The Impact of Keynes on Economics in the 20th Century (review)

The Impact of Keynes on Economics in the 20th Century. Edited by Luigi Pasinetti and Bertram Schefold. Cheltenham, U.K., and North Hampton, Mass.: Edward Elgar, 1999. xvii; 247 pp. $95.00.

In 1997, in the year after the sixtieth anniversary of the publication of Maynard Keynes's General Theory of Employment, Interest, and Money, the European Society for the History of Economic Thought dedicated its annual conference to Keynes's work. From the outpouring of excellent papers that were presented, Luigi Pasinetti and Bertram Schefold have chosen a small collection that bears on the questions of how Keynes affected economics and economic policy in the twentieth century.

These are actually two quite separate questions, and they might easily have been addressed in two separate books. As it turns out, most of the book is devoted to the latter, Keynes's influence on economic policy. The second and third parts of the book, which constitute about eighty percent of the book's volume, are devoted respectively to Keynesianism in European countries (before and after the General Theory) and institutional discussions of Keynesian policies. The ten essays in these two parts are first-rate and fit nicely into the literature of the last decade that analyzes exactly how demand management policies were introduced into the Western economies.

For those who are familiar with Peter Hall's highly influential collection The Political Power of Economic Ideas: Keynesianism across Nations (1989), all six essays in part 2 (two on France, one on Spain, one on Germany, and two on Italy) will be helpful in filling out the story of how macroeconomic policy was adapted in Western Europe.

The essays in part 3 of the book are equally important to scholars of economic policy making. Although these essays each deal with a specific institution or episode in the history of macroeconomic policy making, they could just as easily have been included in part 2. For instance, the superb essay by Dorothee Rivaud-Danset on the role that the rationalization of industry played in the deliberations of the Macmillan Committee (1929–31) is a case study in the national, institutional contexts that shaped Keynesian policies. Each of the four essays in this section opens new ground in the international story of the transmission and evolution of macroeconomic ideas in the policy arena.

The first section of the book stands in stark contrast to the last two sections. In part 1, Luigi Pasinetti, Robert Skidelsky, and Axel Leijonhuvud each offer an original essay on Keynes's impact on economic theory, as opposed to economic policy. Pasinetti's contribution is a long lament that Keynes's impact was not what it should have been. Rather than a wholesale revolution, as Pasinetti believes Keynes intended, we got the neoclassical synthesis. Leijonhuvud's essay, “Mr. Keynes and the Moderns,” was the after-dinner keynote address at the conference, and it should receive the same warm response from readers that it received there. He creates a novel schemata to differentiate between “classical” and “modern” economic theory, and the difference goes a long way toward explaining the divide between economists who continue to work in a frictionless, stylized world of mathematical abstraction and those who work with the imperfect, adaptive models that better reflect the economy that most people live in. Robert Skidelsky's essay, “The Conditions for the Reinstatement of Keynesian Policy,” is actually more about economic policy than economic theory. Skidelsky attempts to explain how and why Keynesian policy was replaced by policies derived from monetarist and new classical theories. When the essay was delivered at the conference as a plenary session, it was received with some difficulty by believers in the old religion of simple fiscal pump-priming; but it rings true and offers important pointers for those who are ambitious for working toward a more interventionist approach to macroeconomic policy.

Altogether, then, this is a strong collection. It provides...