A Perilous Progress: Economics and Public Purpose in Twentieth Century America

By Fratantuono, Michael J. | Parameters, Autumn 2003 | Go to article overview

A Perilous Progress: Economics and Public Purpose in Twentieth Century America


Fratantuono, Michael J., Parameters


By Michael A. Bernstein. Princeton, N.J.: Princeton University Press, 2001. 376 pages. $42.50.

At the outset of the 20th century, academic economists were struggling for a professional identity and the discipline of economics lacked coherence. By the second half of the century, economists had a direct hand in shaping US government policy, and their field had infiltrated the curricula of other social sciences and even the humanities. By century's end, however, the credibility of the profession and the discipline had been undermined: their capitulation to a statist agenda had left both vulnerable to unforeseen historical forces. Those developments motivate the work of historian Michael Bernstein.

Dr. Bernstein explains that while professionalism is consistent with the aspirations of middle-class America and with US predominance in 20th-century world affairs, it is nonetheless imbued with competing values: individual achievement and meritocracy on the one hand, bureaucratic and even anti-democratic forms of governance by credentialed elites on the other. Furthermore, he believes there is a dialectical relationship between disciplinary knowledge and professional standing, that both are subject to the influences of the modern state, and that the state in turn is shaped by powerful historical events. Thus, he constructs a narrative that weaves threads from three sources--the evolution of the economics discipline, the purposeful cultivation of the economics profession, and the social, political, and military history of the United States.

The American Economic Association (AEA) was established in 1885. Over the next two decades, founders tackled those functional yet nonetheless essential tasks needed to shape a professional community--they promoted value-free research, identified disciplinary boundaries, built a national membership, launched The American Economic Review, and initiated an annual convention. With the advent of World War I, economists helped the government mobilize resources for the effort.

In the 1920s, the discipline witnessed an internal debate between "institutionalists," who advocated an inductive approach to research that acknowledged the rich interaction between economics, politics, history, and society, and "neoclassicists," who argued for a deductive approach to research, based on narrowly focused models of individual choice, as the foundation for understanding market processes. Ultimately, the latter group prevailed and shaped economics into a more formal, abstract, esoteric, and mathematically oriented field. Despite those theoretical advances, economists did not anticipate the onset of the Great Depression and could not explain its underlying causes.

The blind spot spurred challenges to neoclassical doctrine, including the work of John Maynard Keynes, who emphasized the interdependence between aggregate consumption and investment and the potential benefits of deficit spending by government during economic downturns. Nevertheless, throughout the 1930s President Roosevelt kept economists at arm's length and adapted ineffective, ad hoc policies that were motivated by opportunistic political calculation rather than a sustained and coherent economic strategy.

The economy recovered only when the country prepared for and entered World War II. To help the government with the tasks of efficiently managing production plans and transporting material and troops, economists developed new optimization and linear programming techniques. For its part, the AEA took steps to elevate the significance of the profession: it channeled economists into government service, generated consensus reports on various issues, and, following the war, sent emissaries abroad during reconstruction.

Contrary to expectations, in the immediate postwar period, US economic growth was robust, with strong demand for consumption, investment, and exportable goods. In that environment, the economics profession became more homogeneous. …

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