May 15, 2006
From the desk of Jane Galt:John Kenneth Galbraith RIP
Surprisingly enough, it was John Kenneth Galbraith who initially got me interested in economics. While prowling through my parents' bookshelves one day, I happened upon a copy of The Great Crash, (which I still recommend as one of the most engaging treatments of the 1929 stockmarket collapse). Even before I went to business school, I had recognized the signs of a speculative bubble in the stock market, thanks to the good professor, and declined to join my peers in the technology industry in betting on what they sincerely believed was a sure thing--or my fellow students who took out $100K in student loans so that they could hold onto their Webvan stock.
It was natural enough, then, that when my introductory macro professor was outlining the various schools of economic thought, I should ask into which school JKG fell. My professor furrowed his brow, thought for a moment, and finally said "his ideas are less of a school than a conspiracy theory." Over time, I came to appreciate him as one of the most brilliants writer ever to turn their pen to the subject of economics, but not a great economist. But he did have a gift for skewering the more elaborate pretensions of laissez-faire economists: possibly my favourite line of his is "The salary of the chief executive of a large corporation is not a market award for achievement. It is frequently in the nature of a warm personal gesture by the individual to himself." This, incidentally, was written in the fifties, for those who think that there was some kinder, gentler era of corporate governance in the distant past.
Clive Crook, another great economics writer who provides a brutal assessment of the Galbraith legacy in this week's National Journal.
Galbraith's special gifts were not intellectual penetration or access to deeper wisdom, but gravitas, worldly sophistication, armor-plated apprehension of his own intellectual superiority -- and wit (never underestimate that). Friedman does in fact rival Keynes as the greatest economic thinker of the 20th century. His devotion to meticulous scholarship did not preclude him from thinking big: Capitalism and Freedom is up there with Keynes's General Theory and Hayek's Road to Serfdom. Galbraith's The Affluent Society is up there with The Tipping Point and The World Is Flat -- except that Malcolm Gladwell and Thomas Friedman are not usually so wrong in their judgments.During the Second World War, Galbraith worked at the Office of Price Administration, fixing prices as part of that era's semiplanned economy. Unlike every other former central planner I have ever come across, in person or in print -- whether it be from India's old Planning Commission (which Galbraith once advised), the Soviet Union's pre-perestroika Gosplan and its East European equivalents, Africa's agricultural marketing boards, Britain's assorted pre-1979 prices and incomes boards, you name it -- Galbraith brought from that experience the view that there was much to be said for having bureaucrats fix prices. The experience seemed to dismay everybody else and to convert them to the view that markets do the job better. Galbraith thought, no, he had done pretty well.
He appeared to believe that the sensible thing would be to find more brilliant men like himself, difficult though this would be, and to put them in charge. This approach to managing the economy would become more desirable over time, not less, because economic growth would otherwise mean the increasing accrual of power to corporate interests. The countervailing power of the state would need to grow in response -- just the opposite of what modern economic orthodoxy (based on all that specious math) called for.
The book he sometimes said was his best (of the 30-odd he produced) was The New Industrial State, published in 1967. Its thesis was that big companies were growing so powerful that consumers no longer had any say. The basic mechanism of supply and demand was broken. Consumers just did as they were told. All power resided with mighty corporations -- such as General Motors. Long before Galbraith died, and probably even at the time he wrote the book, the falsity of this idea was plain. (What would General Motors have had to say these past 20 years about the impotence of consumers?) Galbraith never saw the need to adjust his worldview.
The basic problem with Galbraith is the same issue I have with most of the urbane prophets of the nanny state: they confuse their preferences about things like lawns, large automobiles, and television programmes with moral imperatives. Then they are confused when the power they have handed the state to impose their preferences on everyone else instead gets used to provide gas tax rebates and NASCAR stadiums. (Stadia?)
Still, reading his less technocratic works is a great pleasure, and one can learn something from every writer--if only to never, ever get on Clive Crook's bad side.
Posted by Jane Galt at May 15, 2006 12:00 PM | TrackBack | Technorati inbound linksIt must be so frustrating to consider yourself a natural aristocrat when your countrymen decline to consider themselves natural serfs.
Posted by: dearieme on May 15, 2006 12:35 PMAll I'd like to know is, when is Megan going to write a book? And will "Jane Galt" be her nom de plume?
Posted by: jg fan on May 15, 2006 05:22 PMI really don't want to start a fight, but I have to say that this is typical of many left-wing "thinkers". Long on style and absolutely abysmal on telling the truth or even caring what the truth really is.
I was a leftist once. I could not remain one due to the deep, abiding dishonesty which pervades that faith.
Posted by: Smoov on May 15, 2006 05:33 PMDo you really think he understood the great depression? I don't think he saw it as Friedman did, and I imagine the latter is more likely to be correct.
Also, you said: "But he did have a gift for skewering the more elaborate pretensions of laissez-faire economists."
That seems mighty anti-market of you. Profits (be they in pure profit-form for the owner, or wage form for an executive, or stockholder form, etc) are absolutely the market's value for the firm.
Whether suppy and demand produce a profit in a monopoly, oligopoly or competitive setting, its still supply and demand and profits still divide as the firm or the owner sees fit; based on the property ownership decided at the firm level.
If an executive is in a position to take his desired wage first and then divide the profits afterward, then that gives him a property right over the market-set profits.
So, it is not an " elaborate pretension" to think that this wage is a "market award for achievement."
Profits are "awards" for risk, supply of a demanded product, achievment of making a firm profitable. You might think they are overpaid, but it doesn't mean that the market is flawed or the reward is unfair or not created by the market.
