Arjun Jayadev over at INET:
Can we theorize the economy as an entity that is growing, evolving, never in equilibrium? An economy passes through periods of intense instability and groping towards an uncertain future as a matter of course? How might one begin?
The pretense that we know the future probabilistically as a given set of probability distributions of every damn thing is, I think, a pretty dangerous delusion, but it’s also a comforting one to some people.
The year was 1967. Young Axel Leijonhufvud sat in front of a pile of papers, full of unfinished notes, half-worked through arguments and intellectual dead-ends that he had been at for nearly four years. Two years into a tenure track position in the economics department at the University of California Los Angeles, he seemed unable to fashion a coherent dissertation from the morass of ideas in the sprawl. This year was his last chance to do so if he wanted to remain in academic employment.
The Swedish émigré had rather immodestly and perhaps unwisely decided that his doctoral work should be on some of the deepest problems of macroeconomics: why was it that the capitalist economy sometimes fails calamitously, and why was it that the Great Depression (still very much in the public memory in the 1960s) had been so very different from ordinary recessions? In trying to understand that defining period of the 1930s he had undertaken a wide range of reading of earlier economists, including a closer reading of the ur-text of the discipline –the General Theory of Employment, Interest and Money by John Maynard Keynes.
One day, following yet another dead-end, and feeling like he was ready to give up and leave academic life, he began to look in desperation at his footnotes. For the first time, he began to see something in his scribblings — an electrifying theme emerged that laid the ground for what was to be a set of ideas that aimed directly at the heart of academic macroeconomics.