Our study focuses on the development of modern economic thought, using that phrase to refer to changes in economic theory since the decline of the Keynesian doctrine that exercised a seemingly uncontestable hegemony in the post-World War II era. Since then, we have witnessed a period of internal tension and disagreement for which no parallel can be found in the history of economic thought. The famous Methodenstreit, which erupted in the early 1880s, was effectively over by 1890; in contrast, the unsettled condition of modern economic thought is now more than a quarter of a century old. The once unchallenged centrality of Keynesian thought has given way to a warring camp whose principal, but by no means exclusive, contenders are (in no particular order of importance) Monetarism, rational expectations, Post Keynesian, New Classical, New Institutional, and New Keynesian economics. We shall treat these new schools at varying length in the chapters to come, with side glances elsewhere.

Moreover, this internecine conflict shows no signs of coming to an end. This phenomenon is not only a remarkable occurrence in itself, but also provides the setting for an intellectual puzzle of more than academic interest. The prestige that attaches to economics may far outweigh its achievements, but there is certainly cause for disquiet when the branch of social inquiry most closely associated with political and social policy lacks a firm foundation, in the sense of a core set of beliefs that commands more or less universal assent from both within and outside the profession.

Our hope is to clarify the reasons for this extraordinary disarray.