Abstract This article examines how pedagogical concerns shaped the development of the three-equation New Keynesian model, which became the dominant framework for teaching and evaluating monetary policy from the 1990s onward. Contrary to the standard narrative, the model did not originate in classrooms or academic journals but in central bank workshops. We show that the many macroeconomists who proposed small models in the 1990s simultaneously targeted researchers, policymakers, and students, pursuing a common set of epistemic virtues: simplicity, realism, and consistency. They tried to accommodate recent advances in expectations modeling and price-setting modeling, to assess theoretically and empirically worldwide shifts in monetary policymaking, and to equip students with a sense of these mechanisms and dynamics. These virtues were negotiated differently across spheres, particularly in the transition from equation-based policy models to diagrammatic classroom representations, illuminating the porous boundary between education, research, and policymaking in modern macroeconomics.
Abstract The aim of our article is to assess what we call the “discrepancy hypothesis.” It states that the transformation of macroeconomics triggered by Lucas, Kydland, and Prescott has failed to percolate into the contents of undergraduate textbooks. In the theoretical part of the paper, we draw a contrast between AS-AD and DGE modeling based on three benchmarks: the presence of microfoundations, the expectations assumption, and the presence of intertemporal substitution. In the article's empirical part, we measure how undergraduate textbooks fare with respect to the AS-AD/DGE divide. We use two sources: the WorldCat database and a survey of undergraduate textbooks used for teaching at leading universities. The discrepancy hypothesis was confirmed. Thirty-four out of the thirty-nine textbooks retained from the WorldCat catalog were based on the AS-AD, and only three were based on the DGE core model. Furthermore, eleven out of the twelve most used undergraduate textbooks in the teaching sample were found to adopt the AS-AD line.
Abstract While teaching has been central to the professional life of many economists, pedagogy has long been a neglected area in the history of economics; this volume contributes to rectifying that situation. What is taught and where it is taught, by and to whom, and for what purposes, are interconnected issues with important questions about the internal development of economic ideas and the many areas where economic analysis has become influential. The tools, methods, and content of economic education have changed with the evolution of the field and differed substantially by level of schooling, across nations, and myriad other factors. Common across all efforts is the attempt to transfer economic understanding from experts to those who either want or are thought to need those skills. The essays in this volume deepen our understanding of what the history of economic education can tell us about economics and its roles in the world.
Abstract Textbooks are seldom thought of as part of the knowledge-creation process. Their role, instead, is typically classified as that of knowledge diffusion. The textbook, so conceived, serves as a passive conveyor of generally accepted knowledge in a field. The treatment of the Coase theorem in the economics textbook literature, though, is an exception. The theorem entered the textbook literature when the theorem was not part of the “generally accepted knowledge of”—or even widely known among—economists. The present article examines the diffusion of the Coase theorem into the intermediate microeconomics textbook literature in the 1960s and 1970s. The textbook treatments of it then and even today never have been “stable and formulaic.” The theorem's treatment in the textbooks works as a spectacular illustration of the halting and sometimes even confused process of knowledge creation.
Abstract This article offers a new way to read Book V of The Wealth of Nations and argues that it contains a robust, integrated, and underappreciated theory of modern state capacity. Though many scholars have offered detailed analyses of distinct topics contained within Book V—for instance, Smith's position on standing armies, education, his “maxims of taxation”—few have treated the final book as a culminating and coherent argument about modern statecraft. Modern states have the unprecedented ability to expand markets and generate wealth, but they were also uniquely vulnerable to new forms of elite predation and capture. For Smith, modern state capacity was a historically necessary response to the vestiges of premodern, precommercial arbitrary power. By examining Smith's treatment of four key topics—defense, the administration of justice, taxation, and public debt—we show how these functions are interwoven into a broader vision of modern state capacity, or, put simply, what modern states do and how they do it. Recovering this theory of state capacity offers a different understanding of “Smith's politics” that transcends interpretations that treat politics either as interference, or as a position on a specific policy.
