Next, let us look at the achievements of the second group of economists, the theorists. Here we come to the heart of economics. The great names in economics—from Adam Smith to Ricardo, Leon Walras, Marshall and Keynes—all owe their fame principally to their theoretical contributions. But their thoughts, in many cases, have suffered the familiar fate of great ideas: first often regarded as quite wrong, they are later taken in stride as obvious and nothing new. Once an idea has been fully accepted, the original difficulty of reaching it is easily forgotten.
Yet much of what today goes for "common sense" or "what every practical man knows" is the laborious achievement of theorists. Take the case history of fiat money and inflation. For centuries, kings and politicians practiced the gentle arts of clipping coins and debasing their gold or silver contents, as an easy way out of financial embarrassments. Their successors accomplished the same thing even more handily by printing paper money. Today we would call that process money-creation for the purpose of deficit spending.
Eventually, theoretical economists, Adam Smith among them, demonstrated that a country does not get richer by running a deficit and multiplying the money in circulation. All that this accomplishes is to drive up prices. The economists then preached the gospel of sound money and balanced budgets until every practical man knew it and believed that he had got hold of an obvious law of nature, instead of a proposition in theoretical economics.
Then theoretical economics, under the leadership of Keynes, took a further step forward. It was discovered that while the gospel of the balanced budget was true enough under conditions of prosperity and full employment, such as Adam Smith and his successors had assumed, it suffered exceptions in depressions. When men and machines are idle, Keynes reasoned, deficit spending need not mean "too much money chasing too few goods" and consequent inflation. The idle men and machines could be drawn into production by money-creation and deficit spending. They would increase the supply of goods and thus keep money and goods in balance. Deficit spending, which at full employment is inflationary, in a depression becomes the means to increase production and end the depression.
Keynes' doctrine, after an initial uproar, was soon accepted by most economists for what it was: not a flat denial of the old teachings but a doctrine dealing with an exception—unfortunately a frequent one—from the classical norm of a full employment economy. But among non-econ
omists the classical teachings had done their work only too well. After they were transmuted in popular thinking from the conclusions of economic reasoning to universal truths, belief in them was hard to shake. It took many years of argument and persuasion to gain popular acceptance of the doctrine that, in depressions, the government should run a deficit and finance it by expanding the volume of money. The example of Keynes demonstrates one of the difficulties of progress in economic theory; the findings of theorists become commonplace, depriving economics of the credit it deserves, and they end up by standing in the way of new ideas.
Finally, we come to the third group of economists, the administrators and policymakers. Most economists probably feel that economic thought and research, if they are to justify themselves, must ultimately lead to action. Of course, it is precisely when economists come out into the arena of business or government that the difficulties against which they must struggle become most apparent.
We would misunderstand the administrators and policymakers, however, if we thought that all their activities were of the spectacular kind that involve full-dress forecasts or basic policy decisions. Much of their work is routine administration and ordinary economic engineering. Existing laws must be executed, new ones drafted. The role of the government with respect to finance, business, labor, agriculture and foreign trade often requires the economist to use his skills within a limited scope to achieve limited results. He employs his tools and plies his trade like an engineer who is told to construct a road or a bridge, without being asked to decide whether the bridge or road is in the right place, or how much traffic will move over it.
Economic craftsmanship of this sort is continually drawn upon in legislation, public administration and business. It serves its purpose regardless of the success or failure of economists in the more controversial roles of forecasters of cycles and propounders of national policies.