Economics in the Long Run: New Deal Theorists and Their Legacies, 1933-1993 (review)

Economics in the Long Run: New Deal Theorists and Their Legacies, 1933-1993. By Theodore Rosenof. Chapel Hill: University of North Carolina Press, 1997. 223 pp.

Rosenof, a historian, argues that divisions among heterodox economists have prevented a unified challenge to orthodox economics. However, evolutionary concepts continue to attract the attention of economists. The contributions of Gardiner Means, Alvin Hansen, and Joseph Schumpeter are specifically examined.

This is a nicely written story, although much of the material will be fairly well known to historians of thought. Occasionally, there will be surprises for the reader, such as Means's strong attachment to monetary orthodoxy or Means's influence on Eichner. There is also some interesting material from the Means and Hansen papers.

The introduction outlines Rosenof's theme: "The failure to achieve synthesis during the late New Deal between the structural approach of Means and the exogenous approach of Keynes and Hansen contributed to the emergence of neoclassical Keynesianism. . . . The divorce between structurally based institutionalism and Keynesianism and the stripping from Keynesianism of its historical dimension undermined the ability of what now passed for Keynesianism to meet the reemergent secular problems of the post-1973 era" (4). Rosenof believes that Hansen's "Continental school Keynesianism" and the secular stagnation thesis might have complemented Means's stress on structure, corporate concentration, and administered pricing. Yet "no genuine or workable synthesis emerged" as "each side tried to subsume the other into its own analysis" (85). This is to be lamented because an institutionalist microeconomics would have provided the appropriate microfoundations for Keynesian macroeconomics (27). If they had buried the hatchet and joined forces, conjectures Rosenof, the history of modern economics could have been very different. You can almost feel the author's frustration that they did not as "the visions of Means and Hansen continued in largely separate spheres" (125).

Schumpeter also shared certain affinities with institutionalists and Hansen (98), but he combined secular and cyclical concerns (103) and highlighted entrepreneurship, innovation, and industrial rise and decline (146). In critical respects Galbraith came the closest to integrating Means's and Hansen's approaches (126).

This is an interesting study with a strong element of wishful thinking or conjectural history. If Hansen had "shifted more fully to Means's position and taken the body of American Keynesians with him, the story of the 1970s might well have been quite different" (131), for Keynesianism would have been so much better if it had incorporated "an institutionally grounded microeconomics stemming from Means and a historically and technologically focused perspective stemming from Hansen" (136).

John Lodewijks
University of New South Wales

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