It is now almost eighty years since Michal Kalecki published his formal mathematical model of the business cycle. In this paper, we want to examine the vision embedded in that early model and the writings he published at around the same time. Sections II and III center on Kalecki’s approach to local and global (in)-stability, and section IV suggests a simplified model designed to pinpoint key aspects of Kalecki’s thinking related to the issue of endogenous cycles, ‘class struggle,’ and growth.

Our paper analyzes and compares two attempts at integrating unemployment in macroeconomics. The first, due to Peter Diamond, consists in a search model exhibiting multiple equilibria and wherein cycles may be produced. The second is due to David Andolfatto and Monika Merz, who, more or less simultaneously, constructed models enabling the integration of the matching function into RBC modeling. In the first sections, we present the methodology upon which our paper is based—Axel Leijonhufvud’s decision-tree insight—and briefly describe these three economists’ motivations and the context in which they were working. We continue with recounting the birth and further development of the search paradigm upon which Diamond’s, Andolfatto’s, and Merz’s attempts were based. These preliminaries settled, we address the heart of the paper, the critical analysis of their respective contributions. Our interest lies specifically in how they made their way in the development of the field. We explain why Diamond’s model, which ambitioned to rival Robert Lucas’s explanation of business fluctuations, did not live up to its author’s expectations. Andolfatto’s and Merz’s project was less ambitious, yet their model became an established component of the RBC program—but at the price of abandoning several constitutive traits of the search approach.

John Maynard Keynes’s essay “Relative Movements of Real Wages and Output” is widely believed to be an important amendment to his General Theory because, in this essay, Keynes relaxed his core assumption of decreasing marginal returns to labor. I discuss the reasons that prompted Keynes to do so and then examine the consequences of replacing decreasing with non-decreasing returns for the model of effective demand from chapter 3 of the General Theory. I conclude that non-decreasing marginal returns do not sit comfortably with the principle of effective demand. The view that Keynes’s 1939 essay constitutes an important amendment to his General Theory has thus to be put into perspective.

The issue of performativity concerns the claim that economics shape rather than merely describe the social world. This idea took hold following a paper by Donald MacKenzie and Yuval Millo entitled “Constructing a Market, Performing Theory: The Historical Sociology of a Financial Derivatives Exchange” (2003). That paper constitutes an important contribution to the history of economic thought, since it provides an original way to focus on the scientific construction of the real economy. The authors discuss the empirical success of the Black–Scholes–Merton (BSM) model on the Chicago Board Options Exchange during the period from 1973 to 1987. They explain this success in part as instead of discovering pre-existing price regularities, the model was used by traders to anticipate option prices in their arbitrages. As a result, option prices came to correspond to the theoretical prices derived from the BSM model. In the present article I show that this is not a completely correct conclusion, since the BSM model never became a self-fulfilling model. I would claim that the October 1987 stock market crash is empirical proof that the financial world never fit with the economic theory underpinning the BSM.

This paper discusses the transition from a perspective in which the determination of income, output, and unemployment was seen as a part of the theory of the business cycle to one in which they are determined independently of the cycle, a transition that meant that the theory of output came to be more sharply separated from the theory of growth. In place of theories of the business cycle, which were rooted in structural changes associated with growth, business cycle theory came to be more of an adjunct to short-run theories. Whereas Arthur Cecil Pigou and John Maynard Keynes were already arguing in terms of the short run by the early 1930s, some American economists continued to think in terms of the business cycle until the very end of the 1930s. This paper shows that for Alvin Hansen and Paul Samuelson, both highly influential figures in postwar economics, the shift came about only because of the need to adduce structural factors to explain the recession of 1937–38 and wartime experience. The focus on income determination as the central macroeconomic problem in Samuelson’s textbook reflected the change in thinking that had happened during the 1940s.

Historians of the social sciences and historians of economics have come to agree that, in the United States, the 1940s transformation of economics from political economy to economic science was associated with economists’ engagements with other disciplines—e.g., mathematics, statistics, operations research, physics, engineering, cybernetics—during and immediately after World War II. More controversially, some historians have also argued that the transformation was accelerated by economists’ desires to be safe, to seek the protective coloration of mathematics and statistics, during the McCarthy period. This paper argues that that particular claim 1) is generally accepted, but 2) is unsupported by good evidence, and 3) what evidence there is suggests that the claim is false.

In “On the Concept of ‘Felicitas Publica’ in Eighteenth-Century Political Economy,” a recent paper in this journal, Federico D’Onofrio strongly criticizes the interpretation that Luigino Bruni and Stefano Zamagni have offered of the eighteenth-century Neapolitan tradition of civil economy and public happiness, as articulated by Antonio Genovesi. D’Onofrio claims that Bruni and colleagues have not fully explored the political meaning of public happiness within eighteenth-century economics, and that Bruni unfairly criticized methodological individualism on the basis of the intrinsically social character of happiness. This paper is a reply to D’Onofrio.

During several decades and until the end of the 1990s, the theory of structural economic dynamics has been absent in the field of so-called mainstream economic analysis. The literature included only either empirically oriented contributions or developments that were related to so-called critical theoretical approaches of structural change. At the end of the twentieth century, however, mainstream economic theorists changed this situation and began to investigate the field of structural dynamics, often using the Solovian theory of economic growth. During the last two decades, they contributed to change substantially the state of the theory of structural change. This contribution first provides an assessment of the advances realized by these theorists. It then confronts these advances with the so-called alternative or critical theoretical approaches of structural dynamics—namely, Luigi Pasinetti’s contribution and ‘evolutionary’ approaches—in order to provide a more complete picture of structural dynamics in the short and the long run.