Bertram Schefold
23.02.2000
Presidential Statement, on the occasion of the opening of the forth conference of ESHET, 25 February 2000, Graz (Austria)
23.02.2000
Presidential Statement, on the occasion of the opening of the forth conference of ESHET, 25 February 2000, Graz (Austria)
Vir Magnifice,
Vir Spectabilis,
Dear Colleagues,
Dear Friends of the Organising Committee,
I should like to thank all those, who, by their efforts, helped to make this conference possible: Lutz Beinsen, Stephan Böhm, Christian Gehrke, Clemens Keil, Gerald Schöpfer, Richard Sturn, Peter Teibenbacher - and - Heinz Kurz ! - and their staff and our sponsors.
Please allow me to take a very personal start, which, as will be obvious, cannot engage our society.
In 1935, my parents lived in Greece and my father was working for the German Archaeological Institute in Athens. They had postponed their marriage because my mother was of Jewish descent, and they hoped that the Nazi regime would fall. Disappointed in this hope, they turned to the German Embassy in order to get married, knowing that my father probably was going to loose his job, although the Nürnberg laws had not yet been passed.
Marriages between "Aryans" and "Non-Aryans" were still possible, but was the embassy allowed to execute one, especially if the groom was an employee of the state?
Surprisingly, there was an Attaché at the embassy who offered to help by writing to the government in Berlin in order to ask. The next morning, the young man (his name was Blankenhorn) phoned very early in the morning and begged my parents to be at the embassy when it opened. He said that a telegram signed by Hitler himself had arrived which forbade this particular marriage there, but that he was prepared to proceed with the ceremony, pretending that he had not yet opened the letter. Blankenhorn, who was to prove his courage and integrity also under other circumstances, became German ambassador in Paris after the war.
A senior colleague, whose work was regarded as useful for the Olympic Games at Berlin, Georg Karo, obtained a permit for Karl Schefold to hang on to his job, but Nazis in Athens managed to get the permit withdrawn.
My father lost his employment and they went to Switzerland. The Swiss on the whole where hospitable, but they already had one archaeologist at Basel so that Karl Schefold had to earn the bread for the family by writing for newspapers, while he was also doing his research, and his academic career only really started more than ten years later. Of course, there were Nazi tendencies also in Switzerland, as there were fascist tendencies in every single European country. Yet, my parents never spoke ill about Swiss individuals with whom they had had to deal during that period.
My father earlier had had to do research on archaeological collections in the Soviet Union during the early Stalinist period. He worked in the Eremitage on Attic vases found in the Black Sea area. When he first came in 1929, there were gentle old scholars of European standing. When he came back in 1930, they had disappeared, and one did not dare to ask what had become of them.
In between, before going to Athens, they were in Rome. The German archaeologists had to show their new finds to the Duce; their best piece was a portrait of Caesar. Mussolini, the father of our problem, looked the marble in its eyes and exclaimed theatrically: "Lo sento, è lui!".
The lesson of these various experiences was to regard it as a merit of a country if the democratic forces prevailed, to regard it as a great misfortune if totalitarianism prevailed and, above all, that one had to maintain the ties with those who defended culture and human decency in the country concerned.
I do not really know what to make of the Austrian situation. This is a free democracy, with some political leaders, in governmental office, who on occasion voice scandalous opinions. Is the reaction of the European Union exaggerated? It certainly appeared to be one-sided, considering the war in Chechenya or the attitude of other nations with regard to immigration and their hesitation to repent political misdemeanours of the past. But it is right for us to be here - obviously, if the government is better than many say it is, and also if it is not. For we are certain of the integrity of those who have organised the conference, and by being here, we support them.
Academics have their own reasons to fear the blindness of political passions. Bene docet qui be distinguit, they said at Bologna, - he teaches well who distinguishes well. The members of the European Society for the History of Economic Thought have among their goals (I quote from the constitution):
"Teaching and research in the history of economic thought in Europe, taking account of different traditions and languages".
What does it mean in our context? It was natural after the Second World War to repudiate much of the intellectual heritage of Germany and central Europe in order to sever all ties with National Socialism. In this process, besides National Socialism, unfortunately much was abandoned, repressed or forgotten, which constitutes part of a valu-able heritage. Populist politicians are dangerous, among other things, because they confound good and evil ideas, in order to let the evil ideas appear as good. The consequence may be that the good ideas appear to be evil: something good is repressed because something bad must be repressed.
