THE CONSERVATIVE DRIFT IN MODERN ECONOMICS
Lekachman, Robert
American intellectual conservatism, as Joseph Epstein observed in this journal's last issue, has become a tendency to be interpreted as well as resisted by radicals. Our contemporary...
...In the rating game Marcus Welby consistently does better than BBC dramas on public television...
...Our contemporary conservatives, like their English predecessors, are skeptical about human behavior and disposed to doubt that social and economic arrangements are susceptible to drastic improvement...
...Why were the liberal tools—full-employment budgeting and revenue-sharing so readily converted into conservative weapons...
...Why shouldn't Richard Nixon hire economists...
...Comparisons of GNP from one year to the next do not, for example, ask how the new goods and services are distributed among rich, poor, and middling families...
...Consider, as a representative example, Dr...
...Steel or General Motors...
...What have they been up to...
...From New Delhi, Galbraith urgently reiterated the message of his Affluent Society—the private sector is bloated and the public sector starved...
...With utter propriety, economists can assist this winner in his effort to interpret and follow these instructions...
...But if, as contemporary economists insist, no scientific method exists for comparing the feelings of different people, then there can be no scientific demonstration that one distribution of income and wealth is better (or worse) than any other distribution...
...By ideology, they ought to be comfortable in any administration...
...By sympathy, association, and training, these men are conservative...
...in Fiftieth Anniversary Colloquium, National Bureau of Economic Research (New York: Columbia University Press 1972...
...Establishment economics relies ultimately upon political and pecuniary markets to define the arena within which it can safely operate...
...After eliminating several generations of radical proposals, Dr...
...The only trouble is that it amounts to an ideology inherently hostile to significant change and implicitly friendly to all handy status quos...
...As a direct result of policies ad vocated or accepted by liberal economists and their Congressional allies, poor people pay more and their affluent neighbors less...
...If he presumes to try, he does no more than express his own elitist prejudices...
...subsidies to low-income individuals for the purchase of housing, college training, medical insurance, and the like...
...2 WHAT an odd subject it is, to be sure, that could ignore until only yesterday leisure trends, the changing significance of work within the home, and the emergence of new disamenities as well as the persistence of old ones...
...A fair example is the computation of Gross National Product and the other national income measures...
...In his March 1966 Harvard Godkin lectures, Walter Heller uttered these proud words: Economics has come of age in the 1960s...
...Because the rich are always with us, "free" markets furnish numerous luxuries that consume resources otherwise available for use in the fabrication of necessities and comforts for people of more modest income...
...The point, however, is by now familiar...
...For as presently computed, the national income measures exaggerate year-to-year improvements in economic welfare because they deliberately avoid judging the consequences of "free" market operations...
...On January 11, 1973, President Nixon announced the end of the Administration's moderately successful experiment with Phase II wageprice controls and their replacement by a vaguely designed and even more vaguely described set of Phase III controls...
...The lesson is much the same out there in the factories and supermarkets...
...Hence still, despite signs of change, the official national income statistics remain an idiot's measure of economic welfare—a record of activities, beneficial and harmful, trivial and important, free and coerced...
...Economists cannot as professionals unite in support of (or opposition to) any set of arrangements for the distribution of income and wealth...
...Tariffs and quotas limit imports, narrow consumer choice, and raise the prices of rival domestic products...
...II I t would have been reasonable to anticipate from the Nixon administration some disgust with the economists aroused by both their failures and their "successes...
...On the other, they join strong affections for efficiency with self-denying ordinances that inhibit analytic judgment of the quality of private output, the equity of present distributions of income and wealth, and the realities of the concentration of economic power...
...expansion since early 1961—an expansion that in its first five years created over 7 million new jobs, doubled profits, increased the nation's real output by a third, and closed the $50-billion gap between actual and potential production that plagued the American economy in 1961...
...Again, although economic growth notoriously gen erates pollution, overcrowding, destruction THE CONSERVATIVE DRIFT IN MODERN ECONOMICS 303 of viable ethnic neighborhoods, demolition of architectural landmarks, clogged highways and overpopulated beaches, and assorted emotional distempers attendant on disruptive change, professional economists and national income statisticians have only recently come around to taking the first steps in modifying the national-income accounts to accommodate these malign side-effects of growth...
