Economics

&
The Economists

Robert M. Hayes
2005

Overview

Why should a library manager think about economics?

Why look at economists?
What is economics?
Brief review of history
The contexts for economics

Personal Economics
Microeconomics
Macroeconomics

The economists

Crucial persons before the Nobel Prize

Nobel Prize Winners

Why think about economics?

Economics is both a powerful tool and a basis for political decisions. The
theories and conflicts that it embodies are central to what is happening today
and to what has happened in the past and will happen in the future.
I think that a library manager needs to have an appreciation of those theories
and conflicts, especially in order to deal with the issues involved in strategic
management. This appreciation does not require expertise in economics but it
does require knowledge of what the theories and conflicts are and, perhaps
even more important, of what the methodologies used to deal with them are.
It is for this reason that I have included economic models among the ones
presented in this course.
Beyond that, though, I think that in addition to the values in simply
understanding what the methodologies are, the library manager may well find
them of value in management.
As I discuss various economic issues, I will try to highlight some of their
implications for libraries and library management.

Why talk about economists?

I think that one of the ways to learn about the theories, conflicts,
and methodologies is to know who the economists were and how
they have represented them. At the least, it permits one to deal with
them on a personal level rather than merely a conceptual one.
Therefore, later in this presentation, I am going to identify a
number of economists, as well as others that seem to me important,
and, briefly, to discuss major contributions they have made to the
theory, in many cases, to the conflicts, and in all cases to the
methodologies.
In doing so, I am going to divide them into two groups. First are
those who lived before the Nobel Prize for Economics began to be
awarded. Second are those to whom the Nobel Prize in Economics
has been awarded (through 2004, the most recent award).

What is economics?
First, lets look at economics. What is it?
To answer that question, I will first briefly review the history of
economics. Then, describe the contexts for economics , the major
concerns of economics, and finally the major schools of thought
about those concerns.

Brief Review of the History of Economics

The discipline of economics, as we understand it today, emerged in the 17th and 18th
centuries as the western world began its transformation from an agrarian to an
industrial society.
Despite the enormous differences between then and now, the economic problems with
which society struggles remain the same:

How do we decide what to produce with limited resources?

How do we ensure stable prices and full employment of resources?
How do we provide a rising standard of living today and in the future?

Progress in economic thought toward answers to these questions tends to take

discrete steps rather than to evolve smoothly over time. A new school of ideas
suddenly emerges as changes in the economy yield fresh insights and make existing
doctrines obsolete or at least obsolescent. The new school may eventually become a
consensus view, then a stimulus for the next wave of new ideas.
This process continues today and its motivating force remains the same as that three
centuries ago: to understand the economy so that we may use it wisely to achieve
society's goals.

Selected Historical Economic Positions

Mercantilism
Physiocrats
Classicism
Utilitarianism
Marginalism
Marxism
Institutionalism
Keynesianism
Current Theories

Mercantilists
Mercantilism was the economic philosophy adopted by merchants
and statesmen during the 16th and 17th centuries. Mercantilists
believed that a nation's wealth came primarily from the
accumulation of gold and silver. Nations without mines could
obtain gold and silver only by selling more goods than they bought
from abroad. Accordingly, the leaders of those nations intervened
extensively in the market, imposing tariffs on foreign goods to
restrict import trade, and granting subsidies to improve export
prospects for domestic goods. Mercantilism represented the
elevation of commercial interests to the level of national policy.

Physiocrats
Physiocrats, a group of 18th century French philosophers,
developed the idea of the economy as a circular flow of income and
output. They opposed the Mercantilist policy of promoting trade
at the expense of agriculture because they believed that
agriculture was the sole source of wealth in an economy. As a
reaction against the Mercantilists' copious trade regulations, the
Physiocrats advocated a policy of laissez-faire, which called for
minimal government interference in the economy.

Classical Economics
The Classical School of economic theory began with Adam Smiths work,
The Wealth of Nations. In Smith's view, the ideal economy is based on a
self-regulating market system. He described it as an "invisible hand" that,
if each individual pursues self-interest, results in producing the greatest
benefit for society as a whole. Smith incorporated some of the
Physiocrats' ideas, including laissez-faire, into his own economic theories,
but rejected the idea that only agriculture was productive.
While Adam Smith emphasized the production of income, David Ricardo
focused on the distribution of income among landowners, workers, and
capitalists.
Thomas Robert Malthus used the idea of diminishing returns to explain
low living standards. Population, he argued, tended to increase
geometrically, outstripping the production of food, which increased only
arithmetically.

Utilitarianism
Coming at the end of the Classical tradition, John Stuart Mill
parted company with the classical economists on the inevitability
of the distribution of income produced by the market system. Mill
pointed to a distinct difference between the market's two roles:
allocation of resources and distribution of income. The market
might be efficient in allocating resources but not in distributing
income, he wrote, making it necessary for society to intervene.

Marginalism
Classical economists theorized that prices are determined by the costs of
production. Marginalist economists emphasized that prices also depend
upon the level of demand, which in turn depends upon the amount of
consumer satisfaction provided by individual goods and services.
Marginalists provided modern macroeconomics with the basic analytic
tools of supply and demand, consumer utility, and a mathematical
framework for using those tools. Marginalists also showed that in a free
market economy, factors of production - land, labor, and capital - receive
returns equal to their contributions to production. This principle was
sometimes used to justify the existing distribution of income: that people
earned exactly what they or their property contributed to production.

Marxism
The Marxist School challenged the foundations of Classical theory.
Writing during the mid-19th century, Karl Marx saw capitalism as an
evolutionary phase in economic development. He believed that capitalism
would ultimately be succeeded by a world without private property.
Advocating a labor theory of value, Marx believed that all production
belongs to labor because workers produce all value within society. He
believed that the market system allows capitalists, the owners of
machinery and factories, to exploit workers by denying them a fair share
of what they produce.
Marx predicted that capitalism would result in growing misery for
workers as the effort of capitalists to maximize profit would lead them to
adopt labor-saving machinery, creating an "army of the unemployed"
who would eventually rise up and seize the means of production.

Institutionalism
Institutionalist economists regard individual economic behavior as
part of a larger social pattern influenced by current ways of living
and modes of thought. They rejected the narrow Classical view
that people are primarily motivated by economic self-interest.
Opposing the laissez-faire attitude towards government's role in
the economy, the Institutionalists called for government controls
and social reform to bring about a more equal distribution of
income.

