Money and Markets: Essays in Honor of Leland B. Yeager

96 Harry Landreth and David C. ColanderWhile this paper focuses on the changes that took place in American economics duringthe twentieth century, the importance of American graduate education in economicsstrongly suggests important ramifications for the development of non-American economicthought.2 As he points out, by this he does not mean that “anything goes, or that whatever onecomes up with is automatically valid.” He is simply saying that one should “let peoplework with whatever method works for them, and fits with their talents and inclinations,”Austrian Economic Newsletter (1988).3 Our argument is not that he was wrong in holding his views; only that holding thoseviews reduced his influence.4 There are many dimensions of pluralism. There can be pluralism in policy proposals,where the profession comes to multiple mainstream positions on policy. We have notseen a significant post World War II decline in policy pluralism. Where we believe therehas been a decline in pluralism is in methodological pluralism. There is less diversity ofapproach today than there was in the 1930s. It is that aspect of pluralism that we focus onin this paper.5 For a further development of this idea, see Colander (1991).6 This view of economics is developed in Colander (forthcoming) and Colander et al.(2005).7 Since this debate between the formalists and the nonformalists plays such a central rolein the transformation of American economics, it needs to be clarified. It is not a debatebetween those who favor mathematics and those who don’t. It is a debate about theworldview that individuals have concerning the complexity of the economy, and theusefulness of formalizing discussions of the economy with the mathematical tools thatexist at the time. Nonformalists believe that the mathematical tools available at the timeare insufficient to capture the complexity of the economy, whereas formalists believe thatthose tools are sufficient.What this means is that as mathematical tools change, people’s view of the usefulnessof a formal approach may change. For example, with the recent developments in mathematicssuch as chaos and catastrophe theory, and with the increase in the ability ofcomputers to handle difficult problems, views of whether formalism is useful can be quitedifferent today than they were in the 1930s when the tools involved relatively simpledifferential calculus, and almost no developed statistical analysis.8 We see Leland’s methodology as similar to Marshall’s. In many ways Leland was theconsummate Marshallian straddler.9 Austrian economics developed as a separate school only later in the 1970s as a group ofeconomists worked hard to organize themselves into a separate school.10 As an example, consider the path of one of the authors. He, together with three otherTexas economics PhD candidates from the University of Texas at Austin, transferred tothe PhD program at Harvard during the middle 1950s.11 This doesn’t mean that their ideas weren’t correct or better than the emerging ideas; itsimply means their ideas no longer were compatible with the institutional structure of theemerging shape of the economics profession’s institutions.12 Lampman’s Economists at Wisconsin 1892–1992 (1993) may trigger research that willproduce clearer insights into what happened to the Wisconsin school.13 See Colander (1995) for further discussion.Bibliography and referencesAustrian Economic Newsletter (1988). A Conversation with Leland B. Yeager. Austrian EconomicNewsletter, 12(3).Ayres, Clarence E. (1951). The Co-ordinates of Institutionalism. American Economic Review,XLI(May): 47–55.