Schools of Thought: The Feuds That Shape Policy
In the spring of 1944, two men sat in a Cambridge common room, arguing.
One was John Maynard Keynes, the most influential economist in the world. He had just spent several years designing the post-war global financial system — Bretton Woods, the International Monetary Fund, the World Bank. He believed that governments had a duty to manage the economy, to spend during recessions, to prevent the mass unemployment that had nearly destroyed Western civilization in the 1930s. He was the intellectual architect of the welfare state.
The other was Friedrich Hayek, an Austrian economist who had fled Vienna as the Nazis rose to power. He had just published The Road to Serfdom, a book arguing that government control of the economy — even well- intentioned control — was the first step toward tyranny. He believed that markets, left to themselves, would produce better outcomes than any government planner could achieve. He was the intellectual architect of what would later be called neoliberalism.
They were friends. They respected each other. And they disagreed about nearly everything.
This disagreement was not personal. It was a battle between two entire ways of seeing the economy — two "schools of thought" — that would shape the policies of every government on Earth for the rest of the century.
And here is the thing that makes this story essential: neither of them was entirely right, and neither was entirely wrong. Each saw something real and important that the other missed. And the history of economic policy since that Cambridge conversation has been, in large part, a pendulum swinging between their visions — sometimes landing well, sometimes landing catastrophically, and almost always leaving the actual people affected to deal with the consequences of whichever school happened to be in fashion.
Look Around You
The economic policies your government follows right now — the tax rates, the subsidies, the trade agreements, the labor laws — are not neutral, scientific decisions. They are shaped by a particular school of economic thought. Different parties and different eras favor different schools.
Think about the last major economic policy debate you heard about. Was it about whether the government should spend more or less? Whether markets should be freer or more regulated? Whether subsidies help or hurt? Behind every one of those debates is a school of thought — whether the debaters know it or not.
Why Schools of Thought Matter
You might wonder why we need to learn about different schools of economic thought. Is there not just one economics — the correct one?
No. And the fact that many people believe there is — that economics is a settled science like physics — is itself one of the most dangerous ideas in public life.
Economics is not physics. In physics, there are laws that hold everywhere, at all times, regardless of context. The speed of light does not change because a government passed a new law. Gravity does not care about elections.
In economics, the "laws" depend on context — on history, institutions, culture, power, and human psychology. An economic policy that works brilliantly in one country may fail disastrously in another. An idea that was correct in 1950 may be wrong in 2025 — not because the idea changed, but because the world changed.
This is why there are schools of thought — not because economists are confused, but because the economy is genuinely complex, and different aspects of that complexity are captured by different frameworks.
Think of it this way. Six blind men touch an elephant. One touches the trunk and says "An elephant is like a snake." Another touches the leg and says "An elephant is like a tree." A third touches the ear and says "An elephant is like a fan." Each is describing something real. None is describing the whole animal.
Economic schools of thought are those blind men. Each has hold of something real. The mistake is when any one of them insists that their part is the whole elephant.
The Classical School: The Market Knows Best
The founders: Adam Smith (1723-1790), David Ricardo (1772-1823), Jean-Baptiste Say (1767-1832)
The core idea: Free markets, left to themselves, produce the best outcomes for society.
Adam Smith, a Scottish moral philosopher, is often called the father of economics. His book The Wealth of Nations (1776) argued that when individuals pursue their own self-interest through voluntary exchange, an "invisible hand" guides them to produce outcomes that benefit society as a whole.
The baker does not bake bread out of kindness. He bakes it to earn money. But in pursuing his own profit, he feeds the town. The butcher, the brewer, and the baker — each pursuing their own interest — together create a system that feeds everyone better than any central authority could.
David Ricardo extended this with the theory of comparative advantage — the idea that countries benefit from trade even when one country is better at producing everything. If India can make textiles more cheaply than Britain, and Britain can make machinery more cheaply than India, both countries benefit by specializing and trading. Even if Britain is better at everything, trade still makes both better off, as long as their relative advantages differ.
What the classical school got right: Markets are powerful mechanisms for coordinating the activities of millions of people without central direction. Price signals — the rising and falling of prices — convey information that no planning agency could gather. Competition drives innovation. Trade creates mutual benefit.
What it got wrong — or at least, what it missed: Markets do not exist in a vacuum. They require rules, enforcement, trust, and institutions. Without these, markets become arenas for fraud, monopoly, and exploitation. Smith himself knew this — he warned extensively about the tendency of businessmen to collude against the public. But many of his followers forgot that part.