Keynesianism
Reacting to the severity of the worldwide depression of the 1930s, John Maynard
Keynes in 1936 broke from the Classical tradition with the publication of the
General Theory of Employment, Interest, and Money. The Classical view assumed
that in a recession, wages and prices would decline to restore full employment.
Keynes held that the opposite was true. Falling prices and wages, by depressing
people's incomes, would prevent a revival of spending. He insisted that direct
government intervention was necessary to increase total spending.
Keynes' arguments provided a rationale for the use of government spending and
taxing to stabilize the economy. Government would spend and decrease taxes
when private spending was insufficient and threatened a recession; it would
reduce spending and increase taxes when private spending was too great and
threatened inflation. His analytic framework, focusing on the factors that
determine total spending, remains at the core of modern macroeconomic
analysis.

Current Theories
Keynesian theory, with its emphasis on activist government policies to promote
high employment, dominated economic policymaking in the early post-war
period. But, economic theories are constantly changing, and starting in the late
1960s, troubling inflation and lagging productivity prodded economists to look
for new approaches. From this search, new theories emerged:
Monetarism, which updates macroeconomic analysis before Keynes. It
reemphasizes the critical role of monetary growth in determining inflation.
Rational Expectations Theory provides a contemporary rationale for the
pre-Keynesian tradition of limited government involvement in the economy.
It argues that the market's ability to anticipate government policy actions
limits the effectiveness of government intervention.
Supply-side Economics recalls the Classical School's concern with economic
growth as a fundamental prerequisite for improving society's material wellbeing. It emphasizes the need for incentives to save and invest if the nation's
economy is to grow.

Future Theories
It seems to me that we are now in an economic context in which the change is
at least as dramatic as that involved in the addition of an industrial economy
to the agricultural economy during the 19 th century. Of course, it is the
addition of an information economy to the industrial and agricultural
economies.
This implies to me that there will need to be new economic theories that
recognize new facts of life.
Now, the agricultural and industrial economies obviously will continue to
function, as did the agricultural when the industrial revolution occurred. But
the agricultural economy changed in very important ways as it was affected
by the industrial revolution. And, in the same way, there should be changes in
both the agricultural and industrial economies as they are impacted by the
information revolution.
Since libraries are a significant component of the information sector of the
economy, their role in the information revolution, and in the economic
theories to deal with it, must be understood.

The Contexts for Economics

There are three major contexts for economics:
(1) Personal economics (economics of the person and family)
(2) Microeconomics (economics of the firm)
(3) Macroeconomics (economics of the society)
Strangely, as far as I can see, most economists pay relatively little attention,
in either theory, practice, or position to the economics of the person and the
family.
So the major foci of the interests of economists are on micro and
macroeconomics. I suppose that is to be expected, since those are the
contexts in which reward and power reside.
The library functions as a counterpart of the individual firm, so the issues in
microeconomics apply to it. The library community, as a whole, is a
significant part of the information sector of the economy. Therefore, the
issues of macroeconomics apply to that community.

(1) Personal Economics

As I said, most economists, in the past, have paid little attention to
the economics of the individual and the household.
Having said that, recently there has begun to be recognition of the
importance of the individual. The Nobel Prize in Economics for
2002 was awarded to Daniel Kahneman and Vernon L. Smith for
experimental investigations of individual decision-making.

(2) Microeconomics
Microeconomics, or the economics of the firm, is concerned with
the balance between costs and income, especially as determined by
the interactions in the marketplace. The costs arise from labor,
materials, and investment in and return on capital. The income
derives from the customers, based on the prices charged and
payments received from the sale of products and services.
In arriving at that balance, the individual firm faces not only the
forces of the marketplace but those of competition as well. It must
therefore deal with changing costs and demands and changing
competitive environments.
Thus, in micro-economics, we are concerned with

The Marketplace, as the context for selling and buying

The Individual Firm, its product or service production and costs
The Customers, their Demands and the Income from sales to them

The Marketplace
What is the Marketplace? In this context, it is the place for meeting together
of people for the purchase and sale of goods, publicly exposed, at a fixed time
and place. (OED definition 1 for Market)
It must be said, though, that a marketplace usually is much more than that
and, indeed, is a social institution, a forum in which more than merely
economic activities occur.
Having said that, we will now focus on the economic role of the marketplace.
Before doing so, though, I think it is important to recognize a possible
confusion in terminology. Economists and businessmen, but especially the
latter, both use the term market in two quite different ways. One is to refer
to what I have called the marketplace and the other is to refer to the customers
(i.e., the market) for a product of service.
I will try to avoid the possible confusion by identifying the word market
with marketplace and refer to the customers as customers.

When is openness important?

Markets need to be open when:
trust is required in an exchange
products are not standardized and need inspection
there are information asymmetries between buyer and seller
guarantees are difficult to obtain
Markets can be anonymous when:
trust is not necessary
products are standardized and do not need inspection
information is symmetric
guarantees are secure
It is of more than passing interest to note that the recent advent of three things
the Internet, the explosion of derivatives, and the consequent growth of hedge
funds is changing the very nature of the marketplace. In both of the latter two
contexts but to a major extent in the first as well, it is increasingly NOT publicly
exposed but rather is becoming hidden.

Management of a Marketplace
There is, to some degree, the perception that a marketplace functions without
management. Adam Smith referred to it as the invisible hand as though the
processes occur almost without intervention.
The facts, though, are that marketplaces must be managed.
One need is to manage the process of agreement on the terms of exchange,
that is, to manage the individual transaction.
Price must be agree on.
Product or service specification must be agreed on.
Terms of delivery must be agreed on.
But the other is to provide oversight on processes and transactions
To ensure legality of trade
To enforce standards and regulations
To assure fair trading
To determine effects on third parties (called externalities)

Economic Properties of Markets

In economic terms, a market is intended to assure that resources are
allocated to the most profitable use and that the right amount of any
product or service is produced.
There is said to be market failure when that objective is not met.
When a marketplace for a product or service does not exist, it cannot
function.
When events are very dynamic, markets may not respond properly.
When there is asymmetric information, markets are likely not to
function properly.
When the externalities to transactions are significant and substantial,
markets will not be effective.
When there are significant returns to scale, markets may not be
effective.
When a resource is controlled by a monopoly, markets do not allocate
resources efficiently

Asymmetric Information
Asymmetric information arises when the seller and the buyer have
different information related to the transaction.
Typically, the seller knows more about the good (and its defects)
than the buyer
Buyers cannot easily distinguish reliable goods from faulty goods
The result of asymmetric information is that the decisions by the
buyer and seller will not lead to the best result, for one or the other
and therefore for the effectiveness of the market.
In the case of the library, there are usually significant asymmetries
between the knowledge of the library and its staff and that of the user.
But, interestingly enough, this has been one of the strengths of the
relationship between the library and its users, not a deficiency. And
this is an issue worth pursuing!

