Past Sense
As you read the story of macroeconomics that these pages
tell, you might notice that it puts more stress on history
than the leading textbooks do. Some of the leading textbooks
have virtually no discussion of the past. Perhaps their
authors believe that history will bore students. Or perhaps
there are other reasons.
Many of the leading textbook authors are recognized as
experts--they have reputations for being at the top of the
profession. Their expertise is a primary reason that their
books are selected. Professors often use the textbook as an
authority and it is hard to do that if the textbook is not
written by a big name in economics. Expert authors usually
explain the theoretical approach that they think gives the
best understanding of how the world works. There is no
necessary role for history in this approach, but there is an
alternative.
In macroeconomics there has always been considerable
disagreement on how best to understand the world. The
experts disagree. The history of ideas and events not only
helps one understand why this disagreement exists, it is an
interesting story in its own right. Macroeconomics has not
seen slow and steady progress refining its basic and
fundamental theory. Rather it has seen sharp turns, detours,
and occasional retreats. Economic positions have been forged
in intellectual wars and by the failures and successes that
economists have had as their ideas have been used in the
real world.
Not all history is equally important. Macroeconomics has
roots that go back centuries. If you study American history,
you will encounter several major controversies in the 19th
century that were about macroeconomic issues. For example,
early in the century Andrew Jackson battled the Second Bank
of the United States and killed it, an outcome that had
significant macroeconomic consequences. Fifty years later
controversies involving the monetary roles of gold and
silver excited the American public and were a key part of
populist discontent and protest. However, the impact of
these controversies on us today is minimal. Although the
economists of the day were interested in and studied these
dispute, these issues appeared and disappeared without
significantly shaping the way the next generations of
economists viewed the world.
The Great Depression of the 1930s did change the way a
generation of economists viewed the world. The British
economist John Maynard Keynes proposed a way to understand
the Great Depression that attracted many of the brightest
young economics students of his day. These economists,
convinced that they had important new insights into how the
world worked, invented macroeconomics as a separate subfield
of economics. One of them, Paul Samuelson, wrote the
textbook that become the standard economics textbook for the
post-World War II era. It evangelized the "new economics" of
the "Keynesian revolution" and raised macroeconomics to
equality with microeconomics.
The Keynesian view of the world dominated other views in
the 1960s and early 1970s. Although it always had critics,
it was not argument but events and problems of the 1970s
that caused the next generation of economists to renounce
parts of the Keynesian faith. Ideas when tried often do not
work as their proponents had expected, and when the
Keynesian ideas were tried, they stumbled. Older,
pre-Keynesian ideas saw a revival, and new ideas were
developed to patch up the cracks in the Keynesian edifice.
Some of these ideas were tried in the late 1970s and early
1980s in an attempt to curb inflation, and the results of
that period have also shaped future economists.
In the chapters ahead we will try to make sense of how
macroeconomists view issues and problems by discussing
several conflicting views. We will often look at the past to
understand how these ideas and theories fit into the big
picture of macroeconomics. In our telling of macroeconomics,
history is important, the past matters, and a sense of the
past is often a key to the present.
Copyright
Robert Schenk
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