THE last five years have seen a major and unexpected shift in the continuing debate over American economic policy. After several decades of dominance by Keynesian macroeconomic concepts, the conservative microtheory, with its stress on incentives and their distortion by governmental policy, has increasingly set the terms of this debate. Particularly in the political arena, economic conservatives have been on the steady offensive, criticizing government policies-in the areas of taxation, spending, welfare, and regulation-for ignoring their acute and cumulative impact on the incentives of individuals and businesses. The liberal response, though vehement and persistent, until recently has failed to achieve any sustained coherence or consistency.