Category: Classical Economics

The Character and Role of Economic Theory

Over the years, much has been written about the methods employed in economic theory. The recent financial crisis and the ongoing economic crisis in Europe have resulted in a marked increase in criticisms directed at mainstream economic theory ‘ neoclassical economics (more precisely, marginalist economics). Internal critics of neoclassical economics have been modifying certain assumptions of marginalist economics and have ‘developed’ new forms of economic knowledge such as law and economics, welfare economics, neuroeconomics, new institutional economics and so on. Critics external to marginalist economics, often known as heterodox economics (examples include Classical/Sraffian economics, Post-Keynesian economics and Marxian economics), have provided compelling logical critiques of the theory. Additionally, they also supplement their analysis with empirical and historical details (which is not uncommon in neoclassical economic either). This post is reflective in nature and tries to comprehend the character of economic theory along with a commentary on its contemporary function in the form of questions, thereby reinforcing the reflective nature of this blog post.

First, the definition adopted has a critical influence on the aims and scope of economic theory. For instance, the definition of economics as a study of reproduction and accumulation of wealth/income (characteristic of the heterodox economic theories mentioned above) is qualitatively different from a definition which views economics as a study of allocating scarce resources among competing ends (characteristic of neoclassical economics). The former definition is more modest in scope and seeks to provide answers to a limited number of questions vis-‘-vis the latter one which encompasses any and every issue where human decisions are involved. Examining the causes of accumulation and growth warrant the following theories: a theory of value and distribution; a theory of activity-levels (at times, this is absent); and a theory of economic growth. While examining the causal connections within these theories, some features of human behaviour are taken as given. The most important, perhaps, is the human propensity for self-betterment in material terms. Such a limited domain enables these economic theories to be more specific and definite thereby improving their explanatory power in the analysis of economic growth, unemployment, technical progress, wage dynamics and so on. An extremely wide scope is entailed by the definition of economics present in neoclassical economics; consequently, we see the emergence of sub-fields such as: cognitive economics, neuroeconomics, economics of philosophy, experimental economics, evolutionary economics, cliometrics, etc. The questions addressed in many of these sub-fields often have nothing to do with the generation of income or its distribution. The questions being asked are different, and quite relevant in understanding various aspects of human behaviour and institutions. However, if the aim of economic policy and economists is to improve material well-being, neoclassical economics and its sub-fields are not entirely satisfactory, primarily for logical reasons. The two most dangerous tenets of marginalist economics are the marginal productivity theory and the tendency to full employment.

Second, economic theory, I think, has two broad functions. One is to explain the logically necessary connections which exist between various economic variables, and the direction of causation. Usage of terms such as exogenous, endogenous, dependent and independent variables convey the direction of causation. For example, classical/Keynesian theory argues that activity levels and economic growth is demand-led whereas marginalist economics posits that activity levels and economic growth is supply-driven. This is a theoretical debate, which cannot be resolved by recourse to empirical data given the high degree of correlation present among (macro)economic variables such as income, investment, saving, etc. Another reason for the debate being unresolved is the incommensurability of the two kinds of economic theory involved ‘ classical/Keynesian vs. marginalism. The other broad function of an economic theory is to provide an explanation for the manner in which these (marco)economic variables grow over time; strictly speaking, the dominant economics influences the way in which data is collected and presented and the explanation for the data is also provided by the dominant economics. (A chief, although not very reliable, exception to this is the econometric technique known as VAR which attempts to undertake ‘measurement without theory’.) Much of these numbers will need to be supplemented with contextual and historical details. Also, in economics, one needs to be careful about assigning too much ‘reliability’ to data so much so that they are considered ‘adequate’ to overturn a particular economic theory. This is not to say that data does not matter, but that it should be treated with significant caution.

