Front Page Titles (by Subject) Academic Economics as Ideology - Literature of Liberty, Summer 1982, vol. 5, No. 2
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Academic Economics as Ideology - Leonard P. Liggio, Literature of Liberty, Summer 1982, vol. 5, No. 2 
Literature of Liberty: A Review of Contemporary Liberal Thought was published first by the Cato Institute (1978-1979) and later by the Institute for Humane Studies (1980-1982) under the editorial direction of Leonard P. Liggio.
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Academic Economics as Ideology
“Fifty Years of Ideology: A Selective Survey of Academic Economics in the United States, 1930–1980.” Journal of Economic Studies 8, no. 1 (1981): 16–36.
Defining ideology as “a mixture of consciously or unconsciously accepted ideas and beliefs” that “provides the underlying support or rationalisation for fundamental features of thought and action in a society,” the author presents a detailed panorama of the prevalence of ideology and values in the allegedly value-free academic discipline of economics from the Depression to 1980 and the revival of the Austrian School.
The author debunks the notions that academic economics during this period was ideologically value-free in its selection of texts, advocacy of government intervention, hiring practices, mathematical methodology, or changing policy recommendations and ideas with the winds of fashion. Over the past half-century, academic economists have not lived up to their self-image of objective scientists practicing value-free analysis. “The question of whether they had ever been completely faithful to this position in the past lost its significance beginning in the 1930s when the line between science and policy was virtually obliterated.”
The Depression which ushered in the New Deal's unprecedented government intervention beginning in 1933 did not seem catastrophic to the sheltered seclusion of most college campuses. Alfred Marshall's neo-classical paradigm continued as the basis of lectures, discussion, and textbooks throughout the 1930s and into the immediate post-World War II months. Orthodox economists dismissed the insights of the rival institutional economics which looked upon economic behavior as “a complex web of interrelated economic, political, sociological, and psychological influences.”
The war years exposed students to militarist and nationalist propaganda consonant with the official ideology of creating a “war man” and a patriotic “military-industrial complex.” This atmosphere was favorable to the interventionist economic doctrines of John Maynard Keynes' The General Theory of Employment, Interest and Money (1936). “The idea of essentially costless warmaking sustained the political ideology of war” and Keynesianism extended government spending into social outlays. “The Keynesian aggregative macro-approach directed its attention to full employment defined as consisting of essentially homogeneous jobs as such. Large-scale government spending programs unencumbered by the constraints of the gold standard emphasized increasing consumer income to remedy a deficiency of aggregate demand. The accompanying expansion in government direction of the economy was taken for granted. . . .”
The new Keynesian principles gave rise to two types of economists, whom Shakle termed the “mathematicians” and the “conceptualists.” “Academic economics as a profession of technicians engaged in structuralising, controlling, and predicting the behaviour of the economy. . . became possible with the increasing use of quantitative methods and the computer solution of complex models, optimisation objectives, and econometric equations.” The PhD program ideologically emphasized Keynesianism and quantitative methodology; it downplayed the history of economic thought. A communications problem developed when this abstruse formalism was introduced to undergraduates. The classroom saw method triumph over subject matter, and endured the tedium of formalistic lecture without discussion of underlying meaning and significance.
The post-war decades witnessed the Keynesian full employment dogmas installed as the new orthodoxy. Textbooks such as Samuelson's taught Keynesian theory to an entire generation of economists. “The Keynesian paradigm mean while prevailed for several decades. This faith was eventually shaken not by the intellectual evolution of theory but by the unfolding of economic disasters to which Keynesianism's nonchalance over inflation had contributed.”
“As multiplying interest groups pushed their claims on government for part of the national income, the number of economists taking positions on current questions and the politics of full employment was greater than ever before. Theoretical interest meanwhile took the form of discussions of the public interest in terms of initiating, controlling, and allocating costs and benefits.”
The predominant collectivist liberalism supporting the ideology of the mixed economy eventually met with classical liberal or libertarian challenges. Milton Friedman and the Chicago economics department played a major role in articulating a defense of the market economy. A renewed interest in the Austrian School added momentum to the market approach. “Hayek's exposition of the contribution of the individual to the optimum function of an economy as against the inefficiency of centralised bureaucratic management won a degree of attention along with his other contributions. Mises' discussion of the logical impossibility of rational socialist calculation continued to be cited. . . . His general theory, especially Human Action attracted a circle of ardent disciples.”
Law, Politics, and Freedom
The following summaries treat a variety of topics concerned with legal, political, and social theory in relation to individual freedom and rights. In keeping with the spirit of Professor Norman Barry's bibliographical essay on “The Tradition of Spontaneous Order,” Leon E. Trakman's two opening summaries imply the significance for legal history and theory of the spontaneous order mechanisms of the market (the evolution of Law Merchant from commercial custom and human experience) and of contract. The legal and ethical aspects of the medieval peace movement and of the natural evolution or history of just war doctrine are next summarized. Spontaneous order notions form an implicit backdrop to the next summary, Professor Barry's contrast of the theory of liberalism and political interest conflict. The remaining summaries touch on other questions of legal, philosophical, and political theory, as well as bibliography.