During the past three centuries, three economists stand out as archetypes,

symbols of three distinct approaches to economic philosophy. In the

eighteenth century, Adam Smith, a student of the Scottish Enlightenment,

expounded a “system of natural liberty” (what we might term a

liberal democratic order consisting of an unfettered market and limited

government), and elucidated how a nation flourishes and advances the

standard of living of its citizens. In the nineteenth century, the German

philosopher Karl Marx attracted and inspired workers and intellectuals

who felt disenfranchised by industrial capitalism and sought radical solutions

to inequality, alienation, and exploitation of the underprivileged.

Finally, in the twentieth century, the British economist John Maynard

Keynes sought to stabilize a crisis-prone market system through activist

fiscal and monetary government policies.

The Pendulum and the Totem Pole

The stories and ideas of these Big Three economists are told in context

of a larger history I have described in greater detail in The Making of

Modern Economics. In the introduction to that work, I describe two

possible approaches to writing about the lives and ideas of economists,

what I term the spectral versus the hierarchal approach.

The most popular method of analysis I describe as a pendulum, by

which historians place each economist somewhere along a political

spectrum, from extreme left to extreme right. Figure A illustrates the

pendulum approach used in many economics textbooks.

The Pendulum Approach to Competing

Economic Theories

Simple though it is, I see several problems with the spectral approach.

First, it treats Karl Marx and Adam Smith as coequals, that is,

 “extreme” in their positions and therefore equally bad. By implication,

neither man’s position is sensible and must be rejected. The result is

a pendulum-like swing between the two extremes, eventually coming

to rest in the middle. Consequently, the moderate, middle-of-theroad

position held by John Maynard Keynes appears to be the more

balanced and ideal. But is his system the way to achieve growth and

prosperity? Or is the middle of the road simply the path toward big

government and a cumbersome welfare state?

I suggest as an alternative the “hierarchal” approach. In Indian

folklore, the higher one’s placement on the totem pole, the higher the

rank of significance. Instead of comparing economists horizontally

on a pendulum or spectrum, we might choose to rank them by height

according to the same standard of achievement. Using this totem pole

structure, I would reformulate the diagram according to Figure B.

The Totem Pole of Economics

I have chosen a ranking system consistent with the opinions of most

economists. A large majority of economists and historians of economic

thought consider Adam Smith the greatest of the Big Three. His model

of competitive markets constitutes the “first fundamental theorem of

welfare economics,” what George Stigler called the “crown jewel”

of economics, the “most important substantive proposition in all of

economics” (Stigler 1976, 1201).

Next on the list is John Maynard Keynes. Despite substantial

criticism of the Keynesian model, it continues to endure as a macroeconomic

model in institutional analysis and policy matters. As a

defender of bourgeois values, Keynes supported individual liberty,

but on a larger scale, he thought that macroeconomic intervention is

essential to stabilize the economy, a view still held by many economists

today.

The third man on the totem pole is Karl Marx. Although his endorsement

of centrally planned command economies at both the micro and

macro level has been largely discredited, Marxist interpretations of

class conflict and economic crisis still draw the attention of sociologists,

historians, and economists.1

The story of modern economics can be told through the eyes of the

Big Three. I have added vital transitional chapters between the three

biographies to complete the story. As you will see, it is a cunning plot

that has many unexpected twists and turns. Let us begin.

Figure B The Totem Pole Approach: The Ranking of Three Economists

(Smith, Keynes, and Marx) According to Economic Freedom

and Growth

1. Those radical economists who take issue with my ranking of Marx as “low

man” on the totem pole may take comfort in the argument made by some experts in

Indian folklore who claim that the figure on the bottom may in fact be the founder

or most significant chief in the history of the tribe.