Grand Pursuit

by Sylvia Nasar

  16. After marrying impulsively, Schumpeter rushed off to Egypt, the miracle economy of the Belle Epoque, to make his fortune as a lawyer and money manager. In Cairo, he found inspiration for his greatest work, The Theory of Economic Development.

  17. Friedrich von Hayek got interested in how markets and modern economics functioned in the trenches during World War I as a corporal in the Austro-Hungarian army. In the Second World War, Hayek obeyed Wittenstein’s injunction by writing The Road of Serfdom, a devastating attack on command-and-control economies.

  18. Hayek’s cousin, Ludwig Wittgenstein, an aviation engineer turned philosopher, impressed upon young Hayek that the duty of genius was to tell uncomfortable truths and to speak of the unspeakable.

  19. World War I wrecked the foundations of the nineteenth-century economic miracle and bankrupted the governments of victors and vanquished alike, leaving in its wake famine, hyperinflation, and a revolutionary firestorm that spread from the Urals to the Rhine.

  20. As the finance minister of a mutilated, penniless, and starving nation, Schumpeter (standing, third from left) tried to convince Austrians that they could recover economically without throwing themselves into the arms of either red Russia or resentful Germany.

  21. John Maynard Keynes (center), the clever, ambitious, self-confident heir to one of England’s intellectual dynasties, defined the good life as the one available to a London gentleman on the eve of World War I. He is shown here with Bloomsbury pals Bertrand Russell, the philosopher (left), and Lytton Strachey, the biographer (right).

  22. Keynes collected artists and writers as well as, thanks to his speculative genius, art. The great love of his youth was Duncan Grant, the painter (left) who, like most of Keynes’s other bohemian friends, refused to serve in World War I and urged Keynes to apply for conscientious-objector status.

  23. Keynes became the point man in Britain’s wartime Treasury for loans from the United States to France and other allies and played a supporting role at the 1919 peace conference. Favoring debt forgiveness among the victors and modest reparations for the losers, he resigned in protest after the Big Four refused to make postwar economic recovery in Europe a priority in the Versailles peace treaty.

  24. In 1923, Hayek spent a postdoctoral year in New York City, where he met Irving Fisher and wrote a withering critique of monetary reformers who claimed that central banks could tame the business cycle by managing the money supply. He doubted that forecasters could anticipate the economy’s ups and downs ahead of time sufficiently reliably to serve as guides to policymakers.

  25. The postwar slump drew Joan Robinson, the dreamy but driven daughter of a general, to economics, a war-hero husband, and England’s celebrity economist, John Maynard Keynes. Self-confident, articulate, uninhibited as a writer, she broke into Keynes’s all-male inner circle of disciples, developing a theory of how the rise of big business might lead to an unwelcome combination of higher prices and lower employment. She enlisted the help of her gifted but neurotic lover, Richard Kahn, who served as a go-between with the great man.

  26.

  27. To the surprise and disapproval of his Bloomsbury friends, Keynes married the Russian ballerina Lydia Lopokova, a member of Sergei Diaghilev’s itinerant Ballets Russes. Her riotous sense of humor, fractured English, and lack of intellectual pretension made her the love of his life.

  28. Irving Fisher (left) and Joseph Schumpeter (right), shown in New Haven in 1932, embraced opposing prescriptions for how to fight the Great Depression but joined forces to promote the use of mathematics in economics.

  29. Months before D-Day, Franklin Delano Roosevelt called on the Allies to avoid the mistakes made after World War I by focusing on postwar economic recovery.

  30. Young Milton Friedman (with wife, Rose), one of the legions of young Keynesian supporters of the New Deal, played a key role in Secretary Henry Morgenthau’s wartime Treasury, which was, for all practical purposes, run by the brilliant but devious Harry Dexter White.

  31. Keynes (right) and White were the principal architects of the Bretton Woods monetary system that paved the way for postwar economic recovery in the West. A Soviet agent of influence and spy, White was taken by complete surprise when Stalin refused to join.

  32. Paul Anthony Samuelson was the most influential American Keynesian of the post–World War II era. With a world view shaped by the collapse of the farm belt, the Florida land bubble, and the Great Depression, he modernized economics with mathematics, Keynes’s theories, and numerous original ideas of his own. Postwar generations of Americans, including John F. Kennedy, imbibed the new economics through his textbook and Newsweek column, and he is regarded as the guiding spirit behind the 1963 Kennedy tax cut.