Perhaps I have no sense of humor- but I took offense at that generosity toward a clearly socialist-influenced jab at the market and property rights.
Robert Frank's apology for Galbraith is also revealing of the aesthetic bias that sustained his work. He quotes the man himself:
"The family which takes its mauve and cerise, air-conditioned, power-steered, and power-braked automobile out for a tour passes through cities that are badly paved, made hideous by litter, blighted buildings, billboards, and posts for wires that should long since have been put underground."
I can see his readers cringe. "Mauve and cerise, how hidieous?" Never mind that said color combination was never produced by Detroit. Air conditioning, power steering and power brakes are all standard items now, but in the 1950s they hinted of luxury and decadence. Of course, the same sights would be available to someone driving a pious black Ford stripped of all frippery.
His proof of underfunded government is equally wan. Admittedly government is responsible for the state of the highways, but contractors in Massachusetts have always been equal to the task of spending every nickel appropriated and not giving fair value. Big Dig, anyone?
But the next three items are all aesthetic. Blighted buildings might require some funding, if only to demolish (don't tell the preservationists), but billboards and utility polls are privately owned.
Frank, as a liberal in good standing, rides to Galbraith's defense:
"Mr. Galbraith's arguments may have failed to win the approval of free market economists. Yet, unlike many of his critics, he recognized a bad allocation of resources when he saw one."
Which is an affirmation of Galbraith's aesthetic bias, and a demonstration that liberalism is based on contempt, not compassion.
Posted by: Robert Schwartz on May 15, 2006 06:04 PMdearieme said:
It must be so frustrating to consider yourself a natural aristocrat when your countrymen decline to consider themselves natural serfs.
This is an absolutely wonderful expression. Is it your own? If not, where did you find it? I can think of many, many people to whom it applies.
Posted by: Average Joe on May 15, 2006 07:01 PMIn his defense, I can say of Galbraith that he was very ... tall. And that's about it. And, after all, so is Megan.
Posted by: Robert Speirs on May 15, 2006 08:35 PMMegan, I have a great deal of respect for your intellect and opinion, but you are flat wrong about The Great Crash. While investment bubble was certainly a contributing factor, he glosses over the role of government intervention in the market, both pre-crash and especially post-crash.
Posted by: David Beatty on May 15, 2006 08:40 PMWhat a waste of talent. He might have been a good economist.
Posted by: Mitch on May 15, 2006 11:10 PMGeorge Meany had a famous quote about how "economics is the only profession in which you can gain great eminence without ever being right." I always thought he was referring to Galbraith.
Posted by: Dr. Manhattan on May 15, 2006 11:39 PMthis is typical of many left-wing "thinkers". Long on style and absolutely abysmal on telling the truth
Not just left-wing. But I have to say, long on style (if only it were true!) deserves more credit than it gets. See Postrel, Virginia.
liberalism is based on contempt, not compassion
Different people get there in different ways, some based on compassion, some on contempt. And some are motivated to become libertarians out of respect for the individual, others out of greed. I care more about outcomes than motives, myself; even greed works better than compassion for most purposes of government, when you look at end results.
David Beatty: Though Jane G. can certainly defend herself, I think she meant the book got her interested in economics (probably because it was so well written), not that she still endorses the precepts it contains.
Mitch: Well, he had every opportunity. Personally I wish he'd been a theater critic.
Posted by: Shelby on May 16, 2006 12:22 AMIf anything he was a spokesman for statism. He was also the vanguard of the anti-capitalist movement that has been so successful in the last couple of decades. What was it about his intellect that you found interesting anyhow?
Posted by: NOTR on May 16, 2006 01:58 AMAverage Joe: that's very kind. Mine own: it just flew off my keyboard - my own response to JKG. I think he wrote beautifully; I think he wrote tripe. P.S. I'm British, and the few real aristocrats whom I've met have been, on the whole, charmers. Especially the couple who had a gravestone down the road for one of the old boy's ancestors - seventh (or was it eighth?) century. They were good fun on the subject of johnny-come-latelies who arrived with William the Conqueror.
Posted by: dearieme on May 16, 2006 05:45 AMYou might be right, Shelby, it's possible I misread her statement. If so, Megan, I apologize.
dearieme,
I second the thought: what a wonderful comment. How I wished it were at hand a few weeks ago when I was debating a statist a few weeks back.
I'll be Oscar Wilde remarking "I wish I'd said that," and dearieme will rightly note, "You will, Oscar, you will."
Posted by: Kevin F on May 16, 2006 10:02 AMShelby: I meant liberal as in Galbraith, Teddy Kennedy and John Kerry are liberals. Not libertarian as in our esteemed hostess' namsake.
Posted by: Robert Schwartz on May 16, 2006 04:23 PMDid any of you ever see that hilarious Second City TV skit from 1982, "Battle of the PBS Stars"? It featured a football game with William Buckley leading one team against one led by Carl Sagan. Galbraith, a frail-looking Milton Friedman, and an oversized James Baldwin were on the respective teams.
(Mister Rogers also boxed Julia Child.)
Posted by: D------ on May 16, 2006 06:16 PMRobert Schwartz:
I don't even want to think what the orthodox Randian reaction to the lumping of (John) Galt with libertarians is. Not good, I'm sure of that.
I figure that anyone as tall as Galbraith must have bumped his head a lot. That could explain his track record.
Posted by: J Bowen on May 17, 2006 02:00 PMComments are Closed.