Economists who have influenced me

Many people find it difficult to place me in the intellectual universe of economics. This is not surprising, given that I have been influenced by many different economists, from Karl Marx on the left to Friedrich von Hayek on the right.

The Neoclassical school has been the dominant school of economics for the last two generations, so I have also been schooled in it throughout my career. It can provide us with some very useful tools to analyse problems within a given structure, but it is not very good at understanding how the institutions, technologies, politics, and ideas that define that structure evolve over time.

In this respect, Hayek is very different from the Neoclassical school, even though many Neoclassical economists mention him in the same breath as Milton Friedman, on the basis that he was one of the most influential advocates of the free market. Unlike Neoclassical economists, however, Hayek does not take the socio-political order underlying the market relationship as given and emphasizes the ultimately political nature of our economic life. This is a big contrast to the Neoclassical view, which thinks that economics and politics can be, and should be, separated. Indeed, if you read Hayek’s book, Individualism and Economic Order, you will see that he is very critical –sometimes even abusive – of Neoclassical economics.

At the other end of the political spectrum is Karl Marx. With the collapse of communism, people have come to dismiss Marx as an irrelevance, but this is wrong. I don’t have much time for Marx’s utopian vision of socialism nor his labour theory of value, but his understanding of capitalism was superior in many ways to those of the self-appointed advocates of capitalism. For example, when free-market economists were mostly against limited liability companies, Marx saw it as an institution that will take capitalism on to another plane (to take it eventually to socialism, in his mistaken view). In my view, 150 years after he wrote it, his analysis of the evolution of labour regulation in Britain in Capital vol. 1 still remains one of the best on the subject. Marx also understood the centrality of the interaction between technologies (or what he called the forces of production) and institutions (or what he called the relations of production), which other economic schools have only recently started to grapple with.

Also insightful about the long-term evolution of capitalism are Friedrich List, Joseph Schumpeter, Nicolas Kaldor, and Albert Hirschman. They had very different approaches from each other and were interested in different aspects of capitalism, but they have all deeply influenced me in my thoughts about the processes of technological evolution and wealth creation, and the political struggles surrounding those processes. Through his friendship and scholarship, Erik Reinert has helped me to more deeply explore the theories and historical evidence related to the ideas of these and other ‘production-oriented’ economists.

I have also been heavily influenced by Herbert Simon. In 23 things, I’ve called him the Last Renaissance Man, and that wasn’t just a ploy to attract the reader’s attention. Having done fundamental research in economics, operations research, psychology, public administration, political science, and artificial intelligence (AI), he truly understood how humans think and make decisions and explored in varied and profound ways the implications of this understanding for the design of organizations and social institutions. Some Neoclassical economists have adopted Simon’s notion of ‘bounded rationality’ but unfortunately only in a sanitized version, because it is fundamentally at odds with the rational optimisation framework of Neoclassical economics.

Despite having been educated and taught in Cambridge, I have not been very ‘Keynesian’ in my approach to economics. This is not because I disagree with Keynesian thinking, but because I have mainly done my research on ‘micro’ issues, such as trade and industrial policy. However, I have come to be drawn more into ‘macro’ issues in the process of thinking about the recent financial crises, especially the 1997 Asian crisis and the 2008 world crisis. In thinking about these issues, John Maynard Keynes, Hyman Minsky, and Charles Kindleberger have been big influences.

Not all Neoclassical economists are free-market economists I criticize in my writings. Through their works in welfare economics, Neoclassical economists, like William Baumol, Amartya Sen, and Joseph Stiglitz, have greatly influenced me, even though I am in the end not a Neoclassical economist like they are (having said that, we can debate whether Joe Stiglitz still remains a Neoclassical). In addition, I have learned a lot from Joe Stiglitz’s work on globalization, economic development, and financial crises.

Last but not least, I have been greatly influenced by my teachers in Cambridge. Bob Rowthorn, my PhD supervisor, helped me develop my thoughts with his agile thinking that cuts across different schools – Marxist, Neoclassical, and Institutionalist. Ajit Singh, Gabriel Palma, and Peter Nolan taught me different aspects of development economics, all with different but equally innovative approaches, and taught me how to do research that is grounded in reality.