This is the second volume of Roberto Marchionatti’s three-volume set that aims to provide a handbook of the history of economic thought that spans from 1890 up to the most recent developments of the discipline. This volume is specifically devoted to describing the evolution of economic theory in a frantic historical period for Western society (1919 to 1945). The review of Volume I might be found in this journal (Becchio Reference Becchio2022).
The two volumes look very much alike in the narrative and the way of dealing with the development of economics: Marchionatti follows a chronological and geographical order by focusing on biographies of the main economists and schools in the UK, in Austria, and in other European centers, as well as in the United States.
The introduction offers a historical reconstruction of the time. Chapter 2 is focused on John Maynard Keynes and includes his forerunners and followers located in Cambridge as well as in Oxford, albeit the Oxford part is much less developed than the Cambridge part. Chapter 3 copes with economics at the London School of Economics, limited to the contributions provided by Lionel Robbins, Friedrich von Hayek, John Hicks, and Abba Lerner. Chapter 4 deals with the economic theory that emerged in German-speaking countries, mostly in Vienna, with special attention to the development of general economic equilibrium theory that took place at the Wiener Kreis and at the Mathematische Kolloquium. Chapter 5 is centered on econometrics, which emerged in the Scandinavian countries, and around the figure of Ragnar Frisch. Chapter 6 is devoted to economic theory in the United States and it recollects the contributions of Wesley Mitchell, Joseph Schumpeter, Frank Knight, John von Neumann, and Oskar Morgenstern, who were located, respectively, in New York (New School and Columbia), Chicago, Harvard, and Princeton. Chapter 7 is about “great controversies” (the fate of “Marshallianism” in the UK and in the United States; the debate on economic planning; the querelle on the methodological issue regarding econometrics that occurred between Keynes and Jan Tinberger). The last chapter questions the nature of the economic theory as it has been developed during those years: by following George Shackle’s opinion (see below), the author opens up the question about the possibility to consider it as the highest point ever reached in economics.
The volume is consistent as well is the ambition of the author. Nonetheless, it is very hard to condense many theoretical contributions in a book: the author is inevitably forced to make some choices; some relevant contributions may be missed (for example, Ronald Coase has been only mentioned) or excessively summarized (this is the case of the economic theory of the time that had been developed in the United States as well as in Oxford).
There are some aspects of Volume I that have been replicated in Volume II. As mentioned above, Marchionatti adopted a narrative mainly focused on biographical sketches, often redundant, within a geographical framework, rather than being focused on topics and the way they have been intertwined in a cross-cultural dimension. This narrative might make it easier to give an overall perspective to economists as well as scholars of other disciplines interested in the history of economics, albeit it could disappoint “more advanced” scholars of the history of economics, who are used to scrutinize the evolution of themes in historical terms and are well-acquainted with biographies. The only exception is Chapter 7, devoted to the “great controversies of the time,” where the author deals with economic issues embedded in a history of ideas framework.
Like Volume I, this volume presents a very good historical overview, mainly related to the description of the political situation of the time. Nonetheless, as in Volume I, a consistent picture of the industrial transformation and socio-economic development barely emerges, although it is strictly connected with the theoretical reflection of economists mentioned in the book (think about Schumpeter and the fate of industrial capitalism). Furthermore, the author chose to articulate his narrative around the label “school” in order to present his historical perspective. This might be either problematic, as Marchionatti himself points out (p. 22), or unclear: for instance, what does the author mean in labeling the Austrian theory from Ludwig von Mises onwards as a “new” Austrian school?
Chapter 8 represents the theoretical core of this volume: it is centered on Shackle’s definition of the economic theory that emerged during the interwar period as “the years of the high theory.” According to Shackle, it “began in the mid-1920s an immense creative spasm, lasting for fourteen years until the Second World War, and yielding six or seven major innovations of theory which together have completely altered the orientation and character of economics (Shackle Reference Shackle1967, p. 5)” (quoted on p. 415). This book is a tentative attempt to scrutinize the validity of such a statement. Marchionatti rightly makes a reference to Schumpeter, who considered the “years of the high theory” only as a development of the economic theory that emerged in the previous period (between the late nineteenth century and the First World War), albeit, as Schumpeter admitted, in the following period a more sophisticated technique had dramatically improved the theoretical quality of the discipline.
The author confesses his own position, which is closer to Schumpeter’s than to Shackle’s, by considering “the turbulent period between the two world wars [as] a process of change which involves the intellectual communities of economists” (p. 417) and as the starting point of a process of deconstruction and reconstruction of Alfred Marshall’s theory. According to Marchionatti, Marshallianism must be intended as “the main pillar of the old mainstream” (p. 417) developed by Arthur Cecil Pigou. Marchionatti underlines that the critique of Marshallianism should to be intended in terms of methodology of economics rather than of pure theory. Moreover, the author suggestes that Keynes and Hayek represented the two (opposite) possible criticisms of Marshallianism.
The other main idea of the author is related to the consequences of the migration of the most important economists of the time from Europe to the United States. That migration, which occurred in the 1930s, due to the well-known political circumstances, had de facto determined a process of theoretical “colonialism,” which had a double effect: on one side, it unified the American economic thought, and, on the other side, it shaped the present mainstream economics. I guess that this process likely will be described in the following Volume III.
The combination of these two ideas is a key point for the community of historians of economics. By following Marchionatti’s suggestion, we might consider whether the origin of the present mainstream economics is truly a process of deconstruction and rebuilding of Marshallianism under the American eyes, or whether it has a more complicated origin that cannot ignore the complexity of the economic theory that spread between the two sides of the pond up to 1945 and that should be described in a more sophisticated way. Furthermore, as historians of economic ideas, shall we subscribe to the author’s “Eurocentric” vision? Or shall we make some distinctions that include the peculiarity of American economic thought?
These questions remain open, and Volume III will likely help readers to add further relevant elements in order to discuss them and maybe to find some plausible answers as well as to address new ones to the community of historians of economics. Hence, we praise Marchionatti’s efforts and insights and acknowledge him for giving us this opportunity for an open discussion on these fundamental aspects of the history of economics.
