Production rather than preferences should play the leading role in the theory of markets, as in the book’s analysis of volatility and policymaking. Production is not only the fount of social wealth, it is organized by firms whose decisions are guided by a clear ordering principle, their profitability. There is moreover an institution, the market, that can weed out the firms that fail to pursue profits effectively. But the purging of inefficiency by the market confronts policymakers with the dilemmas of Schumpeterian creative destruction. Policies that compensate firms and their owners for any declines in profitability will also dampen the threat of bankruptcy; the enforcement of productive efficiency can require unfettered competition. An application to international trade illustrates some of the challenges: For foreign competition to lead to productive efficiency, domestic prices must be aligned with world prices, which will push some firms into liquidation.

The problems that afflict Pareto efficiency can be overcome if the criterion is rebuilt on preference-free foundations. A policy change passes the ‘availability test’ if it allows agents to afford whatever they purchased originally: Agents might not then be better off but no one can legitimately object to the change. One way to pass the availability test is to give agents the right to repeat their original transactions; a reform of rent control serves as an example. A second strategy stabilizes prices for consumers while letting the prices that firms face promote efficiency in production. A deregulation of a public utility, for example, can preserve consumer prices while giving firms an incentive to innovate. These policy alternatives show how to resolve the Schumpeterian dilemma of creative destruction: They harness the progressive feature of capitalism, that it fosters technological change, while protecting the individuals who can be harmed by the same forces. Conventional laissez-faire policies are in contrast difficult to justify even from within the orbit of traditional economic theory and can generate bitter social conflict. An application to opening an economy to free trade shows how to combine the advantages of technological change while satisfying the availability test.

This chapter criticizes the strand of recent political science and political theory that claims liberal democracy is under threat from illiberal populism and that this is a wholly unique phenomenon of the present rather than part of recurrent crisis of liberal democracy tied to the political sociology of the Schumpeterian competitive party model. Viewed this way, this crisis is in fact a result of the failure of liberal democracy to offer citizens a defensible principle of legitimacy based on a robust notion political equality, the core principle of democracy. Precisely, what appears to be the source of its robustness, the competitive process of parties and politicians for the popular vote is—when viewed as a recurrent struggle to bring this model back under the control of citizens—the very source of its frailty. The dichotomy liberal democracy-populism blinds us in assessing the actual developments arising from the fragility of liberal democracy. Indeed, it may inform responses that will lead to outcomes quite at odds with the original intentions of those who deploy it.

This concluding chapter naturally considers the long-term impact of the image of Keynes that has been suggested in the substantive chapters. It thus confirms the view that ‘Pragmatic Keynesianism’ had obvious traction in situations where practical expedients are sought in face of economic problems. But it also suggests that ‘Dogmatic Keynesianism’ has insights that can be applied (in a more theoretical sense) in understanding the workings of the economy, with reference to the rival theories of especially Schumpeter, Hayek and Friedman. The abiding concern that Keynes showed with the concepts of probability and uncertainty is highlighted; but also, in a methodological frame, the conclusion identifies intractable reasons why individual economic rationality cannot be relied upon to rescue us. Above all, this is a book that appeals to the historical record in offering us insights on the unique career path of a figure who was rather more than today’s conception of a professional economist.

This chapter brings together ideas from earlier chapters on decision-making and integrates them with perspectives from evolutionary economics to analyze the process of structural change. It begins with a neo-Marshallian view of the competitive process and price setting in a mature industry, which is then extended to consider how selection processes work when an industry is disrupted by customers switching to different products or the uptake of innovative production systems. This leads to a view of industries as being akin to sporting leagues in which the winners can increasingly dominate unless new entrants or less-successful firms can fight back despite smaller profits by rewriting the rules of the game. The uptake of new concepts is analyzed via Dopfer et al.’s “micro–meso–macro framework,” in which a “meso” is a generic concept that firms apply in different “micro” ways, often triggering much wider “macro” changes (e.g., impacts of smartphone apps) but where adoption can be delayed by deal-breaker issues with initial versions and other sources of resistance to change. Finally, the chapter examines how shifting corporate politics shapes how bold firms are in making innovations and how the changing distribution of knowledge in an industry affects the division of labor between firms.

Emphasis on structural change as an essential element of long-run growth in capitalist economies since the Industrial Revolution is a main characteristic of Pasinetti’s scientific work. Technical progress is the main driver of structural change and economic growth.Pasinetti integrates structural change in economic analysis by considering the double-sided nature of technical change and the interaction between the supply side (growing productivity) and the demand side (increasing per-capita income) and the evolving structural dynamics of employment and consumption. The analysis is conducted on the basis of vertically integrated sectors which may differ in the growth rates of productivity and demand. In order to maintain full employment over time, an effective demand condition and a capital accumulation condition must be satisfied. In his modern theoretical analysis of Ricardo’s machinery problem Pasinetti shows that a continuous process of structural change is a precondition to avoid technological unemployment. Furthermore, full employment has to be actively pursued by an economic policy raising effective demand and promoting research and development thus combining the insights of Keynes and Schumpeter.

In the framework of a critical illustration of the contemporary history of economics, this chapter provides a brief illustration of Wicksell and the Swedish school, Veblen and his institutionalism, Weber and his method, Schumpeter and his notions of statics and dynamics, Keynes and his views on probability and uncertainty as well as on finance and employment