Two decades have passed since Roger Backhouse’s acclaimed introduction to the history of economics has been published. This new edition contains a few updates throughout, as well as a new chapter on economics in the twenty-first century. It is simultaneously published in the United States by Princeton University Press, under the title The Ordinary Business of Life: A History of Economics from the Ancient World to the Twenty-First Century. A work of magistral erudition, the book is a pleasure to read. Backhouse succeeds in explaining profound economic ideas in clear and direct prose.
As is often the case in journeys through Western ideas, the reader walks very fast through the centuries in Antiquity and dramatically slows down in the twentieth century. In the modern period, the narrative centers on Britain, France, and German-speaking countries. The United States enters the stage in the nineteenth century. After WW I, Backhouse’s story moves effortlessly back and forth between England and the United States. The twentieth century and first two decades of the twenty-first occupy roughly half of the book.
Backhouse rejects both “whig history” and the view that lost economic ideas from the past need to be reclaimed for the present (“retrogression”). He is interested in what economists “were doing,” but he does not abide by strict linguistic contextualism either. He assumes the existence of economic phenomena. Words like commodity, trade, money, product, market, demand, supply, division of labor, profits, interest, capital, growth, etc., are used for diachronic analysis, even if Backhouse stresses that their meaning evolved. At different times, economists were asking different questions, reflecting the social, political, and economic problems they were facing. Backhouse does not offer a single key to read the history of economics, which excuses me from providing a one-paragraph summary of over 2,000 years of history.
The first chapters deal with problems that fall within a substantive definition of economics: domestic production, the regulation of trade, the value of money, agriculture, the construction of national economies and their relation to individual behavior, the production and consumption of luxuries, the workings of markets, etc. External events such as wars and revolutions, as well as internal methodological shifts, are the primary drivers of historical change. The nineteenth century saw the establishment of “political economy,” as well as the last generation of thinkers like Karl Marx and John Stuart Mill, whose work spanned an immense breadth of human knowledge. The marginal revolution coincided with the institutionalization of economics in universities, scientific societies, and journals. Economics split from history; it became narrower as it refined its methods of theoretical inquiry and empirical measurement, without ever finding a consensual way to integrate the two. In the twentieth century, economic teaching and research became more international and more American. The number of professional economists increased dramatically as they found their place also in government and international organizations. In the late twentieth century, economic research became more empirical, more applied, and structured into various fields. While fragmentation increased, most economists share a core neoclassical framework, thanks to years of homogenous training in manipulating a set of canonical models. The strengthening of disciplinary culture also led to the emergence of heterodox currents in the 1970s (which sadly receive only brief coverage in the book).
In the last chapter, Backhouse discusses the work of recent Nobel Prize winners in addition to important issues facing our societies (globalization, inequality, the environment). So, what is economics today? According to Backhouse, “economics has become less a series of doctrines than, as Marshall advocated, an engine of analysis,” combining mathematical and quantitative techniques, a distinctive style of reasoning, such as “balancing costs and benefits,” and ideas borrowed from other disciplines to tackle difficult problems (pp. 412, 419).
On controversial issues, Backhouse avoids taking a side. For instance, he recognizes that since the second half of the twentieth century, the mathematization of economics has resulted in some research being “driven by an agenda internal to the discipline” rather than by “real-world problems,” which led “critics to argue that economics has become divorced from reality, a charge fiercely denied by others” (p. 267). Advanced modeling allowed economists to “resolve issues” that were “confusing” to previous generations. However, precision came at the cost of marginalizing issues less readily formalized into a mathematical framework (p. 297).
Some chapters stand out as marvels of contextual explanation, synthesizing existing scholarship into rich narratives (e.g., chapter 4: “Science, Politics and Trade in Seventeenth-century England”; chapter 10: “The Rise of American Economics, 1870–1939”; chapter 14: “Welfare Economics and Socialism, 1870–1945”). Backhouse draws from his extensive readings and collaborations with fellow historians of economics over the past decades, as well as from his own pioneering research on the history of macroeconomics, welfare economics, economic policy, economic methodology, and Paul Samuelson. Other chapters are composed of slightly disjointed sections. This probably reflects a difficult compromise between maintaining a comprehensive coverage of economic thinking through the ages and refraining from imposing a strong thesis that would deform the diversity of questions and methods followed by past economic thinkers. In this revised edition, reorganization of material on the twentieth century involves trade-offs in terms of narrative flow. But the new edition also sees Backhouse taking a historiographic stance against casting economists into retrospective “schools of thought.”
