoverishes the EU periphery.

The present EU narrative and accompanying 鈥榚vidence based policy鈥� [4] are based on dramatic simplifications, Ricard鈥檚 trade theory being one of them. Close parallels exist between the criticism of neo-classical economics and modern criticism of other sciences. A classical critique of the 鈥減hysics envy鈥� of economics is Phillip Mirowski鈥檚 More Heat than Light (1989), a critique he has renewed ever since. The theories used and supposed evidence are based on dramatic simplifications and compressions of available perceptions of the state of affairs and possible explanations. Hypocognition is the term now being used for this oversimplification phenomenon. [5] Another term used to describe this state of affairs is 鈥榮ocially constructed ignorance鈥�. This ignorance is not the result of a conspiracy, but of the sense-making process of individuals and institutions:

To make sense of the complexity of the world so that they can act, individuals and institutions need to develop simplified, selfconsistent versions of that world. The process of doing so means that much of what is known about the world needs to be excluded from those versions, and in particular that knowledge which is in tension or outright contradiction with those versions must be expunged. [6]听

This type of problem has been discussed earlier by Jerome R. Ravetz under the term 鈥榰sable ignorance 鈥�[7].

It should be noted that this document is written more based on my studies of industrial dynamic at Harvard Business School than on standard economic theory. The document is also written in a different language than most modern economics, in English rather than in mathematics. This was also the case with what I have labeled The Marshall Plan Narrative 鈥� that economic structure is the key factor explaining wealth 鈥� ever since its 1588 inception with Italian economist Giovanni Botero鈥檚 bestseller Sulle Grandezze delle Citt脿 (1607) [8]. Languages have different strengths and different uses. I have argued for a long time that using mathematics in order to qualitatively understand economic development is like writing a thesis on snow in Swahili, where there are likely to be few words to distinguish between types of snow. On the other hand, the Saami language in Northern Fennoscandia has more than 300 different terms that describe different qualities and conditions of snow听[9].

Through its equality assumption, neo-classical economics kills our understanding of the importance and profound consequences of diversity. This is extremely serious for our perception of the world around us, not only because diversity has been and is a central feature of European nature, culture, and political history, but also because understanding economic development and its absence 鈥� understanding convergence and divergence 鈥� requires a profound understanding of diversity. [10]

Combined with the use of mathematical symbols, the equality assumption carries with it an unconscious 鈥� but artificial 鈥� feeling of being an objective observer. In spite of perhaps having observed reality from only one of many possible angles and having unconsciously made sweeping generalizations 鈥� assuming that things which are very different are in fact alike 鈥� the modern economist is easily trapped in a false belief in his or her own objectivity, into hypo-cognition. I find that Friedrich Nietzsche warned against this lack of perspective over a hundred year ago:

The only seeing which exists is a seeing in perspective, a seeing with perception; and the more feelings we allow to get involved about an issue, the more eyes 鈥� different eyes 鈥� that we mobilize to observe one thing, the more complete will our concept of this thing, our objectivity, be. Would not eliminating the will鈥�.be the same as to castrate the intellect?

In other words, we must attempt to perceive the complex realities behind simple numbers.

The document contains a brief description of the long-term political background for the shift in the European socioeconomic narrative. This story necessarily starts in the 1840s, with the coming of age of two cosmo-political economic theories: Communism and what was then called Manchester liberalism (now neoliberalism). The contrasts and conflicts between these two politically extreme theories 鈥� communism and extreme liberalism 鈥� and above all the compromises which were forged between them formed what Europe finally became. A key point here is how the two cosmo-political philosophies 鈥� called the irrational twins by German economist Gustav Schmoller 鈥� came to lose their glitter towards the end of the 19th century, yielding to theories which, because they understood the links between economic structure and economic wealth, argued against both cosmo-political economic theories. I argue that the 1989 death of one of the irrational twins 鈥� communism 鈥� led to a totally unwarranted resurrection and domination of the second irrational twin in the form of neoliberalism 鈥� completely overshadowing the sensible compromises that had been worked out over time. The death of one irrational twin led to the triumphalism of the second, and equally irrational, twin, i.e. neoliberalism. This heavily influenced the Maastricht process and the Maastricht criteria leading to the demise of the Marshall Plan Narrative. As I see it, decisions made in the age of partly irrational market triumphalism from 1989 to 1992 are the core of many of the present problems of the EU. I would argue that the present economic divergence process within the EU would have been much better understood and preventable by the economic understanding of 1947, and I shall try to rebuild my narrative on neo-classical economics + shallow innovationism in that spirit.

