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Inequality in Cambridge and Chicago

No one should doubt the intellectual contributions of Chicago School luminaries like Milton Friedman, George Stigler, James Buchanan, and Robert Lucas to economics and political economy. Yet it is hard to imagine a body of work more antithetical to broad thinking about inequality and justice.

PRINCETON – Many people seem to be losing faith in capitalism, and with it, any faith they had in economists, who are seen as its apologists. The New York Times reporter Binyamin Appelbaum’s new book, The Economists’ Hour, raises many uncomfortable questions. Did economics take a wrong turn? Did those of us who do not subscribe to its Chicago School neoclassical variant nonetheless allow ourselves to be pushed too far in that direction? Would the world have been a better place if Cambridge economists had achieved more influence, and Chicago economists less? And, by Cambridge, I of course mean Cambridge, England.

When I became an economist in Cambridge 50 years ago, economists and philosophers talked to one another, and welfare economics was taught and taken seriously. John Rawls’s landmark 1971 work A Theory of Justice was much discussed, and Amartya Sen, Anthony Atkinson, and James Mirrlees, all then in Cambridge, thought about justice and its relationship with income inequality.

Sen, inspired by Kenneth Arrow’s Social Choice and Individual Values, which he read as an undergraduate in Calcutta, wrote about social choice theory, relative and absolute poverty, and utilitarianism and its alternatives. Mirrlees solved a version of the question of how to reconcile a preference for equality with the need to respect incentives, and Atkinson showed how to integrate views about inequality with its measurement.