North Dumped Marxism Injection of Numbers Led to Laissez-Faire

Article excerpt

On his way to the Nobel prize, Douglass C. North traveled a long, ideological road from Karl Marx to Adam Smith.

As a college student at the University of California at Berkeley in the 1940s and later as a young economics professor in the 1950s, North found Marxism to be "the only organized theory around" that explained the Depression and "provided an intellectual explanation of what was going on in the world."

In the decades since, North has become one of the nation's leading economic innovators, developing his own organized theory of the world. That theory is a modern-day version of the laissez-faire doctrine of limited government propounded by Adam Smith in the 18th century.

To North, the key to economic development is for a nation's institutions to provide incentives to growth by protecting private property and contracts.

Until now, North's has been an iconoclastic view whose adherents were in the minority among economists. "Intellectually, he has never been bothered about being outside the mainstream," says Lee Benham, the Washington University professor instrumental in luring North to the university a decade ago.

"He's 72, but he goes to conferences and accuses his younger colleagues of being old fogies. He has been in professional combat all his life, with most of the professors in his field disagreeing with him most of the time."

At a news conference on Tuesday, North smiled when asked if the Nobel prize offered vindication. "You're darn right it does," he said.

Later, while crossing the campus to a reception of colleagues and students, he remarked, "It's a long job to persuade people when there is a paradigm in the profession, so I did not expect to see a big change before I died."

In each of North's ideological incarnations, he has focused on one simple question: Why are some societies rich and others poor?

With memories of the Depression still fresh, North thought Marx provided the answer. But after he became an economics professor at the University of Washington in the 1950s, his Marxist leanings began to fall away over chess games with colleague Dan Gordon. The two discussed economics over rooks and knights, and "Gordon won all of the arguments."

Ready To Challenge

Early in the 1960s, North was ready to take on the first convention of the profession. He argued that the mathematical rigor of quantitative economic analysis should be injected into economic history.

North and other leaders of this "new economic history movement" - called cliometrics - reanalyzed historical economic data and debunked long-accepted explanations for historical developments.

For example, they challenged the explanation for the industrial revolution that still appears in every child's history text. They concluded that new inventions, such as the steam engine, did not have as big an impact on the rapid economic growth in England as historians had assumed.

Similarly, Robert Fogel, the University of Chicago professor who shared the Nobel with North, concluded that the railroad had not had the decisive impact on the development of the American West ascribed to it in historical accounts. …