A brief note on how the innovation narrative was introduced in the European Union appears as a necessary part of the introduction. After he passed away, the economic theories of Austrian-born Harvard economist Joseph Alois Schumpeter (1883-1950) 鈥� the 鈥減rophet of innovation鈥� [11] 鈥� declined into obscurity. However, Richard Nelson and Sidney Winter鈥檚 1982 An Evolutionary Theory of Economic Change launched a neo- Schumpeterian narrative that revived the importance of innovation. In the late 1980s this narrative reached the institutional level with OECD鈥檚 TEP (Technology-Economy) program (1988-92). In 1993 the narrative was picked up by what was then called The European Economic Communities with Jacques Delor鈥檚 White Paper on Innovation听[12]. Two years later, the new narrative was published by what in the meantime had become the European Community, as EUs Green Paper on Innovations [13]. Richard Nelson is an American, but the other important scholars in the new field of innovation studies were all Europeans: Richard Freeman, Giovanni Dosi, Bengt-脜ke Lundvall, and Luc Soete. The two latter founded an international network, Globelics, dedicated to innovation studies, which has held international conferences since 2003. More recently the idea of 鈥渙pen innovations鈥� has apparently brought the innovation process closer to a neo-classical model, but as I see it such 鈥渙pen innovations鈥� [14] 鈥� while very useful in some industries, like IT 鈥� are not representative of the economy at large.

This report 鈥� which criticizes the European Union鈥檚 innovation narrative 鈥� is written by a convinced Schumpeterian, a person who thinks that innovation indeed should be put at the centre of the economic narrative. I am, however, convinced that the present EU narrative of innovation fundamentally is a neo-classical narrative, not reflecting the context- and industry-specific nature of the innovation process. Since my student days at Harvard in the mid-1970s 鈥� thanks to being taught by one of Schumpeter鈥檚 best friends at Harvard听[15] 鈥� I have considered myself a Schumpeterian economist. Schumpeter鈥檚 understanding of the world 鈥� his techno-economic narrative 鈥� satisfied both my queries as a businessman 鈥� I had started a manufacturing company at the time 鈥� and my queries on uneven economic development which I had tried to understand during my work in Peru. I therefore enthusiastically joined the neo-Schumpeterian tribe and Globelics. But I soon saw what was coming. Already at the First Globelics conference in Rio de Janeiro in 2003 I warned that 鈥渂y integrating some Schumpeterian variable to mainstream economics we may not arrive at the root causes of development. We risk applying a thin Schumpeterian icing on what is essentially a profoundly neoclassical way of thinking鈥� (i.e. a neoclassical cake). [16] The next year I published an alternative Schumpeterian narrative, where economic activities were seen as being qualitatively different. [17]

Perhaps I should also add that I consider myself a convinced European, who twice voted in favor of Norway joining the community. It is easy to pinpoint when my enthusiasm for the European Union turned to deep skepticism, it was in the evening of April 30, 2004 鈥� the night before many former Soviet Republics joined the EU 鈥� and the place was the Tallinn Opera House, where next day鈥檚 accession was being celebrated. I was suddenly struck with the thought that what I was attending was essentially the funeral of the European welfare state as we had known it. A virtually instant integration between a recently de-industrialized group of countries, involving millions and millions of people, where the 鈥渨inners鈥� were making 1 Euro an hour, and a wealthy Europe where the 鈥渓osers鈥� were probably making 10 Euro an hour would have to wreck at least some welfare in the European Union. That same year, with an Estonian colleague, we predicted the Latin-Americanization of Europe: falling wages and larger economic differences. [18] In 2007 we followed with a paper called European Eastern Enlargement as Europe鈥檚 attempted suicide? [19] In 2013 we published an article arguing that the roots of present European crisis long preceded the financial crisis. [20] I have previously applied the same type of narrative as used here on poor countries. [21]

