Perry G. Mehling — Maynard's Revenge: A Review

Lance Taylor, Maynard’s Revenge: The Collapse of Free Market Macroeconomics (Harvard 2010).

The central theme of the book is that Keynes and his fellow travelers or “OId Believers” (another pregnant image), were “correct about how to do macroeconomics”, which is to say they were methodologically on the right track. The biggest thing they were right about was the importance of blending both history and equilibrium or “thinking in historical and logical time” (as Joan Robinson put it). The reason this is so important is that the economy itself is a constantly changing and evolving entity, which means that individuals face epistemic problems of uncertainty, not just risk. In a world like that, historico-institutional methods provide a kind of knowledge that mathematico-statistical methods simply cannot, knowledge to inform individual decisions but also social policy.

Concretely, the way Keynes blended the two methodological approaches was by building his theoretical structure on the solid foundation of the National Income and Product Accounts, whose development he played some role in stimulating. The accounting framework gives us a picture of the economy as a whole, and macroeconomic theories are essentially about how various elements of that accounting framework fit together, in a system of mutual causation. Keynes little pamphlet “How to Pay for the War” is perhaps the epitome of this kind of approach.

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Maynard's Revenge: A Review
by Perry G. Mehling | Perry G. Mehrling, Professor of Economics at Barnard

Keynes did what used to be called "political economy" rather than economics formalized to look like a science, for which mainstream economists criticize both him and that approach, which has fallen into disfavor. However, Post Keynesians both predicted the impending crisis and have offered concrete plans for resolving it, while mainstream economists missed it and have been unable to meet the challenge of reversing the ensuing disaster. Go figure. Maybe something amiss with the mainstream approach that suggests revisiting political economy?