Economics. Writings about economic matters developed in the United States before the emergence of an academic discipline devoted to political economy and economics. As in Britain, U.S. authors devoted an extensive pamphlet literature to the advocacy of economic policies and actions, most particularly as related to monetary issues, employment, and international trade.
Economic Thought in the Early Republic
. Despite the early influence of Adam Smith's
The Wealth of Nations (1776), his major policies did not become the basis for the organization of the U.S. economy after independence. Instead the programs associated with Alexander
Hamilton introduced a system of mercantilism, discarding free trade in favor of tariff protection for manufactured goods. The federal
Constitution and related legislation defined the government's power over monetary and banking issues,
immigration, and land distribution. Differences between the Hamiltonians and the more agrarian followers of Thomas
Jefferson on economic policy seem minor compared to their general acceptance of Smithian principles about
individualism, choice, and markets. Although economic arguments about the path of economic growth and the distribution of income remained central in the early national era, no discipline emerged in the United States that could be described as economics.
Prior to 1820, colleges subsumed political economy (as it was generally called until about 1900) into their concern with moral philosophy and the moral study of social problems. The central readings were based on treatises written by Europeans, whether British, such as by Adam Smith and John Ramsay McCulloch, or, more importantly in the first half of the nineteenth century, by the Frenchman Jean‐Baptiste Say. American editions of European texts often used footnotes to describe how American conditions differed. These references, and the emerging school of American writers of texts or monographs on economics, substantially revised British economic theory. Few American economists believed in the accuracy of the pessimistic theories about population growth and land rents associated with Thomas Malthus and David Ricardo. American economics reflected the seemingly unlimited amount of land available in the United States, and thus evinced a greater optimism concerning the effects of population growth on land rent. Perhaps the most sophisticated of these “optimists” was the Pennsylvanian Henry Charles Carey, who followed his father Matthew Carey by advocating protective
tariffs and using the American experience to invert the principles of Ricardian rent. Carey argued that population density and
urbanization offered significant economic returns, presenting a case for reducing the pace of western migration in order to encourage the development of cities and manufacturing industries.
Elements of Political Economy (1837) by Reverend Francis Wayland, president of Brown University, was the first influential economics textbook published in the United States. Wayland regarded political economy as basically an extension of Christian moral philosophy, which aimed to influence social action by its impact on popular audiences. While Wayland exemplified the predominant approach down to the
Civil War, there was also a Pennsylvania school of protectionists and a southern school, exemplified by Thomas Cooper, that extolled free trade, anticapitalism, and (under certain conditions of land availability and climate)
slavery.
Economics as a University‐Based Discipline
. The professionalization of economics as an academic subject came in the last third of the nineteenth century, under the influence of scholars who had studied in Germany, often with members of the Germany Historical School. These scholars, the most important of whom in influencing the direction taken by economists was Richard T. Ely of Johns Hopkins University and, after 1892, the University of Wisconsin, maintained the antebellum interest in social reform, which they now based on Christian
socialism. They also maintained the goal of educating the masses, and often involved themselves in nonacademic organizations to reach a wider audience. When the American Economic Association was formed in 1885, with Francis A. Walker of the Massachusetts Institute of Technology as president and Ely as secretary, its founders attempted to broaden the membership to include businessmen, government officials, and other members of the public. While more professional economists emphasized empirical research, most aimed the research to advance social reforms they advocated.
In the late nineteenth century, many colleges and universities introduced programs in economics. Subsequently, programs in
political science (government) emerged as a separate academic discipline. Academic journals devoted to economics appeared in the 1880s. An increasing concern with empirical research, theory, and scientific approaches did not mean a loss of interest in social reform, but rather a shift in the strategy of influencing public policy toward bringing the presumed expertise of the academic economists to bear upon public officials. Economists now served on government regulatory agencies, testified before legislative and investigative bodies, and designed state and municipal tax structures. In the years before
World War I, academic economists were central in the drafting of the
Federal Reserve System, tariff policy and its implementation, and other forms of national economic regulation. At the state level, University of Wisconsin economist John R. Commons promoted the “Wisconsin Idea,” by which economists and other specialists would work with legislators in the shaping of public policy. World War I saw an expanded use of economists in the national government, particularly at the
War Industries Board.