Third and finally, it is of great practical importance to know what economic policies can be advanced based on economic theory, supplemented by data or not. In other words, what conditions must a particular theory fulfil in order for it to be reliable’ Is an empirical assessment necessary or is it sufficient’ How sound must the logic be’ To what extent must the assumptions be scrutinised’ Can econometric analysis provide conclusive evidence’

Kaushik Basu’s Economic Methodology and the Economic Survey of India 2011-12

As the title suggests, this blog post examines a couple of policy recommendations made in Chapter 2 (Micro-foundations of Macroeconomic Policy) of the Economic Survey 2011-12. This examination is carried out in conjunction with Kaushik Basu’s economic methodology which is scattered across the Economic Survey and very visible in his 2011 book Beyond the Invisible Hand: Groundwork for a New Economics (Princeton and Oxford: Princeton University Press). Note that we are making an assumption, albeit very plausible, that Basu authored and/or significantly influenced the contents of Chapter 2 of the Economic Survey. On the basis of these two texts ‘ Chapter 2 and his 2011 book, this blog post evaluates (1) Basu’s method of doing economics, (2) his affinities towards the micro-foundations approach and (3) his (select) macroeconomic recommendations. The blog post concludes with a critical look at the role of economics as espoused by Basu.

Basu writes in the Economic Survey that ‘monetary and fiscal policies are part science and part intuition and common sense’ (p. 24). This statement reflects the openness to knowledge possessed by the author. However, owing to his role as the Chief Economic Advisor of India, he is an economic architect. Therefore, at a deeper level, one wonders whether he is talking about the ‘intuition and common sense’ of a particular individual (himself’) or a certain group of individuals. We get to read more of his thought on ‘intuition’ in his 2011 book. Some priceless extracts are reproduced below:

‘My view is that in economics, the need for intuitive understanding is much greater than most economists would have you believe. Good economic policy requires a ‘feel’ for things over and above the knowledge of theorems and regression coefficients’ (p. 14).

‘Both interventions and noninterventions have too often been left to the ideological whims of believers. They need to be founded on analysis and reason, not faith’ (p. 23).

‘What we so often take to be features of the world are actually propensities of the mind’ (p. 51).

‘My belief about the puzzle of knowledge lies somewhere between the skeptical and evolutionary claims. I have faith in our intuition’ (p. 53).

‘Causality lies in the eyes of the beholder’ (p. 54).

‘To sum up, scientific knowledge has to be combined with intuition and a shot of skepticism for it to be useful’ (p. 54).

On p. 23, he argues that policy interventions should be based on reason and not faith. However, on p. 53, he asserts that he has faith in (his’) intuition. Most of his comments seem to indicate a certain sense of confusion on what the scientific method entails and the role of economic theory in particular. This is quite unfortunate, since it comes from the pen of the current Chief Economic Advisor of India. If it is not confusion then it seems to be a proposal that ‘any idea goes’ wherein obviously the ‘idea’ is decided by those in power. Whatever happened to reason’ At the risk of repetition, let me state that this is an extremely dangerous outlook to possess because bad economic policies have devastating implications for majority of the population.

Basu rightly points out in his 2011 book that ‘the economy must be viewed as embedded in society and politics’ (p. xi). No one disputes this fact of reality. A worthwhile digression follows. Classical economists such as William Petty, Adam Smith, David Ricardo and Karl Marx in their contributions to political economy, as it was called then, never said otherwise. They stressed the need for proper social and political institutions. Coming back to Basu, he further writes: ‘Minimally, a proper understanding of economics requires recognizing that our economic relations are a part of a larger sphere of social and cultural interactions and institutions’ (p. 104). Based on this premise, he criticises neoclassical microeconomics for restricting individual choice to their budget sets for, in reality, they make choices outside their budget sets. In other words, there is a wide range of behavioural options which cannot be captured by the budget set and therefore Basu arrives at the conclusion that traditional microeconomic theory is very unqualified to deal with human behaviour. But, isn’t the aim of microeconomics to explain (economic) prices and quantities’ Or, should we consider microeconomics as the study of human behaviour’ Basu seems to think of the latter when he discusses economics. For him, economics is primarily the study of human behaviour and actions and not primarily a study of incomes and prices (on this, see Economics: The Study of Commodities). It also must be kept in mind that Basu’s scientific strengths lie in game theory, behavioural economics and related fields. In his 2011 book, he himself states that his analysis ‘belongs predominantly to positive social science’ (p. 98).