Externalities
Externalities arise when there are effects of a transaction upon
others not involved in it. Those effects might be negative (e.g.
pollution) or they might be positive (e.g., R&D spillovers).
With negative externalities, the effect of the market is that too
much may be produced.
With positive externalities, the effect of the market is that too little
may be produced.
For the library, there would appear to be many externalities, with
benefits from its existence and use arising in many ways. This is an
issue well worth exploring!

Increasing Returns
Increasing returns to scale (what are called economies of scale)
are in principle a good thing, since they improve the efficiency in
use of fixed resources.
But increasing returns to scale are inconsistent with perfect
competition and therefore lead to market failure.
Either small firms fail to exploit increasing returns
Or increasing returns tends to lead to monopoly
For the library, the issue of whether there are economies of scale
has been investigated, but the results to date have been at best
equivocal.

Production and its Costs

I turn now to the individual firm, its products and/or services and, in
particular, to the costs associated with them. (For the economist, the
nature of the particular product or service is almost immaterial.)

Sources of Cost
Opportunity Cost vs. Purchase Cost
Fixed Cost vs. Sunk Cost
Total Cost (i.e., fixed cost plus variable cost)
Unit Cost
Marginal Cost vs. Average Cost

Sources of Cost
There are three sources of cost:

Labor
Capital, as the investment in the tools of production
Materials that must be acquired for the substance of production

Usually, economists have focused on the relationship between the first

two of those sources of cost and have created production models
that are intended to represent that relationship. The most basic and,
in many respects, simplest of them is the Cobb-Douglas Model.
I have, in the past, applied the Cobb-Douglas Model to libraries and,
in doing so, identified technical processing as part of the capital
investment (along with the collection and the facilities), with library
services as the labor in production of products and services.

The Role of Labor

Labor has several roles to play in the operations of the firm:
The work of production.
The marketing or selling of the production.
The distribution or delivery of the product or service.
The management of the other workers.
For whatever reasons, the wages for these several roles tend to be quite different,
usually with the managers receiving substantially more than the others. And
perhaps that is warranted since the advancement to management should reflect
greater knowledge, skills, and abilities to make decisions.
Increasingly, the roles of labor are becoming mechanized, even those in
management, with robots and computers carrying ever greater proportions of
the work involved. This raises the issue of what people will do as they are
replaced by machines. This first arose in industry, during the 19 th century, but it
still looms today.
For the library, many aspects of operations have been and are being supported
by the use of computers, so the issue is relevant,

The Role of Capital

Capital is the investment in the tools that support production, indeed
including those that directly replace labor. By use of those tools, the
individual worker can produce far more than would be possible without
them. Indeed, in many cases, it would be impossible to produce without
them.
For an individual firm, a management decision must be made between
what is called in-house investment in capital versus out-source
investment. Namely, is the acquisition of the tools of production
accomplished within the firm or by purchase of them from outside the
firm?
In the case of the library, is technical processing (selection, acquisition,
processing, and cataloging) done by library staff or by contract to
external providers of those services? This is not a hypothetical or
rhetorical question!

Two Meanings of Capital

There is the potential for confusion in the uses of the word capital. One use
is to refer to the investment in the tools of production; the other is to refer to
the money which represents that investment.
In this presentation, I am limiting it to the former meaning. Therefore, while
one may have money to invest, it does not become capital until that money
is invested in tools of production.
In particular, the money could be spent on many things: on labor, on personal
expenditures, on wasted dissipation. Thus, money in itself is not capital but
simply the ability to spend.
Of course, having said that, the money could be invested in a variety of ways
that will provide income. In doing so, presumably the place of investment will
use the money for its own purposes, which might include investment in
capital, but it might be for other uses.
For the library, this distinction is relevant when there are funds, such as those
derived from a development program, that may be invested, perhaps as an
endowment.

The Role of Materials

For the production of physical goods, there almost always is the
need to acquire raw materials which constitute the substance of
the products. Again, as with capital investment, this can be done
in-house or out-source, but for most physical products, it will be
by out-source. It would only be the largest of firms that would own
its own iron mines and steel mills in order to produce automobiles.
But even for the production of non-physical, intangible goods and
services, there may be the need for raw materials.
In the case of the library, the collection, represents capital, of
course, so it is not raw materials in this sense. However, photocopy
paper and toner might be an example of raw materials.

Opportunity Cost vs. Purchase Cost

The purchase cost for a resource is the amount of money or other
resources required to use the resource.
Opportunity cost of a resource is the revenue foregone by using
money or other resources to acquire the given resource for a
particular purpose rather than using them for an alternative.
For under-employed resources, opportunity cost can be quite low.
But for scarce or heavily used resources, opportunity cost can be
very high.
In the case of the library, choices between collection development
and provision of services, between acquiring books or journals,
between acquiring print materials or electronic access are each an
example of opportunity cost vs. purchase cost.

Fixed Cost vs. Variable Cost

Fixed cost is the cost that has to be incurred before any production can take
place. It is likely to be represented by capital investment in the tools of
production. It may be represented by infrastructure of the firm, including its
management. It is here that risk capital is so significant. And return on that
risk capital investment surely is necessary if that investment is to be made.
In the case of the library, at any given time the cost of the collection and of
the facilities is essentially a fixed cost, not something that is a function of the
amount of use made.
Variable costs are the costs incurred as a function of the amount of
production. It is likely to be represented by the labor costs in production of
the product or service.
In the case of the library, the variable costs are indeed a function of the
amount of service provided. They arise from circulation, or use, of the
collection and from reference services provided to the users, and from other
types of services (such as photocopy and bibliographic instruction).

Fixed Cost and Scale of Operations

It should be noted that there is an underlying relationship between
the magnitude of fixed costs and the scale of operations. It reflects
the maximum capacity of given fixed costs to handle the workload.
Therefore, one should consider the fixed costs as fixed for an
identified maximum scale of operations. If that maximum is
exceeded, the fixed costs will increase.
In the case of the library, this is well exhibited by the fixed costs in
buildings and facilities. They have a limited capacity in terms of the
size of collection that can be stored and the number of users that
can be accommodated. If the scale of operations grows, either in the
capital investment in the collection or in the number of users to be
served, there will need to be additional fixed costs in the
buildings and facilities needed to accommodate them.

Fixed Cost vs. Sunk Cost

Sunk cost is a fixed cost that cannot subsequently be recovered (e.g. on
closure of the firm or in sales of assets for any other reason). Fixed costs
other than sunk costs may be recoverable.
Entrants to a market have to meet fixed costs.
Those firms that exit a market will forfeit sunk costs, but not other fixed
costs.
In the case of a library, the distinction may be irrelevant, unless the library
decides to cease all or some portion of its operation. In such a case, there
would be the need to determine what capital investment could be
recovered. Presumably the portion of the collection involved might have
market value (in some cases even exceeding the purchase costs). The
investments in selection, acquisition, processing, and cataloging though,
are likely not to be (although the sale price for the collection might include
some recognition of those investments). Buildings and facilities may be
saleable.

