For 20 years in the middle of the last century, John Kenneth Galbraith, who died yesterday at 97, was the "best known living economist". But he was not, and will never be, regarded as a great economist by economists. He is best thought of as a sociological economist, who tried to develop a theory and a policy from an analysis of the institutions of contemporary American capitalism. He had a genius for significant description, and wrote with confidence, wit and a notable talent for phrase-making, but the theory he sought proved elusive and he had no lasting effect on policy.

His big idea was that the "market system" lauded by economists was a fiction to disguise the existence of economic power. Far from consisting of small, competitive firms whose decisions were determined by consumer choice, the economy was ruled by big corporations, independent of the market, and run by managers who were able to fix prices and control sales through advertising.

Although he came to praise, not bury capitalism, he was also a left-wing Keynesian who believed that large public expenditures were needed. In his first big book, American Capitalism (1952), he explained that corporate power had provoked the "countervailing power" of trade unions, retail chains and other large producers. As capitalism was itself working to minimise exploitation, public ownership was no longer required.

This book had a big influence on British Labour Party thinkers such as Tony Crosland, who were trying to wean the party off their faith in nationalisation. Much later, Galbraith partially admitted he had been wrong: under the impact of globalisation, monopoly power had surrendered to international competition, restoring to some extent the traditional picture.

Galbraith's best book, The Affluent Society, was written in the Swiss ski resort of Gstaad in 1956, a charming place to challenge the contemporary obsession with economic growth at all costs. To satirise this thinking, Galbraith invented his most famous phrase: "the conventional wisdom".

The main idea of the book was not new. The time would soon come, Keynes had argued in 1930, when society would need to accommodate its psychology to plenty, not scarcity. Given affluence, more and more people would (or should) opt for leisure, free time, and intellectual achievement rather than more consumption. Galbraith simply said this situation had arrived - at least in America.

America was suffering from the ills of affluence, not poverty. With declining satisfaction from consumption, new wants had to be constantly created by advertising. His most incisive idea was that growing private consumption required matching spending on public services - what he called a "social balance" - if it was not to foul up cities and countryside and reduce people to idiocy. A pioneering thought was that production should be tested for its environmental effects.

Galbraith was in effect arguing that the balance between private and public consumption needed to shift. Ronald Reagan and George W Bush took the opposite, tax-cutting road. Of course Hurricane Katrina revealed the folly of starving public services, so public opinion may shift back to Galbraith's way of thinking.

Other events have dealt an even more intriguing blow to Galbraith's hopes. He believed that as people got richer, each extra dollar would give them less pleasure. How then is one to explain the fact that hours of work in Britain and the US have scarcely fallen since 1960, although these societies have grown much wealthier? Is it because economists are simply wrong about human nature: that as people's consumption expands they want more, not less? Or is it because advertising turns us into consumption addicts? Or is it because globalisation has made affluence too insecure and too uneven in its spread for most people to ease off work?

Galbraith's opposition to the Vietnam War was his finest public stand. There was no one able or willing to play this role at the court of Bush or Blair in 2002-3 where the invasion of Iraq was plotted. It is not that such people were not around. But Bush and Blair wanted to hear arguments for the war they wanted, while JF Kennedy wanted arguments against the war he dreaded. Had Kennedy not been killed, history might have turned out differently.

Galbraith has often been compared to Keynes, and they had much in common. But the way they did their economics was very different. Keynes produced theories, Galbraith, theoretically-inspired sociology. Keynes thought that ideas ruled the roost; Galbraith thought it was structures of power. His was a non-Marxist version of class struggle, with the intelligentsia as the engine of social innovation and carrier of the "public purpose".

His position seemed to be that as long as the Democrats are in power and advised by the right people the state can be trusted. This is dangerously close to the Marxist belief that the problem of the abuse of power, and the need to build safeguards against it, would disappear when the dictatorship of the proletariat was established. This cavalier attitude to the problem of power marks Galbraith as an authentic product of the first half of the last century.

The Affluent Society will live on because the questions it discusses are timeless. The wit and wisdom of Galbraith will continue to delight. To those who aspire to public service he will remain a model of a "public intellectual" He was a man both in and for his time but he will continue to inspire those who think economics should be brought into closer touch with life as it is and as it should be.

The writer is professor of Political Economy at Warwick University, and the biographer of John Maynard Keynes