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Saturday, March 2, 2013

Book Review: Grand Pursuit-The Story of Economic Genius by Sylvia Nasar



The world economic system is changing and people are adjusting rapidly to new ways of living. Modern economics is full of wonder and predictions that are based in a number of assumptions from theorist history. Sylvia Nasar puts in perspective the history of economic thought so that readers can make better sense of the decisions today through a theoretical past lens. Like Robert L. Heilbroner’s 1953 classic The Worldly Philosophers this book goes a step further and describes concepts with increased clarity. 

The choice of theorists used in the book is interesting and entirely of the author’s choosing. Even though well-known theorists such as Karl Marx, John Maynard Keynes, and Joseph Schumpeter are present, other theorists such as Webb, Fischer, and Hayek are also discussed. These theorists contributed substantially to the thought of economic systems but have not had the opportunity to truly be explored in most books. 

The book moves into the perspective of the theories in the times and circumstances in which they lived. For example, Schumpeter was named the president of Vienna’s old investment bank M.L. Biedermann the day it went public at the ripe age of 29. By this time, he was so far in debt that he was chased both civilly and criminally by a pack of angry investors. A number of his businesses went broke, his Theresianum partner was a crook, and he was forced to compensate shareholders. 

You might also find some interest in Irving Fisher’s theories. He was one of the first neoclassical economists within the United States. Fisher was one of the first people to use cost of living adjustments for employees. Ironically he did not like them stating that they were “money illusions” and both Wall Street Traders and employees alike were prone to this inflation false perception. People perceived money as stable and price of goods as adjusting, which is actually the reverse of what was happening. 

As long as the cost of living was getting higher, the Index Visible employees welcomed the swelling contents of their “high cost of living” pay envelopes. They thought their wages were increasing, though it was carefully explained to them that their real wages were merely standing still. But as soon as the cost of living fell they resented the “reduction” in wages.

To Fisher money was fluctuating and employees who were given more money to make sure they were receiving their “fair pay” were happy. However, when the cost of living declined an appropriate reduction was taken from their paychecks to ensure that they were not overpaid. Employees did not understand the concept that money has relative worth compared to other costs around them. 

The author sets the chapters around three main Acts that help highlight in what context the economic thought developed. Hope, Fear, and Confidence were seen as the political and economic backdrops of different genres of thought. The book is well thought out and maintains an excellent host of references for each chapter. Such a book is written at a college level and is fairly easy to follow chronologically. 

Nasar, S. (2011). Grand Pursuit: The Story of Economic Genius. NY: Simon & Schuster Paperbacks. ISB 978-0-684-87298-8
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