Total Costs
Total costs of production are the sum of fixed and variable costs. If
T = Total Cost, F = Fixed Costs and V = Variable Costs, then: TC
= FC + VC
Fixed costs have to be incurred whatever the scale of production.
They are taken as constant within a pre-determined maximum
scale of operation. It should again be noted that there will be
dependence of the magnitude of fixed costs on the maximum scale
of operation they can handle.
Variable costs depend on the volume of production, the actual
scale of operation.

Unit Costs
In economics, there are two measures of unit cost:
Marginal cost is the additional cost of producing the next unit
given that the company has already produced a number of units
Average cost is the total cost for producing n units divided by n.
That is, A = T/n
If there are large fixed costs, then marginal cost will usually fall
below average cost.

Economies of Scale
Economies of Scale arise when the average cost declines as the scale of
production increases.
This will usually be the case when there are large fixed costs, since those
fixed costs will be divided among a larger number of units. It will sometimes
be the case when the learning curve results in increased efficiency.
This will usually NOT be the case when the variable costs increase as the
number of units increase. This can arise, in particular, when production
consumes a scarce resource or results in decreased efficiency.
In principle, one would expect a library to have substantial economies of
scale, given the usually large capital investment in collection, building, and
facilities. There have been studies made to examine whether that indeed is
the case, but the results were at best equivocal.

Customers, Demands, and Income

Lets now turn to the other side of the economic balance, the
customer as the recipient of the production and the source of
income to balance the costs incurred in production.
Who are the customers?
What are their needs?
What are they willing to pay?

The Range of Customers

In most industries, there are three groups of customers:

Individuals (persons and households)

Other firms
Government

For many industries, these groups may be either or both national

and international.
For the library, the first two of these groups are clearly present,
the second being represented by inter-library loan. For public
libraries, there is likely to be a significant level of use by
government. For archives, as a closely allied activity, government
may well be the primary customers.

What are their needs or demands?

Here I will not try to generalize the issues, but instead I will focus on the needs
or demands of the users of the library.
It would appear, on the surface of it, that the most basic of them is the access to
the books, journals, and other materials that are the major capital investment
of the library. Beyond that is access to the services that the library staff and
facilities provide.
And for many if not most libraries, those are probably the only needs that must
be met.
But I think that underlying those needs is a more fundamental one. It is the
need to assure that access to the information materials is possible. To meet this
need means that at least some library must preserve the record, really
independent of whether there is an evident, immediate need for it or customer
for it.
It is here that the library becomes not so much a means for meeting the needs of
the individual user as for meeting the needs of society. It is this that makes the
library an institution of public policy.

What are they willing to pay?

Here again, I will not try to deal with the general economic picture of the
willingness of customers to pay, but instead will focus on the library.
Most libraries do not function on the payments by individual users (except for
specific services, such as photocopying), but rather on funding by the society
or institution to which the users belong.
The willingness to pay is therefore a societal or institutional issue. And it
probably must be dealt with as a political process rather than a strictly
economic process.
In most institutions, the library is treated as a part of overhead expense. In
some companies, though, it is treated as a cost center or even profit center,
and in such cases effectively the users do pay for the librarys services.
Of most interest, though, there are situations in which the library is regarded
as part of the institutions own capital investment, as one of its tools for
production. This is clearly the case with an academic library and especially so
for a research library.

(3) Macroeconomics
Macroeconomics tries to answer questions like the following:
Why do prices change from one time period to another?
Why does national employment vary from year to year?
Why does average income vary among countries?
The role of macroeconomics is to help in the following areas:
Establishing social policy and making social choices
Measuring national income
Determining national fiscal policy
Managing money and banking
Dealing with inflation, unemployment, and economic growth
Fitting a country into the world economy
The tools of macroeconomics are valuable to library management in
Fitting libraries into the national economy
Determining the level of resources appropriate for libraries
Guiding social and institutional policies with respect to libraries

Measuring National Income

Gross domestic product (GDP) is a measure of the income and the
expenditures of an economy. It is the total market value of all final
goods and services produced within a country in a given period of time.
Note that it measures only the final products, not intermediate ones,
and that it includes both good and services.
For an economy as a whole, income must equal expenditure:

Every transaction has a buyer and a seller.

Every dollar spent by a buyer is a dollar of income for a seller.

The flow and essential equality of income and expenditure can be

illustrated by the following diagram.
In this diagram, I have highlighted, in blue, the flow of taxes, from
households and firms to government. And I have highlighted in red the
flow of wages, rents, and profits from governments and firm to income
to households.

Markets for Goods and Services

Markets for Factors of Production

Output from
Markets
Receive
goods/services

Input to
Markets
Provide Labor,
Money, Land
Pay taxes

Output from
Markets
Receive income

Individuals,
Households

Input to
Markets
Order, pay for
goods/services
Pay taxes

Receive
revenue
Receive
goods/services

Provide factors of
production
Order, pay for
factors of production
Pay income for
wages, rents, profit
Pay taxes

Receive revenue

Firms

Provide goods
and services
Order, pay for
goods/services

Receive taxes
and fees
Receive
goods/services

Provide
infrastructure
Order, pay for
factors of production
Pay income for
wages, rents

Receive taxes
and fees
Receive factors
of production

Pay taxes

Governments

Provide
infrastructure
Order, pay for
goods/services

Receive factors
of production

The Input-Output Matrix

The flow of transactions represented by this chart and especially
those involved in the firm to firm transactions, is quantitatively
described by what is called the input-output matrix of the
national economy.
Of course, the national input-output matrix does not show the
individual firm-to-firm transactions but instead accumulates them
by industry groups. It therefore shows the purchases by each
industry group from each industry group.
It also shows the total sales by each industry to governments and
to the groups of individuals and households, called end users.
Finally it shows the purchases and sales for each industry that
involved sources and customers, of whatever kind, outside the
country.

Libraries in the Macroeconomy

So what does the macroeconomy mean for libraries? Or, perhaps
more to the point, what do libraries mean for the macroeconomy?
To me, the key point is the role of the information sector in the
macroeconomy and, therefore of the library as a component of the
information sector.

Economists
It needs to be recognized that economic positions and theories are not like
those about the physical and biological world. The things they deal with
reflect the decisions of people, not the laws of the world, which presumably
are independent of what people do.
The positions and theories are the result of the work of individuals, called
economists. They have brought to the process of creating those positions
and theories their own views of what is right and what should be social
policies., governing what people do.
It is therefore essential to understand who these persons were and what
their positions were.
I will review a selected set of economists in two groups

Those who lived before the Nobel Prize for Economics

Those who have been awarded the Nobel Prize for Economics

In addition, I will review a selected set of non-economists who have, in one

way or another, influenced those economists.