Under the circumstances, the subject of our conference has been well chosen. If the history of economic thought includes that of the rise and fall of political conceptions, progress does not appear as definitive.
Why is progress in economics being questioned? One can be annoyed by the pretence of new discoveries. Eager young researchers claim to have proved new theories; old historians point out that there are predecessors. The new growth theory or the new theory of foreign trade have been cited as examples.
If the progress of economics in some domains is not linear, it presumably is cyclical. Whether old insights are lost temporarily or definitively: the relevant point is that academics must reckon with the possibility that important truths can be forgotten. They may be rediscovered when time is ripe for them.
Linear progress exists and strikes me as most impressive in mathematics. Take non-Euclidean geometry. There were doubts about the independence of the axiom of parallels in the 17th and 18th century. Gauss discovered the logical possibility of a non-Euclidean geometry, whereas Kant had believed that Euclidean geometry represented a truth which was a priory given. Gauss - who had many other excellent ideas which could be published - decided to stay silent about this one, until others made the same discovery: first the lawyer Schweikart, then the Hungarian Bolyai and the Russian Lobachevsky. Riemann generalised the idea to many-dimensional, curved spaces, and what had appeared as an abstract mathematical fancy, capable of no physical application, became the foundation of Einstein's theory of general relativity which at first was supported only by three meagre empirical phenomena and which has now become one of the two pillars of modern astrophysics.
I find it difficult to believe that a similar triumph could ever be celebrated in economics, but one can not be sure. It may be noted, however, that some cyclical evolutions can be observed even in mathematics in the approach to rational and irrational numbers, where the importance of the ancient insights into the paradoxes of the infinite were rediscovered in the late 19th and early 20th century, long after one had thought to have reabsorbed the entire mathematical knowledge of antiquity through the study of Euclid's textbook. Linear progress, on the other hand, is undeniable in economics, as far as the development of conceptual tools is concerned. Their application, however, is tied to broader ideas and to schools, and their disappearance and reemergence is connected with the political visions which give direction to their evolution.
There is the old idea that supply and demand determines price. In Steuart we find the refinement (which is rendered more precise in Adam Smith) that supply and demand determine a market price which gravitates towards a natural price, given by costs including normal profits. This conception reappears in the revival of the modern classical school, in spite of the apparatus of supply and demand curves based on a different theory of distribution which had been developed in the interim.
Fritz Neumark (himself earlier an emigrant to Turkey), in an article on cycles in the history of economic ideas, discussed an entire list of doctrines which oscillate between polar orientations. There is individualism and the market on the one hand, authority and plan on the other, similarly free trade and protection, world economy and autarky. The individual and the market are - within limits - defended by Aristotle against Plato, by Smith against absolutist's interventions in the mercantilist period and today individualism continues to ascend.
A nominalist's definition of money had been attributed to Plato. Neumark sees it reaffirmed by romantic economists and by Fichte, whereas Aristotle provides a metalist's account of the origin of money in his politics. Oresme is clearly a metalist who believes that all coins, gold, silver, and even copper, should be minted in such amounts that the value of the metal - whatever that is - augmented by the cost of minting, is equal to the purchasing power of the coin, but this is a reaction to earlier Medieval nominalist ideas, according to which the Prince is entitled to taking seignorage in order to finance his expenses. The classical authors start from cost of production. Schumpeter takes an intermediate position in that the purchasing power of money is above the cost of production of the precious metals, yet precious metals are necessary to stabilise the currency.
Modern theories of money are inevitably nominalist, in that the metal base has been taken away. It might now be more interesting to speak of a cycle insofar as opinion alternates between the view that money should be seen as exogenous or endogenous.
Exogeneity is associated with the idea of a given stock of the circulating medium and endogeneity begins with the observation that even gold is not there as a given amount of coin because gold can also be put to the so-called industrial uses as plate or jewellery. Authors could be of the opinion that the partition of the precious metals into monetary and industrial uses was primarily determined by convention - the monetary stock then was exogenous - or endogenously ruled by prices. We have the related opposition between the banking and the currency schools, the curiosity that money is treated as a given stock in Keynes who questioned the quantity theory, then there is the monetarist counterrevolution and now some advance of the idea of exogeneity.