  33. In the 1950s, Joan Robinson, the most famous of Keynes’s English disciples, repudiated her brilliant early work and became one of Stalin and Mao’s trophy intellectuals. She was a harsh critic of American leadership in mainstream economics. She is shown here, partially hidden, in Beijing in July 1953 with Dr. Chi Chao-ting, Roland Berger, and Harold Spencer at the signing of the first “Icebreaker” trade deal.

  34. Robinson urged her protégé, Amartya Sen, who came to Trinity College, Cambridge, from Calcutta in 1953, to give up “that ethics rubbish.” Democracy and the people’s welfare were luxuries that poor countries could not afford, she insisted. Sen ignored her advice to work on famines, economic justice, and the problem of translating individual into social choices.

  35.

  Photo Credits

  Mary Evans Picture Library: 1, 2, 4, 10, 12

  Hulton Archive/Getty Images: 3

  Collection International Institute of Social History, Amsterdam: 5, 6

  Courtesy of the Marshall Library of Economics, University of Cambridge: 7, 8

  Courtesy of the Library of the London School of Economics and Political Science, reference number 00042: 9

  ©The National Portrait Gallery, London: 11, 21

  Manuscripts & Archives, Yale University: 13

  University of Albany, State University of New York: 14

  Harvard University Archives, call # HUGBS 276.90p (2): 15

  Mary Evans Picture Library / Thomas Cook Archive: 16

  Courtesy of Michael Nedo and The Wittgenstein Archive, Cambridge: 17, 18

  Mary Evans Picture Library / Robert Hunt Collection: 19

  Courtesy of the Austrian State Archives: 20

  “Photograph of Duncan Grant and Maynard Keynes at Asheham House in Sussex, the home of Leonard and Virginia Woolf”—Vanessa Bell ©Tate, London 2011: 22

  Keystone France/Gamma-Keystone/Getty Images: 23

  The Cambridgeshire Collection, Cambridge Central Library: 24

  Courtesy of Peter Lofts Photography: 25, 26

  E. O. Hoppe/Time & Life Pictures/Getty Images: 27

  Harvard University Archives, call # HUGBS 276.90p (43): 28

  Courtesy of the Franklin D. Roosevelt Presidential Library: 29

  Courtesy of Jan Martel: 30

  Courtesy of the International Monetary Fund: 31

  Courtesy MIT Museum: 32

  Courtesy of the 48 Group Club: 33

  Courtesy of the Cambridge-India Partnership: 34

  AP Photo/Richard Drew: 35

  About the Author

  SYLVIA NASAR is the author of the bestselling A Beautiful Mind, which won the National Book Critics Circle Award for biography. She was an economics correspondent for The New York Times and is the John S. and James L. Knight Professor of Business Journalism at the Columbia University Graduate School of Journalism. She lives in Tarrytown, New York.

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  Notes

  NOTES ON SOURCES

  In researching Grand Pursuit I consulted and read hundreds of inspiring and informative works of biography, history, and economics. But the following are the books on which I especially relied for facts, ideas, and understanding:

  Preface: Claire Tomalin, Jane Austen: A Life, (New York: Knopf, 1997); Gregory Clark, A Farewell to Alms: A Brief Economic History of Modern Britain (Princeton: Princeton University Press, 2009); Bradford DeLong, unpublished economic history of the twentieth century; Harold Perkin, The Origins of Modern British Society (London: Routledge, 1990); Angus Maddison, The World Economy: A Millennial Perspective (Paris: OECD Publishing, 2006) and The World Economy: Historical Statistics (Paris: OECD Publishing, 2006); Mark Blaug, Economic Theory in Retrospect (Cambridge: Cambridge University Press, 1983); T. W. Hutchison, A Review of Economic Doctrines 1870–1939 (London: Clarendon Press, 1966); W. W. Rostow, Theorists of Economic Growth from David Hume to the Present (Oxford: Oxford University Press, 1992); Niall Ferguson, Cash Nexus (New York: Basic Books, 2001).

  Act I Prologue: Kitson Clark, “Hunger and Politics in 1842” (Journal of Modern History, 24, no. 4 (December, 1953); James P. Henderson, “ ‘Political Economy Is a Mere Skeleton Unless . . .’ : What Can Social Economists Learn from Charles Dickens” (Review of Social Economy, 58, no. 2 (June, 2000); Michael Slater, Charles Dickens (New Haven: Yale University Press, 2009).

