An Introduction to Economic Analysis and Policy

An Introduction to Economic Analysis and Policy

An Introduction to Economic Analysis and Policy

An Introduction to Economic Analysis and Policy

Excerpt

Some years ago when American 'institutionalists' were particularly vocal, it was commonly argued that the apparatus of theoretical economics was applicable (if at all) only to a simon-pure laisser-faire system. It was then postulated that the existing economic order had developed institutions so far removed from the abstractions of the pure theorist that all conclusions drawn from the intricate logical constructions had utterly no validity. The logic chopping of quibbling economists had, it was argued, become as meaningless as the metaphysical exercises of the medieval scholastics. Instead, so ran the argument, one ought to 'look and see' what was actually going on, to accumulate facts and measure secular and cyclical changes in significant economic data. One ought, moreover, it was said, to observe and describe the development of institutions and to note the changes and modifications in the structure and behavior of the economic organism. Theory had no place in the 'realistic' study of economic life.

But the more one observed and described, the more the desire grew to understand why the economic machinery acted as it did, and especially to understand why it so often acted perversely. Indeed, the grubbing for facts stimulated theory. The apparatus of analysis became even more complicated. New theoretical tools were devised. A leading illustration is the development of the theory of monopolistic competition.

It is by now fairly evident that the theoretical apparatus which professional economists have gradually constructed during the last two centuries is indispensible, not only for an under . . .

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