Grand Pursuit: A History of Economic Genius Read online

  Praise for Grand Pursuit

  New York Times bestseller

  The Washington Post: “Best Books of 2011”

  New York: “Best Books of 2011”

  The Boston Globe: “New and Recommended Books”

  “Like Lords of Finance, Grand Pursuit is narrative history at its finest. Told with unpretentious verve and vivid detail. . . . Absorbing.”

  —James Pressley, Bloomberg.com

  “Grand Pursuit is a worthy successor to Robert Heilbroner’s The Worldly Philosophers. . . . Nasar’s aim is to put the reader into the lives of the characters of a sweeping historical drama that extends from Victorian England to modern-day India. . . . Reflects the depth and breadth of her research but also the elegance of her prose.”

  —Steven Pearlstein, The Washington Post

  “[Robert] Heilbroner was out to provide an easy-to-digest survey of economic thought through the ages. Nasar has set herself a task at once narrower and more ambitious. She has a story to tell, a story of tragedy, triumph, and as the subtitle says, economic genius. . . . [The] book as a whole is made up of so many wonderful parts . . . [A] rich, in places dazzling, history”

  —Justin Fox, The New York Times Book Review

  “Nasar brilliantly brings to life game-changing economists from Marx to Hayek and from Sidney Webb to Milton Friedman, tracing the evolution of modern economic thinking through the richly detailed stories of the men and woman who reshaped how we think of life’s possibilities. . . . This is an utterly fascinating book on many levels. . . . A Beautiful Mind, Nasar’s previous book, was about an economist named John Nash, but Nasar’s mind is pretty good, too. No lesser mind could have written a book so rich, so compelling, so important, and so much fun.”

  —Mickey Edwards, The Boston Globe

  “Capacious and absorbing.”

  —John Cassidy, The New Yorker

  “A fascinating excursion into the economic ideas and personalities that have deposited most of us at a standard of living unparalleled in human history. . . . Engrossing. . . . Nasar, who wrote A Beautiful Mind, . . . is drawn to intellectual giants. They stomp across the idiosyncratic and readable pages of Grand Pursuit, which unfurls with a David McCullough–like knack for telling popular history. . . . On these pages, the dismal science shines.”

  —Karen R. Long, Cleveland Plain Dealer

  “Nasar is a superb writer. . . . The book is a kind of portrait gallery of economic thinkers, each artfully set down in his or her time and place. . . . You can’t help becoming engrossed in their lives.”

  —James Grant, The Wall Street Journal

  “Grand Pursuit is a history of economics which is full of flesh, bloom and warmth. The author demonstrates that there is far more to economics than Thomas Carlyle’s ‘dismal science.’ And she does so with all the style and panache that you would expect from the author of the 1998 bestseller, A Beautiful Mind. . . . A wonderful book. Grand Pursuit deserves a place not only in every economist’s study but also on every serious reader’s bedside table.”

  —The Economist

  “One of the many wonderful things about Nasar’s book is that in it, economic genius isn’t limited to the usual suspects. . . . Nasar brings out the humanity in the dismal science by showing their ideas are nearly always rooted in formative experiences.”

  —Time

  “A timely reminder of the importance of the so-called dismal science. . . . Written almost as a novel and aimed at those without a background in economics, the book charts capitalism’s evolution through the eyes of the people who invented it. . . . It is compellingly written, full of detail and vivid anecdotes, and with a refreshing focus on people rather than prices.”

  —Gregor Hunter, The Nation

  “Nasar has written a compelling history of modern economics, a story of the theorists as well as of their theories. . . . Grand Pursuit is artfully rendered and a delight to read. . . . One suspects that future economics textbooks will warrant some revisions. Their authors would profit from consulting Grand Pursuit.”

  —Roger Lowenstein, Bloomberg BusinessWeek’s **FIVE STAR** Review

  “The story of the evolution of a radical, planet-reshaping idea. . . . The canvas is epic. . . . The details are fresh, at times startling. . . . At the same time, gnarly but critical concepts . . . shine through in all their richness and complexity. If only Econ 101 had been this interesting!”

