Book: The big geniuses of economics (or political economy)

Da mesma autora de Brilliant Mind (sobre o matemático John Nash),  uma biografia "coletiva" de grandes economistas. Alguns faltando, mas os que aí estão podem confirmar que a economia não é, decididamente, uma ciência exata...
Paulo Roberto de Almeida 

BOOKSHELF

Grand Pursuit: The Story of Economic Genius

By Sylvia Nasar
Simon & Schuster, 558 pages, $35

Follow the Money

The best economists are formidable intellects, 

but do they really know what they are talking?

James Grant

The Wall Street Journal, September 10, 2011

By JAMES GRANT

Mankind missed a bet 2,000 years ago when no one thought to invest $100 or its equivalent in Roman coin in a certificate of deposit compounding at 2% a year forever. The principal balance today of this ungifted benefaction would come to the astounding sum of $15,861,473,276,036,900,000. That would be $2.3 billion, before tax, for every man, woman and child on earth. But the ancients bungled, perpetuating the problem of scarcity and leaving the way open for Sylvia Nasar to write her "Grand Pursuit: The Story of Economic Genius," a survey of economic thought from Charles Dickens to Paul Samuelson and beyond.

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Irving Fisher

Economic genius would seem to be in short supply these days. On the say-so of economists, Congress has spent upwards of $1 trillion to "stimulate" an economy that remains unstimulated. The best economists are formidable intellects, as it goes without saying—Ben Bernanke was the spelling champion of South Carolina—but you begin to wonder if they know what they're talking about.

Ms. Nasar divides her book into three "acts," like a play. They are "hope," "fear" and "confidence." "Hope" is what the Victorian thinkers, including Dickens, in his role of social reformer, and Karl Marx (of all people), gave the world concerning the possibility of solving the economic problem through conscious effort. "Fear" is what the interwar economists—confronting first hyperinflation and then the Great Depression—had to wrestle with and surmount. "Confidence" is what returned after World War II, as governments implemented the allegedly constructive notions of the Keynesians and monetarists.

Her collected geniuses, Ms. Nasar claims, were "instrumental in turning economics into an instrument of mastery." I find nothing in these pages remotely to substantiate that contention. Economics may be an "engine of analysis," as Alfred Marshall said, or an "apparatus of the mind," as Keynes put it. But economists no more set the world to producing and consuming than baseball statisticians hit home runs. Then, too, you'll never see Bill James, the dean of the baseball sabermetricians, trip up a base runner the way the government thwarts an entrepreneur. The intervention-minded economists are the ones who give the government its big ideas.

Ms. Nasar, the author of "A Beautiful Mind" (1998), the story of the mathematician John Nash, is a superb writer, fully meeting the standard set by Robert Heilbroner, in his "The Worldly Philosophers" (1953), for graceful writing on a difficult subject. You may or may not agree that the word "genius" fairly describes the mental apparatus of each of her heroes, but you can't help becoming engrossed in their lives. In her telling, Karl Marx has never seemed more repugnant or Joseph Schumpeter more persevering.

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Milton Friedman

The book is a kind of portrait gallery of economic thinkers, each artfully set down in his or her time and place. Thus, in post-World War I Vienna, the fortunate were preoccupied by the destruction of the Austrian currency, the krone. The less fortunate, having no krone, worried about starving to death. The author quotes a conversation between Anna Eisenmenger, a middle-class Viennese diarist, and her know-it-all banker.

"If you had bought Swiss francs when I suggested, you would not have lost three-quarters of your fortune," said he.

"Lost!" she exclaimed in horror.

"Why don't you think the krone will recover again."

Her money was invested in government bonds. "Surely," she said, "there can't be anything safer than that."

"But, my dear lady," the banker replied, "where is the State which guaranteed those Securities to you? It is dead."

Schumpeter and Friedrich Hayek were in Vienna in those awful days, Schumpeter living large. A failed Austrian finance minister, the future author of the memorable phrase "creative destruction" and of the great book "History of Economic Analysis" got himself elected the president of Vienna's oldest investment bank. The timing was perfect, and Schumpeter plunged into the bull stock market that Anna Eisenmenger's banker had been talking up.

"The frenzy of deal making, buying and selling was intoxicating," Ms. Nasar writes. "Schumpeter may have dressed like a bank president, but, as the Viennese press observed snidely, his lifestyle was as extravagant as a lord's . . . . He was as careless of his reputation as he was of his money. In response to a business associate's warning about appearing in public with prostitutes, he rode up and down . . . a main boulevard in the inner city . . . with an attractive blonde prostitute on one knee and a brunette on the other."

The May 1924 crash of the Vienna stock market cost Schumpeter his money as well as what was left of his self-respect. "Despite his misadventures in politics and banking," Ms. Nasar relates, "his reputation as a brilliant economic theorist had survived."

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Karl Marx

Irving Fisher, too, gave a better account of himself in theory than in practice. There was seemingly nothing that didn't interest the tireless Yale economist. He made time for the hard sciences and the soft. He was an entrepreneur, scholar, exercise fiend, Prohibition exponent, paper-money zealot and eugenics advocate. Attempting to develop a model of the U.S. economy, he didn't just settle for a mathematical exposition but designed and built a hydraulic contraption to raise his ideas to the third dimension. They called him a genius.