...As late as the 1920s, A. C. Pigou, Alfred Marshall's Cambridge successor, was arguing on strictly Benthamite grounds that economic changes that promoted income equality also increased economic welfare...
...It must be a tribute to their residual good sense that economists in such large numbers are to be found on the side of progressive social change and mildly egalitarian redistributions of income, wealth, services, and power...
...Nevertheless, economists, when they inspect wages, prices, budgets, and interest rates, perceive complexity and uncertainty...
...Much of the answer is to be found in standard economic ideology...
...For in the end, marginalism inhibits, paradoxically, even the structural shifts that appear to be dictated by the valuations of conventional theory...
...Rivlin sketches three strategies which she finds attractive: tax and cash transfers...
...5 Now at the Brookings Institution, Dr...
...Matters are no better on the buying side of the supply-demand equation...
...Lester Thurow's brilliant Public Interest (Spring 1973) essay "Toward a Definition of Economic Justice" demonstrates how hard it is for an excellent technician of egalitarian disposition to harmonize technique and ethical principle...
...Who thinks any useful social purpose would be served by having the Federal Government running U.S...
...That patron saint of Anglo-Saxon economics Alfred Marshall adopted as his motto "natura non Tacit saltum"—nature makes no leaps—and neither, his Principles of Economics at length insisted, ought societies...
...As economists now belatedly explain, these costs can readily be shifted back to the polluters ("internalized" according to professional jargon) if Congress and state legislatures compel the polluters to install efficient cleansing devices or purchase expensive licenses to pollute...
...Probably no student of Mr...
...A new run on the American dollar, apparently led by American multinational firms and banks, caused a second devaluation...
...The prices of the luxuries are lower and those of the necessities higher because of this resource diversion...
...Within the New Frontier certainly it was tax reduction fervently advocated by Walter Heller which won the President's favor...
...Always they fear the ROBERT LEKACHMAN general equilibrium dislocations which may attend the best-intentioned tinkering with any part of the system...
...What led the economists astray was not the absence of native wit, but the presence of good graduateschool training...
...The graduate schools teach new technique but old wisdom...
...But in much better professional conscience, they can join hands on behalf of measures that promote freer markets and more efficient use of human and natural resources...
...Even when economists are uneasily aware of the imperfections of existing markets, the concentrations of economic power in defiance of economic theory, and the inequities of great wealth, their prefer ence for tiny readjustment, and their desperate dependence upon markets as the only institution with which they are trained to cope, prevent them from advocating important change...
...Nevertheless, the accident of birth confers many dollar votes upon him...
...As amateur politicians and apprentice campaign strategists, economists naturally but nonprofessionally advocate all manner of preferences for large social change...
...efficiency is almost the only scientific value that economists are educated to identify...
...Economists were in a stronger polemical posture when their technique was less intricate and their distributive principles were more boldly avowed...
...Henry Wallich, once on the Eisenhower CEA, declared that "In the long run, the fewer controls the better, and I applaud them for decidingthat the long run is now...
...Rivlin, like her colleague Joseph Pechman, has harsh words to say about tax inequity, there is really no reason the beneficiaries of present arrangements should not also claim their rights as leading actors in the system...
...In Brookings hands, economics becomes the ally of minute, incremental change...
...Okun reacted to President Nixon's plan to dismantle some 115 categorical grant programs in the 1974 budget with the comment that it was "impeccable economic and intolerable social policy...
...vices, subsidized housing, job training, and other subverters of the work ethic...
...Who is the economist to judge his fellow citizens...
...American intellectual conservatism, as Joseph Epstein observed in this journal's last issue, has become a tendency to be interpreted as well as resisted by radicals...
...In his period Mill was far from a conservative...
...Two presidents have recognized and drawn on modern economics as a source of national strength and Presidential power...
...Arthur F. Burns, the first economist to head the Federal Reserve System...
...Economists know about efficiency...
...Burns, Who Voices Full Support...
