Virtually unchallenged as the consensual center of macroeconomics during the first two decades of the postwar period, Keynesianism became by the late 1960s a model in general disrepute. In his brilliant overview of what happened, Gregory Mankiw begins with an intriguing aspect of the Keynesian downfall: The disregard – even the “derision” – to which Keynesian doctrine was increasingly subjected was almost entirely confined to theoretically oriented academic circles. In policy-oriented centers, public or private, its essential validity and usefulness were largely unquestioned. The reason is that the emerging criticisms were impossible to translate into operational models capable of illuminating economic problems or performing more successfully than the Keynesian macroeconomic prototypes they sought to displace.

Mankiw makes clear, however, that this disparity raises as many questions as it answers. Five centuries ago, he points out, a navigator who steered by the Ptolemaic system would have guided his ship more successfully than one who followed the still poorly understood Copernican one. This raises the possibility that the poor operational performance cited by the remaining Keynesian practitioners only reflected a Copernican revolution in its early stages – a warning against the easy conclusion that because the anti-Keynesian models were not of practical use, they must have been based on erroneous theoretical underpinnings.

At the conclusion of his survey, however, Mankiw advances another possibility: “Copernicus had a vision not only of what was wrong with the prevailing paradigm, but also of what a new paradigm would look like. In the past decade, macroeconomists have taken only the first step in this process; there remains much disagreement on how to take the second step.”