A recent working paper by the German Bundesbank produces the following conclusion regarding EU convergence: 鈥�Our main findings suggest no overall real income per capita convergence in the EU, however, we identify subgroups that converge to different steady states using an iterative testing procedure鈥�.. The empirical evidence suggests a clear separation between the new and old EU member states in the long run鈥�. [22] It is my hope that the qualitative economic aspects discussed in this paper may shed some light on this lack of convergence.

Table of Contents of the report:

1. Introduction 鈥� the two Socio-economic Narratives.
2. A Brief Background for the Irrational 1989/1992 Triumphalism: The 1840s and the Birth of the Irrational Twins.
3. EUs Three Slippery Concepts: an Overview.

3.1 Competitiveness
3.2 Productivity.
3.3 Innovation.

4. The Alternative Sociotechnical Narrative: How Innovations Differ in Occurrence and Diffusion.

4.1 The 鈥淨uality of Economic Activities鈥� as a determinant for Economic Welfare.
4.2 The Classical and Collusive Modes of Diffusion of Technological Gains.

5. Key Mechanisms of Economic Retrogression; De-industrialization, the Ratchet Wheel that Collapsed, and Overvalued Exchange Rates.
6. Separating the Real Economy from the Financial Economy.
7. Diversity as the forgotten dimension: Kant vs. Fichte.
8. The Killer Apps of Capitalism: Ferguson (2011) vs. Reinert (2015).
9. Conclusion. Jean Monnet鈥檚 own metaphor as the EU being like the Kon-Tiki raft.

Download the full report here.

Footnotes

[1] For an explanation of the term .[2] Presently the financial sector makes huge amounts of money by effectively shrinking the Greek economy. A basic rule of capitalism since the 1700s has been that the private interests in making money must coincide with the public interest of seeing economies grow rather than shrink. I shall return to this later.
[3] Buchanan, J. (1979). Indianapolis, Liberty Press, p. 231.
[4] Saltelli, A., and Giampietro, M. (2015). .[5] Lakoff, G. (2010). 鈥�,’ Journal of Environmental Communication 4:1, 70-81.
[6] Rayner, S. (2012). 鈥樷��, Economy and Society, 41:1, 107-125,.
[7] Ravetz, Jerome., R., (1987). ‘,’ Knowledge: Creation, Diffusion, Utilization 9(1), 87-116.
[8] English translation: On The Greatness of Cities.
[9] Eira, Inger Marie (2012). , PhD Thesis, University of Troms酶.
[10] For a discussion of diversity which may be seen as an integral part of this work, see Reinert, Erik and Ting Xu, 鈥樷��, The Uno Newsletter, Vol. II, No. 13.
[11] This is the title of Harvard professor Tom McCraw鈥檚 biography of Schumpeter.
[12] (1993). This White Paper starts with the phrase: 鈥淲hy this White Paper? The one and only reason is unemployment. We are aware of its scale, and of its consequences too. The difficult thing, as experience has taught us, is knowing how to tackle it鈥�.
[13] European Commission (1995). .
[14] See e.g. Hippel, Eric von (2011). 鈥淥pen User Innovation鈥�. In Soegaard, Mads and Rikke Friis Dam, . Aarhus, Denmark: The Interaction Design Foundation.
[15] Australian economist Arthur Smithies (1907-1981).
[16] Reinert, Erik S. & Sophus Reinert (2003). Innovation Systems of the Past: Modern nation-states in a historical perspective. The role of innovations and of systemic effects in economic thought and policy, Paper prepared for the 1st Globelics Conference, Rio de Janeiro.
[17] Reinert, Erik S. (1994). 鈥楥atching-up from way behind 鈥� A Third World perspective on First World history鈥� in Fagerberg, Jan, Bart Verspagen and Nick von Tunzelmann (eds.) , Aldershot, Edward Elgar, pp. 168-197.
[18] Reinert, E. S. and R. Kattel (2004). 鈥溾��, Praxis Working Paper no. 17, Praxis Foundation, Estonia.
[19] Reinert, E. S. and R.听 Kattel, 鈥欌��, WP No. 14, TOC-TUT WP series, 2007.
[20] Reinert, E.S. and R. Kattel (2014). 鈥楩ailed and Asymmetrical Integration: Eastern Europe and the Non-Financial Origins of the European Crisis鈥�, in Sommers, Jeffrey & Charles Wolfson (eds.), , London, Routledge, pp. 64-86.
[21] Reinert, E. S. , London, Constable, 2007.
[22] Borsi, Mihaly Tamas and Norbert Metiu (2013). 鈥溾�� Deutsche Bundesbank Discussion Paper, No 28/2013.

