Economics: The Trunk and the Branches

Economic thought, as it spreads out through time and space, has some resemblance to a tree. There are roots, some of which may go down a long way, but most prominent, in the seventeenth and eighteenth centuries, are people like Sir William Petty, Richard Cantillon, the Physiocrats like A. R. J. Turgot and Francois Quesnay, and perhaps we should add Thomas Mun and Sir James Steuart on the Mercantilist side, and perhaps even Bernard Mandeville. There is no doubt, however, that the main trunk begins with Adam Smith. Even if he is not the ‘Adam’ of economics (for he had some forebears), he is certainly the ‘Smith’, for he forged economic ideas into a remarkably insightful, consistent, and productive structure of theory. The Wealth of Nations is still a good book for the teaching of basic economics. Adam Smith not only laid the foundations of equilibrium price theory — which has not really improved much since The Wealth of Nations, Book I, Chapter VII — but he also had a theory of economic development and evolution, which stands up very well today. He realised that an increase in productive powers of a system came out of the learning process, that is, a genetic factor of production, which developed partly through what today might be called ‘folk learning’ of skills and dexterity, but also out of scholarly learning from the ‘philosophers’ and specialised designers, something which was relatively rare in his own day.1 This learning of productivity was fostered by the division of labour, which also had some perverse learning effects.2