THE USES OF HISTORY

• Historians of economic thought often assume that understanding economics requires knowledge of its past, but this necessity is not obvious.
• This debate parallels discussions in other fields, such as the history of science.
• Advocates for studying history point to the benefits of ancient wisdom, while critics emphasize starting fresh, free from past constraints.
• The failure of science to advance while relying on Scripture and Aristotle is a common argument against historical reliance.
• Between Copernicus and Newton, this debate was framed as a conflict between the ancients and the moderns.
• Voltaire argued that contemporary science books were more useful than ancient texts, questioning the need to study old works.
• Skepticism exists today about the relevance of ancient economic theories, encapsulated in the phrase “the wrong opinions of dead men” (Blaug 1978:1).
• Schumpeter, in his History of Economic Analysis, addresses why we study the history of any science, questioning the value of revisiting outdated ideas.
• He acknowledges that discarding outmoded thoughts is important but suggests that studying the past can be beneficial.
• Schumpeter identifies three distinct benefits of studying the history of a discipline:
  • Pedagogical advantage: Relying solely on the latest texts can hinder understanding; history provides context and direction.
  • New ideas: Historical study can inspire fresh perspectives and solutions, learning from both successes and failures.
  • Insights into the human mind: History shows “logic in the concrete” and reveals how people document their thought processes.
• Schumpeter argues these benefits are especially pertinent to economics, yet this discussion focuses on the history of economics in India.
• The argument for pedagogical advantage is less convincing in this context since Indian economic thought is often less known.
• For modern Indian students, studying figures like Keynes or Adam Smith may offer more relevant perspectives than studying Kautilya or Ranade.
• However, the argument for gaining new insights into current problems through historical study is particularly strong in this case.
• Exploring less familiar economic theories can highlight both similarities and contrasts in economic thought.
• Schumpeter’s third argument for studying the history of economics emphasizes its insights into the human mind.
• This perspective is especially relevant for the history of economic thought in India, linking it to broader aspects of Indian thought, culture, and civilization.
• In ancient cultures, the workings of the mind are often intertwined with religion, necessitating consideration of religious factors in economic history.
• Max Weber highlighted the contrast between oriental and occidental religions:
  • Oriental religions are characterized by contemplative mysticism (e.g., Hinduism).
  • Occidental religions emphasize ascetic activism (e.g., Judaism).
• Weber posited that Hinduism views the world as eternal and unchangeable, while Judaism sees it as created and changeable.
• This cultural heritage of Judaism is said to have shaped the rational, progressive attitude of Western civilization, fostering a rational religious ethic conducive to economic growth.
• Weber’s analysis suggests that the absence of such rationality in other cultures, like India, may inhibit their economic development.
• This raises doubts about the potential for a meaningful history of economic thought in India, making the current study potentially futile.
• The historian of Indian economic thought may be tempted to focus only on aspects where Indian thought diverges from Western ideas, risking a distorted picture.
• This issue is not unique to Indian thought but applies more broadly; oversimplifying cultural differences can lead to misleading generalizations.
• Schwartz cautions against simplistic comparisons that reduce cultures to fixed essences, urging historians to be skeptical of totalizing keys to understanding cultures.
• While differences between Indian and Western economic thought are important, so too are differences within Indian thought itself.
• Nuance is key; the truth often lies in the complexities rather than broad generalizations about cultures.
• Arguments that frame cultural features as fixed overlook the coexistence of diverse elements within any system of thought.
• Ancient Judaism included more than just a rational ethic; it also encompassed elements of monarchy and magic.
• Hinduism is marked by significant diversity, making precise definitions challenging, as it encompasses both this-worldly and other-worldly views.
• Early Hindu scriptures regarded worldly success as morally desirable and essential for a civilized life, integrating rational pursuit of gain within moral boundaries.
• The decline of Hindu society later emphasized views on the futility of worldly pursuits, but the tradition of material values persisted.
• Weber’s account lacks recognition of these complexities, focusing instead on Puritanism as an archetype of rationality.
• Weber’s thesis on the genesis of modern economic growth oversimplifies the rationality of Puritanism, which coexisted with beliefs in astrology, witch-burning, and the persecution of dissenters.
• The characterization of Calvinism as “an extreme application of rationality to life” is called into question by the coexistence of various beliefs within it.
• An intriguing inquiry arises: how did certain views within the Puritanical ethic fall away while their economic rationalism persisted?
• Weber’s analysis attributes differences in economic performance to the “permanent, intrinsic character” of religious beliefs but fails to provide insight into these dynamics.
• Revisiting the Schumpeterian argument, the study of Indian economic thought can reveal much about the Indian mind.
• The effectiveness of this illumination would increase by moving beyond the distorting lens of Weberian sociology.