Erik Reinert is Professor of Technology Governance and Development Strategies at Tallinn University of Technology.

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Based on a project started in 1975, this paper lists works on economics which were published in book form in 10 editions or more 鈥� including translations 鈥� before 1850. Included are also texts that were first published as manuscripts 鈥� ancient Greek economics 鈥� if they fulfill the criteria of achieving 10 or more book editions before 1850.

The list comprises one book printed in the 1400s, 4 books published in the 1500s, 13 during the 1600s, 46 during the 1700s, and 16 during the period from 1800 to 1848.

The language distribution is as follows (Roman numerals indicate the position on the list):

• 4 books were originally printed in Latin, three translated from ancient Greek authors Aristotle and Xenophon (I, II, IV) and one by a German (XXXIII Pufendorf)
• 1 book was originally published bilingual, Latin and Italian (XXXI Belloni)
• 2 books were originally published in Dutch
• 2 in Spanish
• 7 in German, of which one by an Austrian (XLV Sonnenfels) and one by a Swiss (XLI Hirzel)
• 7 in Italian
• 27 in English, of which 5 by Scots (XIX Law, XXXII Hume, XLVI Steuart, LIII Smith, LXXI McCulloch), 2 by Welshmen (XXX Tucker, LXVI Owen), and 3 by Americans (XXXVII Franklin, LVIII Paine, LX Hamilton)
• 30 in French, 2 of which by Germans (XXXIX Bielfeld & XLIII Beausobre), one by an Italian (XLIX Galiani), and 2 authors hail from the Republic and Canton of Geneva (XXXVIII Rousseau, LI, LII, LV, LVII Necker).

Six authors are represented with more than one work. One of them was first written in Greek and first published in printed form in Latin (II, IV Zenophon), the other four were written and published in French. Pierre Daniel Huet (1630-1721, XXI, XXIII), Gabriel-Fran莽ois Coyer (1707-1782, XXXV, XLVII) 鈥� the former a Bishop and tutor of the Dauphin and the latter an Abb茅 鈥� and Victor de Riquetti Mirabeau (XXXVI, XL) have two books each. Jean-Baptiste Say (1767-1832) is represented with three works on the bestseller list (LXV, LXVII, LXXII), while the only author with four different works on this list (see above) 鈥� Jacques Necker (1732-1804) 鈥� Minister of Finance and an ardent anti-physiocrat 鈥� stood for principles different from those of Say.

Only two authors of the bestselling economic books are women, Jane Marcet (LXVIII) and Harriet Martineau (LXXV).

Methodology

Defining the limits of 鈥榚conomics鈥� is of course not straightforward. Not only does the delineation between economics and other sciences become more difficult the further we go back in time, authors tended to cover broader subject areas back then, at the same time the definition of what economics is has also narrowed over the recent decades. A main guideline for inclusion has been if the author is included in the 1900-1901 edition of Palgrave鈥檚 Dictionary of Political Economy or similar works in other languages. This explains the inclusion of authors like Pufendorf and Filangieri: although today normally classified as lawyers they made significant contributions to economics. Herbert Foxwell鈥檚 collection, which forms the core of the Kress Library, used criteria wider than ours.

