Solving the Crisis in Economic Theory

Except for a few brief years in the 1930s, the development of monetary theory and international trade theory has been dominated by a pre-Keynesian, i.e. neoclassical, logic. Although this analytical approach may have been useful as a rough approximation a century or more ago when economic affairs were organized on a significantly different basis than currently and our previous knowledge of the economic system was negligible, this neoclassical view has hampered the development of an economic theory which is relevant for the fundamental problems which plague twentieth century developed, market-oriented, production economies organized on a forward money contracting basis. Unfortunately, until we get our theory right, the ability of economists to provide sound guidelines to policy makers facing hard, important, and urgent economic problems will be severely restricted. Thus it is incumbent upon those of us who believe that the study of economics is for ‘practical purposes’, that we take the critical leap forward and bring monetary theory and international trade theory into effective contact with the real world. To do so we must choose among the various economic schools of thought which currently vie for the attention of economists and policy makers around the world.