Economists before the Nobel Prize

PRIVATE VALUE ORIENTED
Adam Smith
Thomas Malthus
David Ricardo
Alfred Marshall
Vilfredo Pareto
John A. Hobson

1723-1790
1766-1834
1772-1823
1842-1924
1848-1923
1858-1940

PUBLIC VALUE ORIENTED

Jeremy Bentham
John Stuart Mill
Karl Marx
Henry George
Thorstein Veblen
John Maynard Keynes

1748-1832
1806-1873
1818-1883
1839-1897
1857-1929
1883-1946

METHODOLOGY ORIENTED
Leon Walras
Francis Edgeworth
Irving Fisher
Joseph Schumpeter
John von Neumann

1834-1910
1845-1926
1867-1947
1883-1950
1903-1957

Note that I have listed these persons in three groups:

Private Value Oriented
Public Value Oriented
Methodology Oriented
These represent what I think are the three major approaches to economic
practice, analysis, and theory. Of course, each of the persons, to one degree or
another, falls into each group. The assignment made here simply reflect my own
idiosyncratic view of the major emphasis of each of their objectives.

Private-Value Oriented
The next six displays present the economists that I identify as
private-value oriented.
Please recognize that each of the economists will be concerned
with both public and private values, as well as methodology, so
this assignment simply represents my own interpretation of the
primary focus.

Adam Smith (17231790)

Adam Smith was a Scottish social philosopher and political economist
best known for An Inquiry into the nature and causes of the Wealth of
Nations (1776), the first major work of laissez-faire economics. It covered
such concepts as the role of self-interest, the division of labor, the
function of markets, and the international implications of a laissez-faire
economy. Wealth of Nations established economics as an autonomous
subject and launched the economic doctrine of free enterprise.
Smith laid the intellectual framework that explained the free market and
still holds true today. He is often accredited with the expression "the
invisible hand," which he used to demonstrate how self-interest guides
the most efficient use of resources in a nation's economy, with public
welfare coming as a by-product. To underscore his laissez-faire
convictions, Smith argued that state and personal efforts, to promote
social good are ineffectual compared to unbridled market forces.

Thomas Robert Malthus (1766-1834)

In 1798 Malthus published An Essay on the Principle of Population
as it affects the Future Improvement of Society, with Remarks on the
Speculations of Mr. Godwin, M. Condorcet, and other Writers. It
argued that human hopes for continued social happiness must be
vain, for population will always tend to outrun the growth of
production. The increase of population will take place, if
unchecked, in a geometrical progression, while the means of
subsistence will increase in only an arithmetical progression.
Population will always expand to the limit of subsistence and will
be held there only by famine, war, and ill health.

David Ricardo (1772-1823)

Ricardo published Principles of Political Economy and Taxation (1817). He
was an English economist who systematized the rising science of economics
in the 19th century. In his Iron Law of Wages he argued that attempts to
improve the real income of workers were futile since an increase in income
of workers results in more children and a larger workforce, and employers
then will lower wages as the working population grows exponentially.
Ricardo postulated the concept of comparative advantage which argues
that a country gains from specializing in what it does best and trading with
other nations. As a result, he was an opponent of protectionism for national
economies, believing that protectionism led towards economic stagnation.
Comparative advantage forms the basis of modern trade theory.
Ricardo, for much the same reasons. also opposed the "corn laws which
were intended to protect British landowners from foreign competition by
guaranteeing them a high price for their produce.

Alfred Marshall (1842-1924)

Marshall was one of the chief founders of the school of English neoclassical
economics. His magnum opus, Principles of Economics (1890), was his most
important contribution to economic literature. It was distinguished by the
introduction of a number of new concepts, such as elasticity of demand,
consumer's surplus, quasi-rent, and the representative firm, all of which
played a major role in the subsequent development of economics. His
Industry and Trade (1919) was a study of industrial organization; Money,
Credit and Commerce was published in 1923. Writing at a time when the
economic world was deeply divided on the theory of value, Marshall
succeeded, largely by introducing the element of time as a factor in
analysis, in reconciling the classical cost-of-production principle with the
marginal-utility principle formulated by William Jevons and the Austrian
school. Marshall is often considered to have been in the line of descent of
the great English economistsAdam Smith, David Ricardo, and J.S. Mill.

Vilfredo Pareto (1848-1923)

Vilfredo Pareto (1848-1923) was an Italian sociologist and economist. His first
work, Cours d'conomie Politique (189697), included his famous law of
income distribution, a complicated mathematical formulation in which Pareto
attempted to prove that the distribution of incomes and wealth in society is
not random and that a consistent pattern appears throughout history
He laid the foundation of modern welfare economics with the concept of the
Pareto optimum, which states that the optimum allocation of the resources of
a society is not attained so long as it is possible to make at least one individual
better off in his own estimation while keeping others as well off as before in
their own estimation.
A key point about a Pareto optimum is that it essentially preserves the status
quo for those who have.
In social choice, Pareto efficient is: If alternative X is preferred to alternative
Y by every individual, then the social ordering should also prefer X to Y.

John A. Hobson (1858-1940)

John A. Hobson was an English historian and journalist with an
interest in economics. He wrote one the most famous critiques of
the economic bases of imperialism in 1902. Although his lack of
understanding of markets and marginal analysis led to his being
ostracized by his contemporary academic economics circles, his
thoughtful critique of the justifications of imperialism and his
work taking the topic back to first principles stands today as an
example of respect for all peoples throughout the world. He was a
member of the Fabian Society, and although he wrote for several
socialist journals, he was an independent thinker who argued that
capitalist goals had been perverted by special interests and
misdirected governments.

Public-Value Oriented
The next six displays present the economists that I identify as
public-value oriented.
Please recognize that each of the economists will be concerned
with both public and private values, as well as methodology, so
this assignment simply represents my own interpretation of the
primary focus.

Jeremy Bentham (1748-1832)

English philosopher, economist, and theoretical jurist, the earliest and
chief expounder of Utilitarianism. He distinguished between maximizing
individual utility and aggregate utility as the basis of social organization.
He related happiness to the means to obtain it, so the wealthier a person is
the greater happiness he can attain.
The critical question for Bentham was whether unhindered pursuit of
individual happiness could be reconciled with morality. He believed that
morality required that actions be judged on the basis of how their
outcomes affect general utility in a society.
But what is general utility in a society? Bentham argued that it was the
sum total of individual utilities of all members of a society. He
emphasized the need for equal weights in this summation, so no person's
utility should count more than another's.

