Notes on the Effects of Economic Ideas on Policy: the Example of the German Social Market Economy*

No short and simple, non-trivial generalisation will stand up to much critical examination regarding the complex subject of the effects on economic policies of the theories, doctrines and ideas of economists. Nevertheless, striking generalisations have from time to time been attempted, as notably in the famous, now somewhat hackneyed, concluding paragraph of Keynes's General Theory. In those so-often-quoted words Keynes described the world as being "ruled by little else" than "the ideas of economists and political philosophers, both when they are right and when they are wrong" (Keynes [1936], p. 383). Certainly economists have been prepared to claim credit for phases of outstanding economic success. For example, in the middle of the nineteenth century, when the English economy was approaching the peak, relatively, of its economic power, and when England was justifiably coming to be known as "the workshop of the world", Nassau Senior triumphantly claimed credit for the ideas of his fellow classical political economists. In 1853 he asserted to a Frenchman regarding England's economic success: "It is the triumph of theory. We are governed by philosophers and political economists and you see the results" (Senior [1978], p. 169). Moving forward about a century we find Keynes's Cambridge successors claiming credit, on behalf of Keynes's ideas, for the historically almost unprecedented economic success, in terms of such usual indicators as levels of growth and unemployment, which much of the