The thing about Marx is that he was a brilliant journalist in many ways, but he was a terrible reporter. Despite his reputation for being the great chronicler of the Industrial Revolution and its evils, he was more like a Web news aggregator.
The worst thing about Marx was that he began with an answer, and then set out to find the facts that would support it. He was actually quite isolated. He lived in London, which was the center of the economic and intellectual world, within a mile of the greatest geniuses who were living at the time — George Eliot, John Stuart Mill, Charles Dickens — all of whom were obsessed with economic issues and were talking about them and debating them. Yet he never engaged with them. The reason he didn’t was that he already knew capitalism was rotten, that it was doomed.
S+B: Where did that conclusion come from?
NASAR: It came straight out of the Book of Revelation, which was a bit of a revelation for me, and came to me because I spent some time at a research institute with [Princeton professor of religion and author] Elaine Pagels, who was writing a book about the Book of Revelation. I found that Marx really got all his economics, and the bones of his narrative, from Friedrich Engels, who was his coauthor, financial benefactor, and all-around guardian angel. Engels, in fact, ran a cotton factory in Manchester to support his slacker friend — who spent 20 years not writing his book — and had been reared as a sort of fundamentalist Lutheran. Engels knew the Bible inside and out, and the Book of Revelation was his favorite book. And there it all is: the world splitting into two great armies; the fundamental conflict that ends history, that brings justice; and finally the downtrodden will prevail. I was able to trace that link in their correspondence and their writing.
That to me answers the question of why people embrace bad ideas or ideas that don’t work. It’s because we’re human beings, and we find narratives that are very powerful and appeal to our emotions.
S+B: So Alfred Marshall was spectacularly right, and Karl Marx was spectacularly wrong, yet Marx is much better known.
NASAR: This is the weird thing. If you look at the first edition of Robert Heilbroner’s The Worldly Philosophers: The Lives, Times, and Ideas of the Great Economic Thinkers [Simon & Schuster], which was published in 1953, Marx is the hero and Alfred Marshall is this little Victorian prune who was totally out of touch with what was really going on. So it was really amazing to find out that the opposite was true.
Marshall was very well regarded in his own time. One of the striking things about him that I found was that he was so clearly focused on poverty. He was supportive of labor unions, so he was very different from some of the earlier economists, and he really differentiated himself in the policies that he supported. He favored antipoverty measures and public schooling, which in England was controversial much longer than in the United States. He also was certain that antipoverty measures would not fatally undermine the competitive mechanism that was driving business to pursue greater productivity, which was something many people believed then. Some people believe it even today.
S+B: Another thinker whom you rescue somewhat from the past — and who built on Marshall’s work — is Beatrice Webb. She doesn’t feature much in most conventional accounts of the history of economics, and few people are likely to recognize her name, or realize that she was the inventor of the concept of the social safety net.
NASAR: Yes, the idea of the minimum wage, the notion that government policy could actually prevent poverty, starts with her. Many people today would call her a sociologist, but in her lifetime, she was regarded as an authority on economics. She took from Marshall the idea that one cause of poverty was poverty, and she worked out policy solutions.