The Future of Economics: Bruce Caldwell on History and the Dismal Science

Your average economics textbook presents the neat image of a discipline with many useful conceptual paradigms for viewing the world. But it almost never gives any sense of how these ideas developed.

And as it turns out, the actual history of economics, like that of every science, is much messier.

That was Bruce Caldwell’s message in his recent address to the Southern Economics Association in November. (Click below to download a PDF of the speech as prepared for address).

Caldwell – an INET Advisory Board member, Director of the Center for the History of Political Economy at Duke University, and one of the world’s foremost Hayek scholars – makes the case that the study of the history of economics should be an essential part of training future economists.

“Ideas matter,” he says. “They have consequences for how we see the world and organize our practice.” And understanding how those ideas developed should be an important part of the program.

Caldwell uses the case of the a long-discredited philosophy of positivism and it’s still-lingering affects on economics to demonstrate his point.

Many economists in the 20th century claimed the mantle of a positive science, Caldwell suggests, “to defend the proposition that the social sciences are, really truly are, scientific,” even though positivism was no longer accepted in philosophy of science.

And even worse, many staked out positivist positions without knowing they were doing so. The lack of self-awareness and historical perspective were both a symptom and a cause that still persist in the discipline today.

The problem with the positivist approach was one that Hayek himself identified in his criticism of economics. “For Hayek,” Caldwell says, “scientistic doctrines (the adjective was a pejorative for him)claimed the mantle of science, but were in reality unscientific.” And positivist economics was no exception.

Over time the influence of positivism has faded in economics as more diverse approaches to the dismal science have been accepted. But economics’ positivist residue remains evident as it has kept one key part of the discipline out of the citadel: economic history and the history of economic thought.

Caldwell argues that this omission is a serious mistake, especially in the wake of a financial crisis that economists missed despite the obvious historical precedents. And this mistake can’t be attributed to a lack of demand, as economics students are now practically beating down the door to have access to courses in the history of economics.

The future of the profession, Caldwell suggests, lies in a return to these more context-sensitive approaches that understand history is essential. And at Duke, he is leading the charge.

The good news is that more and more of the economists of the future seem to agree.