  Chapter I: David McLellan, Karl Marx: Interviews and Recollections (New York: Barnes & Noble, 1981); Gustav Mayer, Friedrich Engels: A Biography (Berlin: H. Fertig, 1969); Steve Marcus, Engels, Manchester and the Working Class (New York: Norton, 1974); Gertrude Himmelfarb, The Idea of Poverty: England in the Early Industrial Age (New York: Alfred A. Knopf, 1984) and Poverty and Compassion: The Moral Imagination of the Late Victorians (New York: Random House, 1991); David McLellan, Karl Marx: His Life and Thought (London: Macmillan, 1973); Isaiah Berlin, Karl Marx: His Life and Environment (London: Thornton Butterworth, 1939); Francis Wheen, Karl Marx: A Life (New York: W. W. Norton & Co., 1999); Dirk Struik, Birth of the Communist Manifesto (New York: International Publishers, 1986); Anne Humphereys, Travels into the Poor Man’s Country: The Work of Henry Mayhew (Athens: University of Georgia Press, 1977); Francis Sheppard, London 1808–1870: The Infernal Wen (London: Seeker and Warburg, 1971); Asa Briggs, Victorian Cities (Berkeley: University of California Press, 1993); Gareth Stedman Jones, Outcast London (London: Penguin Books, 1982).

  Chapter II: Mary Paley Marshall, What I Remember (Cambridge: Cambridge University Press, 1947); J. M. Keynes, “Alfred Marshall 1842–1924,” in Arthur Pigou, ed., Memorials of Alfred Marshall (London: MacMillan, 1925); Gertrude Himmelfarb, Poverty and Compassion: The Moral Imagination of the Late Victorians (New York: Alfred A. Knopf, 1991); Peter Groenewegen, A Soaring Eagle: Alfred Marshall 1842–1924 (London: E. Elgar, 1995); John Whitaker, Early Economic Writings of Alfred Marshall, Vols. 1–2 (London: The Royal Economic Society, 1975); John Whitaker, The Correspondence of Alfred Marshall, Vols. 1–3 (Cambridge: Cambridge University Press, 1996); Tizziano Raffaeli, Eugenio F. Biagini, Rita McWilliams Tullberg, eds., Alfred Marshall’s Lectures to Women: Some Economic Questions Directly Connected to the Welfare of the Laborer (Aldershott, UK: Edward Elgar Publishing Company, 1995).

  Chapter III: Barbara Caine, Destined to Be Wives: The Sisters of Beatrice Webb (Oxford: Clarendon Press, 1986); Carole Seymour Jones, Beatrice Webb: Woman of Conflict (Chicago: Ivan R. Dee, 1992); Royden Harrison, The Life and Times of Sidney and Beatrice Webb: The Formative Years, 1858–1903 (London: Palgrave, 1999): Kitty Muggeridge and Ruth Adam, Beatrice Webb: A Life, 1858–1943 (New York: Alfred A. Knopf, 1968); Margaret Cole, Beatrice Webb (New York: Harcourt Brace, 1946); Michael Holroyd, Bernard Shaw (London: Chatto and Windus, 1997); William Manchester, The Last Lion: Winston Spencer Churchill: Visions of Glory, 1874–1932 (New York: Little Brown, 1983); Gertrude Himmelfarb, Poverty and Compassion: The Moral Imagination of the Late Victorians (New York: Random House, 1991); Elie Halevy, A History of the English People in the Nineteenth Century, Vol. 6, The Rule of Democracy (1905–1914), (London: Ernest Benn Ltd., 1952); Jeanne and Norman MacKenzie, The Diary of Beatrice Webb, vols. 1–4 (London: Virago, 1984); Norman MacKenzie, The Letters of Sidney and Beatrice Webb, vols. 1–3 (Cambridge: Cambridge University Press, 2008).

  Chapter IV: Muriel Rukeyser, Willard Gibbs (New York: Doubleday, Doran and Co., 1942), William J. Barber, ed., The Works of Irving Fisher, vols. 1–17 (London: Pickering and Chatto, 1997); Irving Norton Fisher, My Father: Irving Fisher (New York: Comet Press, 1956); Muriel Rukeyser, Willard Gibbs: American Genius (New York: Doubleday, Doran and Co., 1942); Robert Loring Allen, Irving Fisher: A Biography (Cambridge: Blackwell Publishers, 1993); Richard Hofstadter, The Age of Reform: From Bryan to FDR and Social Darwinism in American Thought (New York: George Braziller, Inc., 1969); Jeremy Atack and Peter Passell, A New Economic View of American History (New York: W. W. Norton, 1994); Perry Mehrling, “Love and Death: The Wealth of Irving Fisher,” Research in the History of Economic Thought and Methodology, Warren J. Samuels and Jeff E. Biddle, eds. (Amsterdam: Elsevier Science, 2001; New York: Harcourt Brace Jovanovich, 1992), 47–61.