...The drift of this analysis is, according to taste in nomenclature, mildly liberal or mildly conservative...
...Political markets are congressional, presidential, state, and local contests used by rival politicians to present themselves and their programs to the inspection of the electorate...
...Waiting in the wings, Great Society economists can usefully employ themselves in the making of efficiency judgments of their previous handiwork...
...Lyndon Johnson's ill-fated attempt to support simultaneously an ever bigger war and an increasingly expensive set of social programs overheated the economy and generated an inflation that 1973, seven years after its inception, has not yet been tamed...
...As citizen, the typical economist probably voted for George McGovern...
...In real life, price competition, at the heart of free market requirements, proceeds, if at all, under a large variety of limitations...
...Their virtuosity in cost-benefit analysis helps them sort out the weaker from the stronger social initiatives of the recent past, compose endless interpretations of the successes (few) and the failures (many) of job training, compensatory education, housing subsidies, and community action, and accept, when opportunity knocks, employment in the citadels of the Nixon administration...
...now they sound like unwieldly superbureaucracies...
...From the economists's standpoint, each of these market imperfections distorts efficient allocation of resources and generates the wrong answers to the signals given by the customers...
...Ill Under the circumstances, the response of establishment economics to concrete issues such as the domestic plans of the second Nixon administration is necessarily limited and peculiarly disembodied...
...Moderate economists were of similar opinions...
...By the end of March in a speech that mingled Vietnam and food prices ("beef with honor" in Mary McGrory's apt words), the President reluctantly announced retail and wholesale freezes on the price of beef, pork, veal, and lamb...
...As far in the past as 1848, John Stuart Mill insisted that "only through the principle of competition has political economy any pretension to the character of a science...
...How then did these economists and their colleagues find themselves in such disrepair that President Nixon could plausibly advance budget limitations (mostly created by tax cuts sponsored by liberal economists) as an excuse for reducing social expenditures...
...and grants to localities to enlarge their "capacity to render services...
...Accepting the prevailing political climate, mainstream economists concentrate on immediately available possibilities...
...With considerable ingenuity, conservative social scientists have argued that government intervention out of benevolent motive into free market processes usually generates unexpectedly malevolent consequences...
...Herbert Stein who in 1973 began his fifth year as member and chairman of the Council of Economic Advisers...
...Thus the conservatives judge most of the social experiments of the 1960s to be failures, less because of fraud and maladministration, and more because New Frontiersmen and Great Societarians were foolishly utopian in their expectations and unwisely Rousseauist in their view of the possibilities of human perfectibility...
...Talented performers realize more income and cast more dollar votes when they go to market...
...there is general agreement [how can she be sure?] that the solutions should remain within the existing framework of American government...
...Alice M. Rivlin's "A Counter-Budget for Social Progress...
...The volume's senior author, Charles Schultze, had been Budget director during the Johnson years and his coauthors had also occupied Great Society posts...
...If, come 1976, Edward Kennedy, Walter Mondale, or some as yet unidentified savior returns the country to Democratic stewardship, the economists will gladly accept new definitions of political reality and new opportunities for incremental change...
...One ought then to absolve of any charge of inconsistency Great Society economists who initially presided over and now negatively evaluate Lyndon Johnson's wars on poverty, racial discrimination, and assorted social ills...
...It is old doctrine that markets allocate efficiently only when the producers and sellers are engaged in genuine competition, and the pattern of consumer demand accurately mirrors the tastes and preferences of buyers...
...If all income were earned, people would be richer or poorer according to the differing estimate free markets make of their skills and talents...
...Their willingness to use, for the first time, the full range of modem economic tools underlies the unbroken U.S...
...The 1964 tax, advocated by Heller, Tobin, Okun, Ackley, and their colleagues, was remarkably successful as a tool of economic stimulation...
...He may not utter interpersonal comparisons of the utilities of rich and poor persons...
...The paralyzing grip of economic myth and false fears on policy has been loosened...
...Moreover, achievement was intellectual as well as material: Together with the gradual closing of that huge production gap has come—part as cause, part as consequence—a gradual, then rapid, narrowing of the intellectual gap be 302 tween professional economists and decisionmakers...