In the first three decades of the twentieth century the discipline of economics assumed its present shape. Economics became mainly an academic discipline, with teaching and research primarily at colleges and universities, although, as befit a field dealing with real‐world issues, a nonacademic fringe of policy advocates always existed. Economists developed a standard corpus of microeconomic theory, first in prose, then geometrically, and later mathematically. They gave more attention to collecting empirical and quantitative data concerning the economy, a trend boosted by the formation of the National Bureau of Economic Research (NBER) in 1920, under the leadership of Edwin F. Gay, a Harvard economic historian. Its director of research, the Columbia University economist Wesley C. Mitchell, whose major research focused on the economic problem of the
business cycle, led the NBER to collect and analyze large bodies of quantitative data. Despite a new emphasis on theoretical and empirical matters, economists still sought to influence public policy by demonstrating their importance to political elites. Economists often participated in government economic commissions in the 1920s.
From the Great Depression to the Post–Cold War Era
. The depression of the 1930s led to some disillusionment with the standard economic models, particularly as the decline persisted for longer than had earlier economic downturns. Thus the analysis of the British economist John Maynard Keynes attracted considerable attention, and under the influence of the Harvard economist Alvin Hansen and his students, including Paul Samuelson,
Keynesianism dominated macroeconomic theory in the 1940s and 1950s. Keynes modified the standard classical model, but more important for policy purposes, he presented an argument for an activist government role in the economy, including the use of government tax and expenditure changes to influence the economy. It is unclear whether or not Keynes actually influenced U.S. economic policy in the 1930s, but the “Keynesian Revolution” clearly had a major impact upon the discipline.
The interest in using the government as an active agent in influencing the economy placed a premium on the acquisition of reliable information about economic conditions. While data of various types had long been collected by government agencies and as part of the decennial censuses, the 1930s saw the beginnings of the government's collection of monthly data on
unemployment and prices, and quarterly data on national income and output. While the concept of national income was long known, and several American writers presented estimates in the nineteenth century, only with the work of Simon Kuznets in the 1930s was the concept clarified and detailed methods of implementation and measurement devised. The government's measures of national income subsequently featured in wartime debates about military mobilization. The 1930s thus saw a marked increase in the number of government regulatory agencies and statistical collection organizations, often using economists, a tendency further accelerated during
World War II. Economists continued the time‐honored tradition of disagreeing with each other, at times causing negative public and political reactions. Some criticized economists for being too certain about their arguments, while others, like President Harry S.
Truman, expressed frustration over their equivocation, preferring what he referred to as “a one‐armed economist” (one who would never say “on the other hand”!).
At the end of World War II, reflecting Keynesian influence, Congress passed the
Employment Act of 1946, which included a provision for a Council of Economic Advisers to collect and prepare data for the president and issue an annual economic report. The precise nature and impact of this council has changed over time, reflecting political and personal factors, but it did make economists (who in most cases served only briefly, on leave from academic positions) central to policy debates, and, over time, led to more positions for economists in governmental agencies. Although microeconomic theory continued to become more mathematical and abstract, in the years after 1950 economists and economic knowledge became more highly valued by business, governments, and international agencies, while economics came to play a role in the study of political science and law. Under the theoretical and empirical critiques of Milton Friedman and others, especially at the University of Chicago, macroeconomics shifted away from the Keynesianism of the 1950s toward a focus on monetary forces and the ability of markets to adapt to changing conditions. Despite disagreements among economists about theory and policy, economics continues to influence public policy and adjust its principles in accord with what has been established as basic empirical reality.
See also
Banking and Finance;
Demography;
Depressions, Economic;
Economic Development;
Economic Regulation;
Education: Rise of the University;
Monetarism;
Monetary Policy, Federal;
Social Gospel;
Social Science;
Sociology.Bibliography
Michael Joseph Lalor O'Connor , Origins of Academic Economics in the United States, 1944.
Joseph Dorfman , The Economic Mind in American Civilization, 5 vols., 1946–1959.
John B. Parrish , Rise of Economics as an Academic Discipline: The Formative Years to 1900, Southern Economic Journal 34 (July 1967): 1–16.
Herbert S. Stein , The Fiscal Revolution in America, 1969.
Robert L. Church , Economists as Experts: The Rise of an Academic Profession in America 1870–1917, in The University in Society, ed. Lawrence Stone, vol. II, 1974, pp. 571–609.
Mary O. Furner , Advocacy and Objectivity, 1975.
Paul K. Conkin , Prophets of Prosperity, 1980.
William J. Barber , From New Era to New Deal, 1985.
William J. Barber, ed., Breaking the Academic Mould, 1988.
Mary O. Furner and Barry Supple, eds., The State and Economic Knowledge, 1990.
William J. Barber , Designs within Disorder, 1996.
Stanley L. Engerman