Since his objective is to study human behaviour, he proposes that we expand the scope of economics. This proposal, as we all know, has important repercussions on economic theory and eventually on economic policy. As Malthus pointed out, to study wealth and its distribution, one needs depth and not breadth; in short, the boundaries or scope of economics must be clearly outlined, however limited they might seem. Introducing several aspects of culture as Basu suggests will only make the explanatory and causal content of economic theory very weak. In fact, it might make economic theory too open that it can be used to explain everything. This must be resisted at all costs for it is knowledge that is at stake here (see also Malthus: The Scope of Political Economy). Basu therefore hopes to expand the scope of economics by altering and widening its foundations in order to usher in the micro-foundations approach in macroeconomic theory as well as in policy making. One glance at the title of Chapter 2 of the previous three Economic Surveys is sufficient for this purpose – 2009-10: Micro-Foundations of Inclusive Growth; 2010-11: Micro-foundations of Macroeconomic Development and 2011-12: Micro-foundations of Macroeconomic Policy. The mark of Kaushik Basu is indelible.

Basu seems to be doing exactly what Gary Becker did when he applied microeconomic tools to a variety of human behaviour around the 1970s. Although, things have improved since then and research in game theory and behavioural economics have been reasonably successful in dispelling the very nice-to-hear qualities of the individual/agent in the economy. Cooperation, reciprocity, trust, etc have once again (Adam Smith talked about a lot of this in his Theory of Moral Sentiments; although he believed that it was necessary to assume certain behavioural propensities when studying the generation and distribution of wealth) begun to play an important role in economics. Basu does provide the reader with many such insights in his 2011 book by drawing upon his earlier research. As a consequence, he criticises the manner in which mainstream neoclassical/marginalist economics employs methodological individualism, especially the textbook version of it. Basu is unhappy because the agent in mainstream economics still does not carry out identity-based behaviour (p. 49). He demands an agent who is more social which does not imply a complete rejection of methodological individualism. Basu is candid about this: ‘It is not within my ability to break away from methodological individualism to the extent that we will eventually need to in order to have a more powerful social science and at the same time retain rigor’ (p. 101). He wants an increased role for identities in economic theory ‘ caste, gender, race, language, etc. As pointed out earlier, bringing too many variables when studying a specific problem often muddies and obfuscates the phenomenon under study. Moreover, the cognizance of such identity-based behaviour can easily be taken into account while formulating policies without having to call for an overhaul of economic theory. Therefore, Basu calls for widening the scope of economics:

‘A fundamental step in broadening the scope of economics is to recognise that the feasible set of actions open to individuals is much larger than our models make it out to be’ (p. 27).

‘Minimally, a proper understanding of economics requires recognizing that our economic relations are a part of a larger sphere of social and cultural interactions and institutions’ (p. 104).

‘How a nation functions at the level of macroeconomic aggregates depends a lot on the nuts and bolts of the economy. In our concern with managing the large and attention-catching variables, it is easy to let attention slip on the small, which may be vital’ (p. 39, Economic Survey 2011-12 ).

Given Basu’s view about the scope of economics, it is easy to understand why he promotes the micro-foundations approach in macroeconomics. This is undertaken in a manner which shows complete disregard for alternative/heterodox macroeconomic schools such as the Post-Keynesians, the Sraffa inspired Classical/Keynesians, the Marxians or the Kaleckians. These schools of thought are built on the belief that the economy is a system which has a logic and working distinct to itself. They criticise the neoclassical/mainstream economists of committing the fallacy of composition when they conceptualise the economy as an aggregation of individuals (see Some Logical Fallacies in Economics). Basu strongly advocates using the micro-foundations approach to macroeconomic issues in the Economic Survey. He writes:

‘The error has usually been in misreading the incentives and behavioural traits of the individuals who are to benefit from the policies and those who are supposed to carry out their day-to-day functioning. Fortunately, this is beginning to change both in the discipline of economics as well as in the design of policies in India. There is increasing recognition that flawed micro-foundations can devastate the best of macro intentions’ (p. 24).

‘Macroeconomic policymaking entails a mix of science and intuition. To ignore either of these would be a mistake. We need to marshal the best scientific knowledge available and study the microeconomic foundations of these macroeconomic concerns and then blend them with intuition and commonsense to craft policy’ (p. 25).

In short, according to Basu, micro-foundations is THE way forward both of economic theory and for policy.

His macroeconomic policy recommendations are problematic because of two reasons. First, his method of doing economics seems to be lack focus on the issues at hand ‘ unemployment, poverty, inflation, agricultural growth and so on; instead, his entire focus is on human behaviour and micro-foundations. Second, he appears to lack a solid understanding of macroeconomics, especially its alternative schools. In any case, let us take a look at two of his major macroeconomic proposals ‘ on fiscal deficit and Government as an enabler.