...As social scientist, he has to be aware that the contrary preference of 62 percent of the voters has and, moreover, ought to have an impact upon the choice of national policy and the allocation among competing objectives of federal resources...
...The child of a millionaire has contributed nothing to GNP...
...Excessive enthusiasm on the path to full employment often entails inflation which, for economists, may damage efficiency as much, though differently, as unemployment...
...Such skepticism is reinforced by the professional aspiration to avoid value judgments (— nonmarket conclusions uttered by human beings...
...Coming from a Democratic government in exile such as the Brookings economists, this qualified but unmistakable concession of past error has been of considerable intellectual assistance to the Nixon administration, which for its own reasons has harbored deep resentments against community action, legal ser 1 Setting National Priorities: The 1973 Budget, by Charles L. Schultze, Edward R. Fried, Alice M. Rivlin, and Nancy H. Teeters (Washington, D.C.: Brookings...
...So, at least equally, are the various redistributions of power and wealth that are the staples of radical prescription...
...In economics this moral is repetitive...
...Paper mills which pour foul odors into the air and foul chemical wastes into adjacent streams have long imposed upon individuals and communities the expense of cleaning themselves, their possessions, and the municipal water supply...
...Thus it has always been...
...Cautious experiment, accompanied by constant evaluation, is much preferable to the funding either of programs yielding small results or of large untested new ventures...
...Rivlin served the Great Society as assistant secretary of Health, Education and Welfare in charge of program evaluation...
...After all these cheerful statements, stock market, currency market, and corporate price behavior were, to write temperately, distressing...
...If businessmen produced only two classes of output—pollutants and antipollutants, Department of Commerce statisticians would routinely total the price tags on the items classified under each rubric and call the result Gross National Product...
...Nor does one hear serious proposals any more for direct provisions of social services by the Federal Government...
...Ford, Chrysler, and General Motors jostle each other for market shares in ways that do no include the prices they charge their dealers for comparable models, fuel economy, safety, or antipollution...
...Economists of all people should be militant anti 4 Galbraithians, a professional minority, insist that advertising effectively manipulates and distorts the actual preferences of buyers...
...It becomes impossible for him to believe that men of good will can by their individual actions stem inflation, or that it is possible to impose changes in any one market or industry without causing problems in other markets or industries...
...Unfortunately most lay readers of Dr...
...On the one hand, they affirm the legitimacy of the political market...
...Although careful statisticians refrain from identifying as synonymous GNP and economic welfare, Presidents, lesser politicians, and ordinary folk inevitably do so interpret annual celebrations of ever-larger GNP...
...She identifies "plenty of reason to be outraged by this budget if one believes the Federal Government ought to be substantially increasing, not decreasing, its efforts to improve opportunities for the poor and to increase social services for everyone...
...The profession has been equally tardy in its concession of the extent to which pri 2 See "Is Growth Obsolete...
...Let me recall two events...
...Interpersonal comparisons are verboten...
...Heller's eulogy was intoned at just about the last date when an economist could point with plausible pride to a pleasing combination of high employment, steady growth, and reasonably well-behaved prices...
...Even according to their own favored criteria, economists have done badly...
...The independent Arthur Burns venerates the work ethic, hates to spend public money, and evinces more sympathy for the ideas of his old friend Milton Friedman than chairmen of the Federal Reserve have displayed in the past...
...Patents narrow the ambit of legal rivalry...
...Almost all THE CONSERVATIVE DRIFT IN MODERN ECONOMICS economists are free traders...
...In the construction trades, strong unions limit the entry of new labor...
...Economists have retreated from antitrust and nationalization, not in very many instances beROBERT LEKACHMAN cause they are in the pay of General Motors or ITT, but because a genuine rearrangement of the industrial landscape would upset the economy after a fashion only to be guessed at, andtherefore to be avoided...
...Kennedy's decision in late 1962 to propose a package of tax reforms and tax reductions implied postponement at best of new public spending initiatives and narrowing of the revenue sources of such programs in the future...
