Robbie Mochrie is a Professor of Economics at Heriot-Watt University in Edinburgh and has worked as an economic advisor to the Church of Scotland. He now presents in Spain How to Think Like an Economist (La Esfera de los Libros), a review of some of the most influential minds in the field.
This way of organizing thought, he warns, is very current at a time when the economics of the 20th century must evolve to adapt to the realities of the 21st century.
From your book, it is clear that economics and philosophy were practically a single discipline that later split.
Yes, it was one of the things that surprised me when I started writing the book. I realized that philosophers like John Stuart Mill and Karl Marx substantially wrote about economics in the 19th century, with Mill becoming a key figure in economic thought by mid-century. Later, I discovered that Alfred Marshall came to economics after studying ethics, which is interesting in itself. John Maynard Keynes' dissertation at Cambridge was on probability theory; before becoming an economist, Keynes was a philosopher specialized in understanding the nature of uncertainty and how it relates to people. I found in Keynes' interactions with Friedrich Hayek that many of his concerns were essentially ethical and philosophical. One surprising thing in the book to me was how late the divergence between economics and philosophy occurred in the history of the discipline.
Mentioning ethics, another key point: it is essential for economic theory to function.
Absolutely. Aristotle defined four civic virtues: prudence or practical wisdom, temperance, which is actually patience and the willingness to delay gratification; courage, necessary for Athenian citizens as they could go to war, and justice, which he conceived in terms of interpersonal relationships, treating people correctly.
Can you summarize the history of economics very briefly? Aristotle emphasizes prudence, Thomas Aquinas emphasizes justice, Adam Smith emphasizes temperance, and Maynard Keynes emphasizes courage. These ethical ideas run through economics, and you need all of them because it is about our relationship with the world. So, we need to understand how to use our resources, how to manage uncertainty, how to manage our relationships with others. And often, we have to be willing to forego immediate gains to have greater gains in the future, which can be uncertain.
So, as you say, it is necessary to think like an economist. Now more than ever?
Absolutely, I would say it has not been as important since the 1930s, a time marked by Franco's rise in Spain. I believe we are at risk of seeing a rise of the far right. So, yes, thinking like an economist is extremely important at this moment, particularly being able to see long-term and act with courage; I would encourage people to act with courage and manage uncertainty.
In what sense?
In the early 20th century, economists realized that the nature of the world had changed, that society had changed and was much more complex than it had been in the 19th century. So, the economics of the 19th century no longer worked; a new type of 20th-century economics was needed. Now we see that 20th-century solutions are no longer effective: we are facing the problem of climate change, so we need a 21st-century economics. Perhaps it will be a much more ecological economy. But understanding the processes by which our thinking changed in the 19th century allows us to understand how the change should be today and what kind of activities we should incentivize.
It also seems that people are increasingly affected by the global economy, not just the local one.
Yes, the economy affects everyone simply because we live in it. As you say, both locally and globally. We cannot exit the economy by packing our things, putting them in a backpack, and going to live in a cave. So, we are in this complex and globally connected system, and we have to understand it and understand how our behavior changes the system. And that requires a particular way of thinking that economics has been developing for the past 250 years, since Adam Smith published The Wealth of Nations. Now we are in a situation where we have to understand new problems of globalization exacerbated because our capabilities mean we have to manage the damage our society can cause to the planet.
How does the relationship between economics and politics influence the current context of interconnected crises?
We have to understand how economics and politics work together, and that also means we have to spend much more time thinking about how we can improve international relations between governments because the global problems we face cannot be solved by individual governments; there has to be cooperation.
One of the best examples of this is the trade wars threatened by Donald Trump. How will they affect the global economy and the citizen?
I am not specialized in trade, and we do not know what Trump will do, but in economics, there is the theory of the madman, which basically says that if you are going to have a negotiation, one way to get the best possible terms is to make it seem like you are capable of doing anything, making it very difficult for your opponents to guess what you will do. And I think there is an element of this in President Trump's current statements. But what concerns me most are not the tariffs but the immigration policy.
Why?
Because we live in a world undergoing a very rapid demographic transition. I am not sure what the birth rate is in Spain, but I remember that in Italy, it has dropped to 1.3 children per woman. In some Asian countries, it is even lower. So, immigration will be essential to sustain the society we live in. At the same time, in Africa, this demographic transition is happening much faster. As development reaches Africa, people's behavior changes as it did in Europe, Latin America, and Asia. And that will have very substantial long-term effects.
What will be the effects in the United States?
The United States is closing itself off to talent and skills. Its leadership in the global economy has always been based on being open to immigration. The only time it was not was in the 1920s, and in the 1930s, it suffered the Great Depression. I am not saying it is the cause, and it is also linked to imposing tariffs, but I must say that, as someone interested in that era, President Trump seems to be doing everything possible to repeat policies that turned out disastrous.
In your opinion, who has been the most relevant economist? In terms of understanding what is happening, a person I particularly admire is an MIT professor, Robert Solow, who developed the economic growth model. And in a way, it is not so much for Solow's contributions but for how he created a research culture at MIT that generated some of the most important ideas in economics. I believe we need economists like Robert Solow to be able to solve the problems we have today.
And which economist do you think is most misunderstood?
I am convinced that Keynes is seriously misunderstood. But I think the most misunderstood is Karl Marx. Marx has many very profound ideas, but his economic analysis was already outdated when he was writing it. Later economists dismissed his ideas outright. I believe this is why Marx is much more influential today in sociology, philosophy, or history because what Marx said is particularly irrelevant.
Any others?
Another economist who has been misunderstood in many ways, especially in the United States, is Adam Smith. Smith was a social philosopher, and I believe he cannot be analyzed as a prophet of free enterprise, as American liberals and conservatives seem to have interpreted him, especially from the 1970s. Gloria Liu wrote a fascinating book on how Smith's work has been understood in the United States, arguing that Chicago economists needed to recreate what Smith had said to justify their approach to economics, but it was not what Smith had actually said. So, if someone tells you that Adam Smith was very interested in the free market working more efficiently, they have not understood Smith.
If you had to choose one idea from one economist, what would it be?
I would say Adam Smith's idea of the invisible hand, the idea that the economy is a self-regulating organism, is absolutely essential. Another economist I am going to mention is George Akerlof, and for a very personal reason: when I started my graduate studies in economics, it was because I began reading Akerlof's work, and it was unlike anything I had read as a university student, and I wanted to learn more. Akerlof is a very interesting economist because he shows how the limits of human rationality can have a significant effect on the economy. He was the first person to give me a convincing explanation of the nature of the unemployment problem. He seeks inspiration for economic models outside of economics, and I think that is a very good approach. I show my students the work for which he won the Nobel Prize in Economics and explain that it was rejected by four publications. It is so complicated that a 20-year-old student cannot understand it, but it changed what was possible in economics. And I tell them that all they need is a brilliant idea, and they too can transform the economy.