Grand Pursuit | Sylvia Nasar

Summary of: Grand Pursuit: The Story of Economic Genius
By: Sylvia Nasar

Introduction

Dive into the captivating world of economic genius in the book ‘Grand Pursuit: The Story of Economic Genius’ by Sylvia Nasar. This summary takes you on a historical journey through the lives and ideas of some of the greatest economic thinkers, from the era of Charles Dickens to the present day. Explore key developments and revolutionary concepts in economics such as the role of government, the welfare state, and the balancing of individual and societal interests. Discover how these economic masterminds worked tirelessly to improve living conditions, eliminate poverty, and create equitable opportunities for all.

A Christmas Carol’s Impact

Charles Dickens’ A Christmas Carol criticized English society’s acceptance of poverty by portraying Ebenezer Scrooge’s transformation from a miser to a philanthropist. This countered the belief that poverty resulted from overpopulation, as argued by Thomas Malthus. The English Poor Law of 1834 required people to enter a workhouse to receive aid. The Industrial Revolution led to economic growth, but also increased poverty and disease due to overcrowding. European social unrest led to Karl Marx and Friedrich Engels’ collaboration on a new political and economic system for workers. Henry Mayhew’s 88-part exposé on London’s poor living and working conditions contributed to the push for a “new Political Economy.” After A Christmas Carol’s publication in 1843, the concept of Christmas as a time of generosity and compassion became widespread. Dickens’ work provided a moral lesson and inspired social change, illustrating the power of literature to influence society.

Lessons in Economics from Alfred Marshall

The book discusses Alfred Marshall, who is known as the father of modern economics. Marshall believed in empowering workers by improving their skills and productivity, which he believed would result in higher pay and better living conditions.

In the late 19th century, England was gradually moving towards democracy, bringing working people into the electoral process. As a result, politicians had to take their interests into account. Economic thinkers of the time sought to understand how society could advance, making use of economics and science.

One of these thinkers was Alfred Marshall, who studied political economy at a time when a financial panic had thrown millions into destitution after a decade of relative prosperity. Marshall believed that the reason poverty continued despite abundant resources was due to low productivity. Socialists blamed greedy business owners, while Malthus blamed the poor themselves. However, Marshall’s view was that empowering workers by improving their skills and productivity would result in higher pay and better living conditions. He also recognized the untapped economic potential of women.

Marshall spent much of his time doing fieldwork in factories and companies, which led him to marvel at Americans’ readiness to move or change jobs to pursue opportunities, and at women’s relative freedom. Principles of Economics, published in 1890, is Marshall’s masterwork. It posits that competition forced businesses to become more productive, leading to higher pay for workers and greater profits for firms. According to Marshall, better pay allowed laborers to become businesses’ customers, setting off a virtuous economic circle.

In conclusion, Alfred Marshall’s teachings are relevant today, especially in a time of economic uncertainty. His emphasis on empowering workers through training and education to improve their skills and productivity is still valid. His theory about how competition forces businesses to become more productive and benefits both workers and firms is equally applicable in modern times.

Revolutionizing Social Welfare

Beatrice Potter Webb’s efforts to establish economic reform in the 1800s together with her husband Sidney and their friend George Bernard Shaw, contributed to the foundations of the modern welfare system that we know today. As a member of the Fabian Society, Webb championed the idea of government intervention to counteract the societal and economic hardships of the poor. Her research among the poverty-stricken population provided an in-depth understanding of the matter, leading her to refute the common notion that poverty was a moral failure. Instead, she believed that it was the government’s responsibility to address the issue. Her activism resulted in significant parliamentary proposals, including the introduction of unemployment and disability insurance, mandatory education, and the setting up of public works schemes. By fighting for national economic reforms, Webb, together with her husband, laid the foundation for the modern welfare state.

America’s Economic Ascent

At the turn of the 20th century, the US economy shifted from agriculture to industry, propelled by the arrival of eight million British and Irish immigrants. Yale economist, Irving Fisher, examined the role of money in an economy and coined the concept of “money illusion.” He advocated for state intervention to balance individual interests and societal good and criticized laissez-faire ideology, stressing the need for financial education. As a result of these efforts, American personal incomes soon matched those of Great Britain. Fisher’s work highlights the importance of understanding the complexities of market dynamics, personal finance, and socioeconomic objectives.

Economic Theories after World War I

The aftermath of World War I brought economic need and hardship, leading to social unrest and radical political movements. New economic theories emerged, including Joseph Schumpeter’s view of economies as dynamic and evolutionary, and Friedrich von Hayek and John Maynard Keynes’ differing worldviews on government intervention. Schumpeter believed in government-guided free markets, while Hayek believed in using mathematics and statistics for accurate forecasting and Keynes favored active government economic involvement. These theories shaped economic thought and policy for years to come.

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