In the middle of the nineteenth century, the term ‘economics’ was given to the various studies of the use of human resources and money. At the time many of these studies were undertaken by individuals who had an interest in a particular event and were helped by the fact that they were living in a time when people and governments were measuring everything. Indeed some of the early works of inspiration in the field of economics were undertaken before the collective term had gained common usage.
Origins
Economics and the economy are related but different. Economics is concerned with the efficient use of resources. The economy is the ecosystem created by financial transactions within a defined group or territory. The study of these two things is relatively recent, gaining prominence with the rise of the industrial revolution in the nineteenth century.
In the middle of the nineteenth century, the term ‘economics’ was given to the various studies of the use of human resources and money. At the time many of these studies were undertaken by individuals who had an interest in a particular event and were helped by the fact that they were living in a time when people and governments were measuring everything. Indeed some of the early works of inspiration in the field of economics were undertaken before the collective term had gained common usage. For example the measurement of troop losses in the French Neapolitan’s ill-fated march on Russia provided a breakthrough in the use of graphs to illustrate a point. The original work is outlined below, the thickness of the line represents the number of troops, with the brown line showing the march on Moscow, and the black line showing the return journey.
Similarly Florence Nightingale used graphs to show that most British troop deaths in the Crimean War were not from battle. The red in her graph shows casualties from battle, while the much larger blue colour shows the casualties from malnutrition and disease.
Of course the nineteenth century also gave rise to the measurement of lots of other things, some of which turned out to be useful; although not always for the reason they were originally undertaken. The measurement of several thousand fingerprints was originally an attempt to classify people’s personalities until the researcher realised that fingerprints were unique. Fingerprints then became a useful unique identifier, still used today. Another obsession of the time was phrenology, the measurement of people’s skulls as another ill-fated method of determining personality traits. But this was just one of the widespread measurements and observations of the natural world. Pursuits that resulted in the establishment of museums and the publication of Darwin’s “Origin of the Species”. The nineteenth century also saw the first attempt at using patterns in weather observations to predict the weather. The cross over between various studies was also common, for example the world’s first published weather forecasts were created by the retired captain of ‘The Beagle’: the boat that Darwin sailed on when he made is breakthrough observations on the Gallipolis Islands.
Similar to these other nineteenth century pursuits, economics was founded on the belief that if you could measure it you were a step closer to understanding it, and once you understood it you could predict it. However the ability to predict outcomes which is regarded as a proof of concept in science proved to be very elusive in economics. The elusive ‘invisible hand’ introduced by Adam Smith in 1776 to explain the markets ability to find its own equilibrium remained unseen. What was observed, although rarely predicted, were numerous economic booms and busts. In the new world there were gold rushes followed by ghost towns. Throughout the world the industrial revolution, and railways changed the way people lived. Capitalism, through stock exchanges established in the late eighteen and early nineteenth century was a key vehicle for raising the funds necessary to undertake the level of investment required to create the factories and railways of the day. These also saw numerous booms and busts in the value of individual companies and ventures. Increasingly people wanted greater certainty, and they looked to economists to provide it. A century and a half later people are still wanting certainty, but settling for guidance from economists.
Crystal Ball Economics
It is unfortunate that the popular view of economics has never escaped the obsession with predicting the future. It is also disappointing that the media coverage on economics focuses on the small range of economic levers available to the government. The study of economics, and particularly social economics has provided many valuable insights into the relationship between economics and society and government. That different governments and ideologies have attempted different things has also helped to provide greater insights into the risks and rewards of various socioeconomic policies and initiatives.
The best predictor of today is our past, and the best predictor of our future is our present.