Selected Essays of Axel Leijonhufvud
Economists of the Twentieth Century series
Like cells, organisms or ecologies, economies are complex adaptive systems. What such systems have in common is the capacity for self-regulation of the activity levels of their various components. These capacities are never unbounded. Beyond certain limits, they will break down. More generally, their effectiveness will depend both on internal structural characteristics of the system in question and on the magnitude of external shocks to which they are exposed. What are the limits to an economy’s capacity to coordinate the activities of its members? How does the behavior of the system change under extreme conditions? In what ways does its performance depend upon the institutions that govern the market process? In what circumstances might the coordinating capabilities of the economy be improved by institutional design or by deliberate intervention in markets? These exemplify the coordination questions which have been my main interest as an economist. I regard them as the central ones in macroeconomics. With one exception, all of the essays in this volume deal with them. This could be said also of my book Information and Coordination (1981a), but Parts III–V of the present collection are a good deal more ‘institutionalist’ than that earlier one. The essays in Part I attempt to put the development of macroeconomics from Keynes to Lucas in historical perspective. The misunderstandings of Keynes’s General Theory, which I worked on thirty years ago, remain important even today because of the sequence of later muddles that they originated and that eventually led to the virtual...