Pete Boettke did not address his question to me, but I feel compelled to try a response. My apologies to Mary Morgan and Malcolm Rutherford.

I do not think that your schemata makes any contribution to understanding the history of American economics before 1936, Pete, and as such it does not strike me as any kind of serious defense of Krugman's statement. 

At the time of the nation's centennial in 1876, Charles Dunbar from Harvard  "observed that American scholarship as yet contributed nothing to fundamental economic knowledge. In his reading, American economics to date had been derivative, stagnant, and sterile." (Bill Barber) At that time, American economics did not have the kind of division that you try to establish, Pete, between "mainstream" and "mainline" largely because it did not have the theoretical sophistication to warrant such a distinction; however, American economics at that time was narrowly defined ideologically as laissez-faire.  As the first president of the AEA, Francis Amasa Walker, observed, it was true at that time that laissez-faire, "was not made the test of economic orthodoxy, merely. It was used to decide whether a man were an economist at all". Thus, to be an economist in America before the AEA was founded in 1885 meant that one was an advocate of laissez-faire, and this belief was based on a loose interpretation of the Protestant work ethic filtered through Say's and Bastiat's writings. But there was no modern, technical argument for this advocacy: the support of laissez-faire was an ideology. The young economists who founded the AEA were, of course, interested in pushing the envelope and founded the Association, in part, to give legitimacy to their desire to study the legitimate functions of the state in the economy (in contradistinction to the older advocates of laissez faire).

Between 1885 and 1935, there were many American economists who continued to advocate laissez-faire, but a growing number who did not. There were Christian socialists, Social Gospelers, historical economists, marginal economists, and Institutionalists who argued against laissez-faire. The people in these groups (which were not necessarily mutually exclusive) who did not advocate laissez-faire simply did not believe that the market would always lead to the best possible outcomes. It was not true at that time that most American economists were advocates of some form of belief that markets would usually, eventually, if allowed, produce the best possible outcomes for the American economy, although some certainly did believe that. And I do not think that this difference of opinion was merely a matter of a distinction between :"mainstream" and "mainline". In fact, for most of this time (1885-1935), there was no "mainstream" American economics. From the founding of the AEA through the early 1930s, American economics was a largely plural enterprise in methods and in outlooks (i.e., advocates of laissez-faire and advocates of the importance of the state in obtaining the best possible economic outcomes). 

Thus, I believe, Pete, that the theoretical frame that you want to use to defend Krugman is anachronistic and attempts to see the past through the filter of the present (or the much more recent past).

To pick up on another thread in this discussion, I would argue that Krugman has simply repeated the canned history that Keynes perpetrated in the General Theory. It was bad history then and it is bad history today.


Brad Bateman