CRITERIA FOR SELECTION

• Historians of economic thought must define boundaries for their work, acknowledging that these judgments are somewhat arbitrary.
• Different historians may have varying judgments about what is important, leading to diverse histories with different scope, coverage, and emphasis.
• Justification for the approach taken in defining coverage is necessary, even if tentative and incomplete.
• A key principle for delimiting scope is the distinction between economic thought and economic analysis.
• Schumpeter defines economic analysis as the intellectual efforts to understand economic phenomena, while economic thought encompasses all opinions and desires about economic subjects, particularly regarding public policy.
• This approach explains the reliance on epics, religious texts, and public speeches as source material for studying Indian economic thought.
• The focus is on opinions and desires related to economic policy rather than the analytic or scientific aspects of economic thought.
• A history of economic analysis in India would have to start in the nineteenth century, reflecting reactions to classical political economy and neoclassical traditions.
• The final chapter may blur the distinction between economic thought and analysis but remains focused on broad policy directions rather than specific theoretical models.
• The criterion of whether discussions analyze how markets work is too narrow for understanding economic thought, especially in the Indian context.
• The idea that economic behavior was not autonomous before the seventeenth century limits the scope of what can be considered in the history of economic thought.
• Much of the material in this book does not meet the autonomy criterion for economic behavior.
• Buddhist literature valued economic success but still imposed conduct rules, like the eightfold path, limiting the legitimacy of economic activity.
• In Kautilya’s Arthasastra, economic rules aimed at maximizing state revenue but remained subordinate to political objectives.
• Indian thought traditionally did not view economic activity as a separate and autonomous realm, a perspective not unique to India.
• As Hicks noted, economic aspects of life in the past were less differentiated from other life aspects compared to today.
• Strictly applying the autonomy criterion would exclude premodern economic thought, including Gandhian economics, which criticized separating ethical and economic analysis.
• The discussion scope excludes economic and social history, although brief historical context is provided where necessary.
• Economic ideas will not be systematically related to the social milieu or underlying class interests; instead, they are treated as having their own life.
• Galbraith critiques the idea that economic thoughts are solely products of their time, asserting they cannot be separated from their context.
• This view aligns with the Marxist tradition, which connects concepts to material conditions, providing coherence but neglecting the discipline’s logic.
• In pre-modern India, economic ideas were influenced by factors beyond economic conditions, and the state of the economy itself is often unclear.
• Stereotypes, such as the notion of particularly backward Indian agriculture, complicate sociological analyses of Indian thought.
• Historical evidence indicates many Indian peasants lived on the margins of subsistence, challenging simplistic views of economic conditions.
• Pre-industrial societies share characteristics that complicate agricultural productivity comparisons.
• Statistical data comparing agricultural productivity in India to other contemporary societies is limited.
• Available evidence indicates that in major crops like wheat and maize, Mughal India had higher yield rates per unit of land than more advanced West European countries during the seventeenth century.
• India’s seed-yield ratios for individual crops were also generally more favorable (Habib 1963; Slicher van Bath 1963:239–46).
• Consequently, a higher standard of living would be expected in India, and many historians argue it was indeed the case.
• Spear (1970:47) states, “the average peasant had more to eat than his European counterpart,” supported by other historians (Moreland 1968; Desai 1972, 1978; Dasgupta 1988).
• Caution is advised in making comparisons due to conceptual and statistical challenges in assessing pre-industrial standards of living (Dasgupta 1978).
• The main argument is to advocate for studying economic ideas in their own right, rather than linking them directly to historical events.
• While economic ideas are not strictly determined by history, historical experiences enrich understanding and can shift theoretical perspectives.
• An Indian example highlights this: Ranade’s writings were criticized for lacking socialist appreciation, affecting his views on capitalist industrialization (Datta 1941–2).
• Over the past fifty years, the appeal of socialist industrialization has diminished while interest in capitalistic development has increased, suggesting a more favorable reevaluation of Ranade today.
• Historical context influences the range of economic questions considered relevant at any time; only a few receive serious attention from scholars or the public.
• Understanding the prevailing social, economic, and political circumstances is essential for grasping the history of economic thought.