In terms of the number of editions, the methodology has been relatively straightforward. We have included works that appeared in ten or more editions, including of course translations, before 1850. We have followed the practice of Carpenter (1975) in excluding practical works and manuals for merchants, farmers, and craftsmen. Journal articles have not been included.

The authors are aware that the number of editions by no means is the only possible way to measure the diffusion of ideas. Unfortunately it is generally impossible to estimate the number of copies printed. This list is therefore biased against authors who were already famous when their bestselling work was printed, since the initial print run is likely to have been large.

Carpenter (1975) makes this argument 鈥� a probably very large first print run of an already famous author 鈥� about Pedro Rodriguez Campomanes (1723-1802) whose Discurso sobre el Fomento de la Industria Popular (1774) was translated into Dutch, German, Italian, and Portuguese but did not make it to 10 editions in total. The flip side of this bias against authors who were already famous, is a slight bias in favor of authors who started as outsiders, but whose ideas proved to have a large impact. In sum, we find this makes the list more 鈥� rather than less 鈥� interesting.

The Great Mirror of Folly (Het groote Tafereel der Dwaasheid) which was published in folio format in Amsterdam in 1720, consisting of a large number of engraved plates, one researcher with more than 30 copies at hand concluded that each and every copy may be unique. This book therefore meets our criteria in an unusual way, and the subject 鈥� the mechanisms of speculation of financial crises 鈥� also makes it highly relevant in today鈥檚 context. It is also the only anonymously published book on our list^[1], and one of two books originally published in the Dutch language.

We have made one exception to the ten-editions rule in order to include an author who was very influential at the time, and where the same arguments were spread over different books which, alone, do not meet the ten edition criteria, but when considered as one publication do. The author is Johann Heinrich Gottlob von Justi (1717-1771) who developed his theories in many books with similar texts. One reason for this is probably that book publishing was the main income for this itinerant economist, another may well have been the turbulences of the Seven Years鈥� War. Justi was not only the most important 18^th century German economist, he was also the only one to be extensively translated.^[2] We felt that the many books on the same subject 鈥� bordering on self-plagiarism 鈥� make him qualify in order to provide the overview we wish this publication to render.

Main findings

Probably the most interesting outcome of this work is that if we assume some degree of correlation between the influence of a text and the number of editions published, the publication history we present here suggests that some authors who were once influential are now being neglected.

From the point of view of development economics we can observe a pattern of cyclicality in economic literature, a cyclicality we can also observe in policy shifts. This cyclicality is tied to the rise and fall of the hegemonic powers over time.[3] The United States under Trump is presently abandoning free trade at the same point in the 鈥榟egemonic cycle鈥� as when England abandoned the same principle in the early part of the 20^th century and as Holland, the earlier European superpower, did after 1725.

As we shall discuss later, 鈥榚mulation鈥� 鈥� copying the economic structure of the leading economic power in order to catch up with them 鈥� seems to have a common early strategy which later shifts to one of 鈥榗omparative advantage鈥� once international competitiveness has been reached in the manufacturing sector.

Thus in his 1729 work The trade and navigation of Great-Britain considered (XXVI), English writer Joshua Gee straightforwardly explained the colonial economic strategy of England, to prevent manufacturing in the colonies (the text below is not as racist as in sounds, a few years earlier the English had prohibited the export of woolen manufactures, the most high-tech item of the day, from Ireland):

That all Negroes shall be prohibited from weaving or spinning or combing of Wool, or manufacturing hats, 鈥ndeed, if they set up manufactures, and the Government afterwards shall be under a Necessity of stopping their progress, we must not expect that it will be done with the same ease that now it may.

Gee鈥檚 book was published in at least 20 editions between 1729 and 1780, including translations. As a comparison there were 16 editions of Ricardo鈥檚 Principles between 1817 and 1850, only 4 of them in England. Today David Ricardo and his trade theory is probably, after Adam Smith, the economist who is best known to students of economics. For bestselling author Joshua Gee there is not even a Wikipedia entry in any language.