Like Keynes—indeed, like Milton Friedman—Fisher had no time for the gold standard. Economists could do better with paper money, he insisted. Actually, economists have not done better with paper money. Of Friedman, a later monetarist, an exasperated critic once said he wished that he (the critic) was as sure of anything as Friedman was of everything. Fisher, too, had the cocksureness gene. In 1914, he insisted there would be no war because the nations were economically one. And in 1929 he was certain that there would be no bear market—stock prices, he famously declared, had reached what "looked like a permanently high plateau." Fisher by then was a rich man—in his spare time he had helped to found Remington Rand—but he lost everything in the Depression. People mocked and scorned him.

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Joan Robinson

You wonder how he could find the strength to swing his legs out of bed in the morning. "Public recrimination and ridicule added to the stress and humiliation of financial ruin," Ms. Nasar relates. Yet Fisher not only bore up but also produced some of his best work, including a 1933 essay, "The Debt Deflation Theory of Great Depressions," that sophisticated investors, post-2008, have avidly rediscovered.

Once upon a time, economics was called political economy. Reading "Grand Pursuit," you more than ever regret the change in nomenclature. Economists turn out to be political creatures, much like the rest of us. It's a nice question whether, for instance, Friedman espoused floating exchange rates because he believed in the principle of unfettered action or because he believed that floating rates were technically superior to fixed rates (the kind in place for most of modern economic history until 1971). Ecumenically, Ms. Nasar's cast of economists includes righties as well as lefties: Friedman, Hayek, Schumpeter in the cause of more or less free markets; Joan Robinson, Sidney and Beatrice Webb, and Marx himself for collectivism. The author plainly sides with the interventionists, but she calls a Red a Red.

There are some strange ducks among the geniuses. When the Webbs were courting in 1891, he sent her a full-length photograph of himself. In reply she sent what might be the least romantic epistle ever written, even by an economist. "Let me have your head only," she pleaded—"it is your head only that I am marrying."

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John Maynard Keynes

There are bulls and bears, too, in these pages, the bears seeming to predominate. Schumpeter and Fisher are the standout optimists, each irrepressible in his belief in the capitalist future, even when they didn't have two nickels to rub together. Alfred Marshall also took a sunny view of mankind's material prospects. He marveled at the sheer power of compound interest: "If you can get mental and moral capital to grow at some rate per annum there is no limit to the advance that may be made." As for America, which the English economist toured in 1875, he called it an "empire of energy."

By contrast, the Keynesians were inclined to doubt that the world could get along without the intercession of governments staffed by people like themselves. The phrase "secular stagnation" fell from their lips in the 1940s, even on the eve of the great postwar boom. As for Marx 100 years earlier, the sight of prosperity drove him to distraction. He had, he was sure, ruled out the possibility in his writings. In especially low moments he would pray for war.

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Friedrich August von Hayek

There isn't room for every economist in this book or any other, but I myself missed the voice of Jacques Rueff, the 20th-century theorist who was able to demonstrate the superiority of the classical gold standard over the faux gold standard devised by Keynes (incorporated in the Bretton Woods system of 1944-71) or the paper-money regime advocated by Fisher and Friedman.

I missed, as well, Murray Rothbard, who blamed the Great Depression on the Hoover administration. It didn't intervene too little, Rothbard unconventionally sought to show in his 1963 book, "America's Great Depression," but rather too much. The economics profession just smiled at this contention, but the unsolved case of the depression of 1920-21 counts heavily for Rothbard's thesis. It was a deep and painful slump (a young Army veteran, Harry S. Truman, lost his Kansas City haberdashery to bankruptcy), with the wholesale price index dropping by 37% and the measured rate of unemployment tripling to 12%.

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Paul A. Samuelson

But it ended. Why it ended will mystify anyone who has taken to heart the arguments of Keynesians for more fiscal and monetary stimulus to revive today's economy. To meet the crisis that spanned the administrations of Woodrow Wilson and Warren Harding, the Treasury ran a budget surplus and the Fed raised interest rates. Yet the slump did end, and the 1920s roared.

The musicologist Ludwig von Köchel systematized, cataloged and published the musical output of Wolfgang Amadeus Mozart—he's the "K" that denotes a particular Mozart composition. Köchel was a botanist and mineralogist as well as musical scholar, but Mozart was the genius. In the matter of income and wealth, savings, and investment, the Köchels are the Friedmans and Schumpeters and Hayeks. The Mozarts are the Fultons and Edisons and Jobses.

Mr. Grant, editor of Grant's Interest Rate Observer is the author, most recently, of Mr. Speaker: The Life and Times of Thomas B. Reed, The Man Who Broke the Filibuster.

William Shirer: um reporter das miserias do seculo XX

BOOKSHELF
A Talent for Being There
By BARTON SWAIM
The Wall Street Journal, August 2, 2011

The Long Night
By Steve Wick
Palgrave Macmillan, 264 pages, $27

Before William Shirer wrote 'The Rise and Fall of the Third Reich,' he witnessed the Nazis' rise firsthand.

