G. L. S. Shackle’s journal article is a historical and pedagogical survey of economic thought, centred on Britain and moving from nineteenth-century general equilibrium through the upheavals of the 1930s to the discipline’s contemporary responsibilities. Its provocative title names the collapse of an intellectually satisfying picture of automatic economic harmony, not the disappearance of economics. The argument moves from competition and unemployment through growth theory and mathematical methods, before proposing a curriculum organised around practical questions. Its ultimate concern is how economics can become more useful without mistaking formal precision for an adequate understanding of human conduct.
It asserted a natural, impersonal, self-regulating harmony of interests in the whole economic world.
This sentence identifies the promise of the general-equilibrium tradition associated with Walras, Wicksteed, and Pareto. Prices supposedly coordinated production, distributed income, and directed expenditure towards an optimum. Shackle stresses the demanding assumptions behind that achievement: perfect competition requires not merely physically identical commodities but the absence of imagined differences, instantaneous price communication, and, in its extended formulation, costless factor mobility. Sraffa’s challenge in 1926 exposed the neglected territory between monopoly and competition. The subsequent theories of imperfect competition weakened the organising principle of the older system even when their authors understood themselves as improving it. More fundamentally, an efficient allocation conditional on a particular income distribution cannot establish that the distribution itself is just or desirable.
Mass unemployment made this breakdown publicly unavoidable. Orthodox theory could not account for abundant resources remaining unused during the Depression. Shackle presents Keynes’s intervention through intellectual autobiography: hearing Joan Robinson at the joint research seminar in Cambridge in October 1935 transformed his understanding and led him to abandon a thesis attempting to explain unemployment through a model of inflation. This recollection makes theoretical change an experience of illumination, rather than merely a succession of published propositions.
But it is only in so far as they do order extra machinery and buildings and get them produced, and so fill the "saving gap", that there will be any saving.
The crucial Keynesian move is to deny that attempted saving automatically becomes investment. If income-earners withhold consumption expenditure, businesses must undertake sufficient investment to sustain output and employment; where expected profits do not induce them to do so, government expenditure must replace the missing demand. Shackle treats the contemporary accusations against Keynes—hostility to thrift, freedom, and private enterprise—as failures to recognise the argument’s logical basis. Government intervention follows from the absence of any automatic guarantee of full employment, rather than from a simple preference for state control.
His account also qualifies the opposition between Keynes and Hayek. Hayek analysed excessive investment encouraged by easy credit when resources were already fully employed; Keynes addressed deficient demand and idle resources. Postwar inflation consequently restored the relevance of concerns that had seemed misplaced during the Depression.
We may say that the Hayek-Keynes debate of 1932 was unnecessary, for Keynes was discussing deflation and Hayek was describing inflation.
This distinction allows Shackle to connect employment theory with growth economics. Harrod’s achievement was to bring together the multiplier’s relation between investment and consumption levels and the accelerator’s relation between investment and increases in consumption. Their reconciliation yielded conditions for steady expansion without violent fluctuations. Shackle places this abstract work, alongside Domar’s, within a broader field that also includes historically informed studies by Lewis and Rostow. Development is both an analytical problem and an urgent political question: population growth and persistent poverty threaten international stability, while Western assistance is entangled with ideological competition.
Mathematical economics receives an equally qualified assessment. The foundation of the Econometric Society in 1930 marked an overt methodological transformation, although mathematics had long contributed to the discipline. Shackle questions the segregation of mathematical specialists but recognises genuine advances in proof and calculation, including input-output analysis, game theory, and linear programming. The ironic contrast between economics as a gentleman’s verbal pursuit and a “computing factory” registers both lost intellectual elegance and increased capacity to confront distress.
The article’s constructive second movement sets out ten questions and regroups them into five teaching domains: value and distribution; money and employment; money, banking, and public finance; growth; and international trade. This sequence makes full employment a condition that allocation theory cannot simply assume. It also connects monetary institutions with political power: both private banks and governments have interests that may conflict with stable purchasing power. Shackle asks whether the Bank of England should enjoy independence comparable to the judiciary’s, while advocating teaching that integrates monetary management and public finance. Trade likewise raises distributive questions about compensating nations that benefit least from free exchange, alongside Britain’s dependence on overseas markets and food supplies.
The conclusion replaces the image of a ruined edifice with that of a tree bent but not broken by successive intellectual storms. Economics must relinquish disciplinary self-sufficiency and engage psychology, anthropology, sociology, and political theory.
Much recent work in economics has treated man as a computer. Let us also study him as an artist, a poet, a mystic, a dreamer, in some degree, even in his economic activity.
The article’s enduring relevance lies in this conjunction of analytical reconstruction and human breadth. Shackle accepts formal tools and practical policy responsibilities while refusing to let either restore the old illusion of a complete, self-sufficient science.
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