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History of Political Economy 35.1 (2003) 166-168

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The Lost Art of Economics: Essays on Economics and the Economics Profession. By David Colander. Cheltenham, U.K.: Edward Elgar, 2001. x; 203 pp. $75.00.

David Colander believes that of Neville Keynes's tripartite division of economics into the positive, the normative, and the art of economics, only the first two receive serious attention. He regards the “art” of economics as no less significant. If well done, positive economics tells us how economies function, and normative economics sets out the ideal conditions we wish to achieve, while the “art” of economics concerns the selection of the policies required to get there.

He takes the example of monetary economics. Each country has its own banking system, and its banks will function in particular ways on which there will be many [End Page 166] influences. In conducting monetary policy we need to know how a change in interest rates will influence lending to households and to small and large companies, and attitudes to risk of lenders and borrowers. Without this knowledge monetary policy could be misconceived and its impact seriously under- or overestimated.

The art of economics is especially concerned with policy issues that involve detailed knowledge and judgment, such as what monetary policy will actually achieve. Colander believes that far too little of the art of economics is taught in U.S. universities. Courses focus on the positive and the normative to the exclusion of the practicalities of policy.

His concern about the state of economics teaching and practice goes deeper. He believes that the leading economic practitioners base their work almost exclusively on the creation of alternative rationality-based models, and on testing these against the best available data. The achievement of tenure, promotion, influence, and esteem almost wholly depend on success in this central activity.

That leaves little scope for courses in, for instance, the history of economic thought, and most departments consequently marginalize such apparent inessentials. None of the great economists of the past actually created models and then proceeded to test them, so narrow practitioners of the approach that now dominates the profession are bound to regard most of our greatest predecessors as irrelevant to the present concerns of students and faculty.

Colander has several chapters that develop elements of this thesis, and he also has chapters on Milton Friedman, on John Maynard Keynes, on the neoclassical school, and on how economics should develop in the next half-decade. He writes extremely attractively, and readers will greatly enjoy the thrust and detail of almost every chapter. There is also advice on how to achieve and how not to achieve promotion. Those, for instance, who recognize that they have an unpleasant personality will have to publish more to achieve tenure. This Oxford reviewer recalls nostalgically that when Thomas Balogh (later Lord Balogh) presented evidence to the Franks Commission on the government of Oxford University, he declared that the ending of automatic tenure would have the undesirable consequence that fellows of Oxford colleges would have to behave agreeably to their colleagues.

Historians of economic thought will welcome Colander's succinct accounts of the strengths and weaknesses of Keynesianism and of neoclassical economics. The weaknesses of Keynesian economics are supposedly that budget deficits do not actually expand the economy, that the multiplier is very small, that unemployment will in any case converge upon a near-fixed natural rate, and that there are no longer clearly definable cycles. Colander comments that Keynes himself never advocated deficit financing, that U.S. econometrics actually works best with a multiplier of 2, that the U.S. natural rate of unemployment has mysteriously fallen from 6 to 4 percent so it is hardly an irreducible minimum, and that in the not so distant future there will be a sufficient recession to convince the profession that cycles are not dead. What he admires especially in Keynes is the questioning mind that continually sought to analyze the world around him in a Marshallian manner. [End Page 167]

Neoclassical economics used to be...


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pp. 166-168
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