What Was “It” that Robbins Was Defining?David Colander

Middlebury College

Robbins did not see his definition as novel of controversial

• Economics, we have suggested, is essentially the study of the disposal of scarce goods and services. This suggestion has not met with universal acceptance. But the difference between this and other definitions now current is not a very serious matter. (p. 344)

Robbins’ Prescriptive Message

• The only question with regard to the scope of economics which can be said to be in any sense alive, is the question whether economics, as such, can be said to include judgments of what is good and bad in the world of relative scarcities. (p. 345)

Robbins’ Wanted More Value Judgments in Political Economy

• My suggestion here, as in the Introduction to my Political Economy: Past and Present, is that its (political economy) use should be revived as now covering that part of our sphere of interest which essentially involves judgments of value. Political Economy, thus conceived, is quite unashamedly concerned with the assumptions of policy and the results flowing from them. I may say that this is not (repeat not) a recent habit of mine. In the Preface to my Economic Planning and International Order, published in 1937, I describe it as “essentially an essay in what may be called Political economy as distinct from Economics in the stricter sense of the word. It depends upon the technical apparatus of analytical Economics; but it applies this apparatus to the examination of schemes for the realization of aims whose formulation lies outside Economics; and it does not abstain from appeal to the probabilities of political practice when such an appeal has seemed relevant.

• It should be clear then that Political economy in this sense involves all the models of analysis and explicit or implicit judgments of value that are usually involved when economists discuss assessments of benefits and the reverse or recommendations for policy. (pg 8) Ely lecture AER

The need to separate out policy analysis (political economy) and the science of economics

• those who adopt this latter attitude (the view that his definition will preclude economists from being interested in policy) are concerned not so much with problems of definition as with problems of conduct or department. They think that the economist will sacrifice opportunities for usefulness if he abstains from excursions into social philosophy and (apparently) they think that if such excursions are not dignified by the title, economics science, he may feel precluded from making them. The warning may be necessary. But the psychology may be questioned. To me at least, it seems difficult to believe that recognition of the distinction between the two kinds of propositions will prevent any man of spirit from being interested in both. (345) 1938

Recognizing the Limits of Economic Analysis

• What precision economists can claim at this stage is largely a sham precision. In the present state of knowledge, the man who can claim for economic science much exactitude is a quack. The problems of human motive we have to analyse with the “vast amorphous phantoms” of psychology at their back, are nebulous enough in all conscience. It is not because we believe that our science is exact that we wish to exclude ethics from our analysis, but because we wish to confine our investigations to a subject about which positive statement of any kind is conceivable. (Robbins, 1927, 176)

Conclusion: Robbins’ Prescriptive message:

• Welfare Economics belongs in Political economy—not in the science of economics

• The Appropriate Methodology for policy analysis is very loose, not precise.

• The need to differentiate precepts from theorems. (J.N. Keynes’ division)

A good textbook definition should be consistent with Jacob Viner’s definition:

Economics is what economists do.

The current one is not; it does not reflect what economists do.

What differentiates economics is their modeling approach. As one Harvard student said in answer to the question

about what is the economic method:“Putting it down in math, and then really trying to identify something that really comes out of that model—looking for a correlation among variables.”

The definition was never a good definition of what economists teach, and

it was never meant to be. • To see why we have to

look at the history of the definition.

• That history centers around Lionel Robbins’ famous 1935 essay on the scope and method of economics

• The definition for Robbins was a side issue for Robbins’

• His main point was about value judgments in the science of economics.

• He was not writing about the teaching of economics.

From Classical to Marshallian Neoclassical to Walrasian

Neoclassical

• Movement to Walrasian from Marshallian economics in the science of economics

• Studying constrained optimization in a general equilibrium framework.

Background to Robbins’ Essay

• Alfred Marshall J. N. Keynes

Marshall’s view of methodology and the definition of economics

• I take an extreme position as to the methods and scope of economics. In my new book I say of methods simply that economics has to use every method known to science. And as to scope, I say “Economics is the study of mans actions in the ordinary business of life.”

Alfred Marshall (1890 Principles of Economics)

• “Political Economy or Economics is a study of mankind in the ordinary business of Life; it examines the part of the individual and social action which is most closely connected with the attainment and with the use of material requisites of well-being”

Paul Samuelson’s view of the 1930s

• “to a person of analytical ability, perceptive enough to realize that mathematical equipment was a powerful sword in economics, the world of economics was his oyster in 1935. The terrain was strewn with beautiful theorems begging to be picked up and arranged in unified order.”

Robbins’ definition was descriptive, not prescriptive.

