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Redefining the Economy: How the „Economy‟ Was Invented in 1620, and Has Been Redefined Ever Since

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Redefining the Economy: How the „Economy‟ Was Invented in 1620, and Has Been Redefined Ever Since Redefining the Economy: How the „economy‟ was invented in 1620, and has been redefined ever since Benjamin Hav Mitra-Kahn Submitted for a PhD in Economics City University London Department of Economics September 2011 . List of Contents List of contents.............................................................................................................. 2 List of tables and figures ............................................................................................ 5 Acknowledgments ..................................................................................................... 6 Abstract ..................................................................................................................... 9 Abbreviations .......................................................................................................... 10 Chapter 1 The Emergence of a space for the economy, 1600-1623 ....................................... 15 1. Where is the space for an economy in 1600? ....................................................... 17 1.1 Why every Englishman was an Island in 1600 .............................................. 21 1.2 Going from Boom to Bust ............................................................................. 24 2. The traditionalist reply to the crisis ..................................................................... 27 2.1 Misselden‟s challenge seems to fall short ...................................................... 29 2.2 Misselden‟s careful, and logical, use of Aristotle........................................... 32 2.3 Accounting for the benefit to the common-wealth .......................................... 35 3 How the economy was invented: a conclusion ..................................................... 39 Chapter 2 What mercantilism? Mun vs. Political Arithmetick, 1620-1700 .......................... 45 1. Why mercantilism implies an economy ............................................................... 47 1.1 Smith‟s sources, influence and modern critics of mercantilism ....................... 48 2. Thomas Mun and his original economy .............................................................. 50 2.1 Mun‟s supposedly mercantilist economy ....................................................... 54 3. Political Arithmetick and empirics ...................................................................... 56 3.1 William Petty‟s fair taxes, 1662 .................................................................... 58 3.2 William Petty‟s Political arithmetick, 1676 ................................................... 60 3.3 Petty‟s economy becomes the blueprint for later work ................................... 64 4. The economy in the heyday of „mercantilism‟..................................................... 66 Chapter 3 The real „golden age‟ of empirics and political arithmetick, 1695-1720 .............. 70 1. Charles Davenant and his work ........................................................................... 72 1.1 Davenant‟s 1695 war economy: .................................................................... 74 1.2 Promoting Growth in 1695 ............................................................................ 76 2. Davenant sets out his economic “doctrine” ......................................................... 77 2.1 An international comparison of economies .................................................... 81 3. The Government sponsored trade account ........................................................... 83 4. Same debate, new rules: Periodicals and Parliament ........................................... 86 4.1 The Tory leader uses a periodical and empirics ............................................. 87 4.2 The Whig Party and the British Merchant Economy ..................................... 89 5. A period defined by the domestic and international, via empirics ........................ 94 Chapter 4 The credit driven economy of Defoe and Walpole, 1720 - 1742 ........................... 97 1. Daniel Defoe and his economics ......................................................................... 98 1.1 The Economy ................................................................................................ 99 2 1.2 The source of trade ...................................................................................... 102 2. Where Public Finance comes in ......................................................................... 104 2.1 The National Debt as a Parliamentary responsibility .................................... 108 3. Walpole‟s use of National Debt accounts ........................................................... 110 3.1 Challenges to Walpole lead to public national accounts ............................... 111 3.2 The national debt only mattered after 1720 .................................................. 116 4. The end of the flow economy............................................................................. 117 Chapter 5 Political fragmentation breaks empirical economics, 1740-1780 ........................ 121 1. Political fragmentation changes the economic debate ......................................... 122 1.1 Matthew Decker‟s apparent conversion........................................................ 125 1.2 Decker and Political impact ......................................................................... 128 2. The contribution of professionals ....................................................................... 131 2.1 The anonymous professional of 1746 ........................................................... 132 2.2 Andrew Hooke and Newton‟s ratios ............................................................. 135 2.3 Hooke‟s Economy ....................................................................................... 140 2.4 Arthur Young, the last of the practical economists ....................................... 142 3. Scholars vs. industrial policy advisors ............................................................... 147 3.1 What sort of an economy could emerge from this? ....................................... 149 4. The end of an 18th century of empirical advice ................................................... 151 Chapter 6 A French Alternative to Physiocracy, 1750-1789 ................................................ 153 1. The Physiocratic Economy ................................................................................ 154 1.1 Physiocrats and empirics .............................................................................. 156 1.2 The opponents of Physiocracy who had empirical evidence ......................... 158 2. The Merchants‟ System ..................................................................................... 159 2.1 Economic Growth defined by Gournay ........................................................ 165 2.2 Measuring the Economy .............................................................................. 168 2.3 The administration and its followers changed France ................................... 169 3. Voltaire and the economy .................................................................................. 171 3.1 Voltaire‟s empirical use of the merchants‟ system ........................................ 173 3.2 Voltaire‟s economy ...................................................................................... 175 4. France and Britain – two different economies, but similar protagonists .............. 179 Chapter 7 Adam Smith‟s economy in the long 19th century, 1770 - 1930 ............................ 182 1. Smith‟s economy and its immediate academic influence .................................... 183 1.1 Smith‟s idea becomes political ..................................................................... 186 1.2 The final critics of Adam Smith‟s economy ................................................. 189 2. Adam Smith‟s new perspective on the economy ................................................ 191 2.1 The problem with national accounts from the 19th century ........................... 194 2.2 The problem with our histories of national accounting ................................. 197 3 Challenging Smith‟s classical economy .............................................................. 201 3.1 Marshall‟s rejection of Smith ....................................................................... 203 4. The Long 19th century comes to an end .............................................................. 205 3 Chapter 8 Keynes convinces Britain to re-define the economy, 1930 - 1945 .......................210 1. Getting away from Clark‟s 1937 Marshallian economy ......................................211 2. Where GNP does not come from… ....................................................................215 2.1 Why James Meade did not invent GNP ........................................................218 2.2 And why Richard Stone did not invent GNP either ......................................222 3. Keynes needs to convince the Treasury ..............................................................225 3.1 Keynes‟s continued involvement in National Accounting .............................229 4. The importance of Keynes‟s redefinition of the economy ...................................232 Chapter 9 How British GNP conquered the USA, 1920 - 1950 ............................................236 1. Simon Kuznets and the US economy .................................................................237 1.1 Welfare and National Income .......................................................................239
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