John Stuart Mill (1806-1873)

English philosopher, economist, and exponent of Utilitarianism. He was
prominent as a publicist in the reforming age of the 19th century, and
remains of lasting interest as a logician and an ethical theorist.
First, Mill argued that society's utility would be maximized if each person
was free to make his or her own choices. Second, Mill believed that
freedom was required for each person's development as a whole person.
In his famous essay On Liberty, Mill enunciated the principle that "the
sole end for which mankind are warranted, individually or collectively, in
interfering with the liberty of action of any of their number, is selfprotection." He wrote that we should be "without impediment from our
fellow-creatures, so long as what we do does not harm them, even though
they should think our conduct foolish, perverse, or wrong."
Mill was not an advocate of economic laissez-faire. He favored inheritance
taxation, trade protectionism, and regulation of hours of work of labor.

Karl Marx (1818-1883)

Marx, of course, is the revolutionary economist. He published
(with Friedrich Engels) The Communist Manifesto, the most
celebrated pamphlet in the history of the socialist movement. He
also was the author of the movement's most important book, Das
Kapital. These writings and others by Marx and Engels form the
basis of the body of thought and belief known as Marxism.
Marx considered his theory of surplus-value as his most important
contribution to the progress of economic analysis. Surplus-value is
the difference between what labor produces and what labor is
paid. Marx argued that the increase in capital (as the tools for
production) and in the concentration of that capital during the 19 th
century was due to the allocation of labor surplus-value to the
accumulation of capital.

Henry George (1839-1897)

Henry George was a land reformer and economist who wrote Progress and
Poverty (1879) in which he proposed that government should tax only the
income from the use of the bare land, but not from improvements, and abolish
all other taxes.
George argued that most taxes stifle productive behavior, but a tax on the
unimproved value of land was different. The value of land comes from two
components, its natural value and the value that is created by improving it (by
building on it, for example). Therefore, argued George, because the value of the
unimproved land was unearned, neither the land's value nor a tax on the land's
value could affect productive behavior.
George was right that other taxes may have stronger disincentives. But
economists now recognize that site values are created, not intrinsic, so even a
tax on unimproved land reduces incentives.
George's argument also assumes that in setting taxes, government can separate
raw value of land from value of improvementsa difficult, if not impossible,
task, especially for a politically motivated government.

Thorstein Veblen (1857-1929)

Veblen was a U.S. economist and social scientist who sought to apply an
evolutionary, dynamic approach to the study of economic institutions.
In The Theory of the Leisure Class (1899) he coined the term
"conspicuous consumption to describe consumption undertaken to
make a statement to others about one's class or accomplishments. This
term, more than any other, is what Veblen is known for.
Veblen was an economic iconoclast. He did not reject economists'
answers to the questions they posed but he thought their questions were
too narrow. Veblen wanted economists to try to understand the social
and cultural causes and effects of economic changes. What social and
cultural causes were responsible for the shift from hunting and fishing
to farming, for example, and what were the social and cultural effects
of this shift? Veblen was singularly unsuccessful at getting economists
to focus on such questions.

John Maynard Keynes (1883-1946)

Keynes was an English economist, journalist, and financier, best known for
his revolutionary economic theories (Keynesian economics) on the causes of
prolonged unemployment. His most important work, The General Theory of
Employment, Interest and Money (193536), advocated a governmentsponsored policy of full employment, based on beliefs that (a) economic
fluctuations significantly reduce economic well-being, (b) government action
can improve upon the free market, and (c) unemployment is more important
than inflation.
The long and continuing battle between Keynesians and monetarists has been
fought primarily over (b) and (c).
In contrast, the recent debate between Keynesians and classical economists
has been fought over (a). New classical economists believe that anticipated
changes in the money supply do not affect real output; that markets adjust
quickly to eliminate shortages and surpluses; and that business cycles may be
efficient.

Methodology Oriented
The next five displays present the economists that I identify as
methodology oriented.
Please recognize that each of the economists is very methodology
oriented, so this assignment simply represents my own
interpretation of the primary focus.

Leon Walras (1834-1910)

Walrus was a French-born economist whose outstanding work, lments
d'conomie politique pure (187477) (Elements of Pure Economics), was one of
the first comprehensive mathematical analyses of general economic equilibrium,
i.e., the balance between prices and quantities of commodities.
First, he built a system of simultaneous equations to describe the economy, a
tremendous task. He then showed that, because the number of equations equaled
the number of unknowns, the system could be solved to give economic
equilibrium
Second, Walras was aware that, while such a system of equations could be solved
in principle, doing so in reality was difficult, so he simulated a market process
that would obtain equilibrium. This process was one of trial-and-error in which
a price was called out and people in the market said how much they were willing
to demand or supply at that price. If there was an excess of supply over demand,
then the price would be lowered so that less would be supplied and more would
be demanded. Thus would the prices "grope" toward equilibrium.

Francis Edgeworth (1845-1926)

Edgeworth was an economist of formidable mathematical attainments with,
however, a rather obscure style of writing. He originally hoped to use
mathematics to illuminate ethical questions and his first work, New and Old
Methods of Ethics (1877), drew on mathematical techniques, especially the
calculus of variations.
His most famous work is Mathematical Psychics (1881), which presented his
ideas on the generalized utility function, the indifference curve, and the
contract curve, all of which have become standard devices of economic theory.
Edgeworth contributed to the pure theory of international trade and to
taxation and monopoly theory. He also made important contributions to the
theory of index numbers and to statistical theory, in particular to probability,
advocating the use of data of past experience as the basis for estimating future
probabilities.

Irving Fisher (1867-1947 )

Irving Fisher was one of America's greatest mathematical economists
and one of the clearest economics writers of all time. Fishers work on
money and prices, with its sophisticated use of statistical techniques,
provided the basis for recent theoretical work in economics.
Fisher called interest "an index of a community's preference for a
dollar of present [income] over a dollar of future income." Interest
rates, Fisher postulated, result from the interaction of two forces: "time
preference" people have for capital now, and the investment
opportunity principle (that income invested now will yield greater
income in the future).
Fisher defined capital as any asset that produces a flow of income over
time. Capital and income are linked by the interest rate. Specifically,
wrote Fisher, the value of capital is the present value of the flow of (net)
income that the asset generates. This still is how economists think about
capital and income today.

Joseph Schumpeter (1883-1950)

Schumpeter was a Moravian-born American economist and sociologist known
for his theories of capitalist development and business cycles. His influence in
the field of economic theory was powerful. In his Capitalism, Socialism, and
Democracy (1942), he argued that capitalism would eventually perish of its own
success, giving way to some form of public control or socialism. He argued
that capitalism would spawn an information society (my term, not his) in
which the nature of capital investment would change.
His book was much more than a prognosis of capitalism's future. It was also a
sparkling defense of capitalism on the grounds that capitalism sparked
entrepreneurship. He distinguished between inventions and entrepreneurial
innovation, and pointed out that the latter comes not just by using inventions,
but also by new means of production, new products, new forms of organization.
His History of Economic Analysis (1954; reprinted 1966) is an exhaustive study
of the development of analytic methods in economics.