The classical school also assumed that markets always clear — that supply and demand always find equilibrium, and that unemployment is therefore a temporary, self-correcting phenomenon. The Great Depression of the 1930s demolished this assumption. When millions were unemployed and factories stood idle, the market was not "clearing." Something else was going on.
The Marxist School: The System Is Rigged
The founder: Karl Marx (1818-1883)
The core idea: Capitalism is a system of exploitation, in which the owners of capital extract surplus value from the labor of workers.
Marx agreed with the classical economists that capitalism was extraordinarily productive. He marveled at its dynamism. But he saw something they did not — or would not — see: the system was built on a fundamental inequality of power.
Workers, Marx argued, do not sell their labor voluntarily in any meaningful sense. They sell it because they have no choice — they do not own the means of production (factories, land, tools). The owner buys their labor for a wage that is less than the value of what they produce. The difference — the surplus value — is the owner's profit. Profit, in this view, is not a reward for risk or innovation. It is the product of exploitation.
Marx predicted that capitalism would destroy itself through its own internal contradictions. Competition would drive wages down. Workers would become impoverished. Crises of overproduction would recur as workers could not afford to buy what they produced. Eventually, the workers would rise up and replace capitalism with a collective system of ownership.
What Marx got right: The analysis of power in economic relationships remains profoundly relevant. Workers and owners are not equal participants in a free exchange — the power imbalance is real, and it shapes wages, conditions, and lives. Marx's analysis of economic crises — of boom and bust, of speculative excess, of the tendency of capitalism to produce inequality — has been validated again and again.
What he got wrong: The prediction that capitalism would collapse under its own weight has not (yet) come true. Capitalism proved far more adaptable than Marx expected — it absorbed labor movements, created welfare states, and reformed itself just enough to prevent revolution in most countries. And the alternatives to capitalism that were tried in the twentieth century — the Soviet Union, Maoist China — produced their own forms of exploitation, often far worse than what they replaced.
"Philosophers have only interpreted the world in various ways; the point, however, is to change it." — Karl Marx
The Keynesian School: Government Must Act
The founder: John Maynard Keynes (1883-1946)
The core idea: Markets can fail, and when they do, the government must step in to restore demand and employment.
Keynes wrote his masterwork, The General Theory of Employment, Interest, and Money, in 1936 — in the depths of the Great Depression. Millions were unemployed. Factories were idle. The classical economists said: wait. The market will correct itself. Wages will fall, and employers will start hiring again.
Keynes said: they are wrong. When everyone is afraid, they stop spending. When they stop spending, businesses lose revenue and fire workers. Fired workers spend even less. A vicious downward spiral sets in. The market does not correct itself — it spirals downward.
The solution, Keynes argued, was for the government to step in and spend. If private individuals and businesses are too frightened to spend, the government must fill the gap — building roads, schools, hospitals, anything that puts money in people's pockets and restarts the cycle of spending and earning.
This idea — fiscal stimulus — became the foundation of government economic policy in the Western world for nearly forty years. The post-war boom, from 1945 to about 1973, was the Keynesian golden age. Governments managed demand. Unemployment stayed low. Growth was strong. The welfare state expanded. It seemed like economics had been solved.
What Keynes got right: The insight that markets can fail — that they can get stuck in low-employment equilibrium, that demand matters, that the government has a role in stabilizing the economy — was revolutionary and remains valid. Every major recession since Keynes has been fought, at least in part, with his tools. When India's government spent heavily during the COVID-19 pandemic to support the economy, it was applying Keynesian principles.
What he got wrong — or what his followers got wrong: Keynesian policies work best in recessions, when there is idle capacity. But governments found it difficult to stop spending when the recession was over. The result, by the 1970s, was stagflation — simultaneous high inflation and high unemployment — a phenomenon that the Keynesian model did not predict and could not easily explain. This opened the door for the next revolution.
The Austrian School: Leave It Alone
The founders: Carl Menger (1840-1921), Ludwig von Mises (1881-1973), Friedrich Hayek (1899-1992)
The core idea: The economy is too complex for any central authority to manage. Individual liberty and spontaneous market order produce better outcomes than planning.
The Austrian school is, in many ways, the philosophical opposite of Keynesianism. Where Keynes saw a role for government management, the Austrians saw danger in it. Where Keynes worried about insufficient demand, the Austrians worried about the distortions created by government intervention.