  Chapter V: Seymour Harris, Joseph Schumpeter: Social Scientist (Cambridge, Mass.: Harvard University Press, 1951); Wolfgang F. Stolper, Joseph Alois Schumpeter: The Public Life of a Private Man (Princeton: Princeton University Press, 1994); Robert Loring Allen, Opening Doors: The Life and Works of Joseph Schumpeter, vol. I (New Brunswick: Transaction Publishers, 1991); Richard Swedberg, Joseph A. Schumpeter: His Life and Work (Cambridge, UK: Polity Press, 1991); Thomas K. McCraw, Prophet of Innovation: Joseph Schumpeter and Creative Destruction (Cambridge, Mass.: Harvard University Press, 2007); Charles A. Gulik, Austria from Habsburg to Hitler, vol. I (Berkeley: University of California Press, 1948); David F. Good, The Economic Rise of the Hapsburg Empire 1750–1914 (Berkeley: University of California Press, 1990); Joseph Schumpeter, History of Economic Analysis (Cambridge, Mass.: Harvard University Press, 1954).

  Act II Prologue: Charles John Holmes, Self and Partners (Mostly Self): Being the Reminiscences of C. J. Holmes (London: Macmillan, 1936); Anne Emberton, “Keynes and the Degas Sale,” History Today, December 31, 1995; Ray Monk, Ludwig Wittgenstein: The Duty of Genius (New York: Penguin Books, 1991); Ray Monk, Bertrand Russell: The Spirit of Solitude 1872–1921, vol. I (New York: Simon & Schuster, 1996); Hugh Mellor, Frank Ramsey: Better Than the Stars (London: BBC, 1994); Henry Andrews Cotton, with a Foreword by Adolf Meyer, The Defective, Delinquent and Insane: The Relation of Focal Infections to Their Causation, Treatment and Prevention, Lectures delivered at Princeton University, January 11, 13, 14, 15, 1921 (Princeton: Princeton University Press, 1922).

  Chapter VI: Eduard Marz, Joseph A. Schumpeter: Forscher, Lehrer und Politiker, Munchen: R. Oldenbourg, 1983); Eduard Marz, “Joseph Schumpeter as Minister of Finance in X Helmut Frisch, in Schumpeterian Economics (New York: Praeger, 1981); F. L. Carsten, The First Austrian Republic (Aldershot, UK: Wildwood House, 1986); F. L. Carsten, Revolution in Central Europe: 1918–1919, Aldershot, UK: Wildwood House, 1988); David Fales Strong, Austria (October 1918–March 1919) (New York: CUP, 1939); Norbert Schausberger, Der Griff nach Oesterreich: Der Anschluss (Wien, Muenchen: Jugend und Volk, 1988); Otto Bauer, The Austrian Revolution, (London: Parsons, 1925); Eduard Marz, Austrian Banking and Financial Policy: Creditanstalt at a Turning Point, 1913–1923 (New York: St. Martin’s Press, 1984); Christ
ine Klusacek and Kurt Stimmer, Dokumentation zur Oesterreichische Zeitgeschichte 1918–1928 (Wien und Muenchen: Jugend und Volk, 1984); Joseph A. Schumpeter, Aufsatze zur Wirtschaftspolitik, Wolfgang F. Stolper and Christian Seidl, eds. (Tuebingen: JCB Mohr, 1985); Joseph A. Schumpeter, Politische Reden, Seidl and Stolper, eds. (Tubingen: JCB Mohr, 1992).

  Chapter VII: D. E. Moggridge, ed., The Collected Writings of John Maynard Keynes, vols. 1–30 (London: Macmillan, 1971–1989); Paul Mantoux, The Carthaginian Peace or The Economic Consequences of Mr. Keynes (Oxford: Oxford University Press, 1946); Robert Skidelsky, John Maynard Keynes, Vol. 1, Hopes Betrayed (New York: Viking, 1986); Donald E. Moggridge, Maynard Keynes: An Economist’s Biography (London: Routledge, 2009); Margaret MacMillan, Paris 1919: Six Months That Changed the World (New York: Random House, 2002).

  Chapter VIII: Peter Gay, Freud: A Life of Our Time (New York: W. W. Norton, 1988); F. L. Carsten, The First Austrian Republic (Aldershot: Wildwood House, 1986); Otto Bauer, The Austrian Revolution (London: Parsons, 1925); Eduard Marz, Austrian Banking and Financial Policy: Creditanstalt at a Turning Point, 1913–1923 (New York: St. Martin’s Press, 1984).