...Although liberal economists favor various government interventions in the interest of the poor, black, and otherwise vulnerable, they are necessarily suspicious of the quality of government action simply because market tests do not typically apply...
...What of the mainstream professionals, the Keynesians and post-Keynesians who have dominated the journals and the graduate departments and staffed Washington agencies...
...The immediate reaction of Walter Heller, Gardner Ackley, and Arthur Okun—three liberal economists who had served during the eight Kennedy-Johnson years as chairmen of the Council of Economic Advisers—was applause for the President's initiative...
...For if Walter Heller accurately praised the profession for its role in the mid-1960s, then critics had an equal warrant to complain of the meek fashion in which Ackley, Okun, and Schultze administered an inflationary regime from 1966 through 1968...
...In a conservative period, when the chances of egalitarian action are low to zero, the economists, whatever their politics, have congenial work to do...
...THIS EMPHASIS upon markets explains Brookings uneasiness about recent social reform...
...trusters, enemies of national trade unions, foes of occupational licenses and professional credentials, bigoted free traders, and, like Mill, eager by inheritance taxation to diminish the distortions of free markets occasioned by accumulations of inherited wealth...
...They nobly refrain from judgment on the biological or social merits of the items which enter into the grand total...
...vate entrepreneurs fail fully to "internalize" some of their costs...
...Be it said in their honor that only the Chicago economists have consistently spelled out the full implications of the economists' central valuations...
...A dollar taken from a rich man hurts him less than a dollar removed from a poor man and, by easy extension, a dollar more for a man who starts with only a few implies a quantity of joy greater than the pain endured by the millionaire who surrenders that dollar...
...On the Right, Friedmanite structural change is to be avoided...
...Oligopoly is the dominant style of manufacturing organization, but far from the only 3 During the first Nixon administration, the major auto companies entered into a consent decree witha sympathetic Antitrust Division of the Department of Justice which featured a promise to stopcolluding to halt the design of better antipollution devices...
...Within the Kennedy administration, the argument about how best to stimulate a sluggish economy centered on the relative merits of lower taxes and larger social spending...
...She then gives the devil his due: "With some important exceptions, the social programs the President cut were outdated or inequitable or only partially effective...
...Let it be said yet again that Walter Heller, Arthur Okun, and Gardner Ackley are sincere friends of the poor, black, and deprived...
...The 1964 presidential election issued Lyndon Johnson a set of instructions which the economists helped him to carry out...
...and James Schlesinger, who moved as chairman of the Atomic Energy Commission to the directorship of the Central Intelligence Agency...
...The last spell of euphoria on the part of economists about the state of their discipline occurred in the wake of successful national pursuit of high growth and employment...
...Since conventional wisdom holds there is no scientific way to compare the satisfactions of different people, it is as possible that economic welfare will be enlarged by subsidizing Nelson Rockefeller as a BedfordStuyvesant welfare mother of five...
...I noted earlier that economists find most attractive the "scientific" objectives of efficiency, growth, and free choice...
...They are on public record in favor of progressive taxation, loophole closing, and a wide variety of federal interventions on behalf of the needy...
...Although some economists are egalitarians, still others uneasy about GNP increase as an unequivocal community boon, and probably a substantial majority (of Americans in general as well as economists) distressed by the persistence of poverty amid general plenty, economic science fails to justify these generous sentiments...
...The 1973 edition of Samuelson's Economics defines Gross National Product "as the sum of final products such as consumption goods and gross investment...
...The subhead noted that "Heller, Ackley and Okun are joined by Dr...
...Choice of tax reduction as the instrument of business expansion has had the fiscal consequence of reducing the 1973 tax receipts of the federal government by approximately $45 billion—if the 1962 rates were still in force...
...Here quotation marks surround successes because these were the social programs that tax cuts, rapid economic growth, and larger tax collections had made possible...
...Their training, concluded Stigler with approval, transforms economists as social scientists into conservatives...
...THE CONSERVATIVE DRIFT IN MODERN ECONOMICS 305 The "counter-budget" of the title is based less on economic analysis than on a set of political judgments...
...As men of practical policy whose central professional value is efficient operation of the economy, economists can readily urge budgetary and monetary initiatives by Congress and the President which promote high rates of growth and full employment of men and material resources...