John von Neumann (1903-1957)

John von Neumann was a brilliant mathematician and physicist
who also made three fundamental contributions to economics.
First, a 1928 paper by von Neumann, established him as the father
of game theory. Second, a 1937 paper, laid out a mathematical
model of an expanding economy, raising the mathematical basis
for economics. Third was heory of Games and Economic Behavior,
coauthored with his colleague economist Oskar Morgenstern.
In their book, von Neumann and Morgenstern asserted that any
economic situation could also be defined as the context of a game
between two or more players.
In addition to game theory, their book gave birth to modern utility
theory.

Relevant Non-Economists
I think it is important to recognize and to include in this listing a
number of persons who, while not economists, are very relevant to
the development of economic positions and theories.

Marquis de Condorcet (1743-1794)

Count Henri de Saint-Simon (1760-1825)
Robert Owen (1771-1858)
Charles Fourier (1772-1837)
Adolph Lowe (1893-1995)

Marquis de Condorcet (1743-1794)

Marquis de Condorcet (1743-1794) was a French mathematician
and philosopher, a liberal and humanitarian who took an active
role in the French Revolution. His most famous work was Outline
for an Historical Table of the Progress of the Human Spirit
(translated title).
In social choice, the Condorcet Principle is: If one alternative is
preferred to all other candidates then it should be selected.

Count Henri de Saint-Simon (1760-1825)

French social theorist and one of the chief founders of Christian
socialism. In his major work, Nouveau Christianisme (1825), he
proclaimed a brotherhood of man that must accompany the
scientific organization of industry and society.

Robert Owen (1771-1858)

Welsh manufacturer turned reformer, one of the most influential
utopian socialists of the early 19th century. His New Lanark mills
in Lanarkshire, with their social and industrial welfare programs,
became a place of pilgrimage for statesmen and social reformers.
He also sponsored or encouraged many experimental utopian
communities, including one at New Harmony, Ind., U.S.

Charles Fourier (1772-1837)

French social theorist who advocated a reconstruction of society based on
communal associations of producers known as phalanges (phalanxes). His system
came to be known as Fourierism. While working as a clerk in Lyon, Fourier wrote
his first major work, Thorie des quatre mouvements et des destines gnrales
(1808; The Social Destiny of Man; or, Theory of the Four Movements, 1857). He
argued that a natural social order exists corresponding to Newton's ordering of the
physical universe and that both evolved in eight ascending periods. In harmony, the
highest stage, man's emotions would be freely expressed. That stage could be
created, he contended, by dividing society into phalanges.The phalange, in
Fourier's conception, was to be a cooperative agricultural community bearing
responsibility for the social welfare of the individual, characterized by continual
shifting of roles among its members. He felt that phalanges would distribute wealth
more equitably than under capitalism and that they could be introduced into any
political system, including a monarchy. The individual member of a phalange was
to be rewarded on the basis of the total productivity of the phalange.

Adolph Lowe (1893-1995)

The lifework of Adolph Lowe (1893-1995) was greatly motivated
by his struggle with the problem of "freedom and order". Lowe's
concern with the socialization function of education related to his
notion of "spontaneous conformity", For Lowe, the stronger the
commitment to community, the greater is the possibility for
individual autonomy without the threat of social disruption

The Nobel Prize for Economics

The Nobel Prize for Economics (or, more correctly, The Bank of Sweden Prize in
Economic Sciences in Memory of Alfred Nobel) is the world's most prestigious award
for contributions to the field of Economics. It is awarded annually by the Royal
Swedish Academy of Sciences. The prize consists of a gold medal, a diploma bearing a
citation, and a sum of money (US$1,000,000 in recent years). It represents the
ultimate recognition by an economists peers.
The Economics prize was not part of Alfred Nobel's original will, but was added in
1969, with the support of the Bank of Sweden, and has since been judged and
administered by the Nobel Foundation in a way similar to that for the five original
Nobel prizes.
The Economics prize is made on the basis of nominations from selected economists,
recommendation from the Prize Committee to the Academy, and a secret ballot of the
full Academy.
The prizes are intended to reward specific discoveries that have significant impact on
the discipline.
The Nobel laureate is announced each October, and the presentation is made in
Stockholm on 10 December.

Nobel Laureates, 1969 - 2004

1969. Ragnar Frisch and Jan Tinbergen "For having developed and
applied dynamic models for the analysis of economic processes."
1970. Paul Samuelson "For the scientific work through which he
has developed static and dynamic economic theory and actively
contributed to raising the level of analysis in economic science."
1971. Simon Kuznets "For his empirically founded interpretation of
economic growth which has led to new and deepened insight into
the economic and social structure and process of development."
1972. John Hicks and Kenneth Arrow "For their pioneering
contributions to general economic equilibrium theory and welfare
theory."
1973. Wassily Leontief "For the development of the input-output
method and for its application to important economic problems."

 1974. Gunnar Myrdal and Friederich von Hayek "For their pioneering work in
the theory of money and economic fluctuations and for their penetrating
analysis of the interdependence of economic, social, and institutional
phenomena."
1975. Leonid Kantovarich and Tjalling Koopmans "For their contributions to
the theory of the optimum allocation of resources."
1976. Milton Friedman "For his achievements in the field of consumption
analysis, monetary history and theory and for his demonstration of the
complexity of stabilization policy."
1977. Bertil Ohlin and James Meade "For their pathbreaking contribution to
the theory of international trade and international capital movements."
1978. Herbert Simon "For his pioneering research into the decision making
process within economic organizations."
1979. Theodore Schultz and Arthur Lewis "For their pioneering research into
economic development, with particular consideration of the problems of
developing countries."

 1980. Lawrence Klein "For the creation of econometric models and their
application to the analysis of economic fluctuations and economic
policies."
1981. James Tobin "For his analysis of financial markets and their
relations to expenditure decisions, employment, production and prices."
1982. George Stigler "For his seminal studies of industrial structure,
functioning of markets and causes and effects of public regulation."
1983. Gerard Debreu "For having incorporated new analytic methods into
economic theory and for his rigorous reformulation of the theory of
general equilibrium."
1984. Richard Stone "For having made fundamental contributions to the
development of systems of national accounts and hence greatly improved
the basis for empirical economic analysis."
1985. Franco Modigliani "For his pioneering analysis of savings and
financial markets."