‘In the interest of medium- to long-term growth, it is important for us to bring the fiscal deficit down. While an expanded deficit can boost consumption and economic growth, this is medicine akin to antibiotics. It is very effective if properly used and in limited doses, but can cause harm if used over a prolonged period. Hence, government’s aim must be to effect rapid fiscal consolidation. A large deficit over a long period tends to squeeze out the private sector from the credit space. This dampens private investment and productivity and, more significantly, worsens the options of the inflation-growth mix available to government’ (p. 27).

‘This is what is meant by the enabling role of government. It should create a setting where it is in the interest of private agents to deliver on what needs to be delivered’ (p. 28).

As long as the economy is not at the full-employment level of output, crowding-out can never happen. Moreover, Basu forgets that the economy is not a stagnant organism; instead it is a growing one. The idea that government investment crowds-out private investment precariously hinges on the notion of scarcity in the economy. In a setting where the Central Bank controls interest rates so as to maintain price stability, it is difficult to see how crowding-out occurs as a result of government expenditure (see Introductory Macroeconomics: On Crowding Out). As for the enabling government, Basu seems to forget that India requires significant government expenditure/intervention in the form of Right to Food, Right to Education, Right to Employment, Right to Information, etc so that a dignified ‘setting’ can be constructed for everyone.

To conclude, it appears that as a game theorist who has important socially relevant insights, Basu is well on the mark. However, his macroeconomics, unfortunately, is grounded on extremely weak foundations and therefore is well off the mark.

Malthus: The Scope of Political Economy

In these difficult times we live in, what economics needs is perhaps, depth and not breadth. Unemployment, poverty, inflation, food insecurity, financial fragility, debt crisis, etc can be better understood and tackled by diverting increased resources (time and financial) in understanding the production, distribution, exchange and consumption of wealth. This blog post very briefly examines Thomas Malthus’s (1766-1834) view of political economy ‘ its method, scope, uses and limitations. ‘For this purpose, I have used John Pullen’s definitive variorum edition of Malthus’s Principles of Political Economy published as 2 volumes by Cambridge University Press in 1990.

According to the Cambridge Advanced Learners Dictionary, ‘scope’ is defined as the ‘range of subjects covered’. In the context of political economy, scope refers to the range of subjects it covers. That is, the scope of political economy informs us about the sphere of analysis, the boundaries or limits, the kind of situations it describes and its applicability in the real world or, its relevance. Keeping in mind that mathematics played only a small role in political economy during Malthus’s time, let us see what his view of political economy is: ‘the science of political economy bears a nearer resemblance to the science of morals and politics that to that of mathematics’ (p. 2). Undoubtedly, morals played and still play an important role for interventions in the economy based on what we consider to be a ‘good society or economy’. And politics, distributional conflicts over income, land, natural resources and employment are integral part of any economy. Thus, it is important that political economy (and economics) takes into account these distributional conflicts when theorising or modelling an economy. However, for purposes of theory, these conflicts can be taken as given from outside economics (exogenous) or can be determined within economics, in the manner of behavioural economics.

It would not have mattered if political economy was/is not a very important branch of knowledge. Reminiscent of Keynes’s words, Malthus writes: ‘The science of political economy is essentially practical and applicable to the common business of human life. There are few branches of human knowledge where false views may do more harm, or just views more good’ (p. 12). But, Malthus wrote it more than a century earlier. (See also Sismondi’s words of a similar nature). Since Malthus viewed political economy to have significant practical applications, the complete title of his book reads ‘Principles of Political Economy Considered with a View to their Practical Application‘. The editor, Pullen, gives us a bit more information on this matter. ‘This was apparently a lifelong concern. As a student at Cambridge in 1786 Malthus wrote to his father: ‘I am by no means, however, inclined to get forward without wishing to see the use and application of what I read. On the contrary I am rather remarked in college for talking of what actually exists in nature, or may be put to real practical use” (p. 291, Vol II; all other page numbers excepting this refer to Vol I).

Malthus understands that ‘To trace distinctly the operations of that circle of causes and effects in political economy which are acting and re-acting on each other, so as to foresee their results, and lay down general rules accordingly, is, in many cases, a task of very great difficulty’ (p. 12). Economic processes are caused by a multiplicity of causes and often not by a single one. Owing to this and because of his view of economics as a practical science, he maintained that ‘[t]o know what can be done, and how to do it, is, beyond a doubt, the most valuable species of information. The next to it is, to know what cannot be done, and why we cannot do it’ (p. 17). In other words, we must be very aware of the ‘scope’ of our knowledge.

