The Crisis of Vision in Modern Economic Thought [Paperback]

Robert Heilbroner (Author), William Milberg (Author)

Book Description

Publication Date: January 26, 1996

A deep and widespread crisis affects modern economic theory, a crisis that derives from the absence of a "vision"--a set of widely shared political and social preconceptions--on which all economics ultimately depends. This absence, in turn, reflects the collapse of the Keynesian view that provided such a foundation from 1940 through the early 1970s, comparable to earlier visions provided by Smith, Ricardo, Mill, and Marshall. The "unraveling" of Keynesianism has been followed by a division into discordant and ineffective camps whose common denominator seems to be their shared analytical refinement and lack of practical applicability. This provocative analysis attempts both to describe this state of affairs, and to suggest the direction in which economic thinking must move if it is to regain the relevance and remedial power it now pointedly lacks.

Editorial Reviews

Review

"The Crisis of Vision in Modern Economic Thought is essential reading if one wants to understand the dynamics of why economists have moved from one system of theoretical constructs to another. Everyone, even the central participants in these movements, will learn something of interest and be forced to rethink why different theories emerge in different historical contexts." Lester C. Thurow, Massachusetts Institute of Technology

"...disarmingly challenging....For those interested in the momentous shifts in intellectual argument about economics over the past two decades, The Crisis of Vision in Modern Economic Thought, offers a powerfully insightful tour d'horizon of the battlefield." Richard Parker, The New York Times Book Review

"Lucid, thoughtful writing in the best tradition of Heilbroner." Robert Kuttner, Editor, The American Prospect

"A thoughtful and provocative evaluation of the literature by two of the most sincere and best informed critics of mainstream macrotheory. One must never make the mistake of disregarding Professor Heilbroner's illuminating discussions of the shortcomings of current economics." William J. Baumol, New York University

"Heilbroner and Milberg argue with passion that the degeneration of economics must be stopped and reversed. As they explain with great eloquence, it is not simply a question of enriching the existing theory with more empirical data. The problem is a crisis of vision, affecting the core of economic theory. This book is highly recommended for all those concerned about economic problems and wishing to understand the workings of modern economies." Geoffrey Hodgson, University of Cambridge

"A must read for all who want to understand why economic analysis and economic policy have been so inept and impotent in recent decades. Heilbroner and Milberg provide a clarion call for professional economists and policy advisors to open their eyes and develop the necessary vision to understand the operation of a capitalist economy so they can produce policies that will guide us to a prosperous global economy in the 21st Century." Paul Davidson, University of Tennessee

"Heilbroner and Milberg's voices join a growing chorus of dissatisfaction with the direction taken by mainstream economic thinking. Their careful dissection of recent trends in post-Keynesian theory is a true work of economy: lucid, balanced, and succinct." Keith Tribe, Keele University

"The vision thing-presented in typical Heilbroner fashion-insightful, well-written, interesting, and challenging. Heilbroner and Milberg reverse the order of politics and economics, making economics the handmaiden of politics, rather than politics the handmaiden of economics. And they may be right." David Colander, Middlebury College

"This book presents a well-informed and uncomfortably hard-hitting critique of contemporary economics. It deserves to be widely read and debated." Roger E. Backhouse, University of Birmingham

"This book is well worth reading for anyone who wishes to obtain an excellent and very insightful overview of the current state of a discipline that is in a very curious state indeed." Alex Viskovatoff, Review of Social History

Book Description

A deep and widespread crisis affects modern economic theory derived from the absence of a "vision" or set of shared preconceptions. This analysis attempts to suggest the direction in which economic thinking must move if it is to regain the relevance and remedial power it now pointedly lacks.

Product Details

• Paperback: 131 pages
• Publisher: Cambridge University Press; 1st edition (January 26, 1996)
• Language: English
• ISBN-10: 0521497744
• ISBN-13: 978-0521497749
• Product Dimensions: 8.3 x 5.4 x 0.4 inches
• Shipping Weight: 6.4 ounces (View shipping rates and policies)
• Average Customer Review: 4.0 out of 5 stars  See all reviews (2 customer reviews)
• Amazon Best Sellers Rank: #248,956 in Books (See Top 100 in Books)

More About the Author

Robert Heilbroner is the Norman Thomas Professor of Economics, Emeritus, at The New School for Social Research. He is the author of over twenty books, among them The Worldly Philosophers. He lives in New York City.