  —Rik Kirkland, Fortune.com “Weekly Read” column

  “Grand Pursuit makes for lively reading. . . . A colorful, even exciting series of historical vignettes involving important protagonists in the history of economic thought.”

  —Robert M. Solow, winner of the Nobel Prize, The New Republic

  “It is the quirks and personalities of these economic thinkers that bring Grand Pursuit to life. Nasar argues that the details of their personal successes and failures—along with the weighty history revolving around them—inspired their individual conclusions about how the system works. . . . Through Nasar’s ambitious storytelling, we see Western society evolve from one in which most people live in poverty to one in which government tries to grapple with unemployment and inflation and raise the standard of living for all.”

  —Alana Semuels, Los Angeles Times Book Review

  “If there’s a way to be entertained as well as edified by what critic Thomas Carlyle called the dismal science, this riveting history is it.”

  —More

  “Nasar’s vivid writing makes economics interesting to a general audience by telling the stories of the men and women behind the theories and equations.”

  —Jingwen Hu, The Philadelphia Inquirer

  “The author of A Beautiful Mind, who knows how to humanize big ideas, makes a sweeping case for post-Malthusian economics as the single most important driver of the progress of mankind.”

  —New York magazine (New Books Fall Preview)

  “Nasar offers a fresh way to look at the growth of economic theory over the last few centuries via certain extraordinary people. . . . A sweeping perspective of the subject to readers who ordinarily might not pick up a tome devoted to economics.”

  —Fredericksburg Freelance Star

  “A lively, instructive tome.”

  —Mother Jones

  “Grand Pursuit traces the evolution of economics through personalities. . . . A compelling story amid academic drudgery.”

  —Justin Moyer, The Christian Science Monitor

  “Nasar does a good job of laying out the historical circumstances under which economic theory evolved between the early 19th century and the post–Second World War period. . . . Grand Pursuit . . . is a rattling good read and brings to life a subject that desperately needs to be much better understood.”

  —Peter Foster, National Post (Canada)

  “Nasar’s last book, A Beautiful Mind, demonstrated her deftness in portraying one great thinker (troubled math genius John Nash). This new title applies the same strengths to a broader subject—the history of contemporary economic thought—by focusing on the men and women who shaped it, from Victorian England through the end of the 20th century. The result must rank among the most readable efforts at a history of the field.”

  —Canadian Business

  “Nasar creatively deploys lives-and-times to show the evolution of economics from an explanation of fate into an application of policy.”

  —Booklist

  “A popular treatment of the emergence of political economics, as well as a discussion of the major unresolved issues still on the table today, such as the role of government in managing society versus the efficacy of the free market. . . . Nasar gives a gripping
account of the devastation in Europe after World War I, and the conflict since over how to resolve cyclical economic crises such as the depression of the 1930s and the current recession. . . . Adds an important historical dimension to current debates on the future of the American economy.”

  —Kirkus Reviews

  “Nasar has the skill to make this an engrossing story even for those of us who can barely count.”

  —Library Journal

  “[I]ntellectual history, expertly related through biography. This is rich, compulsively readable stuff. . . . It is hard to overstate the merits of Nasar’s book. Not since Barbara Tuchman has there been a more imaginative and readable interpreter of historical trends.”

  —Economic Principles.com

  “Nasar surveys the leading economic thinkers and their work. . . . She paints complex and colorful portraits.”

  —The Washington Independent Review of Books

  “[An] exceptionally original book. . . . Combining a novelist’s eye for vivid images with a historian’s sense of the contexts in which ideas are produced and disseminated, Nasar presents, in Grand Pursuit, a drama of the shifting patterns of economic thought over the past two centuries which abounds in arresting vignettes.”

  —New Statesman

  “Like Lords of Finance, Grand Pursuit is narrative history at its finest. Told with unpretentious verve and vivid detail. . . . Absorbing.”

  —BloombergBusinessweek.com

  “Like the popular histories of David McCullough and other acclaimed authors, Nasar’s Grand Pursuit is chock-full of fascinating men and women and their stories, with one drama-filled account tumbling on top of another. . . . Grand Pursuit is a very entertaining tale bursting with great stories. . . . Don’t think for a moment you need to have a dog in the fight between Keynesians and the Chicago School to enjoy this book.”