The canon of “great men” whose ideas compose typical history of economics texts appear in this story, but the number of words dedicated to their ideas is appropriately reduced in order to make room for a larger cast, including a few women who made it into the new edition, such as Jane Marcet, Joan Robinson, and Esther Duflo.
Before the institutionalization of economics, the choice of thinkers who should be discussed in such a book is not obvious. Backhouse chooses prominent figures from the historiographic canon (Xenophon, Aristotle, Oresme, Gerard de Malynes, William Petty, etc.). Although he doesn’t always explicate his selection criteria (after all, this is an introductory book), one can assume that they are picked either for their importance on contemporary debates or for the influence they had on later generations of economists.
Backhouse emphasizes that ideas are shaped and shared by communities (of scholars, merchants, academics, etc.). Each historian of economics can probably come up with a few names they wish would have been included (Jean-Jacques Rousseau, Antonio Genovesi, Frédéric Bastiat come to mind). Yet, nearly 300 economists are mentioned in a 400-page book, making this probably the widest coverage of economic thinking in any recent monograph. Thus, David Ricardo gets a good six pages and John Maynard Keynes about eleven pages, far fewer than typical texts that focus on just a few “great men.” Beyond the necessity to limit the length of the book, this choice reflects historiographic commitments of Backhouse. For instance, following Keith Tribe, Backhouse argues that Ricardo was not in the nineteenth century the uniquely important figure of political economy that twentieth-century followers of Karl Marx and Pierro Sraffa made him to be. Likewise, without disregarding the importance that Keynes had on twentieth-century ideas and policy, Backhouse follows David Laidler in showing how Keynes was a synthesizer of ideas floating around in the interwar period. Backhouse also explains well how Keynesianism was more than Keynes: it embraced quantitative analysis, put greater emphasis on dynamics, drew from American institutionalism, and entertained a wider range of policy interventions than Keynes had advocated before his premature passing.
Studying many individual trees without losing sight of the forest also allows for a better characterization of the origin of economic ideas at any given point in time. For example, notwithstanding the important breaks instituted by Carl Menger, William Stanley Jevons, and Léon Walras in the 1870s, Backhouse makes the case that developments in the first decades of the twentieth century were rather anchored on the economics of Alfred Marshall and Knut Wicksell. At the same time, the price theory apparatus associated with the Chicago School in the mid-twentieth century “was arguably much closer to Robinson and John Hicks than to Marshall himself” (p. 300).
The Penguin History of Economics is a trade book for the curious lay public with some background knowledge of economics, besides being a textbook for undergraduate students the world over. It can also serve as background reading for postgraduate courses on the subject. In fact, it should be mandatory reading for economics students whose historical culture is increasingly tenuous—readers of this journal need no convincing. Yet, in the first few chapters, some sections provide very elliptic elements of general history and history of science that might be harder to follow for readers who did not attend school in Western countries (e.g., chapter 3). The book probably covers too much material for a one-semester course in the history of economics, but instructors could easily make a selection and dig deeper into periods of their choice. As it is marketed as a trade book, it contains only a few references to primary sources or secondary literature. Instructors or researchers looking for a critical discussion of sources should consult Backhouse and Tribe’s The History of Economics: A Course for Students and Teachers (Agenda Publishing, 2017).
Backhouse makes economic ideas accessible without essentializing them into a set of principles, as is often the case in economic trade books and introductory textbooks. Even researchers interested in the history of economics could gain a larger historical perspective on their favorite object by reading The Penguin History of Economics. At a time of increasing specialization in the field, Backhouse’s book can serve as a healthy reminder not to lose sight of the bigger picture. It is simply the best guide to the history of economics in the English language.
