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Published by EH.NET (June 2000) 
 
David Laidler, _Fabricating the Keynesian Revolution: Studies of  
the Inter-war Literature on Money, the Cycle, and Unemployment_.  
New York and Cambridge: Cambridge University Press, 1999, xvi +  
380 pp. $74.95 (cloth) ISBN: 0-521-64173-X, $27.95 (paper) ISBN:  
0-521-64596-4.   
 
Reviewed for EH.NET by J. Daniel Hammond, Department of  
Economics, Wake Forest University. <[log in to unmask]>   
 
 
David Laidler's thesis is just as the title suggests. The Keynesian  
revolution was a fabrication. By this Laidler means that the putative  
revolution was neither uniquely Keynesian nor revolutionary. The  
most transforming development of post-1936 economics was the  
synthesis embodied in the IS-LM model. The model, while  
generally and properly associated with Keynes's _General Theory_  
and the "revolution" that followed, owed more to John Hicks, James  
Meade, Roy Harrod, Brian Reddaway, and Alvin Hansen than to  
Keynes. Though the _General Theory_ contained an informal  
version of the model, the ideas that the model was subsequently  
used to organize were themselves neither particularly Keynesian  
nor novel.   
 
If there was not a uniquely Keynesian revolution, why organize the  
book around the idea of such an event? Obviously, one reason  
Laidler did so is because the book is an exercise in myth  
debunking. The term "Keynesian revolution" is part of the common  
parlance among economists, and carries the message that J. M.  
Keynes fomented a revolution with the _General Theory_. No less a  
source than Keynes testified to this. Laidler quotes Keynes from a  
1935 letter to George Bernard Shaw: "I believe myself to be writing  
a book on economic theory which will largely revolutionise - not, I  
suppose, at once but in the course of the next ten years - the way  
the world thinks about economic problems" (p. 3). In the decade  
following publication of the _General Theory_ there was  
disagreement over the particulars of the revolution but little doubt  
that there had been a revolution and that it was Keynesian.   
 
However, Laidler's message is also that something new and  
substantial was fabricated from inter-war economics, for which  
Keynes and his followers were largely responsible. This was a  
consensus on how to deal analytically and practically with  
problems of macroeconomic instability. In this sense "fabricate"  
means "to make" rather than "to make up." The consensus was  
embodied in the formal structure and interpretation of the IS-LM  
model. IS-LM provided a convenient, easy-to-learn, and rich vehicle  
for organizing and comparing ideas. Much of Laidler's book is an  
account of the inter-war material from which this consensus was  
made. Laidler shows how in the framing consensus within the  
formal structure of the IS-LM model portions of inter-war economics  
were preserved and portions were lost.   
 
The book is organized around several themes in the inter-war  
literature. The first theme is Wicksell's influence on the divergent  
ideas in Austrian and Swedish cycle theory. The second is the  
British literature of the period, with Marshall's heavy influence. The  
third theme is geographically based -- the diverse American inter- 
war literature including Irving Fisher's quantity theory, the needs-of- 
trade monetary policy view that was influential at the Federal  
Reserve, empirical business cycle research, and  
underconsumptionism. The fifth and central theme is Keynes's  
_General Theory_ and reactions to it by older and younger  
economists. Laidler's division of Keynes's critics into older and  
younger groups provides a clear view of what was new and what  
was old, what was kept and what was shed, in the "Keynesian  
revolution."   
 
The IS-LM model was not just a formalization of the _General  
Theory_. It was both more and less than this. It summarized, for  
instance, Wicksellian inter-temporal coordination issues and  
Marshallian quantity theory ideas that were not original to the  
_General Theory_. And it omitted key ideas from the inter-war  
period that Keynes emphasized in his book, such as the roles of  
uncertainty and expectations.   
 
_Fabricating the Keynesian Revolution_ is an effective complement  
to Laidler's _The Golden Age of the Quantity Theory_ (Princeton  
University Press, 1991). Between the two, he has provided an in- 
depth account of the development of monetary and macroeconomic  
theory from 1870 through the 1930s. The books share the same  
historiographic approach, detailed and nuanced tracing of the  
development and interplay of ideas from their sources. One  
difference in their content is that this book has less emphasis on  
the interaction of institutions and ideas. But the two books share  
the same central theme, that economic ideas evolve gradually and  
without so much drama as is often presumed. The evolution of  
economic doctrine is complicated, with ideas being created, being  
lost, and being found. Laidler provided a preview of this book's  
thesis in _The Golden Age_. So readers who are familiar with _The  
Golden Age_ will not be surprised by _Fabricating the Keynesian  
Revolution_. They will, however, be amply rewarded for reading it.   
 
 
Dan Hammond is author of _ Theory and Measurement: Causality  
Issues in Milton Friedman's Monetary Economics_ (Cambridge  
University Press, 1996).   
 
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