Conclusions

Economic policy as a discipline had clearly emerged in the 1950s in some European countries - mainly Scandinavian countries, the Netherlands and Italy. Australia was the main country where it had developed outside Europe.

25

Economic policy was built as a discipline mainly by collect­ing various innovations introduced in different fields of eco­nomics, in addition to mathematics and statistics (insofar as the ‘theory of economic policy' is concerned), political philo­sophy and political science (for welfare economics and social choice, i.e. the ‘logic' of economic policy). But it also drew on the evolution of the economic and social systems.

The logic and theory of economic policy constituted the ‘core' of the discipline. Various parts of this core were the object of both minor and vital critiques concerning the exis­tence of government failures. Critiques moved to its core can partly explain why the discipline did not pass over to other countries and did not survive, even in Europe and Australia, after the 1970s or, in some cases, the 1980s. This is appar­ently strange. Section 2.2 offers other possible reasons that could jointly explain this setback.

Netherlands under the impulse of Jan Tinbergen (Caffe 1943b, 1945, 1946a, 1946b, 1947, 1948a, 1948b). In these papers he linked planning to market failures not only for the contingencies of that time but also for more enduring reasons. In a series of reflections from 1947 to 1949, starting again from market fail­ures, he also firmly criticised current policy attitudes. He also implicitly, but clearly, stated a programme of macroeconomic policy dealing with the main issues of the time, i.e. employment, inflation and the balance of payments, making use of public investment, monetary and credit action, the exchange rate and foreign aid.

Starting in 1953, he deepened his theoretical apparatus, being interested in one of the issues he had briefly touched on in his papers on planning, i.e. market failures and the microeconomic policy agenda. He wrote a number of papers on what he later would call the ‘logic’ of economic policy, thus dealing with microeconomic failures of the market. He followed the evolution of the debate on them through time, from the old to the new directions taken on this topic. He also translated the main con­tributions of the new welfare economics into Italian (Caffe 1953a, 1956a, 1956b).^[26]

Caffe’s interest in problems of practical relevance had found two firm theoretical foundations, the logic and the theory of economic policy, i.e. what in the text we call the core of economic policy.^[27] However, his intellectual formation was completed only when he found two important links. The first is what he drew from his mentor, Gustavo Del Vecchio, conceiving the path from analysis to policy as given by different stages of a unitary science, each having a theoretical setting. Thus, by mid-1950s, he pos­sessed all the ingredients for conceiving economic policy as an autonomous discipline in the realm of the economic science, together with a deep knowledge of institutions and history. However, he failed to link the two parts of this core to each other. Knowledge of Zeuthen (1958) finally sparked his concep­tion of economic policy, and he edited the Italian translation of this book. How Caffe discovered the book, published only in Danish, is unclear. Most probably, Caffe already knew Zeuthen both from his previous publications in English (including an incomplete paper that had been requested from him by the editor of the Quarterly Journal of Economics and was published post­humously (Zeuthen 1959) and the Italian translation of part of one of them.

Caffe required Zeuthen (1958) as one of the compulsory refer­ences in his academic course on economic policy from 1961 to 1964. The book, while being very suggestive, proved to be rather

Caffe 1966a: 22-23). In doing this, the set of tools created at a more abstract level (Meade’s ‘tool-making’) should be exploited (Caffe 1966a: 20) ‘in order to develop a set of possible economic situations, sketched in a simplified way, i.e. by abstracting from the greater complexity of real situations’ (Caffe 1966a: 23). This systematic analysis of government action should be followed by an applicative stage, which will determine the real relevance of the relations between the different variables in specific actual situations (Caffe 1966a: 24). Application to real situations, both domestic and international, was indeed done in Caffe (1970). In this second volume he also presented some formal aspects of a social­welfare function, following discussion of two new macroeconomic tar­gets, growth and balance-of-payments equilibrium. A unified presenta­tion of both the core and its applications to real situations can be found in Caffe (1978a).

hard to digest for most students. This might have been one of the reasons why Caffe decided to write his own book and prepared the necessary bricks for it. He both drew from his previous research and undertook new research for filling the process forming the policy agenda through the contributions of classical and neoclassical economists (Caffe 1962, 1964a). The logic of economic policy, including both micro- and macroeconomic failures, was completely developed in a historical perspective in Caffe (1964b).

Caffe's systematic statement of the foundations of public intervention, its design in theory and in practice - what goes under the name of ‘normative' economic policy - apparently omits a detailed discussion of government failures, what later was often referred to as ‘positive' economic policy. This is not so, as he does not think that government failures are irrelevant. In fact, many of his papers refer to such failures.^[28] Probably, at the time he wanted to state the normative approach as a useful innovation to use as a yardstick. In any case, he thought that a large number of government failures are simply due to the scarcity of public information, participation and control.

Why didn't Caffe write a book on economic policy as a discipline himself, before Zeuthen, while possessing all the ingredients of its core and also having deep knowledge of the working of economic systems, in particular, of the institutional and historical features of the Italian one? There may be a number of reasons, among which a personal reluctance to make up some­thing of the kind of a ‘Harlequin costume' rather than a ‘cover­alls' (a quote borrowed from a philosopher, Guido Calogero; see Caffe 1977: 11) drawn from critical analysis of the various con­tributions to economic thought. This reluctance is apparently disproved by his wealth of quotations, which often hide his personal convictions. But this is only appearance. Again, a scientist can follow two roads when expressing his ideas: hiding the sources of his reflections or hiding his ideas and letting the sources of his reflections speak.

imbalance of power among the member countries, as well as from the excessive role of technocrats (see, e.g. Caffe, 1957, 1985).

²⁹ Ciocca (2014: 20) speaks of ‘proud modesty', an expression that perfectly depicts one of Caffe's qualities. Acocella (2015) underlines his tendency to prefer subliminal messages. than formal and closed analysis, a derivation of his inclination to apparent eclecticism, as well as his theoretical background. His eclecticism - which was ‘rigorous, selective, critical' (Ciocca 1995: 149) - might also derive from acceptance of Del Vecchio's (and, before him, Pantaleoni's and Einaudi's) ‘whig' conception of economic science as being characterised by pro­gress without breaks (Faucci 2002: 366-67).

Source: Redrawn, with a few changes, from Acocella 2014b.