Abstract This article critically addresses the “sympathetic market-exchange” thesis in Adam Smith scholarship, which is the interpretative thesis that posits an analogy between sympathy in The Theory of Moral Sentiments and market exchange in the Wealth of Nations such that there is a moral dimension to market exchange.
Abstract This article examines Friedrich Hayek's visits to Brazil during the military dictatorship, contrasting them with his experiences in Chile and Argentina. Primary sources, including correspondence and newspaper records, are used to reconstruct Hayek's activities in Brazil and analyze the cold reception he received from government authorities. The article argues that, unlike in Chile and Argentina, where Hayek was received by high-ranking officials and his ideas were used to support economic policies, in Brazil his presence was ignored by the government. The authors attribute this difference to the national development strategy adopted by the Brazilian military regime, which favored strong state intervention in the economy. The article concludes that the usefulness of renowned economists to authoritarian regimes depends on the compatibility of their ideas with current economic policies. Economists’ travels must be understood not only from the supply side, that is, their motivation to get to know and influence the world, but also from the demand for their ideas from groups linked to the government.
Abstract Smith's theory of value is typically interpreted as assuming that labor quantities or production costs are established prior to the act of exchange. We reverse this view by arguing that these factors are established through exchange itself, as individuals mutually evaluate the worth of their contributions under conditions of freedom, independence, and equality in their bargaining position. These conditions define Smith's account of exchange in the “early state” of society, where independent hunters must agree on how to evaluate their works. This is more than a conjectural detour. It provides a benchmark for judging exchange in advanced societies, where exchange value estimation also involves profit and rent, while equality is often undermined by monopolies or legal restrictions, but also by structural asymmetries in bargaining power. Here, therefore, natural liberty depends not only on the absence of legal interference; it also requires the “progressive state” of society, where individuals are effectively independent, and bargaining regains the symmetry of the early state. Only then do ordinary prices approximate natural prices, understood essentially not as long-run equilibrium prices, but as standards of fair remuneration. This reading reframes Smith's project, moving beyond the classical-neoclassical dichotomy to reveal a theory of justice in exchange rooted in mutual recognition.
Abstract The 250th anniversary of The Wealth of Nations challenges us to ask whether, and to what extent, the interdisciplinary developments in Smith scholarship deepen our understanding of Smith's economic ideas; and whether they can allow us to recover a stronger sense of unity and coherence to his work, or instead bring into sharper view its tensions, ambivalences, and internal fractures. This special issue of HOPE seeks to illuminate the book anew by offering a glimpse of what the Adam Smith of the twenty-first century might look like—contested and reinterpreted, as ever. The Smith who emerges is neither the prophet of spontaneous order nor merely the critic of its illusions; neither the theorist of self-regulating markets nor simply the moral philosopher called in to correct them from outside. He is, rather, a thinker of the fragile conditions under which improvement, liberty, and human flourishing might be brought into concord, and of the recurrent forces that pull them apart.
Abstract John Witherspoon's political and economic thought, which developed mainly in the American phase of his career, borrowed extensively from Francis Hutcheson and even David Hume, both of whom were his intellectual antagonists in Scotland. This fact has led some scholars to conclude that there is a discontinuity between the American and Scottish phases of Witherspoon's career. A more plausible interpretation, however, is that political economy had become, by the late eighteenth century, an ecumenical creed. The example of Witherspoon illustrates how men of very different theological persuasions could agree substantively on matters of political economy. After making a case for the continuity of Witherspoon's thought, this article surveys the contours of his economic ideas, drawing from his early writings and speeches, his Lectures on Moral Philosophy, and his 1786 Essay on Money. Notwithstanding his vigorous disagreements with Hutcheson, Hume, and the Moderate literati of Edinburgh, Witherspoon largely shared their economic perspectives. The theologically orthodox Witherspoon was classically liberal in economics.
