The publication of these two books is a landmark in the development of economic theory. Singly and jointly, they represent a fundamental challenge to the reigning neoclassical orthodoxy. The more sophisticated practitioners of that theory have long recognised that it is in deep trouble, but have stuck to it because of the lack of a viable alternative, on the principle that you can't beat something with nothing. Whatever objections one may have to neo-classical economics, it certainly is something: a highly-developed and formalised body of thought which has been applied to a wide range of practical and theoretical issues. One would hesitate before saying that the work of Marx, Schumpeter or Herbert Simon was 'nothing', and the 'sophisticated practitioners' referred to above would certainly not make any such judgment. Yet they would tend to say that their writing, though not lacking in insights, is amorphous, their ideas unformalised and unformalisable. They might well agree with Lord Robbins, who is reported to have said of Schumpeter's Capitalism, Socialism and Democracy that it was a piece of 'supremely intelligent after-dinner talk'. In any case, they would insist on the global and general character of these theories, and the absence of testable hypotheses to be derived from them.
LRB 20 October 1983 | PDF Download