Furthermore, if our objective is to understand the problems of unemployment and poverty, we must perhaps, as mentioned in the introduction, study in-depth the process of generation and distribution of wealth. I conclude with a statement by Malthus: ‘If we wish to attain anything like precision in our inquiries, when we treat of wealth, we must narrow the field of inquiry, and draw some line, which will leave us only those objects, the increase or decrease of which is capable of being estimated with more accuracy’ (pp. 27-8).

Short Introductions to Keynes: Skidelsky vs Clarke

The recent global financial crisis has led to a renewed interest in the works of John Maynard Keynes. In part, this is motivated by the intellectual failure of contemporary economics and the search for important insights into the working of the real and financial sectors. Another part owes to the dissatisfaction with conventional economics and restoring the research programme of Keynes seems to point at a better alternative. Together, revisiting the works of Keynes does assume great importance in the current economic and political climate. Two books stand out in this regard: Robert Skidelsky’s Keynes: The Return of the Master and Peter Clarke’s Keynes: The Rise, Fall, and Return of the 20th Century’s Most Influential Economist. Both of them were published in 2009. This blog post is a critical examination of these two books.

Skidelsky

According to Skidelsky, ‘the root cause of the present crisis lies in the intellectual failure of economics’ (p. xiv). To avoid such crises in the future, Skidelsky encourages economists to think of economics ‘as a moral, not natural, science’ (p. xvi). We are quite aware of the affinities between Malthus and Keynes, on the role of consumption. Besides this, Malthus had a similar vision of economics (political economy as it was known then) as Keynes. That is, Malthus also views economics as a ‘science of moral and politics’; For Keynes, economics is a ‘moral science . . . it deals with introspection and with values . . . it deals with motives, expectations, psychological uncertainties’ (p. 81). Keynes’s economics and broader ideas, argues Skidelsky, aids in contemporary economic thinking and policy making. In particular, the role of uncertainty is emphasised.

The intellectual stature of Keynes is something that is well-established. Skidelsky provides the readers with a statement from the philosopher, Bertrand Russell: ‘Keynes’s intellect was the sharpest and clearest I have ever known. When I argued with him, I felt that I took my life in my hands, and I seldom emerged without feeling something of a fool’ (p. 57). In any case, Keynes was extremely active in academic and policy discussions.

Keynes argues that investment is determined by expectations and depending on the state of confidence, investment would increase or decrease. This renders investment unstable, as a policy variable. In addition, if savings are greater than investment, it diverts resources ‘from the wider economy into financial speculation and conspicuous consumption’ (p. 69). Consumption is seen as the stable component of demand. Keynes also clarified the very important distinction between decisions to save and actual saving. Firstly, ‘If everyone wants to save more, firms will sell less and therefore output will fall, unless the inducement to invest is increasing at the same time (p. 91). This is the paradox of thrift, a simple enough idea but very powerful which had not been presented clearly so far. Therefore, if increases in saving are not matched by increases in investment, it will cause a fall in output and employment. In short, ‘It is spending, not saving, which creates output and employment; and when spending falls short of earnings, unemployment results’ (p. 91). Skidelsky captures the most important conclusion of Keynes’s General Theory which is ‘that a decentralized market economy lacks any gravitational pull towards full employment’ (p. 97).

So far, so good. However, when it comes to Keynes’s views on classical economics, Skidelsky falls prey to the conventional view. The conventional view being that Keynes attempted to disprove the economic theories of classical economissts such as Smith, Ricardo and Malthus. This view is far from the reality. (For a concise account of this, see my short article in the DSE Journal.) In fact, Skidelsky, being very faithful to Keynes’s words calls Arthur Pigou a classical economist (see p. 104). Suffice it to say here that classical economists such as Smith, Ricardo and Malthus maintained that unemployment could be a permanent feature of capitalistic economies. By classical economists, Keynes actually meant the (neoclassical) economics of Marshall and Pigou. In the following paragraphs, we will see that Clarke deals with this issue in a more satisfying way.