  —Huffington Post.com

  “[R]eading Sylvia Nasar’s Grand Pursuit lets me enjoy some very human life stories while upping my economic savvy. The narrative scaffolding is ambitious: the economic history of the industrial world into which Nasar weaves mini-biographies of influential economists. . . . [An] entertaining and thought-provoking read”

  —The Florida Times-Union

  “[An] ambitious, sprawling survey of modern economics.”

  —The New Yorker (“Briefly Noted” review)

  “Nasar’s Grand Pursuit is a worthy successor to Heilbroner’s story. . . . it is richer and teaches more about economics. Nasar . . . gives a grand but not overly generalized story of the ideas of a set of thinkers who transformed economics in the 20th century. Highly recommended.”

  —Publisher’s Choice

  “General-interest collections as well as college-level holdings strong in economic history and discussion will find this a winner.”

  —California Bookwatch

  “[Nasar] devoted 10 years to bringing cohesion to the story of modern economics.”

  —DailyBeast.com,

  “Fascinating. . . . [This] is great reading for anyone wanting a diversion into economics as biography.”

  —MarketMinder.com

  “What Ms. Nasar does brilliantly here . . . is give us intimate portraits of her subjects, tracing the ways in which personal experiences informed their thinking. Ms. Nasar . . . writes with ease and authority about complicated economic matters, but shows even more fluency evoking the inner lives of her subjects and the social worlds they transited.”

  —The New York Times

  “In Grand Pursuit, Sylvia Nasar broke the mould not only in mining the dismal science for enthralling human stories, but braiding them into a sequence of stylish bio-essays.”

  —Boyd Tonkin, The Independent (UK)

  “An absorbing journey through big ideas and pioneering lives”

  —Independent Print Ltd

  “If you loved [Lords of Finance], you’ll love Grand Pursuit. . . . [Nasar] turns a long-ago adventure into a compelling story for the present day. . . . In her telling, the lives and times of economists make awfully interesting reading.”

  —Strategy-Business.com, Best Business Books of 2011

  “I thoroughly enjoyed the book. . . . [Nasar] does an excellent job of providing insights into each thinker and what drove them. . . . I recommend the book to those who are interested both in the history of economic thought and the characters who played the leading roles.”

  —CBSNews.com/MoneyWatch

  “Sylvia Nasar’s ‘Grand Pursuit’ is an epic narrative excursion into the history of economic ideas and their proponents, from Marx to Milton Friedman. Timely and entertaining, this book deserves as wide a readership as possible.”

  —The Wall Street Journal, “Twelve Months of Reading” feature

  “[Nasar] tells some wonderful stories about [her subjects’] extraordinary lives.”

  —Financial Times, “Reader I Loved Them” (FT writers’ nonfiction favorites from 2011)

  “A vivid narrative.”

  —Bloomberg.com, “Top Business Books”