Hayek's central argument was about knowledge. The economy, he said, runs on knowledge that is dispersed among millions of individuals — the farmer who knows her soil, the shopkeeper who knows his customers, the worker who knows her tools. No central planner, no matter how brilliant, can gather and process all this knowledge. The price system — the rising and falling of prices in free markets — is the only mechanism that can coordinate this dispersed knowledge effectively.
When governments intervene — setting prices, directing investment, managing demand — they inevitably distort the price signals that make the market work. These distortions create new problems, which call for more intervention, which creates more distortions. Hayek called this the "road to serfdom" — a gradual slide from well-intentioned intervention to authoritarian control.
What the Austrians got right: The knowledge problem is real. Central planning does face enormous information challenges. The collapse of the Soviet Union — which attempted to plan an entire economy from Moscow — demonstrated this dramatically. And the Austrian insight that government intervention can create perverse incentives and unintended consequences is important and often overlooked by those who see government as the solution to every problem.
What they got wrong: The Austrian prescription of minimal government has its own blind spots. Markets can and do fail — monopolies form, externalities are ignored, public goods are underprovided, financial crises erupt. The 2008 financial crisis happened not because of excessive government regulation but in part because of insufficient regulation of financial markets. The pure Austrian prescription — let markets work it out — was not a credible response to a global banking collapse.
What Actually Happened
The battle between Keynesian and Austrian (and later monetarist) ideas played out in real time across the twentieth century.
1945-1973: Keynesianism dominated. Government spending was high. Growth was strong. Inequality fell. This was the golden age of the welfare state — in Europe, in the United States, and to some extent in India's planned economy.
1973-1980: Stagflation — high inflation combined with high unemployment — discredited Keynesian orthodoxy. The tools Keynes prescribed did not seem to work when both problems existed simultaneously.
1980-2008: The neoliberal revolution. Reagan in the US, Thatcher in the UK, and eventually Manmohan Singh in India championed free markets, deregulation, privatization, and reduced government intervention. This was the era of Austrian and monetarist ideas ascendant. Growth returned, but inequality soared.
2008-present: The global financial crisis discredited the idea that unregulated markets are self-correcting. Governments around the world responded with massive Keynesian stimulus. But the debate continues — and the pendulum keeps swinging.
The Monetarist School: It's About the Money
The founder: Milton Friedman (1912-2006)
The core idea: Inflation is always and everywhere a monetary phenomenon. Control the money supply, and you control the economy's most important variable.
Friedman agreed with the Austrians about the importance of markets and the dangers of government overreach. But he added a crucial insight: the most important thing the government does is manage the money supply. Get this right, and most other things will fall into place. Get it wrong, and nothing else matters.
Friedman argued that the Great Depression was not caused by a failure of capitalism, as Keynes believed. It was caused by a failure of the Federal Reserve — the US central bank — which allowed the money supply to collapse by a third between 1929 and 1933. If the Fed had maintained the money supply, the depression would have been a mild recession.
This insight shaped central banking for decades. The idea that central banks should focus primarily on controlling inflation through the money supply — monetarism — became enormously influential in the 1980s and 1990s.
What Friedman got right: The money supply does matter enormously. Central banks do have the power to cause or prevent severe economic downturns through monetary policy. The emphasis on controlling inflation has served many countries well.
What he got wrong: Monetarism proved difficult to implement in practice. The money supply turned out to be harder to measure and control than Friedman assumed. And the prescription of strict money supply targets, when implemented by central banks in the early 1980s, caused deep recessions in both the US and the UK — the medicine was sometimes as bad as the disease.
The Developmental School: The State Must Lead
Key thinkers: Alexander Gerschenkron (1904-1978), Alice Amsden (1943-2012), Ha-Joon Chang (born 1963)
The core idea: Late-developing countries cannot simply follow the free-market path. The state must actively guide industrialization and protect infant industries.
This school emerged from the observation that every rich country in the world — Britain, the United States, Germany, Japan, South Korea, China — used state intervention extensively during its period of industrialization. Tariffs protected young industries. Subsidies supported strategic sectors. Government banks directed credit. The state picked winners and supported them.
Ha-Joon Chang, a Korean-born economist at Cambridge, made this argument most provocatively in his book Kicking Away the Ladder (2002). He argued that rich countries, having climbed to prosperity using the ladder of state intervention, were now telling developing countries to adopt free-market policies — in effect, kicking away the ladder that they themselves had used.
