Niall Kishtainy's "A Little History of Economics"

Niall Kishtainy is a writer, economist and historian, and teaches economic history at LSE.

He applied the “Page 99 Test” to his latest book, A Little History of Economics, and reported the following:

On page 99 of A Little History of Economics, I present the central idea of The Theory of the Leisure Class, which was written at the end of the nineteenth century by the iconoclastic American economist, Thorstein Veblen. Page 99 is a fragment of the long story of economics, which I lay out over 40 chapters beginning in ancient times and ending in the present. Yet Veblen’s idea concerns a fundamental economic question which runs through much of the book: what governs people’s economic behaviour?

In the late nineteenth century the conventional view began to emerge that people make economic decisions rationally: they accurately weigh up the costs and benefits of buying this car or taking that job and then choose accordingly. Veblen looked at the matter differently. He thought that people decide less on the basis of abstract principles of rationality than on instinct and habit, which are shaped by deep-seated social and cultural conditions. This gave him an unusual perspective on capitalist society, as shown in the following sentences from page 99 of my book:

On the face of it, capitalism looks as if it has nothing at all in common with ancient societies of tribespeople with their rain dances, sacrifices of animals to the gods and gifts of shells to neighbouring villages. Rational people in capitalist societies are engaged in buying, selling and profit-making. But in fact, says Veblen, if you look closely you’ll see primitive customs living on in the modern economy. We buy things not so much to satisfy our own desires as a completely rational person would, but in order to be approved of by others.

Veblen tells us that in early societies people gained prestige by being powerful enough not to have to work; ploughing fields and chopping logs came to be seen as demeaning. The American economy of the Gilded Age was much the same, he said. Rich people lived off interest from their inherited fortunes and didn’t have to do any real work. They achieved social status by showing off their jewellery and fur coats. They were the ‘leisure class’ devoted to socially wasteful ‘conspicuous consumption’.

Although Veblen’s kind of economics is today out of fashion, in recent decades economists began to unpick the idea of ‘rational economic man’ and to base new explanations of economic behaviour on psychological theories. They’ve also become increasingly sensitive to the potentially damaging effects of extreme concentrations of wealth; some argue that today’s high levels are the sign of a second Gilded Age. Page 99 of the book, a mere glimpse at the thought of a now neglected economist, is therefore a window onto two fundamental debates in economics that continue to this day.

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--Marshal Zeringue