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Paul Krugman ("The New Economic Geography, Now Middle-Aged"), arguing in favor of economists' tendency to simplify and go abstract, to use mathematical modeling and quantitative methods: "The geographers themselves probably won't like this: the economics profession's simultaneous love for rigor and contempt for realism will surely prove infuriating."
( I don't think Krugman is fair to himself when he says contempt for realism )
Until the 1930s and to some extent into the 1940s, institutional economics, with a strong emphasis on "historico-institutional factors," was a major force in American economics. But when the Depression struck, there was a desperate need for answers – and the answers wanted were to the question, "What do we do?" not "How did we get here?" Faced with that question, the institutional economists couldn't deliver; all they could offer was, well, persuasive discourse on the complex historical roots of the problem.
The person who did deliver was John Maynard Keynes. Now, Keynes is a protean figure, whose writings can be read to provide support for many schools of thought. But The General Theory of Employment, Interest and Money, despite occasional historical asides, essentially presents an abstract, ahistorical model of the economy; at its core is a little two-equation equilibrium model of the level of employment. And here's the thing: Keynesian economics, unlike institutional economics, was able to answer the question about what to do: it told you to boost demand with deficit spending.
( How would things be different if X happened instead of Y? )
( I don't think Krugman is fair to himself when he says contempt for realism )Until the 1930s and to some extent into the 1940s, institutional economics, with a strong emphasis on "historico-institutional factors," was a major force in American economics. But when the Depression struck, there was a desperate need for answers – and the answers wanted were to the question, "What do we do?" not "How did we get here?" Faced with that question, the institutional economists couldn't deliver; all they could offer was, well, persuasive discourse on the complex historical roots of the problem.
The person who did deliver was John Maynard Keynes. Now, Keynes is a protean figure, whose writings can be read to provide support for many schools of thought. But The General Theory of Employment, Interest and Money, despite occasional historical asides, essentially presents an abstract, ahistorical model of the economy; at its core is a little two-equation equilibrium model of the level of employment. And here's the thing: Keynesian economics, unlike institutional economics, was able to answer the question about what to do: it told you to boost demand with deficit spending.
( How would things be different if X happened instead of Y? )