India's early development strategy — Nehruvian planning, import substitution, public sector industrialization — was squarely in the developmental school tradition. So was South Korea's state-directed development under Park Chung-hee, and China's state capitalism under Deng Xiaoping and his successors.
What the developmental school got right: The historical record is clear — almost no country has industrialized without significant state involvement. The pure free-market path to industrialization exists mainly in theory. In practice, states have always played a role in building infrastructure, protecting infant industries, investing in education, and directing credit toward strategic sectors.
What it got wrong: State-led development can also fail disastrously. India's License Raj stifled innovation and created vast inefficiencies. Many state-owned enterprises became patronage machines rather than productive enterprises. The developmental state works when the state is competent and accountable. When it is corrupt or captured by special interests — which is common — the cure can be worse than the disease.
The Institutional School: Rules of the Game
Key thinkers: Douglass North (1920-2015), Daron Acemoglu (born 1967), James Robinson (born 1960)
The core idea: What matters most for economic outcomes is not markets or states but institutions — the rules, norms, and organizations that structure human interaction.
Douglass North defined institutions as "the rules of the game in a society." They include formal rules (laws, constitutions, regulations) and informal norms (customs, traditions, codes of behavior). They include the organizations that enforce these rules — courts, police, bureaucracies, regulatory agencies.
The institutional school argues that the difference between rich and poor countries is not primarily about geography, culture, or natural resources. It is about institutions. Countries with inclusive institutions — those that protect property rights, enforce contracts, provide equal access to economic opportunities, and limit the power of elites — grow rich. Countries with extractive institutions — those that concentrate power and wealth in the hands of a few — stay poor.
Acemoglu and Robinson's book Why Nations Fail (2012) made this argument through a sweeping tour of history, from the Roman Empire to modern Botswana. Their central claim is that institutions explain more about economic outcomes than any other single factor.
What the institutional school got right: Institutions clearly matter. The same people, the same culture, the same geography can produce vastly different economic outcomes under different institutional arrangements. North Korea and South Korea are the most dramatic example — the same people, the same language, the same history, divided by a border and subjected to different institutions. One is prosperous. The other is impoverished.
What it got wrong — or at least, what it leaves out: The institutional school can become tautological — defining "good institutions" as those associated with good outcomes, and then explaining good outcomes by pointing to good institutions. The harder question — how to build good institutions in the first place, especially in countries where extractive institutions are deeply entrenched — is not fully answered.
SCHOOLS OF THOUGHT: A COMPARISON
CLASSICAL MARXIST KEYNESIAN AUSTRIAN DEVELOPMENTAL INSTITUTIONAL
──────────── ──────────── ──────────── ──────────── ───────────── ─────────────
KEY Smith, Marx, Keynes Hayek, Gerschenkron, North,
THINKERS Ricardo Engels Mises Chang, Acemoglu,
Amsden Robinson
CORE Free markets Capitalism Markets can Economy is State must Institutions
IDEA produce exploits fail; govt too complex lead determine
best workers must act to manage industriali- outcomes
outcomes zation
ROLE OF Minimal Eventually Active Minimal Central Create and
GOVERNMENT abolished manager of director of enforce
in favor of demand development good rules
collective
ownership
VIEW OF Self- Arena of Can get Self- Needs Depends on
MARKETS correcting exploitation stuck; correcting protection institutional
and crisis needs help (if left and guidance quality
alone)
BIGGEST Monopoly, Exploitation Inflation Market Government How to build
BLIND SPOT inequality, alternatives from too failures, failure, good
market were often much financial corruption, institutions
failures worse spending crises rent-seeking from scratch
ERA OF 1776-1930s 1848-1989 1936-1973 1944-present 1950s-present 1990s-present
GREATEST (and after (various (and post-
INFLUENCE 2008 again) revivals) 2008 again)
POLICY 1991 India Soviet New Deal, Reaganomics, East Asian Property
EXAMPLE reforms, Union, post-WWII Thatcherism Tigers, rights
WTO rules China pre- welfare India's reforms,
1978 states planning era anti-
corruption
drives
Think About It
Which of these schools of thought best explains the economic problems in your own community? Are the problems caused by too much government intervention (the Austrian view), too little (the Keynesian view), exploitation by the powerful (the Marxist view), bad institutions (the institutional view), or a failure to industrialize (the developmental view)?
