Roger E. Backhouse


On his book The Puzzle of Modern Economics: Science or Ideology

Cover Interview of October 26, 2010

A close-up

Modern economics emerged after the Second World War.  Many crucial developments came earlier, for the 1930s was an incredibly fertile period for economic thinking.  But the Second World War mobilized economists for the war effort, and after 1945 hundreds of technically trained men and women (though mostly men) went from government service into academic positions, helping to contribute to a transformation of the discipline over the next two decades.

This process was reinforced by the expansion of higher education, in which many students, including many members of the armed forces taking advantage of the GI Bill, chose to study social sciences, including economics.  For many of them, the Great Depression had stimulated their desire to understand how an economy could fail so badly.

The Second World War led pretty rapidly into the Cold War—and further hot war in Korea.  The result was a transformation of science funding, and economics benefited from this, as did all the social sciences.

One of the most influential sponsors of economic research was the RAND Corporation, a US Air Force think tank, where much game theory was developed.  At the same time the Cold War fostered anti-communism, symbolized by Joe McCarthy’s attempt to root out communist sympathizers.  The charge of “communism” could be levied against anyone arguing for significant state intervention in the economy.  At the same time, there were well-funded conservative groups arguing against government intervention.

What effect did all of these have on economics?

Most economists claim that it had no effect at all.  The US Air Force and the Navy put money into economic research, often not knowing what they wanted, giving economists considerable freedom to determine what they wanted to do.  And whilst free-market think tanks may have influenced politicians, they will not have affected academic research.

However, it is hard to believe that there was no connection between funding and the move towards a more self-consciously “scientific” economics.  In the same way that the changes in economics that took place at the end of the nineteenth century were linked to the move of economics into universities, it would be surprising that changes in the way science was funded did not affect the discipline.

Game theory and technical economics were more congenial to funding agencies than some less technical types of economics.  The case with free-market think tanks is different.  But it seems hard to avoid the conclusion that they contributed to a climate of opinion in which economists proposing free-market ideas found it easier to find an audience for their ideas, even if their academic colleagues were more concerned with their technical proficiency than with their policy conclusions.

None of this is to deny that economists were striving to be scientific.  They were doing that.  But there are many ways to do science.  To explain the path that was taken we need to understand the culture in which economists were operating, and these ideological factors were a part of it.