[This piece appeared in the Canberra Times, December 21, 1999.]
Who were the century’s most important economists? The following presents my own selection of the ten economists of the past hundred years who have had the greatest influence on policy.
1. John Maynard Keynes is far and away this century’s most influential economist, but in saying this it should not be thought I believe that influence as having been for the good. Until the publication of his General Theory in 1936 it was well understood that public spending dragged an economy down rather than propping it up. It will be well into the next century before his destructive influence will have finally disappeared.
2. Friedrich von Hayek is the economist of choice for those nations who have lived under communism these past fifty years. His name today is virtually unknown in the West, but within those economies trying to resurrect free markets, his is the guidance most frequently sought. His Road to Serfdom is beloved by anyone who treasures political freedom.
3. Ludwig von Mises took the fight up to the socialist dogmas of the early twentieth century and showed on paper that no economy could ever solve the problem of allocating resources without a price mechanism, free markets and private property. Who doesn’t know it now? He knew it eighty years ago.
4. Milton Friedman has been the single most important advocate of free markets in the late twentieth century. He was also instrumental in turning the attention of governments away from Keynesian policies, which had created massive worldwide inflation, towards the need for monetary disciplines and a balanced budget. Much of what sounds like the mantra of the economics profession today Friedman had advocated almost on his own in the early years of the post-War period.
5. Arthur Pigou is in many ways my favourite. A conscientious objector during World War I, he nevertheless spent his summers as an ambulance driver on the Western Front. He also wrote the Economics of Welfare which provided the basic framework in which to consider how best to deal with harmful side effects (”externalities”) to the production process. Most of the solutions to greenhouse problems developed by economists today are based on his original work.
6. Paul Samuelson makes the list twice over. His Foundations of Economic Analysis changed the study of economics from a subject based on words into a discipline where without mathematical ability one is entirely lost. But even had he not written his Foundations, his first year text, simply titled Economics, is easily the most influential of our time, having educated three generations in Keynesian sophistries whose baneful effects are indelibly imprinted on the profession.
7. John Kenneth Galbraith wrote popular works on economics which had a massive influence in their time. His basic line was that wage and price controls are an absolute necessity if an economy is to be run at full employment with low inflation. More countries than one ended up adopting such controls whose only effects were to prolong inflation and lower employment. His books still make entertaining reading; just don’t follow the advice.
8. John Hicks was a prolific writer on a wide variety of subjects but his lasting claim to fame is based on a 1937 article, “Mr Keynes and the Classics”, in which he developed an apparatus taught to every aspiring economist. These IS-LM curves show how playing around with aggregate demand can supposedly affect the level of economic activity. It is still how almost every economist is taught to think.
9. Bill Phillips invented the Phillips curve, a device for relating the growth in prices to the growth in unemployment. Debates over policy stemming from this original model have been legion. To this day the Phillips curve sits at the core of discussions over the proper conduct of monetary and interest rate policies.
10. Robert Lucas is famed for developing the theory of “rational expectations” which explains how anticipation of the effects of government policy can prevent that policy from doing what it was intended to do. It is one of the standard ways used to explain why Keynesian policies never work in practice.
It has been a long century and these have been the economists whose names have mattered. Aside from ethnic and religious conflict, no controversies are as intense as those over how economies work. Wars and revolutions have been fought over nothing other than the architecture of the economic system. Passionate differences over economic matters are never ending.
Economists attempt to provide satisfying answers to the age old questions of how to organise production, who should receive how much of what is produced, and what should be the basis of this division.
A century from now the names will be different, but what may be said with certainty is this: the issues will be much the same as those we are dealing with today.
