TB: GOAT: Greatest Economist of All Time (Cowen)
Core Thesis
The great economists of the 19th century embedded new ideas about the world in economic theory — the way Twitter is used today. Today's economists are smarter and better trained but economics is no longer a carrier of ideas; it is primarily a means of data collection and hypothesis testing. The master economist must be simultaneously mathematician, historian, statesman, and philosopher — a combination of gifts rarely found together.
Key Takeaways
Economics as a carrier of ideas
- In the 19th century, if you had a new idea about the world, you embedded it in economic theory. Today that function has separated from empirical economics.
- Today we have split "carrier of ideas" and "tester of economic hypotheses" into largely two separate groups of people. This is neither good nor bad — it has simply happened.
- Demands of specialization and sophisticated hypothesis testing now make it harder than ever to be a successful generalist at the highest levels.
Keynes
- Friedman has been the most influential macroeconomic thinker since Keynes.
- Keynes predicted that stagflation (both inflation and high unemployment) would be possible — which the 1970s delivered.
- Keynes was a macro-oriented macroeconomist: he took a macro point of view analytically on macroeconomics itself.
- Keynes understood fiscal policy as boosting aggregate demand even via wasteful spending (digging and filling ditches).
- His achievement was aligning economics with changes in ethics, culture, politics, and society — what Mill did for the mid-19th century.
Hayek
- Hayek: the economic problem is not optimization but the discovery of preferences and constraints, and learning about procedural rationality.
- Hayek is prominent as a critic of the view that social sciences should mimic natural sciences and should aspire to certain empirical knowledge.
Malthus
- The simplest Malthus: when essential factors do not grow at the same rate and diverge consistently, the scarcer one eventually crashes the system.
- For Malthus, equilibrium triumphs over progress. A prosperous society requires either strong moral restraint or moral failure — a genuine dilemma.
The master economist
- "He must be mathematician, historian, statesman, philosopher — in some degree. He must reach a high standard in several different directions and combine talents not often found together." — Keynes on economists
Mental Models
- Incentives Matter — Cowen's central lens for evaluating each economist: what were the incentives shaping their theory?