Ambiguous Economics
KENEN, PETER
Ambiguous Economics Economic Integration. By Rolf F. Sannwald, Jacques Stohler. Princeton University. 260 pp. $5.00. Reviewed by Peter Kenen Assistant Professor of Economics. Columbia...
...In the postwar discussions of European integration, these have become the advocates of customs unions, pure and simple...
...Thus, only a trained economist could begin to disentangle such passages as this: "The marginal disutility [sic] of liquidity or—depending on the theory of interest employed—the marginal rate of time preference must be equal to the rate of interest...
...Much of Scitovsky's work was in print in 1955 and 1956...
...He surely does not need a refresher course on the theory of protection (Chapter One), or one on balance of payments problems (Chapter Four...
...Why was this book written...
...He too is impressed by the American example and willing to explain America's unparalleled growth by guarded references to its large internal market...
...Meade's study, in turn, is entirely static...
...But Sannwald and Stohler dilute it with a strange neglect of Meade's basic findings...
...The layman, by contrast, deserves to be addressed in English, not in economese...
...They argue that "it cannot be expected that any form of liberalization of international commodity trade can eliminate the income differences which are an aspect of international economic disintegration...
...They identify integration with an improvement of the price mechanism and a concomitant dismantling of barriers to world trade...
...Sannwald and Stohler could have found authorities to buttress their support for the Common Market...
...This may be so, but the analysis which occupies the bulk of this book does not support such dogmatism...
...Neither does it advance the argument significantly...
...The professional economist wants his novelty in a nutshell...
...We are obliged to infer that the authors believe Meade's analysis irrelevant to the facts of economic and political life...
...They faithfully report his conclusion that we cannot know, a priori, whether a customs union will raise or lower economic welfare...
...An economist capable of wading through this (and setting it right) has probably read most of Meade's work...
...The second half of Economic Integration is more clearly consonant with the maximal approach to economic integration which Sannwald and Stohler seem to espouse...
...though his book was not available until this one was finished...
...This extended paraphrase of Meade is no small compliment to that fine economist...
...But it would be equally hard to find two who use the phrase in the same way...
...Columbia University IT WOULD be hard to find an economist or statesman who opposes economic integration...
...he wants to know what the authors can add, not what they have read...
...They argue that integration requires much more than elimination of trade barriers...
...Other economists, such as Gunnar Myrdal, however, associate integration with "equality of opportunity," even with income equality...
...stresses the dynamic aspects of economic union —its impact upon investment and the rate of economic growth...
...And Scitovsky, like Sannwald and Stolher...
...At times, they quote Myrdal with manifest approval...
...Indeed, the first hundred pages of this book are mainly a paraphrase of J. E. Meade's brilliant study on the gains and losses of economic welfare which a customs union is apt to yield...
...This discussion, however, is also conducted on a highly abstract plane, and largely repeats Meade...
...It examines the record of the European Coal and Steel Community (the Schuman Plan) as a model for economic integration under supranational aegis, explores the proposals for a common European currency and the implication of these proposals on payments equilibrium, and discusses the prospects for harmonizing excise taxation within Europe...
...It summarizes much of the literature on economic integration, especially Meade's work, but does not make it more accessible to the layman...
...Some, of the "minimal school," take a negative view of the process...
...It does not examine the implications of integration for economic growth...
...But they then proceed to praise the projected European Common Market without qualification, concluding their study with this intemperate injunction: "If the Continent wishes to prevent its decline at this critical point in its history, the great mass of the people must for once be brought to the point where they do not follow irrational passions but bow to the laws of logic that guide the architects of the European Economic Union...
...And both deserve to be spared the painful task of correcting the authors' errors...
...They advocate creation of supranational agencies to make monetary and fiscal policy for Europe as a whole, and urge measures to stimulate movements of labor and capital among the various countries...
...At the same time, however, Sannwald and Stohler adopt the method and manner of the minimal school in most of their analysis...
...It is hard to know where the authors of Economic Integration stand on this basic issue...
Vol. 43 • March 1960 • No. 12
