This paper is a sequel to De Vroey (1998d) and (1998e). In these papers, I pondered upon the relationship between the Marshallian and the Walrasian research programs and defended the view that a divide should be drawn between them, contrary to the opinion of the majority of economists who see no need for such. I argued that these research programs differ on two scores. First, they are based on different conceptions of equilibrium. Second, they differ on the way in which they broach the issue of the working of the decentralized economy. The hallmark of the Marshallian approach is that it proceeds in two steps. The working of particular markets is analyzed in a first stage whereas the issue of their coordination is assigned to the second stage of the inquiry. Contrarily, the hallmark of the Walrasian approach is to immediately start the analysis at the level of the economy as a whole. Put differently, in the Marshallian approach, partial equilibrium analysis is seen as a first preliminary step to general equilibrium analysis, whereas in the Walrasian approach one immediately proceeds with the latter. The aim of the present paper is to show the incidence of this twofold difference on the interpretation of Keynesian theory.

In recent years the reputation of Herbert Spencer (1820-1903) has undergone a transformation. Indeed, until the mid-1970s the answer to the rhetorical question, “Who reads Spencer now?” would surely have been “hardly anyone.” However, since then sociologist Jonathan Turner, intellectual historian Robert Bannister, political scientist Robert Perrin and dozens of economists and humanists have contributed to reconsideration of his role in nineteenth-century thought. They have also reinterpreted the corpus of his work and suggested new ways to utilize his contributions as a social theorist. Most important for our purposes is their effort to demonstrate that his stances on policy issues were not as mean-spirited as his critics have claimed. Indeed, Bannister, for example, forcefully argues that neither Spencer nor his American contemporary, William Graham Summer, were as consistently in favor of laissez faire or as harsh in their attitudes toward the underprivileged and the lower classes as scholarly convention once had it.

Albert Aftalion introduced Austrian marginalism into France and used it not only to tackle the issue of imputation (1911) but also to build his own theory of business cycles (1913) and of money (1927). Aftalion did not, however, receive the recognition he deserved for his contributions. The reasons are twofold. First, his use of modern analytical tools did not fit well with the dominant bias for the historicist approach that prevailed in France at the time, especially before 1914. Second, the fact that his contributions were available only in French did not help in spreading widely his ideas outside his native country.

Economics in the United States in the 1920s and 1930s was notable for the richness of its methodological and theoretical approaches. Encompassing the peak period of American institutionalism, these years also witnessed a recurrent debate over the proper scope and method of economics which was bracketed by a minor methodenstreit in the 1920s and the measurement-withouttheory dispute of the late 1940s. In retrospect it is apparent which lines of thought would dominate economic discourse in later decades. At the time, however, this future was not as clear. A late 1920s evaluation by Paul Homan of the state of contemporary economics concluded that economists “seem in our own day to be separated by more impassable barriers of thought than at any time in the past” (Homan 1928, p. 10). In looking beyond “the present impasse,” as he called it, Homan concluded that “whether economics in the future shall consist of a body of doctrines, or a body of facts scientifically ascertained, or a technique, or more or less of one and the other, is on the laps of the gods” (ibid., pp. 466-67).