On Macro History

The Economist recently posted a “Brief History of Macro: How we got here.”  It contains a link to a nifty graphic put together by Brunnermeier and Olivan of Princeton, which starts with Keynes.  While starting with Keynes makes perfect sense, there was plenty of important work on macroeconomic issues long before Keynes.

Among them was David Hume who developed a version of the quantity theory of money and worked on what would later become the Phillips curve.

Hayek argued that Hume (and Richard Cantillon) initiated the development of modern monetary economics, which is certainly a fair assessment.  Milton Friedman wrote this of Hume:

 

We have advanced beyond Hume in two respects only: first, we now have a more secure grasp on the quantitative magnitudes involved; second, we have gone one derivative beyond Hume.

Cantillon was also an impressive economist, introducing the concept of “Cantillon effects” and offering early insights into business cycles.  His Essay on the Nature of Commerce is available in its entirety here.

There were, of course, others.  The Physiocratic Tableau Economique was a depiction of the circular flow that is now so ubiquitous in elementary macroeconomics textbooks.  It can also be interpreted as a Leontief-type input-output model, as Ronald Meek explained here.

Keynes himself praised Malthus’ work on aggregate demand, and the important Ricardo-Malthus debates over underconsumption and  Say’s Law of Markets occurred in the early 19th century.  And, John Stuart Mill made important contributions to that debate later in the same century.

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