The most successful economics publication of the period is no doubt Benjamin Franklin鈥檚 Way to Wealth, first published in 1757, which reached more than 1.100 editions before 1850.^[4] It is not a typical textbook of economics, but it is in many ways a handbook in capitalist ethics.

The history of economic thought has traditionally been focused on literature originating in English and French. Indeed, for English readers it will probably be a surprise to find that Adam Smith is number 53 in the chronological order, while for French readers it is probably equally surprising to find that the anti-physiocrats outnumber the physiocrats on the list in an order of 5 to 1. The latter is partly a result of the fact that we found our task would be impossible if we were also to include journal articles on our list.

We have consciously worked in order to bring into light bestselling economists writing in other languages. We consider it an important achievement that this publication now brings to the forefront the founders both of Italian and German economics, Giovanni Botero (V) and Veit Ludwig von Seckendorff (IX).^[5] Our research into Spanish bestsellers only achieved increasing the number of works from 1 to 2 compared to the 1975 list, adding Jovellanos (LXIII) to Ust谩riz (XXV).

As indicated above we feel that the data we present indicate that history of economic thought, as it is handed over to today鈥檚 students, is somewhat biased. A recent list of 650 important economic texts of all times^[6] includes only 41 of the 71 authors on our list. We do not mention this in order to criticize the work in question 鈥� indeed it appears to be very thorough 鈥� but in order to emphasize that our story probably provides a version of the history of economic thought closer to Leopold von Ranke鈥檚 ideal of finding out wie es eigentlich gewesen ist: how it really was, in the sense of which economists were the most popular at the time, measured by the number of editions of their work. ^[7]

Since Wikipedia has become the measure of things, we have indicated the degree of wikipedia coverage of our authors ^[8]. There are no Wikipedia entries for some of our authors, for Culpeper (VI), Cary (XVIII), Gee (XXVI), and Belloni (XXXI). It is worth noticing that, in addition to Culpeper, the only English economists who are not represented on Wikipedia are the two who most honestly explained English economic policy, e.g. (in the case of Gee) the prohibition of manufacturing in the colonies. For Herbert (XXXIII) Wikipedia has only name, dates, and the title of his book.

This publication reveals that confronting our historical record with today鈥檚 textbooks in the history of economic thought, the textbooks have a heavy bias in favour of the physiocrats and disfavor of the anti-physiocrats. Very influential economists before Physiocracy 鈥� like Botero all over Europe and Seckendorff in Germany 鈥� who are presently neglected, stood for the opposite policy of physiocracy, for giving manufacturing industry priority over agriculture in national policy. As regards policy towards manufacturing it is also worth noticing that US Finance Minister Alexander Hamilton鈥檚 Report on the Manufactures (LX) was published in Russian in 1807, just one year after the first translation of Adam Smith鈥檚 Wealth of Nations (LIII) had been completed.

Carpenter鈥檚 policy from the start has been to leave out publications in periodicals, like the 脡ph茅m茅rides du citoyen. Fran莽ois Quesnay and his colleagues鈥� volume on Physiocracy come far from meeting our established cut-off point of 10 editions. Victor de Riquetti Mirabeau 鈥� with two works (XXXVI & XL) 鈥� appears to be the only true physiocrat on our list (Forbonnais did change his mind and opposed physiocracy). Among the bestsellers we find a large number of anti-physiocrats, some of them ardently so: Forbonnais (XXXIV), Galiani (XLIX), Genovesi (XLIV), Mably (XLII), Necker (with 4 different works), and Verri (L).^[9] In fact physiocracy was only carried into practice in two limited geographical areas, and not with success, in Tuscany in Italy and in the Margravate of Baden in Germany. Indeed, today what is normally seen as 鈥榯he beginning of economic science鈥� was a) not the beginning, and b) in practice it was a total failure. To Ferdinando Galiani 鈥� whom Nietzsche called 鈥榯he most profound, sharp-sighted … man of his century鈥� 鈥� Quesnay was no less than 鈥榯he Antichrist鈥�.