Clarke

We need to read Keynes today, says Clarke, because of his ‘lifelong commitment to the strategy of institutional reform through reasoned argument’ (p. 23). This means that we need to understand the historic and political context in which he lived. Also, reading ‘Keynesian economics’ is no substitute for understanding Keynes. In fact, as Clarke informs us: ‘After dining with a group of American Keynesian economists in Washington, DC, in 1944, Keynes said at breakfast the next morning: ‘I was the only non-Keynesian there” (p. 168).

Similar in spirit to Brtrand Russells’ comment, Clarke shares with us that ‘Friedrich von Hayek, Keynes’s most formidable academic opponent, wrote that ‘he was the one really great man I ever knew, and for whom I felt admiration” (p. 10). Clarke sheds light on the not often discussed aspect of Keynes’s life ‘ his training in economics. Alfred Marshall, Keynes’s family friend, taught economics to Keynes. ‘It was the usual Cambridge system of individual supervision, one hour a week for the eight weeks of the teaching term ‘ the only formal instruction in economics that Keynes ever received’ (pp. 24-25). In any case, this doesn’t matter and clearly, it didn’t matter. For him, economic theory was not an end in itself (like the classical economists). ‘The whole point lies in applying them to the interpretation of current economic life’ (p. 49). In this quest, there are no roles for dogmas. Hence, he expressed his dissatisfaction with both anti-capitalist as well as free trade dogmas. However, the latter emerged as his primary target (p. 68). On the free trade system, Keynes writes the following: ‘It is not intelligent, it is not beautiful, it is not just, it is not virtuous ‘ and it doesn’t deliver the goods’ (p. 72). To this end, by writing the General Theory, Keynes wanted to change the thinking of economists first and foremost. This is why the General Theory is ‘a concentrated assault on inside opinion as the necessary prelude to converting outside opinion’ (p. 77). Given those difficult times, the theoretical and policy oriented intervention of Keynes was essential. For, ‘Many people [were] trying to solve the problem of unemployment with a theory which is based on the assumption that there is no unemployment’ (p. 148).

We have already pointed the crucial distinction between saving and investment. Clarke puts forth the importance more clearly. ‘At the time, saving remained prized and honoured as the key to economic recovery. Keynes’s serious point is to distinguish saving (or thrift), which is essentially negative, from the real motor of economic growth, investment (or enterprise)’ (p. 106). Furthermore, Keynes is correct when he states: ‘I think it makes a revolution in the mind when you think clearly of the distinction between saving and investment’ (p. 107). Too much saving diminishes income. ‘It is a paradox because it seems natural to suppose that if individual saving enriches the individual concerned, it must also enrich the community’ (p. 152). Despite these crucial differences between saving and investment, much of the modern theories of economic growth seems to take the equality for granted; thanks to the single-good models and continuous production functions.

The commentary by Clarke on Keynes’s view of classical economics is historically accurate and therefore more satisfying than that of Skidelsky. The following extracts bear testimony to this. ‘Keynes later took him [Pigou] as representative of the ‘classical school’, devoting seven pages of the General Theory to a demolition of Pigou’s The Theory of Unemployment (1933)’ (p. 108). ‘Orthodox economics assumed that the system reached its own equilibrium through the effect of interest rates in reconciling the level of investment to the amount of saving available ‘ through flexible prices, of course’ (p. 131). ”Classical’ economics ‘ really Marshallian orthodoxy ‘ said an infinitely adjustable price mechanism will deliver equilibrium via interest rates’ (p. 134). Finally, Keynes’ friend and a reviver of classical economics, Piero Sraffa, is said to have brought the terms ‘effective demand’ to the attention of Keynes. ‘Keynes decided to salute Malthus as yet another brave Cambridge pioneer by purloining his term ‘effective demand’ to describe his own theory of output as a whole’ (pp. 143-4).

Concluding thoughts

The two introductory books on Keynes by Clarke and Skidelsky attest to the intellectual and practical relevance of his work. A few points are in order. First, a perfectly competitive economy does not have intrinsic forces that result in full employment. Secondly, saving and investment are conceptually distinct variables. Finally, economic theory is a means to understanding contemporary society and not an end in itself. I let Clarke have the last word: ‘Keynes’s name is thus rightly invoked to license fresh approaches to the novel economic difficulties of our own era ‘ to tackle them actively rather than take refuge in inert doctrinal purity‘ (p. 180).