...To economists, the apparatus conveys the message that painful trade-offs, either of price stability or employment, must be made...
...Attachment to market models and reluctance to render ethical judgments entails important consequences...
...Indeed examined critically even the economists' 1964 tax cut triumph says as much about the profession's conservative hierarchy of values as about the capacity of economic analysis to promote social improvement...
...In our day, George Stigler has praised the education of young economists in these terms: He is drilled in the problems of all economic systems and in the methods by which a price system solves these problems...
...Among economists, Galbraith is generally held to be an excellent polemicist and a superior writer but a poor technician...
...If economists were implicated in the design of the War on Poverty, Model Cities, and other disturbers of the status quo, so much the worse for them and their colleagues...
...Profes sional licenses serve much the same function...
...These were also on the whole measures the President disliked or detested...
...William Nordhaus's and James Tobin's "pioneering study" (the words are Paul Samuelson's) put their objective in these words: Our adjustments to GNP fall into three general categories: reclassification of GNP expenditures as consumption, investment, and intermediate...
...From a theoretical standpoint, such a question is irrelevant because economists now believe that there is nothing "scientific" they can say about the psychic enjoyments of different persons...
...3 The limited actual competition in this market focuses upon style, advertising, and meretricious frivolities of design...
...On the contrary, he argued in favor of steeply progressive taxes on inheritances, identified the virtues of zero economic growth, and seriously questioned the impact upon factory workers of production organized purely in the interest of maximum profit...
...imputation for the services of consumer capital, for leisure, and for the product of household work...
...This is to say, the statisticians in principle simply add up the price tags on consumer goods, hours of medical and legal consultation, new machines and structures, and increases in business inventories...
...Rivlin's highly intelligent argument would be constrained to concede that her second point is more effectively argued than the adverse judgment on the budget thrust contained in her initial point...
...In 1972, the portion of a major Brookings Institution study of the federal budget, which attracted most attention,' was a relatively brief evaluation of manpower training, compensatory education, health care, and similar Great Society initiatives...
...A national health service and a national education system once sounded like brave new ideas to reformers...
...Socialism isn't considered radical, just quaint...
...304 ROBERT LEKACHMAN limitation upon price competition...
...The receipts from the latter might finance public facilities and compensate individuals for protecting themselves against remaining pollution...
...The American economy departs significantly from both of these structural arrangements...
...The second event is more recent...
...The old Socialist solution—nationalizing major industries as a means of equalizing incomes—does not attract reformers any more...
...Reassessing their political preferences, the voters in 1968 and more strongly in 1972 gave Richard Nixon a different set of instructions...
...Thus economists of all stripes are skeptical of economic controls: they distort market reactions and interfere with the delicate competition of sellers for customer favor and employees for jobs...
...The "system" is realistically accepted...
...The sooner the controls come off, if, mistakenly, they are applied, the better...
...Failure adequately to measure the costs of growth carries with it persistent overestimate both of the extent and the benefits of growth...
...In modern times economists have liberated themselves from the durable Benthamite proposition that as vessels of pleasure and pain human beings are approximately equal and the further postulate that satisfaction diminishes as the quantity of possessions and income rises...
...LIKE the Brookings budget survey, this story is exemplary not so much as another dis 300 closure of the inadequacies of eminent economists, in this instance as forecasters (though the Times headlines certainly do make that point), but as an excellent insight into the economic cast of mind...
...The Phillips curve, named in honor of its English inventor, explicitly relates rates of unemployment and price rise...
...The economists who, among the social scientists, have probably changed their basic attitudes least, support themselves with a comparatively consistent set of intellectual values...
...The auto industry is paradigmatic of the behavior of the concentrated industries...
...Arthur Burns of course is the impeccably conservative economist at the head of the Federal Reserve System...
...The pretty picture is crucially marred by the reality of inherited wealth...
...THE CONSERVATIVE DRIFT IN MODERN ECONOMICS...
...5 New York Times Magazine, April 8, 1973, p. 33 ff...
