Expectations and the Meaning of Institutions: Essays in Economics

By Don Lavoie; Ludwig Lachmann | Go to book overview

5

ON CRISIS AND ADJUSTMENT [1939]

The character of the relationship between economic science and economic policy has always been problematical. 1 Nor were there any reasons to expect that our own epoch would improve upon an age in which free trade was the teaching of science and protection the order of the day. Nevertheless, it is difficult to believe that future historians of economic thought will feel inclined to describe the attitude of economics to the pressing problems of our days as anything but a disheartening spectacle. And nowhere is this more true than in the field of the business cycle.

'When governments perplexed by cyclical mass unemployment and recurrent depressions turned for advice to those whose special subject was the study of this problem, ' they will have to report, 'economists seized the welcome opportunity for quarrelling with each other. An intellectual mass-duel between two rival groups, the expansionists and the classicists, shook the seats of higher learning. But the strangest of all was that the struggle was not so much about the measures to be undertaken, as about the time one had to wait before undertaking them.'

That such a situation detracts from the authority of economic science is a commonplace. That its only practical effect will be to encourage politicians to come forward with schemes of their own, which none of the duelling scientists would ever dream of approving, is altogether clear. In this situation it seems pertinent to inquire what, after all, the quarrel is about.

Now, it is relatively easy to describe the position of the expansionists. Their intellectual weapons have been forged precisely in order to meet a situation of chronical underemployment. Whatever the merits of their case, at least they leave nobody in doubt as to what is their diagnosis. Once this is accepted, the therapy follows

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