 1986. James Buchanan "For his development of the contractual and

constitutional bases of the theory of economic and political decision making."
1987. Robert Solow "For his contributions to the theory of economic growth."
1988. Maurice Allais "For his pioneering contributions to the theory of markets
and efficient utilisation of resources."
1989. Trygve Haavelmo "For his clarification of the probability theory
foundation of econometrics and his analysis of simultaneous economic
structures."
1990. Harry Markowitz "For having developed the theory of portfolio choice."
William Sharpe "For his contributions to the theory of price formation for
financial assets, the so-called Capital Asset Pricing Model (CAPM)." Merton
Miller "For his fundamental contributions to the theory of corporate finance."
1991. Ronald Coase "For his discovery and clarification of the significance of
transaction costs and property rights for the traditional structure and
functioning of the economy."

 1992. Gary Becker "For having extended the domain of microeconomic

analysis to a wide range of human behaviour and interaction, including nonmarket behaviour."
1993. Robert Fogel and Douglass North "For having renewed research in
economic history by applying economic theory and quantitative methods to
explain economic and institutional change."
1994. John Harsanyi, John Nash and Reinhard Selten "For their pioneering
analysis of equilibria in the theory of non-cooperative games."
1995. Robert Lucas "For having developed and applied the hypothesis of
rational expectations, and thereby having transformed macroeconomic analysis
and deepened our understanding of economic policy."
1996. James Mirrlees and William Vickrey "For their fundamental
contributions to the economic theory of incentives under asymmetric
information."
1997. Robert C. Merton and Myron S. Scholes "For a new method to determine
the value of derivatives"

 1998. Amartya Sen "For his contributions to welfare economics."

1999. Robert A. Mundell "For his analysis of monetary and fiscal policy
under different exchange rate regimes and his analysis of optimum
currency areas."
2000. James Heckman "For his development of theory and methods for
analyzing selective samples." Daniel McFadden "For his development of
theory and methods for analyzing discrete choice."
2001. George A. Akerlof, A. Michael Spence, and Joseph E. Stiglitz "For
their contributions to the analyses of markets with asymmetric
information."
2002. Daniel Kahneman, For having integrated insights from
psychological research into economic science, especially concerning human
judgment and decision-making under uncertainty. Vernon L. Smith, For
having established laboratory experiments as a tool in empirical economic
analysis, especially in the study of alternative market mechanisms

 2003. Robert F. Engle, For methods of analyzing economic time

series with time-varying volatility. Clive W. J. Granger, For
methods of analyzing economic time series with common trends
2004. Finn E. Kydland and Edward C. Prescott, jointly For their
contributions to dynamic macroeconomics: the time consistency of
economic policy and the driving forces behind business cycles

Four aspects of the Nobel Economists

(1) the individuals, their lives and character
(2) the conceptual and theoretical constructs with which their
views of economics is concerned
(3) their applications of those economic concepts and theories
(4) the conflicts, in ideology and application, that are embodied in
the work of these individuals

The individuals, their lives and character

Most if not all of these persons are interesting as individuals. The
example of John Nash (recall the book and movie, roughly based
on that book, A Beautiful Mind) is perhaps extreme, but it is not
unique.
Many of them are academics and, as such, perhaps dull to the
usual public, but all of them are intellectual giants with all of the
personal idiosyncrasies that go with stature. Their stories cover
many geographical regions of the world and time periods of the
past century.
Just to cite a few examples:

 Gunnar Myrdal, the Swedish economist, played significant political

roles in formulating and maintaining the socialist character of the
Swedish political system. He wrote The American Dilemma, published in
1944, which documented the status of black American at the time. It was
instrumental in the Supreme Court's historic 1954 anti-segregation
decision. He also wrote Asian Drama, an inquiry into the poverty of
nations, published in 1968, which similarly documented the status of
underdeveloped Asian countries viz a viz developed Western ones.
Milton Friedman, the American economist, is the champion of the "free
enterprise system", to the level of fanaticism. Indeed, from his tutorship
at the University of Chicago, has flowed an almost endless stream of
economic conservatives that has led the policies, both economic and
legal (see especially Richard Posner) of the United States for decades.

 Vasily Leontieff, a Russian-born American economist, who

formulated the concept of the "input-output matrix" that
measures the inter-dependence of components of the economy and
provides probably the most powerful single tool for understanding
and managing national economies.
Kenneth J. Arrow (1921-) is a U.S. economist known for his
contributions to welfare economics and to general economic
equilibrium theory. Arrows impossibility theorem holds that,
under some well defined and presumably rational conditions, it is
impossible to guarantee that a ranking of societal preferences will
correspond to rankings of individual preferences when more than
two persons and alternative choices are involved.

 In 1994, John Forbes Nash, Jr. won the Nobel Prize for pioneering work
in game theory. Nash was 66. While he was still only 21, he wrote a 27page doctoral dissertation on game theory -- the mathematics of
competition. The great John von Neuman, then at Princeton, had treated
win-lose competitions. Now Nash showed how to construct mathematical
scenarios in which both sides won. Nash put a whole new face on
competition, and he drew the attention of theoretical economists. He had
turned game theory into a tool. This young genius brought the field to
fruition. He went on to MIT and for eight years dazzled the
mathematical world. He worked in economics as well as mathematics.
He even invented the game of Hex, marketed by Parker Brothers. Then,
disaster! For 25 years, from about 1957, he suffered from paranoid
schizophrenia. Mental illness wrapped about him like an evil cloud.
Today, though, he is working on novel uses of the computer in a research
post at Princeton. Nash has survived what looked like death.

Conceptual and theoretical constructs

There are conceptual and theoretical constructs that underlie the
work of all of the individuals. They embody very fundamental
ideas such as "equilibrium" (i.e., the balance between production
and consumption and the balance between competing objectives),
"utility" (i.e., the measurement of relative value), "optimum" (i.e.,
the determination of what is "best"), etc. These concepts embody
real conflicts in objectives (such as those between management
and labor)
Many of the Nobel Prizes were awarded for specific concepts (such
as the "input-output matrix" by Leontieff), so it is natural to
highlight them in the context of specific individuals.

Conflicts in ideology and application

The nature of economics is that, theoretical though it may be, it
embodies fundamental conflicts in ideology and application. The
most evident, of course, is that between capitalism and socialism
(or, at the extreme, communism). Indeed, most of the conflicts may
be simply components of that one, but perhaps not.
The conflict over the global economy is not only part of the
capitalism/socialism conflict but of that between corporate
economies and national economies.

Web site for Economics & Economists

The Web site Library of Economics and Liberty: Home and Main Menu Page
at http://www.econlib.org/ seems to provide a good resource for information
about economics.
They include biographies for many, though not all, of the persons identified in
this presentation.
Among them are several that I have not included but that are as worth
examining as the ones I have highlighted:
Armen Alchian
John Kenneth Galbraith
Friedrich Hayek
David Hume
John Locke
Fritz Machlup
Ludwig von Mises
Max Weber

The End