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  Contents

  Preface: The Nine Parts of Mankind

  ACT I: HOPE

  Prologue: Mr. Sentiment Versus Scrooge

  Chapter I: Perfectly New: Engels and Marx in the Age of Miracles

  Chapter II: Must There Be a Proletariat? Marshall’s Patron Saint

  Chapter III: Miss Potter’s Profession: Webb and the Housekeeping State

  Chapter IV: Cross of Gold: Fisher and the Money Illusion

  Chapter V: Creative Destruction: Schumpeter and Economic Evolution

  ACT II: FEAR

  Prologue: War of the Worlds

  Chapter VI: The Last Days of Mankind: Schumpeter in Vienna

  Chapter VII: Europe Is Dying: Keynes at Versailles

  Chapter VIII: The Joyless Street: Schumpeter and Hayek in Vienna

  Chapter IX: Immaterial Devices of the Mind: Keynes and Fisher in the 1920s

  Chapter X: Magneto Trouble: Keynes and Fisher in the Great Depression

  Chapter XI: Experiments: Webb and Robinson in the 1930s

  Chapter XII: The Economists’ War: Keynes and Friedman at the Treasury

  Chapter XIII: Exile: Schumpeter and Hayek in World War II

  ACT III: CONFIDENCE

  Prologue: Nothing to Fear

  Chapter XIV: Past and Future: Keynes at Bretton Woods

  Chapter XV: The Road from Serfdom: Hayek and the German Miracle

  Chapter XVI: Instruments of Mastery: Samuelson Goes to Washington

  Chapter XVII: Grand Illusion: Robinson in Moscow and Beijing

  Chapter XVIII: Tryst with Destiny: Sen in Calcutta and Cambridge

  Epilogue: Imagining the Future

  Acknowledgments

  Photographs

  Photo Credits

  About Sylvia Nasar

  Notes

  Index

  For my parents

  Preface

  The Nine Parts of Mankind

  The experience of nations with well-being is exceedingly brief. Nearly all, throughout history, have been very poor.

  John Kenneth Galbraith, The Affluent Society, 19581

  In a Misery of this Sort, admitting some few Lenities, and those too but a few, nine Parts in ten of the whole Race of Mankind drudge through Life.

  Edmund Burke, A Vindication of Natural Society, 17562

  The idea that humanity could turn tables on economic necessity—mastering rather than being enslaved by material circumstances—is so new that Jane Austen never entertained it.

  Consider the world of Georgian opulence that the author of Pride and Prejudice inhabited. A citizen of a country whose weal
th “excited the wonder, the astonishment, and perhaps the envy of the world” her life coincided with the triumphs over superstition, ignorance, and tyranny we call the European Enlightenment.3 She was born into the “middle ranks” of English society when “middle” meant the opposite of average or typical. Compared to Mr. Bennett in Pride and Prejudice or even the unfortunate Ms. Dashwoods in Sense and Sensibility,4 the Austens were quite impecunious. Nonetheless, their income of £210 a year exceeded that of 95 percent of English families at the time.5 Despite the “vulgar economy” that Austen was required to practice to prevent “discomfort, wretchedness and ruin,”6 her family owned property, had some leisure, chose their professions, went to school, had books, writing paper, and newspapers at their disposal. Neither Jane nor her sister Cassandra were forced to hire themselves out as governesses—the dreaded fate that awaits Emma’s rival Jane—or marry men they did not love.

  The gulf between the Austens and the so-called lower orders was, in the words of a biographer, “absolute and unquestioned.”7 Edmund Burke, the philosopher, railed at the plight of miners who “scarce ever see the Light of the Sun; they are buried in the Bowels of the Earth; there they work at a severe and dismal Task, without the least Prospect of being delivered from it; they subsist upon the coarsest and worst sort of Fare; they have their Health miserably impaired, and their Lives cut short.”8 Yet in terms of their standard of living, even these “unhappy wretches” were among the relatively fortunate.

  The typical Englishman was a farm laborer.9 According to economic historian Gregory Clark, his material standard of living was not much better than that of an average Roman slave. His cottage consisted of a single dark room shared night and day with wife, children, and livestock. His only source of heat was a smoky wood cooking fire. He owned a single set of clothing. He traveled no farther than his feet could carry him. His only recreations were sex and poaching. He received no medical attention. He was very likely illiterate. His children were put to work watching the cows or scaring the crows until they were old enough to be sent into “service.”

  In good times, he ate only the coarsest food—wheat and barley in the form of bread or mush. Even potatoes were a luxury beyond his reach. (“They are very well for you gentry but they must be terribly costly to rear,” a villager told Austen’s mother).10 Clark estimates that the British farm laborer consumed an average of only 1500 calories a day, one third fewer than a member of a modern hunter-gatherer tribe in New Guinea or the Amazon.11 In addition to suffering chronic hunger, extreme fluctuations in bread prices put him at risk of outright starvation. Eighteenth-century death rates were extraordinarily sensitive to bad harvests and wartime inflations.12 Yet the typical Englishman was better off than his French or German counterpart, and Burke could assure his English readers that this “slavery with all its baseness and horrors that we have at home is nothing compared to what the rest of the world affords of the same Nature.”13