Many Europeans, while admiring the strength and power of the American economy, undoubtedly feel that the system of social values which prevails in the United States, manifested in the acute problems evident in the inner cities and the level of violent crime, for example, leaves much to be desired.

In most Western economies, the general relationship is not in fact between the rate of inflation and the level of unemployment, but between the rate of change of inflation and the rate of change of unemployment.

Keynes tried to show that market economies could settle in equilibrium states in which the labour market did not clear, and in which the level of unemployment was high. He believed that this was due to a particular example of market failure, developed in his concept of effective demand.

By any reasonable criteria, the discipline of economics as a whole, in its present state, is sadly lacking.

But Adam Smith was a philosopher as well as well as an economist, famous in his time as much for his Theory of Moral Sentiments as for The Wealth of Nations. And as he understood so well, society is more than the sum of its individual parts.

The obstacles facing academic economists are formidable, for tenure and professional advancement still depend to a large extent on a willingness to comply with and to work within the tenets of orthodox theory.

The model of competitive equilibrium which has been discussed so far is set in a timeless environment. People and companies all operate in a world in which there is no future and hence no uncertainty.