Read Old Texts, Don't Read Marx
The one where I make both sides angry
Once every few months Twitter goes on a spree where people discover that economists generally don’t read Adam Smith, Keynes, and Marx. Sociologists and philosophers are usually the most outraged because they consider those texts to be foundational. And, well, it’s usually the only exposure they themselves ever get to economics. Common arguments often take the form of “how can you not read the most important texts in the history of your discipline?”.
Economists, in turn, usually have a simple retort. Physicists don’t read Newton. Newton’s correct ideas have been restated and optimized for textbooks. Physicists just learn Newton’s Laws directly and need not concern themselves with biblical views.
The critics then counter that economics is merely a social science and that it needs to stop comparing itself to physics. That it’s not clear whether Marx was right or wrong (sigh) and that economists are simply closed-minded.
I’m here to argue that the critics may have a point, but not the one they think they have.
Why you Shouldn’t Read Marx
First things first, don’t read Marx. Unless your goal is to study the history of economic thought or figure out what Marx really meant, he’s simply not worth reading. The issue with Marx isn’t that he was a socialist, that was fairly common even amongst intelligent people in the 19th century. The issue with Marx is that he was a stupid wordcel who made a hobby out of contradicting himself every other sentence. Sometimes his Labor Theory of Value is a theory of the equilibrium price in an economy, sometimes it requires a coefficient to transform them into prices, and sometimes competition just gives us monopolies so the LToV makes no sense anyway.
In short, there’s little to no value in reading the man. I personally am glad I read Marx, but that’s because I wanted to actually know what he was on about. After recognizing it for the drivel it was, I stopped caring. This also applies to the Communist Manifesto, which is an useful text if you want to know what the Communist Manifesto says. But if your goal is to improve as a social scientist, it will do nothing to help (despite what Twitter claims).
Now then, onto the question of why you should read the classics. And by “classics” I mean the likes of Smith, Irving Fisher, Friedman, and Ken Arrow.
Understanding Paradigms
To understand my argument, we first need the simple concept of Kuhn-Loss for which we must in turn understand Kuhn. Thomas Kuhn was a physicist-turned-philosopher who argued that science often goes through paradigms. Ways of doing science that conform to certain norms and rules. These paradigms have tools which they use to solve puzzles and advance how their models fit the world. A clear example of this is the discovery of Neptune. Scientists noticed that something was off in their model of the solar system, Newton’s equations were not working as they should have. But instead of discarding Newtonian mechanics because it failed to explain the world, they conjectured that they had missed a planet somewhere. And they really had, that’s how we discovered Neptune.
And the paradigm of Newtonian Mechanics held for a pretty long time. At least until it came upon what we refer to as an anomaly. Something that it could not explain and presented a problem for the fundamental ideas of the theory. In this case, it was Mercury’s orbit. To solve this anomaly, Albert Einstein had to come in and completely break open the paradigm, replacing Newtonian Mechanics with something completely new in the form of General Relativity.
But when paradigms are smashed because of anomalies, we often lose significant chunks of knowledge that no longer stand up to scrutiny. This has happened countless times in macroeconomics.
In 1929, the Great Depression ensued. Classical economics could not explain what was going on, an economic downturn should not have taken this shape of a falling price level coupled with falling output. To solve this anomaly, the world made a switch to Keynesian Economics, where we considered aggregate demand to drive the economy (well, at least in the short-run) and believed in the Phillips Curve - the idea that there was a persistent trade-off between inflation and unemployment.
As we made this switch, countless old knowledge was put aside. Economists forgot about Ricardian Equivalence, a 19th century idea which posited that deficits would just result in the public adjusting its own spending patterns. We forgot about the importance of the money supply for the price level that even David Hume understood and kept committing fallacies that now appear utterly silly,
As the Keynesian paradigm continued to dominate, Friedman conjectured that the Phillips Curve would collapse, and it did. Keynesians went into crisis-mode because the US suffered stagflation - rising inflation coupled with a high unemployment rate. As the crisis deepened, Keynesian views faced their own anomaly and the line of thinking receded. There was a resurgence of monetarism as Friedman argued that the money supply was central to explaining the Great Depression, and Ricardian Equivalence returned with a vengeance after it was redone by Robert Barro.
And then the cycle repeated again. Many embraced a new way of studying economics which completely dismissed the relevance of aggregate demand and built everything from rigorous microeconomic principles. Keynesians were at this point unable to meet the new rigorous standards so business cycles were now considered to be purely driven by real factors. This ensued until the New Keynesians came along and managed to “bring back” Keynesian ideas just as Barro had brought back Ricardian Equivalence. They had their moment to shine when other macroeconomists found themselves unable to explain the “anomaly” of the Great Recession.
Kuhn-Loss, Again
The lesson from all of this, is to never underestimate the power of Kuhn-loss. As science switches paradigms, knowledge is lost. Our standards change and previous concepts thought to be obvious become obsolete. This is especially important in the social sciences that have taken great steps towards mathematization. Previous works now usually fall flat due to two factors (1) they do not meet the standard of rigorous mathematical formalization (2) they do not meet the empirical standards of the Credibility Revolution.
This presents an amazing opportunity to any young researcher. Pop open a copy of Fisher’s Money Illusion. You will find that by modern criteria, practically all of his claims are unsubstantiated. You will also find that he has a million interesting hypotheses. You can take any of them and run with it. Write down a model, estimate the parameters. Use the tools of our existing paradigm to bring old ideas back to life.
And this applies pretty broadly for those seeking to do rigorous social science work. I cannot count how many times I’ve heard a Professor mention that they came across their own “novel ideas” as a passing mention in one of Kenneth Arrow’s works. The great thinkers of the past are great for a reason. They survived the test of time and have been filtered out - this gives you pretty good grounds to assume that they’re smart people. And smart people have interesting ideas to contribute, even if they aren’t well-substantiated!
Again, this is everywhere. Are you studying growth? Read Solow and even Adam Smith. Are you studying monetary economics? Fisher, Friedman, Samuelson, maybe Hayek. Anything related to Micro? Ken Arrow. Game Theory? Obviously read Myerson, but maybe even take a look at Neumann. Are you a political scientist? Make sure to read Tilly. And if you study international relations like I do, make sure you get your fair share of Mearsheimer takes to start the morning and make you angry.
P.S. maybe start with this Krugman post which is an older (and perhaps better) version of what I wrote here?