The discussion of the pre-1936 dominance of laissez faire started when Greg Ransom quoted Krugman:

"Until John Maynard Keynes published The General Theory of Employment,
Interest, and Money in 1936, economics -- at least in the English-speaking
world -- was completely dominated by free-market orthodoxy."


I watched the Milton Friedman bio on PBS (aired this week on PBS stations
across the US), "The Power of Choice: The Life  and Ideas of Milton Friedman" 
and found a similar claim. 

*****
Narrator: On the 7th of May, 1942, Milton testifies before Congress. It is
his first such assignment.  The subject is the danger of inflation and how
to prevent it. He seems to echo the generally accepted big government spending 
policies of the Englishman, John Maynard Keynes.

(Keynes speaking in background fades to Friedman.)

Friedman: Everybody then sounded Keynesian because everybody was Keynesian
to a certain extent, more or less at that time.

(Introduce Becker.)

Becker: Keynes argued that the market economies don't have a tendency, left
alone, to come and get full employment, that unemployment could be a pervasive
problem and, therefore, one needed a lot of government assistance and investment 
and the like to bring us up to full employment level. And that was a dominant
paradigm in the study of economics all over the place.

(Description of the creation of and the spring 1947 meeting of the Mt. Pelerin 
Society.)

Friedman: It was the first time I ever met economists, political scientists, 
and others from other countries around the world.  And it was organized 
because as of that time the number of people around the world who were firm
supporters of liberty, a classical liberal point of view about human society,
were very few and far between and were beleaguered where ever they were, in 
a small minority.
*****


I'll focus on just one comment and one question:

1) Notice the effectiveness of framing things as David slaying Goliath.  We
absolutely love it when the little guy triumphs against long odds. To make it
work, we have to build up Goliath. That is the source of the language (e.g.,
"completely dominated") that bothers experts.

2) My question is: But is the Story basically right?  Is the history of economic 
ideas of the 20th century, in a very broad brush, free market to 1936, a meteoric 
rise of Keynesianism, and then a pendulum swing back?  The date of the swing back
is harder to pin down. It was more gradual than Keynes' landslide win. 

Do you think that this Story is roughly true enough to be a reasonable first 
approximation or are the details of the underlying currents and different views
so important that the Story is wrong?  

The Story is attractive because it is easy to understand and tells us about the 
fluidity of orthodoxy, but it hides a lot of complexity and texture. Is the 
trade-off worth it to you?


Humberto Barreto