Robbins’ Dismissal of the Importance of the Definition

• Economics, we have suggested, is essentially the study of the disposal of scarce goods and services. This suggestion has not met with universal acceptance. But the difference between this and other definitions now current is not a very serious matter. (Robbins, 1938, p. 344)

Robbins’ Prescriptive Message

• The only question with regard to the scope of economics which can be said to be in any sense alive, is the question whether economics, as such, can be said to include judgments of what is good and bad in the world of relative scarcities. (p. 345)

• What precision economists can claim at this stage is largely a sham precision. In the present state of knowledge, the man who can claim for economic science much exactitude is a quack. The problems of human motive we have to analyze with the “vast amorphous phantoms” of psychology at their back, are nebulous enough in all conscience. It is not because we believe that our science is exact that we wish to exclude ethics from our analysis, but because we wish to confine our investigations to a subject about which positive statement of any kind is conceivable. (Robbins, 1927, 176)

• Robbins was defining the science of economics, not what economists do, or what they teach, and the definition has to be understood in that context.

The Missing Branch of Economics: Political Economy

• My suggestion here, as in the Introduction to my Political Economy: Past and Present, is that its (political economy) use should be revived as now covering that part of our sphere of interest which essentially involves judgments of value. Political Economy, thus conceived, is quite unashamedly concerned with the assumptions of policy and the results flowing from them. I may say that this is not (repeat not) a recent habit of mine. In the Preface to my Economic Planning and International Order, published in 1937, I describe it as “essentially an essay in what may be called Political economy as distinct from Economics in the stricter sense of the word. It depends upon the technical apparatus of analytical Economics; but it applies this apparatus to the examination of schemes for the realization of aims whose formulation lies outside Economics; and it does not abstain from appeal to the probabilities of political practice when such an appeal has seemed relevant.

• It should be clear then that Political economy in this sense involves all the models of analysis and explicit or implicit judgments of value that are usually involved when economists discuss assessments of benefits and the reverse or recommendations for policy. (Robbins, 1981, 8)

Robbins’ justification for two branches of economics

• those who adopt this latter attitude (the view that his definition will preclude economists from being interested in policy) are concerned not so much with problems of definition as with problems of conduct or deportment. They think that the economist will sacrifice opportunities for usefulness if he abstains from excursions into social philosophy and (apparently) they think that if such excursions are not dignified by the title, economics science, he may feel precluded from making them. The warning may be necessary. But the psychology may be questioned. To me at least, it seems difficult to believe that recognition of the distinction between the two kinds of propositions will prevent any man of spirit from being interested in both. (Robbins, 1938, 345)

The alternative that was not followed: Maffeo

Pantelioni’s Pure Economics, translation: 1898

Pantelioni’s approach—teach economic science

• This manual is intended as a succinct statement of the fundamental definitions, theorems and classifications that constitute economics science, properly so called, or Pure Economics. Thus all questions pertaining to economic art, or Political Economy, are beyond its scope” (p. vii).

• He continues: • This is a departure from the lines on which textbooks of economic

science are usually prepared, their authors’ objects being to equip the reader forthwith for the discussion of the most important economic problem is presented by everyday life” (p. vii).

• He justifies his approach writing:• The discussion of problems of economics art is altogether

superficial and inconclusive, if not based ultimately on theorems of Pure Economics.

Samuelson’s solution--teach the science, but relate it to policy

• In micro—to teach economic science based on utility and profit maximization, but to draw policy inferences from it—based on welfare economics—focus on Pareto optimality, consumer surplus, graphs. Essentially teaching constrained optimization

• In macro—to teach economic science, which then was interpreted as Keynesian macroeconomics with unclear micro foundations. Essentially teaching variations of multiplier model and macro institutions.

Death of Neoclassical and Keynesian Economics

• By the 1970s neoclassical economics was fading in micro and Keynesian economics was fading in macro

• But we continue to use a modified Samuelsonian template for principles.

• In micro, constrained optimization rules, with some tangents.

• In macro, we have deemphasized the multiplier model, and replaced it with an AS/AD equilibrium model and have given more emphasis to growth, and micro foundations.

• The textbook definition is symptomatic of a serious problem in the way we are teaching economics.

• Question 1: According to economic theory, whenever possible government should avoid tariffs.

• Question 2: According to economic theory, the minimum wage lowers the welfare of society.

• Question 3: According to economic theory, if there are no externalities, the market is a preferable way of allocating resources.

Theorems and Precepts

• A theorem is a conclusion that follows from economic theory; it concerns the way the economy works. It does not concern policy questions. A theorem is not debatable by serious economic scientists.

• A precept is a rule of thumb that concerns policy that follows from political economy. Precepts are derived from economic theory, introspection, induction, educated common sense, the standard ethics of the day, and judgments on normative issues.