...Since as an economist our hero has nothing to say about the character of the voters' choice, he ought to cultivate his own garden...
...How can the analyst evaluate alternative arrangements for medical care, pre-school education, urban renovation, manpower training, and so on in the absence of market prices and free choice among competing products by the customers or their parents...
...Here they emphasized the difficulties inherent in the measurement of the consequences of social policies, the scanty information available to the designers of such policies, and the consequent urgency of more rational selection of priorities...
...People do buy more copies of Playboy than of the Public Interest or Dissent...
...The first serious attempt to cope with the disamenities of growth occurred in 1972...
...At the same time, regres sive social security payroll levies have risen $40 billion...
...He cannot believe that a change in the form of social organization will eliminate basic economic problems...
...His teachers inform him that he has no right to judge the quality of the items that enter into GNP...
...She has no trouble at all demonstrating that some existing programs lacked equity, others were "unnecessarily costly," and still others poorly designed actually to diminish hunger, improve the delivery of health services, reduce pollution, or alleviate other human ills...
...Food prices surged upward...
...With diminishing fervor, they advocate antitrust and open access to crafts and professions...
...Through thick and thin, however, Mill clung to the merits of market rivalry and the importance of preserving competitive incentives...
...And although Dr...
...The radical left talks glibly about "overthrowing the system," but never says what would replace it—and the radical left does not have enough political clout to be taken seriously anyway...
...Even here a caveat ought to be uttered...
...Instead the President surrounded himself at least as closely as his Democratic predecessors with economists in positions of prominence, among them George Schultz, successively secretary of Labor, director of the vital Office of Management and Budget, and in the second Nixon administration simulROBERT LEKACHMAN taneously secretary of the Treasury, White House counselor, and chairman of the Cost of Living Council...
...Economic theory as presently construed by 306 practical men and women is a poor weapon against the rich...
...Schlesinger is a veteran of Rand systems analysis...
...On January 13 the New York Times headlined their response: "3 Democratic Economists Back Phase 3 Structure and Principles...
...The relationship of economists to this intellectual trend is an odd one...
...It was an economist who invented McGovern's demogrant...
...Nixon's political history would have been startled if he had staffed his official family with the businessmen and accountants who were so prominent in the Eisenhower regime...
...As Stigler rightly maintained, by the time a young economist has been thoroughly socialized en route to his doctorate, he is burdened by the complexity of economic affairs, convinced that alteration of anything in the economy affects everything else, and deeply indoctrinated with a preference for small, marginal change of a kind that, not entirely coincidentally, economists since 1870 have been comfortable in interpreting...
...Rather painfully, Thurow does so in the course of arguing that consistent application of free market principles necessitates less inegalitarian distribution of income...
...Possibly the most creative economist of his time (it is a professional scandal that a Nobel prize has not yet come his way), Friedman has proposed education vouchers and a volunteer army, measures supported by the Nixon administration, as well as a negative income tax which surfaced as the central element of the now defunct Family Assistance Plan...
...Along the way, the tax reforms have been re peatedly jettisoned...
...No more than conservatives should liberals and radicals applaud inefficiency or shut their eyes to the waste of public funds...
...Boone's Apple Farm Wine sells considerably better than real wine, and so on...
...The Chicago economists, led by Milton Friedman and George Stigler, have long preached a free market message as legitimate heirs to Henry Simons and Frank Knight who two generations ago created the Chicago tradition...
...Schultz and Stein are members in good standing of the Chicago free market cult...
...George Meany rumbled before Congress that labor in its impending negotiations would demand full protection against higher prices...
...If economists were faithful to their own conclusions, the pursuit of efficiency, growth, and free choice should make the profession partisans of radical change in the central institutions of contemporary capitalism...
...In their profession, the Chicago school is a minority, albeit an increasingly influential one...
...Industrial materials began to ascend at annual rates in excess of 12 percent...
...It is again a familiar proposition among economists that market purchases accurately reflect consumer preferences under two conditions: the cus tomers freely express their own desires, 4 and they bring with them the dollars they have earned by productive effort...
...correction for some of the disamenities of urbanization...
Vol. 20 • July 1973 • No. 3