AN OUTLINE OF TOPICS

• The book has ten chapters with the present chapter serving as an introduction
• Chapter 2 focuses on Buddhist economic thought divided into three sections
• Examines Buddhist attitudes toward economic activity concluding Buddhism is favorable to economic enterprise and material progress
• Discusses Buddhist views on price formation and tax policy
• Explores the role of altruism in Buddhist motivations for human behavior and its implications for economic analysis
• Chapter 3 analyzes the principal economic ideas in Kautilya’s Arthasastra consisting of four sections
• Discusses the state’s dominant influence on economic activity
• Details Kautilya’s recommendations on taxation and pricing policy
• Examines the economic aspects of the land system noting a significant amount of privately owned agricultural land
• Briefly addresses interpretation problems
• Chapter 4 covers economic thought during the Muslim period thirteenth to eighteenth century consisting of four sections
• Introduces the political history and Islamic framework for understanding developments in Indian thought
• Describes Islamic principles of fiscal policy particularly land revenue and their application in India
• Discusses monetary policy focusing on the implications of the ban on riba
• Explains a fourteenth-century experiment in price control
• Chapter 5 discusses the economic debate on famines in nineteenth-century India divided into five sections
• Defines famine and explores causes
• Outlines basic principles of famine policy
• Critiques famine policy and provides a summary
• Chapter 6 focuses on Dadabhai Naoroji’s drain theory pivotal to Indian economic nationalism with three sections
• Describes the theory and principal items constituting the drain
• Examines critiques from British and Indian writers
• Reviews the theory’s significance analytically and historically noting exaggeration in the magnitude of the drain but correctness in its mechanisms
• Chapter 7 highlights M.G. Ranade’s contributions to Indian economic thought in four sections
• Discusses his views on poverty and industrialization emphasizing the need for manufacturing and trade
• Outlines his agrarian policy recommendations for agricultural development
• Analyzes economic issues regarding public investment in railways
• Examines his methodology criticizing classical political economy while favoring mercantilism
• Chapter 8 addresses themes of Indian economic thought from Ranade’s death to independence covering
• Discriminating protection principles for industry versus free trade
• G.K. Gokhale’s contributions to the economics of education
• The controversy over the rupee’s exchange value
• The measurement of national income
• Chapter 9 on Gandhian economics is divided into seven sections
• The first section addresses methodological issues highlighting similarities and differences between the Gandhian approach and standard economics
• The next two sections focus on Gandhi’s views on consumption
• The first of these sections outlines his doctrine of the limitation of wants
• The second section discusses his concept of swadeshi
• The fourth section summarizes Gandhi’s ideas about technology and production scale explaining his opposition to modern industrialization
• The fifth section explores his theory of trusteeship and its implications for industrial relations
• The sixth section examines his views on charity, leisure, and the work ethic
• The final section discusses the long-term relevance of Gandhian economic thought
• The last chapter describes key themes of Indian economic thought since independence divided into seven sections
• The first section focuses on the Mahalanobis model adopted for the Second Five Year Plan’s planning strategy
• The second section details economists’ responses to government policies on trade and industry from the mid-1960s onwards
• The third section covers the determination of savings behavior
• The fourth section explains industrial deceleration since the mid-1960s
• The fifth section discusses poverty measurement
• The sixth section addresses agricultural issues
• The last section offers concluding remarks on past and present Indian economic thought