The failure of physiocratic economic policy was a main cause of the shortage of bread in Paris, and thus also a main mover behind the French Revolution.^[10] In spite of their fame, the Physiocrats lost all battles in history, except the one in today鈥檚 economic textbooks. ^[11] The ardent anti-physiocrat Jacques Necker 鈥� the only author represented by four different works in this bestseller list 鈥� represents the theoretical counterpart to Quesnay. Necker鈥檚 strong presence on this list and his absence in today鈥檚 history of economic thought represents the mirror image of Quesnay鈥檚 over-representation in today鈥檚 textbooks and his absence from this list.

For an overview of the publication history of Quesnay鈥檚 tableau 茅conomique see the thorough work of Marguerite Kuczynski and Ronald Meek ^[12]. We have not found a publication of the tableau that qualifies as a pamphlet or book, especially not in the required 10 editions. Curiously, the same Franc抬ois Quesnay in his role as a physician was a very verbose author when writing about his specialty, the art of bleeding patients. His works on the subject appeared in several editions in French, and also in Spanish translations. In 1736 Quesnay鈥檚 volume L’art de gue虂rir par la saigne虂e ^[13] consisted of 375 pages + introduction. By 1750 his volume on the same subject had grown to 716 pages + introduction ^[14].

Another salient observation regards the spread of economic ideas in the early 1800s. Data shows that the ideas of Adam Smith appear to diffuse more through French writers like Jean-Baptiste Say (LXV, LXVII, LXXII) and Droz (LXXIII) than through David Ricardo (LXIX), In fact Ricardo himself, in the translations both into French and German, was published 鈥榓vec des notes explicatives et critiques, par M. Jean-Baptiste Say鈥�. The first economics textbook with a truly global publication record, including Argentina and India, appears to be that of James Mill in 1821 (LXX).

We should also mention three authors one might think were to be found on our list. We may be wrong about the editions, but one conspicuously absent author is Antoine Monchrestien (ca. 1575-1621). His 1615 Trait茅 d鈥櫭ヽonomie politique does not appear to have been published again until 1889. Another author whom we expected to qualify is Jean Charles L茅onard de Sismondi (1775-1842), the Geneva author whose changing ideas about the role of free trade mirrored his time. Richard van den Berg has informed us that Richard Cantillon鈥檚 1755 Essay on the Nature of Trade in General also does not make it to 10 editions before 1850.

At the very last moment before going online with this paper we have found two additional books also qualifying as bestsellers. Both represent the anti-free trade, anti-physiocracy tradition that has been marginalized in the history of economic thought, with yet another English author who is not on Wikipedia. The first work is Charles King鈥檚 The British Merchant; or, Commerce Preserv鈥檇, published in in three volumes in London (John Darby) in 1721.^[15] The second one consists of the doubts expressed in 1768 by Abb茅 Mably (also author of XLII) about physiocracy (Doutes propos茅s aux philosophes economists sur l鈥檕rdre naturel et essential des soci茅tes politiques. A La Haye, et se trouve 谩 Paris, MDCCLXVIII).^[16]

Kenneth Carpenter has also produced massive data, so far unpublished, on translations of publications (not only books) in economics. Using Carpenter鈥檚 data in Chart 1^[17] below, we can observe how the number of translations in political economy virtually exploded in the latter part of the 18^th century. The Vielschreiberei 鈥� the furor scribendi 鈥� of the time manifests itself also as a huge increase in translations.

Studying the balance of translations in economics 鈥� the languages that had a surplus vs. a deficit in the number of translations 鈥� gives some surprising results. Chart II^[18] reveals a wave of translations from English into other languages at the time it became evident that the United Kingdom was forging ahead of other European nations. 鈥楨mulation鈥� 鈥� learning from the leading country 鈥� was the name of the game.^[19] In earlier periods this same principle was reflected in the publications and translations focusing on learning from the Dutch Republic, the leading nation before England: Botero (V), Seckendorff (IX), particularly after his visit to Holland, de la Court (X), Child (XII)^[20], Temple (XIV), and Huet (XXI), all appearing in first editions before 1712.

