I stumbled upon this very interesting conference- The economics curriculum: towards a radical reformation hosted by World Economics Association. Some very interesting papers there.
I just read this nice paper by Nicola Acocella former Prof at Sapienza University of Rome. He discusses the birth of econ policy in Italy:
The birth of Economic policy as a discipline not confined to a set of practical rules intended to explain technical procedures of government intervention is rather recent. The discipline emerged in the late 1950s in Scandinavian countries and Italy only when solid foundations indicating market failures and a theory about conditions for policy effectiveness and design had been developed. The paper intends to explain the reasons for its emergence, the circumstances which helped it to be taught in many Italian universities and a few other European ones, the reasons for its apparent setback and some factors that could facilitate its diffusion in the next years.
What led to development of econ policy as a field?
First, the advent of the Keynesian thought (Keynes, 1936) that had soon developed as the new orthodoxy introduced a new important case of market failure and the need for government intervention.
Then the development of the new welfare economics. Before WWII a large debate arose on basic principles of policy intervention such as that of compensation (Hotelling, 1938; Kaldor, 1939; Hicks, 1939; Scitovsky, 1941; Little, 1949) founded on the non-utilitaritarian bases laid down by Pareto. Bergson (1938) had introduced the notion of a social welfare function, but Arrow (1950, 1951) had shown the difficulty of arriving at such a function starting from individual values. After the war the various market failures were investigated in a systematic way, thus offering justifications for government intervention. A summary of these advances is expressed by Bator (1958).
A third factor came from the new discipline of econometrics, as a development of mathematical economics. Construction of formal models to be tested against reality introduced the idea of the need for consistency of different public policies and the possibility to check their effectiveness against reality. This factor played an essential role for developing the theory of economic policy.
Finally, planned economies experienced high growth rates in the Thirties and the following decade, which contributed to the idea that governments could be successful in ruling economic systems.
He points how Italian econs picked up teaching econ policy..