Abstract Adam Smith has been recognized as an important theorist of labor, but he is also a sophisticated and underappreciated thinker on leisure, offering distinctive insights into its meaning, value, and social conditions. In contrast to recent definitions of leisure as time free from objectively necessary activities, Smith conceives of leisure as freedom from toil and anxiety—a release from the intense physical and psychological demands of self-preservation and social ambition. Paradoxically, he suggests, even as modern European societies improved their ability to meet basic needs and satisfy various desires, they simultaneously reduced leisure time for most individuals. The explanation lies in intensified status anxiety and the oppressive burden of labor imposed on the lower classes. While he values leisure both intrinsically and instrumentally, Smith stops short of calling for maximizing it at the expense of other social goods or endorsing institutional solutions such as legal limits on working hours. His modest vision for recovering leisure in market-based societies rests on the moral culture of prudence and on the voluntary restraint of employers in setting the working hours of laborers.
Abstract The desire to place public opinion on a rational footing through the production and communication of objective, impartial information fostered the development of statistical estimates of national income in the 1910s and 1920s. This article explores the case of Willford I. King, who made notable contributions to income estimation and was hired by Wesley C. Mitchell in 1920 at the founding of the National Bureau of Economic Research (NBER). King's immediate hiring and association with the NBER is puzzling, considering the striking contrast between his early reputation as a controversial conservative author and the bureau's efforts to establish a reputation for impartiality and objectivity. The article addresses this puzzle. It shows how King's political-cum-scientific project converged with that of the leading founder of the NBER, Malcolm C. Rorty, to produce scientific income estimates to debunk socialist theses and defend American democracy. Their twofold project placed the communication of factual knowledge to the general public at its heart. Tensions between scientific and popularization objectives eventually created insuperable difficulties.
Abstract Adam Smith's Wealth of Nations is often associated with the idea that in markets individuals’ interests are led by an invisible hand that unintentionally promotes society's interest. Yet, Smith not only qualifies the conditions under which the invisible hand can align individual interests with society's interest, but he also distinguishes between different interests. This distinction among different interests allows him to show that interests can often conflict, as key asymmetries fracture the harmony between individual and social interest, systematically benefiting one interest at the expense of others. Differences in bargaining power between buyers and sellers; unequal understanding of interests across social groups; asymmetries in access to institutional power and the ability to shape legislation; and divergent levels of institutional stability all tend to generate conflict, rather than promote harmony of interests.
Abstract Adam Smith famously asserted that consumption is “the sole end and purpose of all production.” He further argued that the interest of the producer mattered only insofar as it advanced the interest of the consumer. However, historians of economic thought have often focused on the producer's interest, overlooking Smith's emphasis on the consumer's interest. This article argues that, for Smith, the desire to consume underlying demand was the driver of production. Production was a means to an end: consumption, the act of satisfying human needs and wants. The desire to consume—rooted in imagination and self-love—was the foundation of exchange and the driving force behind the development of the division of labor. The division of labor, in Smith's framework, emerged gradually from the evolving needs and desires of individuals and was intrinsically tied to their fulfillment. Its development was essential to ensuring that both rich and poor consumers could access the necessaries and conveniences that enhanced their quality of life. Ultimately, this article shows that, for Smith, consumption was a practice imbued with moral significance. By sustaining both productive and unproductive classes, consumption contributed to the broader well-being of society.
Abstract Smith's long chapter of The Wealth of Nations devoted to colonies has given rise to conflicting interpretations, owing to its interweaving of moral and consequentialist (or economic) approaches to modern empires. While Smith is sometimes criticized for assigning moral considerations only an ancillary role, we argue, on the contrary, that these considerations reinforce his economic critique of European colonial expansion. We show that the chapter on colonies mobilizes a rhetoric aimed at eliciting the reader's disapproval by emphasizing the dubious character of European colonial ambitions, the role of fortune in European gains, and the severe injuries inflicted on native populations. By linking his analysis of colonization to his discourse on demerit, resentment, and injury, we stress that his concern for overseas populations is fully consistent with his moral and jurisprudential framework. By attributing to colonists all the traits of blameworthy conduct, Smith seeks to awaken the sympathy of his readers for the resentment felt by native populations, which, in turn, raises broader questions of Western collective remorse and potential reparations.