You will probably find that no single school captures the full picture. That is the point.
The Pendulum in Practice
The most important thing to understand about these schools of thought is that they do not stay in textbooks. They walk out of universities and into government offices. They shape the policies that determine whether you have a job, what you pay for food, whether your children can go to school, and whether your country grows or stagnates.
India's economic history is a case study in the pendulum.
1947-1991: The planning era. Influenced by developmental economics, Marxist ideas about the dangers of capitalism, and Keynesian faith in government management, Nehru's India built a planned economy. The state directed investment, owned key industries, protected domestic producers with high tariffs, and regulated private enterprise through the License Raj. The model achieved some important goals — a heavy industrial base, self-sufficiency in food (through the Green Revolution), and the institutions of a democratic state. But it also produced stagnation — the notorious "Hindu rate of growth" of 3-4 percent per year, which barely kept pace with population growth.
1991-2008: The liberalization era. Influenced by classical and monetarist ideas, and pushed by a balance-of-payments crisis, India opened its economy. Tariffs fell. The License Raj was dismantled. Foreign investment was welcomed. Private enterprise was unleashed. Growth accelerated dramatically — reaching 8-9 percent per year in the mid-2000s. The IT revolution created a new middle class. Poverty rates declined.
But inequality widened. The benefits of growth concentrated in cities, in the service sector, and among the educated. Agriculture stagnated. The informal sector — where most Indians work — saw limited improvement. The institutional school would say: the reforms changed the rules of the market game, but the deeper institutions — weak courts, corrupt bureaucracies, social exclusion — remained largely unchanged.
2008-present: The search for balance. The global financial crisis showed that unregulated markets could be catastrophically unstable. India experimented with a mix of approaches — some market-oriented (GST, bankruptcy reform), some state-directed (Make in India, Atmanirbhar Bharat), and some institutional (Aadhaar, digital payments infrastructure). The ideological certainty of the 1990s — "just liberalize and growth will follow" — has given way to a more pragmatic, less doctrinaire approach. Or at least, that is the hope.
Each School as a Lens
Here is the most useful way to think about these schools: each one is a lens. A lens that lets you see certain things clearly while blurring others.
If you are analyzing a problem of monopoly power — a single corporation dominating a market and exploiting consumers — the classical and Marxist lenses are most useful. The classical lens shows you the failure of competition. The Marxist lens shows you the concentration of power.
If you are analyzing a recession — mass unemployment, idle factories, fearful consumers — the Keynesian lens is most useful. It shows you the failure of demand and the need for government action.
If you are analyzing the failure of a government program — a subsidy that enriches bureaucrats instead of reaching the poor, a regulation that stifles innovation — the Austrian lens is most useful. It shows you the knowledge problem, the perverse incentives, and the unintended consequences of intervention.
If you are analyzing why some countries are rich and others poor despite similar resources — the institutional lens is most useful. It shows you how the rules of the game shape outcomes more than any individual policy.
The worst thing you can do is commit yourself to one school and ignore all others. That is intellectual tribalism, and it leads to bad policy.
The best thing you can do is learn the core insight of each school, and then apply the right lens to the right problem.
"When all you have is a hammer, everything looks like a nail." — Abraham Maslow
The Schools You Won't Find in Most Textbooks
Standard Western economics courses typically cover classical, Keynesian, and monetarist economics. They may mention Marx in passing. But there are important traditions of economic thought from outside the Western canon that deserve attention.
Indian economic thought has a tradition stretching back to Kautilya's Arthashastra (c. 300 BCE), which discusses taxation, trade regulation, state enterprises, and price stabilization with a sophistication that would not be matched in Europe for nearly two millennia. The Gandhian economic tradition — emphasizing village self-sufficiency, simple living, decentralized production — offered a radical alternative to both capitalism and communism. We will explore these more in the next chapter.
Islamic economic thought, rooted in the Quran's prohibition of usury (riba) and emphasis on equitable distribution (zakat), has produced an alternative financial system — Islamic banking — that operates without interest. This is not a curiosity; Islamic finance manages trillions of dollars worldwide and has proven remarkably resilient during financial crises, in part because its prohibition on pure speculation prevented the kind of excessive risk-taking that caused the 2008 crash.
Buddhist economics, articulated most famously by E. F. Schumacher in his essay "Buddhist Economics" (1966), challenges the Western assumption that more consumption is always better. It asks: what kind of work leads to human well-being? What level of consumption is enough? How do we create an economy that serves human development rather than merely producing more goods?