Customer Reviews

Most Helpful Customer Reviews

12 of 13 people found the following review helpful:

5.0 out of 5 stars For Keynes., December 5, 2002

By 

Luc REYNAERT (Beernem, Belgium) - See all my reviews
(REAL NAME)   

This review is from: The Crisis of Vision in Modern Economic Thought (Paperback)

The authors are harsh for today's US economists, because they have lost contact with the social reality: "the extraordinary combination of arrogance and innocence with which mainstream economics has approached the problems of a nation that had experienced twenty years of declining real wages, forty percent of whose children live in "absolute" poverty, and which endured an unprecedented erosion of health, vacation, and pension benefits. The commitment to full employment legislated in 1946 has been "honored" in these socially destructive years ... by redefining "full" employment as a higher level of unemployment."(p.6)
The solution of the authors is government intervention in the economy and a re-evaluation of the public sector, although they recognize that Keynesianism was and is not perfect: it was unable to present a coherent theory of inflation; it failed to include a concept of stagflation; and its treatment of the money supply could lead to inflation.
But in fact, the US government intervenes already heavily in the economy, but for the authors not in the right sector: defence.

This book, written in 1995, contains already the central proposition of 'The Silent Takeover' by Noreena Hertz: "On a wold wide scale, this internationalization of finance seriously limits the ability of advanced nations to carry out domestic fiscal and monetary policies that are not compatible with the "will" of a stateless world financial market." (p.120)
Their world vision was correct, but too timid: "On a still lager front, world population growth threatens to bring another billion people into existence within a generation, raising the spectre of large immigration pressures for the advanced world ... Ecological problems ... the forces of ethnic and nationalist unrest ... together with sporadic terrorism." (p.120-121)

It is evident that the above mentioned problems can only be resolved by political intervention. The proceeds of the successes of the market economy can only be redistributed or guided by political decisions, by politicians, not by, but with the help of, economists. The problem is that no international authority has enough power to impose his decisions unilaterally on national states.
Ultimately, the decisions lay in the hands of the voters. If a majority votes for a certain direction, the political authorities have to follow, otherwise they will loose their mandate.
This is a thought provoking book.

2 of 9 people found the following review helpful:

3.0 out of 5 stars A vision ,but no analysis (of J M Keynes),is in this book, June 24, 2005

By 

Michael Emmett Brady "mandmbrady" (Bellflower, California ,United States) - See all my reviews
(VINE VOICE)    (REAL NAME)   

This review is from: The Crisis of Vision in Modern Economic Thought (Paperback)

The two coauthors,Heilbroner and Milberg,understand,in very,very general terms,what Keynes's conclusion was in the General Theory(GT;1936)-due to the extreme difficulty of making optimal decisions about the size and quality of the capital stock to invest in and maintain in the face of irregular technological change over time under conditions of uncertainty(Daniel Ellsberg's ambiguity),capitalist societies will most likely have suboptimal amounts of private and public capital goods(plants,factories,infrastructure,etc.).This insufficient spending on long run investment projects leads to involuntary unemployment.This is as far as Heilbroner and Milberg can get.Due to their very limited mathematical capabilities,they completely overlook the formal technical analysis provided by Keynes in chapters 19,20,and 21 that proves his case.On p.262 in chapter 19 of the GT,Keynes specifies the major analytic conclusion of his theory-Unless the mpc(marginal propensity to consume)=1,involuntary unemployment will result.If the capital stock is at suboptimal levels,the condition then becomes mpc+mpi=1,where mpi is the marginal propensity to invest.This condition is the missing equation in Pigou's macroscopic model that Keynes discusses in the appendix to chapter 19 of the GT.In both chapter 20 and chapter 21,Keynes derives the following optimality condition ,linking both the commodity market and the labor market-w/p=mpl/(mpc+mpi),where mpl is the marginal product of labor derived from an aggregated neoclassical production function(p.283,ft. 1 and 2).Unless mpc+mpi equal 1,it is impossible for labor,in the aggregate,to reduce unemployment by cutting the money wage.Involuntary unemployment will automatically exist.The reason why mpc+mpi will be < 1 is due to the unstable,unpredictable,volatile nature of investment spending.This is ultimately due to the uncertainty or ambiguity of the information base faced by businessmen who are trying to figure out the correct amount of capital equipment to hold in the future in order to make an economic profit in the present by selling the output they have produced with that equipment in the past.Heilbroner and Milberg completely overlook Keynes's analysis although they understand the vision.