Table Of ContentMODERN CAMBRIDGE ECONOMICS
THE EVOLUTION OF ECONOMIC IDEAS
MODERN CAMBRIDGE ECONOMICS
Editors
Phyllis Deane Gautam Mathur Joan Robinson
Also in the series
Michael Ellman
Socialist Planning
Joan Robinson
Aspects of Development and Underdevelopment
Amiya Kumar Bagchi
The Political Economy of Underdevelopment
THE EVOLUTION OF
ECONOMIC IDEAS
Phyllis Deane
Professor of Economic History in the University of Cambridge and
Fellow of Newnham College
CAMBRIDGE
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© Cambridge University Press 1978
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no reproduction of any part may take place without the written
permission of Cambridge University Press.
First published 1978
Reprinted 1979,1980,1982,1984,1988,1993
A catalogue record for this publication is available from the British Library
Library of Congress Cataloguing in Publication Data
Deane, Phyllis.
The evolution of economic ideas.
(Modern Cambridge economic series)
Includes index.
1. Economics — History. I. Title.
HB75.D29 33o'.o9 77-88674
ISBN 978-0-521-21928-0 Hardback
ISBN 978-0-521-29315-0 Paperback
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SERIES PREFACE
The modern Cambridge Economics series, of which this book is
one, is designed in the same spirit as and with similar objectives
to the series of Cambridge Economic Handbooks launched by
Maynard Keynes soon after the First World War. Keynes' series,
as he explained in his introduction, was intended 'to convey to
the ordinary reader and to the uninitiated student some con-
ception of the general principles of thought which economists
now apply to economic problems'. He went on to describe its
authors as, generally speaking, 'orthodox members of the Cam-
bridge School of Economies' drawing most of their ideas and
prejudices from 'the two economists who have chiefly influenced
Cambridge thought for the past fifty years, Dr Marshall and
Professor Pigou' and as being 'more anxious to avoid obscure
forms of expression than difficult ideas'.
This series of short monographs is also aimed at the intelligent
undergraduate and interested general reader, but it differs from
Keynes' series in three main ways: first in that it focuses on
aspects of economics which have attracted the particular interest
of economists in the post Second World War era; second in that
its authors, though still sharing a Cambridge tradition of ideas,
would regard themselves as deriving their main inspiration from
Keynes himself and his immediate successors, rather than from
the neoclassical generation of the Cambridge school; and third
in that it envisages a wider audience than readers in mature
capitalist economies, for it is equally aimed at students in deve-
loping countries whose problems and whose interactions with the
rest of the world have helped to shape the economic issues which
have dominated economic thinking in recent decades.
Finally, it should be said that the editors and authors of this
Modern Cambridge Economics series represent a wider spec-
trum of economic doctrine than the Cambridge School of
Economics to which Keynes referred in the 1920s. However, the
object of the series is not to propagate particular doctrines. It
is to stimulate students to escape from conventional theoretical
ruts and to think for themselves on live and controversial issues.
PHYLLIS DEANE GAUTAM MATHUR JOAN ROBINSON
CONTENTS
Series preface page v
Introduction ix
1 Origins of modern economics i
2 Adam Smith's theory of value 19
3 Origins of modern growth theory 29
4 Classical monetary theory 44
5 Ricardo on value, distribution and growth 60
6 Scope and methodology of classical political
economy 71
7 The marginal revolution and the neo-classical
triumph 93
8 The neo-classical theory of value 115
9 The Marxian alternative 125
10 Neo-classical orthodoxy in the inter-war period 143
11 Monetary theory in the neo-classical era 163
12 The Keynesian revolution 175
13 Twentieth-century growth theory 190
14 Methodological divisions in economics since
Keynes 205
Index of names 227
Subject index 230
INTRODUCTION
There are basically two approaches to a study of the development
of ideas in a discipline. The first concentrates on the dialectical
sequence of change in the theories, concepts and analytical
techniques which constitute the substance of the discipline; the
second traces the historical process of change in the way suc-
cessive generations of scientists have adapted their explanatory
techniques to a solution of the problems they regarded as impor-
tant and soluble. The two approaches are not mutually exclu-
sive, they overlap, and most historians of economic thought have
taken both into account. But they raise different sets of questions.
The approach from the first aspect is primarily concerned with
a rational justification and critique of the theoretical basis of
economic analysis in successive epochs; the second with explain-
ing the historical process of innovation and adaptation in the
analytical framework which economists have typically accepted
as appropriate to the pursuit of their enquiries. The predominant
trend in recent histories of economic thought has been towards
increasing the emphasis on the first approach. Schumpeter's
History of Economic Analysis and Blaug's Economic Theory in
Retrospect are among the more widely known examples of the
genre. This book, mainly intended for students committed to a
systematic study of economic theory, shifts the weight of its
emphasis in the direction of the second approach and seeks to
interpret the history of economic thought as a process of change
in the ideas of successive generations of economists.
A prime difficulty in pursuing this kind of socio-historical
approach in a study of the evolution of economic ideas lies in
specifying the relevant economic consensus, the analytical frame-
work which a given generation of economists accepts as auth-
oritative. It would appear that it is easier to do this for one of
the natural sciences. According to Sir Karl Popper, for example,
'A scientist engaged on a piece of research in, say, physics, can
