The house of economic theory has many mansions. In this book we have considered the structure of four of them. Future generations, no doubt, will witness the building of new additions. Nevertheless, the structures already available provide ample room for adaptation to problems quite different from the ones their original designers had in mind.
The sometimes turbulent economic events of the late 1960s and 1970s bear witness to the continuing vitality and adaptability of the major ‘master models’. Moreover, they have again demonstrated that no single system of economic ideas can be fully satisfying for all purposes. In this period, for example, the basic organizing framework of most macro-economic analysis has been supplied by Keynesian categories. But, while an American president of conservative stripe could proclaim that ‘We are all Keynesians now’, Western governments were simultaneously being reminded that the fiscal medicine to restrain inflationary pressures (i.e. tax increases and public-spending cuts) were less palatable politically than were Keynesian prescriptions for depression. These circumstances have been associated with a major revival of interest in monetarist analyses which have their intellectual roots in the classical and neo-classical formulations of the quantity theory.
Meanwhile, a variety of forces have inspired voices echoing other themes from the past. Growing concern about sources of energy and, in some parts of the world, about availabilities of basic foodstuffs have resurrected interest in the supply approach to the economic process which dominated the thought of the classical economists. The importance they attached to an understanding of the constraints imposed by nature’s endowments to the prospects for uninterrupted economic expansion has acquired a new respectability. Similarly, the recurrence of ‘stagflation’ – with its combination of rising price levels and stubbornly persistent unemployment – has poured new content into a Marxian literature on the inherent contradictions of capitalism as well as into the institutionalists’ critiques of neo-classical equilibrium models.
While the major ‘master models’ offer a variety of perspectives on the economic process, it is important to recall that the pioneers in each of these traditions shared a distinguished attribute. All of them took up their pens in a mood critical of established institutions or patterns of thought. It was this grand tradition that Keynes had in mind when he once described economics as a ‘dangerous science’.