It is particularly attractive and revealing to consider cycles in the appreciation of progress itself. Even in the analytical representation of technical progress, the intellectual progress can hardly be called linear. This, at least, must be the opinion of one who has spent much time on capital theory. In this perspective, there was the splendid account of the advantages of an increasing division of labour in Adam Smith. There followed a brilliant analysis of different forms of technical progress by means of the early versions of the theory of prices of production in Ricardo and Marx. Their interpretation of the innovation of processes could be represented explicitly by analysing the consequent changes in the structure of inputs and outputs. The lowering of cost with the substitution of labour by machinery (without changing the raw materials used) was limited by the conceptual tool: the labour theory of value was used, but this could be mended when input output systems and Sraffa systems were used.
To represent progress in terms of shifting production functions was problematic, by contrast, as the debate on capital theory has shown, although there was something in the idea of representing technical change not as a sequence of discrete steps but as a (almost) continuous stream of innovations. Reswitching almost did away with the production functions. They now have come back in new growth theory.
The appreciation of progress seems to be subject to much wider fluctuations than its representation. Generally, progress looks much bigger than it is, said Nestroy, the great Austrian playwright, in a wonderful phrase which I can neither pronounce in proper Austrian German, nor translate with its characteristic irony, for I am Swiss. We know the basic valuations. There was Hobbes's phrase that the life of the savage was "solitary, poor, nasty, brutish and short". Then this savage was elated by the Enlightenment, with Rousseau speaking of a golden age of man. The freedom of the Indian to pursue diverse occupations was praised by Smith and Marx, so as to establish a historical contrast with modern alienated factory work. 19th century authors, such as Schmoller, saw the savage again reduced to a barbaric state, unfree because of poverty and superstition; paternalistic colonialism would improve his lot. The 18th century view returned triumphant in 1972, when Marshall Sahlins - admittedly not an economist but studied by some of us at the time - published his "Stone Age Economics", a book in which hunters and gatherers constituted "the original affluent society" and in which the 20th century was the age of unprecedented hunger, since there never had been more undernourished people simultaneously been alive as now in what we used to call "The Third World", while a primitive was shown to dispose of more leisure, on the basis of a limitation of needs, than employees in rich countries who lived under the stimulus to develop needs without bounds. (Sahlins, pp. 96, 39).
There is no time here to go into the details of how the story links up with economics in a more technical sense. Sahlins based of his assertions on the work of the great and neglected Russian economist Chayanov who had used neoclassical tools of analysis and did not speak of a limitation of needs but of a balance of the disutility of family work and of the utility derived from the products produced for the peasant household.
There was some ambition to use solid empirical data in the controversy between Friedrich Engels and Bruno Hildebrand on the consequences of early industrialisation for the welfare of the labouring poor. Engels had tried to demonstrate the thesis of increasing immiserisation (later taken up by Marx), in his book about "The Condition of the Working Class in England", and Hildebrand, in the year in which the Communist Manifesto appeared, attempted a statistical proof of the contrary, based on the German experience. The debate surfaced again recently, with economic historians on the whole siding with Hildebrand.
One might also show how the development of growth theory in the 50s was linked to a wave of technological optimism, how it receded in connection with the increased awareness of environmental problems after the report of the Club of Rome had shocked the profession, and how the increased self-confidence of economists to master environmental problems conceptually and administratively - but we do not feel quite safe yet - became one of the reasons why the theory of growth could recover. There is a simple way to transform the cyclical movement of the wheel of fortune into a continuous ascent: always only look and identify with those who are on the rise: the young, the rich and the powerful.
A great and important change with regard to the idea of progress occurred roughly between the beginning of the 20th century and the end of the First World War. The economists of the second half of the 19th century tended to be stern believers in the association of technical progress and the moral development of mankind.
The very idea of economic stage was conceived to mark the idea of progress by showing how successive advances of technology or of forms of communication lead to higher states of society, in which culture reached an increased degree of sophistication and morals would provide more safety for the individual. Schmoller gave a survey of the theories of evolution in existence at the end of the 19th century. They were diverse in how they explained (and not so different from what we have today), but they had this perspective in common: evolution meant progress. Historical relativism, Weber's passionate plea for a value-free science and, above all, the terrible experience of the First World War shattered these beliefs.
To analyse this last connection in detail might be a worthy subject for a future conference of ours. The experiences of growth and regression, of progress and decline, of societal advances and of social disintegration are felt in different ways in different countries. Victory and defeat produce different intellectual climates. It would help mutual understanding to study the ensuing transformations of ideas in the relevant languages. (It may be the case that most important ideas in economics published today are written in English, but the past was different.)
The history of economic thought is interesting not only because there is the detective work to be done in order to discover how modern theories arose, but also because the old ideas are still around and, valid or not, continue to present a challenge which helps us to deepen our understanding of what we believe.