The Classical Economists (in order above: Adam Smith, Thomas Robert Malthus, David Ricardo, Karl Marx and Joseph Schumpeter)* left a vast trove of theoretical writings and economic observations that is not intensely studied today (ECON101 is mostly textbook Neoliberalism). The only classical economist I read in college was Karl Marx in a graduate Sociology Course and was restricted mainly to summary readings and the Communist Manifesto.
There has been somewhat of a resurgence of interest in the classics in World-Systems Theory (an extension of Marxian Economics** focusing on the exploitation of Peripheral Nations) and System Dynamics (see Saeed 2005) prompted by the Limits to Growth.
My purpose in this blog is to translate the Classical Economists into Systems Theory which allows the testable*** ideas to be formalized and used to estimate systems models with historical data (see the Boiler Plate). This exercise would not be possible without some simplification.
The simplification I used to implement the Classical Economics as causal models is the Kaya Identity (above). The Kaya Identity is true by definition and linkages among the extensive variables: (1) More population (N) creates more labor, more demand and more production (Q). (2) More production (Q) creates more energy (E) use. (3) More energy use (E) creates more CO2 emissions. And, (4) More CO2 emissions create increases in Global Temperature (T). The Kaya Identity is used by the IPCC to create a solid foundation for it's Emission Scenarios. The magnitude of effects in the model is determined by the intensive variables (coefficients): (1) n = Q/N, (2) e = E/Q, (3) c = CO2/E and t = T/CO2. The ma of magnitude of effects are also determined by feedback effects between the extensive variables. The feedback effects are less well understood and can be estimated and analyzed with Systems Theory.
The Classical Economists struggled with issues of causality, historical dynamics and feedback effects. Neoclassical Economics concentrated almost exclusively on analyzing equilibrium. Neoclassical Economics also did not study the problems of the Steady State Economy or the Limits to Growth while the Classical Economists did.
The classical Economists have to be read with a purpose. Since they present qualitative, mental models from an early period in the development of Economic Thought, there are many excursions, dead ends and ideas that did not quite work (Schumpeter does a great reading of Marx here, also see Saeed Limits to Growth Concepts in Classical Economics). My purpose in reading the Classics is to develop alternative models that can be tested on World-System data.
Classical Economic Models written in the R Programming Language can be found and run here.
Notes
* Economists I have not included in this list (and there are many, John Maynard Keynes for example) deserve a separate classification. I would include Keynes, for example, in the Modern study of government policy.
** In the US, at least, as a result of Cold War Politics, Marxism is equated to Communism (an ideology) which interferes with an unbiased look at Marxian Economics. Systems Theory allows us to put all the classical economists on an equal footing and find what is "systemic" in their writing.
*** Not everything written by the Classical Economists is statistically testable. Reducing the Classical Economists to systems models ignores most of the richness in their writing but still provides for a wide range of interesting results. Many formal models in Neoclassical Economics (for example the 2025 Nobel Prize in Economics winners model Aghion and Hewitt, 1992) are untestable. All Systems Theory models are testable if data is available.
Classic References
These works are available on line:
- Adam Smith Wealth of Nations
- Malthus An Essay on the Principal of Population
- Malthus Principles of Political Economy
- Ricardo Collected Works
- Marx Collected Works
- JS Mill Collected Works
- JM Keynes The Collected Writings
Excellent Secondary Works
These secondary sources are worth tracking down and reading:
- Hicks Keynes and the Classics
- Higgins Economic Development
- Saeed Limits to Growth Concepts in Classical Economics
- Schumpeter Capitalism, Socialism and Democracy
- Baumol Economic Dynamics
- Boulding The Malthusian Model as a General System
- Galor From Malthusian Stagnation to Demographic Transition
- Ripple Many Risky Feedback Loops Amplify the Need for Climate Action
- Dong Human-Nature Feedback Loops
- Kalman A System-theoretic Critique of Dynamic Economic Models
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