The history of economic thought in the twentieth century is a
bit like the history of Christianity in the sixteenth century.
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. Heresies would occasionally pop up, but they
were always suppressed. Classical economics, wrote Keynes in
1936, “conquered England as completely as the Holy Inquisition
conquered Spain.” And classical economics said that the answer
to almost all problems was to let the forces of supply and
demand do their job. But classical economics offered neither
explanations nor solutions for the Great Depression. By the
middle of the 1930s, the challenges to orthodoxy could no longer
be contained. Keynes played the role of Martin Luther, providing
the intellectual rigor needed to make heresy respectable.
Although Keynes was by no means a leftist—he came to save
capitalism, not to bury it—his theory said