The Crisis Vision in Modern Economic Thought.

• Author: Whalen, Charles J.

By Robert Heilbroner and William Milberg. New York: Cambridge University Press, 1995. Pp. 131. $39.95 cloth, $14.95 paper.

Why has Anglo-American macroeconomic theory been in disarray for the past 25 years? Robert Heilbroner and William Milberg believe the answer must be found by looking beyond economic analysis to the level of preconceptions -- to the pre-analytic "vision" that shapes all economic inquiry. Their study reveals that there has actually been substantial agreement in the macro field during the past quarter century. Yet it also reveals a socially disconnected discipline that is increasingly ill-suited to serving as a useful guide to real-world problems.

The first two chapters of the book explain what is at stake m modern economic thought and then present the orienting framework to be employed throughout the investigation. At stake is the discipline's ability to function as more than a mere intellectual exercise. The framework is rooted in Schumpeter's notion of a "classical situation," a period when one particular theory commands widespread assent. The authors use this concept -- and the argument that changes of vision may occur when dissonances arise between a "view" of the economic world and actual events -- to outline a meta-history of economic thought. This overview divides five classical situations into two categories -- one including those provided by Smith, Ricardo and Mill; and a more recent group rooted in the work of Marshall and Keynes.

Chapter Three identifies both the analytics and preconceptions of the Keynesian consensus. Although the starting point for this classical situation appears to be Keynes's General Theory, Heilbroner and Milberg explain that significant changes were needed to make both its vision and theory "digestible" to the profession. The result was the neoclassical synthesis first presented as a whole in Paul Samuelson's now famous textbook. While some have always considered this "bastard Keynesianism," both the approach and the Keynesian label dominated macroeconomics for more than two decades following World War II.

Chapters Four and Five trace the decline of Keynesian dominance and the simultaneous "inward turn" of macroeconomics. A principal challenge for Keynesianism (though not necessarily an equally-significant challenge for the actual economics of Keynes) was the problem of inflation. Three elements of this difficulty are discussed: inflation theory and the Phillips Curve; the appearance of...