Feminist economics challenges the invisibility of unpaid labor — particularly the domestic and care work done overwhelmingly by women. Standard economic models count only market transactions. The cooking, cleaning, child-rearing, and elder care that women perform — the work that makes all other work possible — does not appear in GDP. Feminist economists argue that any model that ignores half the work being done is not just incomplete but systematically distorted.
Ecological economics challenges the assumption that natural resources are infinite and that environmental damage is an "externality" — a side effect to be noted but not prioritized. Ecological economists argue that the economy is a subsystem of the biosphere, not the other way around. An economy that destroys its ecological foundation is not growing — it is consuming its own future.
These schools remind us that the dominant Western economic traditions, for all their power, are not the only ways of thinking about how humans organize their material lives.
Why This Matters for You
Understanding schools of thought is not an academic exercise. It is essential for understanding the news, evaluating politicians' promises, and making sense of the economic arguments that shape your life.
When a politician says "We need to cut government spending to promote growth," they are drawing on classical and Austrian ideas. When another politician says "We need to increase government spending to create jobs," they are drawing on Keynesian ideas. When a labor activist says "The system is rigged in favor of the rich," they are drawing on Marxist ideas. When a policy analyst says "We need better institutions, not more spending," they are drawing on institutional ideas.
None of these arguments is automatically right or wrong. Each is a partial truth. Your job — as a citizen, not just as a student — is to understand which lens is being applied, what it illuminates, and what it leaves in shadow.
"The ideas of economists and political philosophers, both when they are right and when they are wrong, are more powerful than is commonly understood. Indeed, the world is ruled by little else." — John Maynard Keynes
Think About It
Pick a current economic debate in your country — it could be about privatization, subsidies, minimum wages, or trade policy. Now try to argue each side using a different school of thought.
Can you make a classical argument for it? A Keynesian argument against it? A Marxist critique? An institutional analysis?
If you can, you are not being inconsistent. You are being intellectually honest — seeing the elephant from multiple angles.
The Bigger Picture
We started this chapter with two brilliant economists arguing in a Cambridge common room, each convinced that the other was wrong about the most important questions in economics. We have traveled through two centuries of intellectual combat — from Smith's invisible hand to Marx's class struggle, from Keynes's demand management to Hayek's spontaneous order, from the developmental state to the primacy of institutions.
What have we learned?
First, that economics is not a settled science with a single correct answer. It is a field of genuine, deep, unresolved disagreement. This is not a weakness — it is a reflection of the genuine complexity of the subject matter. Anyone who tells you that economics has been figured out is either selling you something or has not looked closely enough.
Second, that each school of thought captures something real and important. Markets are powerful. Exploitation is real. Demand matters. Central planning has limits. States must sometimes lead. Institutions shape everything. These are not contradictions. They are different aspects of the same complex reality.
Third, that the dominance of any single school of thought in any era is not a sign that it is correct. It is a sign that it spoke to the problems of that era. When the problems change — when stagflation replaces unemployment as the primary concern, or when financial crises replace inflation — the dominant school changes too. This is normal. The mistake is to believe that the currently fashionable school has the final answers.
Fourth, that the stakes are enormous. These are not abstract intellectual debates. They determine whether your government invests in schools or cuts spending, whether your factory is protected or exposed to global competition, whether your wages are determined by market forces alone or supported by minimum wage laws. The school of thought in fashion at the ministry of finance shapes your life more directly than most things you can vote on.
And fifth, that the wisest position is not to choose a side but to understand all sides — to carry multiple lenses and to know which one is appropriate for which situation. This is harder than tribal loyalty to one school. It requires more reading, more thinking, and more tolerance for uncertainty. But it is the only approach that does justice to the magnificent, infuriating complexity of economic life.
Keynes and Hayek kept arguing until Keynes died in 1946. The argument did not die with him. It continues today — in every parliament, every editorial page, every dinner table where someone says "the government should" or "the market should." The argument will never be resolved, because the underlying reality is too complex for any single school to capture.
But it can be better understood. And understanding it — understanding why intelligent, well-meaning people disagree about economics — is the beginning of wisdom about the world.
"The test of a first-rate intelligence is the ability to hold two opposed ideas in the mind at the same time, and still retain the ability to function." — F. Scott Fitzgerald