Economic Theory and Economic Policy

Economists are a somewhat crestfallen lot today. Scepticism about their ability to say something meaningful on matters of great public concern has been expressed at the highest level in our own country and, indeed, in many other countries. There is a widespread, if not as yet fully acknowledged, feeling among men of affairs everywhere that economic theories, whether Keynesian, monetarist or anything else, have let them down. While there is demand for a new international economic order or a new international system of money and finance, there seems to be no Keynes on the horizon who could provide a generally convincing case for any particular set of reforms. The present trade-off between inflation and unemployment is simply unacceptable; but he would be a bold person who can assert that he has a better theory to provide a better answer. A great deal of theoretical work in economics is done in the universities and other research establishments. But there is a feeling, even among men with proven academic credentials, that much of it is as sterile in practice as it is elegant intellectually.