References

[1] Many of the books on the list were published anonymously, but their authors are now known.
[2] We here refer to German nationality, not German language. Hirzel (Swiss) and Sonnenfels (Austrian) were both 18^th century authors who wrote in German and both were translated, but they were not German nationals.
[3] For a discussion of this, see Reinert, Erik, 鈥楨conomics and the Public Sphere: The Rise of Esoteric Knowledge, Refeudalization, Crisis and Renewal鈥�, Paper presented for The Public Mission of the Social Sciences and Humanities: Transformation and Renewal, Social Science Research Center Berlin (WZB), Berlin [4] See Kenneth Carpenter鈥檚 and Sophus Reinert鈥檚 project [5] We have attempted to bring these authors, their national traditions, and the role of emulation to the forefront in the recent Handbook of Alternative Theories of Economic Development, Reinert, Erik, Jayati Ghosh & Rainer Kattel (eds.), Cheltenham, Edward Elgar, 2016. Chapter 1. Erik Reinert: 鈥楪iovanni Botero (1588) and Antonio Serra (1613): 鈥業taly and the birth of development economics鈥�, pp. 3-41, chapter 2: Sophus Reinert. 鈥楨conomic emulations and the politics of international trade in Early Modern Europe鈥�, pp. 42-62; and chapter 3: Erik Reinert and Philipp R枚ssner, 鈥楥ameralism and the German tradition of development economics鈥�, pp. 63-86. The book has 40 chapters.
[6] Hertz & Weinberger (eds.), 2006, see bibliography.
[7] The authors from our list of 80 works who are not in the list of the 650 works are: Bacon, Beausobre, Belloni, Bielfeld, Botero, Cary, Coyer (2 works on our list), Culpeper, de la Court, Droz, Filangieri, Forbonnais, Gee, Herbert, Hirzel, Holroyd, Huet (2 works on our list), Jovellanos, Marcet, Melon, Mengotti, Mirabeau (2 works on our list), Muratori, Poivre, Rossi, Seckendorff, Temple, Thiers, Verri, and Young.
[8] At the time of writing, April 2017.
[9] Probably the most ardent of all anti-physiocrats, Simon-Nicolas Henri Linguet, was guillotined in Paris in 1794.
[10] For a thorough discussion of this, see Kaplan, Steven L., Bread, Politics and Political Economy in the Reign of Louis XV, 2nd edn., London, Anthem, 2015 [1976].
[11] For a discussion, see 鈥業ntroduction鈥� in Handbook of Alternative Theories of Economic Development, op. cit. and Backhaus, J眉rgen (ed.), Physiocracy, Antiphysiocracy and Pfeiffer, New York, Springer, 2011. The balance between physiocracy and anti-physiocracy is dicussed also in Kaplan, Steven L. and Sophus A. Reinert (eds), The Economic Turn: Recasting Political Economy in Enlightenment Europe, London, Anthem, forthcoming 2017. 2 vols.
[12] Quesnay鈥檚 Tableau 脡conomique, edited, with new material, translations and notes by Marguerite Kuczynski & Ronald L. Meek, London, MacMillan, 1972.
[13] A Paris, chez Guillaume Cavelier.
[14] Traite虂 des effets et de l’usage de la saigne虂e, par M. Quesnay, Nouvelle e虂dition de deux traite虂s de l’auteur sur la saigne虂e, re虂unis, mis dans un nouvel ordre et tre虁s augmente虂s [par F. Quesnay], Paris, D’Houry, 1750.
[15] The first translation was into Dutch (1728), then follow several French translations, the first one in 1733, and German (1764).
[16] The large number of editions of Mably鈥檚 complete works adds some uncertainty to the number of editions of this book, but it appears to qualify.
[17] Source: Kenneth Carpenter, published in Reinert, Sophus A., Translating Empire: Emulation and the Origins of Political Economy,听Cambridge, MA, Harvard University Press,听2011, p. 46.
[18] Source Kenneth Carpenter, published in S. Reinert 2011, op.cit, p. 52.
[19] See S. Reinert 2011, op. cit.
[20] Whose 1668 book opens with a statement about the need to learn from the Dutch.

Erik Reinert is Professor of Technology Governance and Development Strategies at Tallinn University of Technology.