In the summer of 1933, William Shirer was living with his new wife in Lloret de Mar, a tiny village on the Catalonian coast. For seven years this young man from Cedar Rapids, Iowa, now 29 years old, had been a reporter with the Paris bureau of the Chicago Tribune, and he had flourished. In 1927, he had been on the very spot when Charles Lindbergh landed in Paris—a remarkable feat when nobody knew where, or if, Lindbergh would land—and he had been the "sole representative of the world press" (as the Tribune would boast) at Mohammed Nadir Khan's coronation as shah of Afghanistan. And yet in the fall of 1932, for reasons unexplained by the Tribune's notoriously difficult owner, Robert McCormick, Shirer received a telegram from headquarters: "Shirer this notification your services with Tribune terminates today October sixteenth stop you will be paid one months salary."

In Paris, Shirer had met Hemingway and Fitzgerald, and like many young American expatriates, he thought he had a great novel in him. So he used what money he had saved to rent that seaside cottage and started typing. But a novelist Shirer was not to be. After a year Shirer gave up and started looking for another reporting job. He found a place with William Randolph Hearst's Universal Service at the company's Berlin office—to the great benefit of 20th-century reportage, as Steve Wick documents in "The Long Night," a superb short biography.

"This work is not a scholarly work," Mr. Wick writes. "My goal from the beginning was to write more of an adventure story than a book of history." "The Long Night" is indeed an adventure story, with short chapters and a fast-paced narrative drive. But Mr. Wick has documented the story with scrupulous attention to detail, too, drawing on Shirer's published works as well as his papers and correspondence. Shirer would achieve fame all over the English-speaking world as a historian of the Third Reich, but he was at his best as a reporter. His greatest talent lay, as Mr. Wick shows, in simply being there when big things happened.

He was there, in March of 1935, when Joseph Goebbels announced that the Reich would disregard the Treaty of Versailles. He was in the Kroll Opera House one year later when Hitler announced that German troops had already begun to march into the Rhineland. In his diary Shirer recorded that Gen. Werner von Blomberg, the commander-in-chief of the armed forces looked pale during Hitler's speech. Later Shirer was told by a high-ranking source that German troops had orders not to engage if they were opposed, so unprepared were they to meet the French army.

When Universal Service went under and Shirer again found himself on the job market, he was approached by Edward Murrow, who persuaded him to take a job with CBS in the incipient field of radio journalism. Americans could now hear the news as it was happening. Shirer was in Vienna in 1938, when German troops crossed the Austrian border and crowds of emboldened Nazis could be seen taunting Jews and forcing them to clean sidewalks with toothbrushes. Later Shirer followed German troops through Belgium on their way to France; he arrived in Paris to find the city deserted, German troops cautiously wandering the streets and a Nazi flag adorning the Eiffel Tower. Shirer witnessed Parisians' bewildered outrage when, in June 1940, news spread that Marshal Petain himself would ask the Germans for an armistice, and Shirer broadcast live from just outside the famous railroad car in Compiègne where, a few days later, the French signed away their country.

By then Shirer's German censors had become perversely difficult. Mr. Wick, a journalist himself, is alert to the dilemma faced by reporters working inside closed countries: Does one tell the story as one sees it and risk ejection, or does one abide by the censorship and hope that the world can exegete the truth from hints and suggestions? For Shirer, as his diaries show, the dilemma was a constant source of anxiety and self-reproach. "For the last few months," he wrote in September 1940, near the end of his time in Berlin, "I've been trying to get by on my wits, such as they are; to indicate a truth or an official lie by the tone and inflexion of the voice, by a pause held longer than is natural. . . . But the Nazis are on to me."

When Shirer returned to the United States, he hosted his own Sunday news show with CBS, but he was forced out in 1947 and blamed Murrow. He spent the next decade living off income earned by memoirs and reviews, but it wasn't enough. "To keep the family afloat," Mr. Wick writes, Shirer undertook a book based on his own wartime reporting but deepened by research into Reich documents. Published at last in 1960, "The Rise and Fall of the Third Reich" was a massive and impressive work of history. He made a fortune from it.

The work's most controversial argument, that Nazism was the inevitable outcome of German history from the Reformation forward, is not a serious one. Shirer's brief and breezy treatment of pre-20th-century German history amounts to little more than a false extrapolation from a truism—like saying that, since Chinese communism is a distinctly Chinese form of communism, it was the inevitable culmination of Chinese history.

Yet Shirer's motivation was honorable. He wanted to squash the idea that Germany had been hijacked by a few extremists. He knew otherwise. "I have still to find a German," he writes in a typical diary entry, "even among those who don't like the regime, who sees anything wrong in the destruction of Poland." That Shirer's most famous book failed to explain the origins of German Nazism is no great mark against him. It is probably beyond the capacity of human reason to explain how a noble, civilized people succumbed to a homicidal delusion. Shirer narrated the events of that descent and did so with integrity. That is enough to earn our gratitude.

Mr. Swaim is the author of "Scottish Men of Letters and the New Public Sphere, 1802-34."