… is from page 40 of Arnold Kling’s excellent new book, published this year, Specialization and Trade: A Re-introduction to Economics (link added):
[Paul] Samuelson and his successors taught that the economic machine had a gas pedal that could be used to avoid economic slowdowns. That device was “aggregate demand,” which could be increased by the government’s printing money, running a budget deficit, or both. In this economic subfield, known as macroeconomics, the concept of specialization is forgotten entirely. Instead, economists employ an interpretive framework in which every worker performs the same job, toiling in one big factory that produces a homogeneous output. Macroeconomics replaces specialization with that GDP factory.
Indeed, it’s not too much to say that macroeconomics in the Samuelsonian-Keynesian mode abstracts away from most of what is essential in economics. Market processes and entrepreneurial searches for profit; specialization; the complementarity of different capital goods with each other and with labor; the role of relative prices; the reality and importance of institutions; the reality and importance of the fact that politicians are relatively uninformed and self-interested agents. These important aspects of economic and social reality are either ignored or treated haphazardly in too much of what is called “macroeconomics.”
