Ingrid H. Rima
The era that began in the 1920s and lasted some twenty years until the beginning of the Second World War is often spoken of as the “high theory” era. It was so called because the innovative theoretical breakthroughs that were made had a potential for completely altering “the orientation and character of economics” (Shackle 1967:5). The Robinson-Chamberlin theories of imperfect or monopolistic competition, Hicks’s revival of Edgeworth’s indifference curves, Keynes’s theory of aggregate effective demand, the Morgenstern-von Neumann theory of games, and the ex ante, ex post construct of the Swedish School were chief among these breakthroughs. Each in its own way these innovations undertook to address the anomalies or “puzzles” inherent in the conventional model of an economic process driven by the maximizing choices of households and firms to determine the equilibrium prices that clear markets. It is thus a conundrum that, some sixty years later, the neo-Walrasian model of the contemporary mainstream is predicated on essentially the same “vision” (to use Schumpeter’s indispensable term) of the real world that was dominant when the creative spasm of high theory began.
Expressed in terms of contemporary literature relating to scientific progress, it is now quite clear that, in spite of Shackle’s expectations, the years of high theory did not bring forth either a new paradigm (Kuhn 1957, 1970) or a progressive SRP (Lakatos 1964, 1971). 1 J. M. Keynes offered a new SRP in economics that was intended to compete with that of “the classics”. But it was not long before J. R. Hicks began the integration of Keynes’s theory into the neoclassical SRP (Hicks 1937). This was accomplished by grafting microeconomic behavioral assumptions onto its “hard core” which, by leading to a general equilibrium conclusion, rendered Keynes’s theory a special case within the “single paradigm…of economic equilibrium via the market mechanism” (Coats 1969).
This chapter intends to focus on the question why neither Keynes’s theory of aggregate effective demand nor the Swedish ex ante, ex post approach were successful in summoning forth either a Kuhnian scientific revolution or a Lakatosian theoretically progressive SRP? The answer, in brief, hinges on the