Knowledge, Truth and the History of Economic Thought
Edited by Stephan Boehm, Christian Gehrke, Heinz D. Kurz and Richard Sturn
Chapter 4: A conservative approach to progress in economics
Jack Birner* INTRODUCTION The economics of today cannot be understood without knowledge of the developments Ð progress and stagnation Ð between 1930 and 1940. An important impulse to theoretical economics in the early 1930s was the introduction into the English-speaking world of the ideas of Knut Wicksell. This constituted a breakthrough in business cycle theory, which resulted in a clash between two competing theories: John Maynard KeynesÕs Treatise on Money (1930), and Friedrich HayekÕs Prices and Production (1931a). Though a public confrontation remained restricted to HayekÕs lengthy two-part review of KeynesÕs book, and KeynesÕs reply,1 the controversy set the tone for the debates in business cycle and capital theory throughout the decade. Keynes developed his ideas into what became the General Theory (1936), and Hayek refined his theory of economic fluctuations in a series of publications culminating in The Pure Theory of Capital (1941). But never was the competition between the two theories clearer than just after the publication of Prices and Production in 1931. Another important development in the early 1930s took place in the field of empirical economics. In 1931 the Econometric Society was founded. A year later, one of the first econometricians, Colin Clark, published The National Income 1930Ð1932. One of its purposes was to improve the quality of the descriptive statistical data2 collected by the official sources in Britain, of which he is very critical (see his Introduction). But Clark wanted more. He needed reliable data for putting to the test...
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