Unconventional Wisdom Interview with John Kenneth Galbraith

INTERVIEW Unconventional Wisdom Interview with John Kenneth Galbraith John Kenneth Galbraith has been writing best- selling books about economics for many years. Those books—of which there are literally dozens—have earned him the reputation as the best-known economist in America, and per- haps even the world. His classics include Amer- ican Capitalism (1952), The Affluent Society (1958) and The New Industrial State (1967). More recently he has written The Culture of Contentment (1992) and The Good Society (1996). But Galbraith’s views, however popular when measured by book sales, are certainly not uncontroversial. He is famous for challenging standard doctrine within the mainstream economics profession and for challenging the value system implicitly reflected by both public and private decisions. Galbraith is currently an Emeritus Professor in the Department of Eco- nomics at Harvard University. He was inter- viewed by Christopher Ragan, Editor of World Economic Affairs, at his home in Cambridge, Massachusetts. ORLD ECONOMIC AFFAIRS: WHO the notion that the Great Depression, for WEA: Some people would argue have been your greatest intel- example, was the result of the control of that your main contribution to eco- W lectual influences, and how is prices and output, an aspect of imperfect nomics over the years has been in this influence evident in your competition. I went through a major altering our underlying value system writings and ideas? transformation that year when I read rather than in developing precise, Galbraith: Well, I began with Alfred Keynes’ General Theory. convincing theories of the structure Marshall. He was my great introduction And then there were many others. Alvin of the economy. One example is that to economics. With much of his work I Hansen, who was the voice of Keynes your views may have increased the eventually came to disagree, but you had here at Harvard, was very influential. I attention paid to poverty and to the to know what was wrong before you was, early on, instructed in the connec- appropriate provision of public could know what was right. I was also tion between economics and government goods, whereas your views on “coun- very much influenced, in the 1930s in action by people both at Harvard and in tervailing power” may not have been California, by Thorstein Veblen, and in Washington—by John D Black at Har- well accepted by the economics pro- the latter half of the 1930s, after I came vard and Henry Wallace in Washington. I fession. Would you agree that your to Harvard, by John Maynard Keynes. concluded, from their work, that there contribution has been mainly in He was a great opening of the window in was a natural bridge between economic terms of changing values rather than 1936. Up to that time, I had adhered to theory and practical action. in precise theory-building? WORLD ECONOMIC AFFAIRS ● SPRING/SUMMER 1997 31 INTERVIEW: JOHN KENNETH GALBRAITH Galbraith: I would agree. My interest outside of the broad current of eco- absolutely essential. One cannot have a in the minor refinements of economic nomics. I served my term as president general theory covering all situations; theory has been very low. Or, rather, it of the American Economic Association one must have an open mind as to the has not been low, but subject to control. which is not something that is accord- particular situation. In Canada and the On the other hand, countervailing ed to outsiders, and I have had a large United States, some of the greatest power—the notion that the institution- number of close friends in the econom- achievements have been by govern- al structure of the economy works by ics profession, at Harvard and all over ment. We have the best university the creation of opposing systems of the country. So I have systems in the world, power—has been, in my view, surpris- never had the sense of largely the product ingly influential. The book in which it exclusion. I am conducting a of government action. appeared [American Capitalism] is still When my appoint- Canada would not have in print, it’s still discussed. I keep ment as president of one-person and been a country if it had- encountering references to countervail- the American Economic hopeless crusade n’t been for the govern- ing power in my reading and I am, by Association was under ment intervention in the no means, disappointed by the recep- discussion, there were against the word field of transportation, tion of that book. some objections to it on “globalisation”. once of central impor- WEA: If nothing else, you have cer- the grounds that I was tance. So I repeat: this is tainly been a successful producer of not strictly orthodox. a question of application terminology—”the affluent society”, Someone made the terrible mistake in of intelligence to the particular situa- “countervailing power”, and “the the discussion of pointing out that tion and not something to be guided by conventional wisdom” are a few Thorstein Veblen had never been presi- formula, sometimes called ideology. examples. dent of the American Economic Associ- WEA: Let me follow up on that Galbraith: The conventional wisdom ation, had never been similarly recog- point because you discuss it thor- has been my best. nised. And that, I have always been told, oughly in your latest book, The Good WEA: Lester Thurow described you was the reason that I was immediately Society. You argue there that, too in The New Palgrave’s Dictionary of appointed. often, both liberals and conservatives Economics as “an economist out of are prone to escaping into ideology the mainstream of economic thought Markets Versus Planning from thought. You argue instead that but in the mainstream of economic WEA: Let me now turn to the topic policies ought to be evaluated on a events”. Do you agree? of markets versus planning. One of case-by-case basis. Do you think there Galbraith: I would broadly accept the central themes in your writing is much hope that the liberal/conser- that observation. Lester Thurow is a very has been that government has a role vative “jump to ideology” will be close friend of mine and was once my to play in economic planning, and reformed? student. His judgement on such matters that economic planning has a role to Galbraith: Oh, the escape into the for- is pretty good. play in successful economies. The mula, the escape into the ideology and WEA: You once described your past half-century has seen significant the pride that is involved in that is very approach to economics as “the lower changes in this regard, the most dra- strong. I would have hoped for a prag- economics” with an emphasis on matic of which was the collapse of matic revolution, but my expectations big ideas and prose rather than on the Soviet Union—an event viewed by are not too high. technical details and mathematics. Do some as proof that market economies WEA: Some people would argue you lament the fact that your writings are superior to planned economies. that much of the success of the East have not been adopted What do you take as Asian economies comes from a judi- by the mainstream of the important lessons cious use of government planning the academic econom- If I had been regarding markets ver- rather than complete laissez-faire. Do ics profession, or do sus planning from the you agree? What important lessons do you think that your rigidly orthodox, fall of the Soviet you draw from the rise of the Asian ideas have spread fur- I think by now Union? Tigers? ther precisely because Galbraith: I have no Galbraith: I draw the conclusion that, of your “lower econom- I would be well doubt on that point. This on the whole, the Asians—Japan, Korea, ics” approach? forgotten. is not a matter of ideolo- Singapore—have been less governed by Galbraith: If I had gy. Ideology here is a theory, less governed by doctrine than been rigidly orthodox, I blanket over thought. the United States, Canada, and the West, think by now I would be well forgotten. The question is one of the pragmatic and that three important things have Only as you emerge to influence the mix. There are some areas where the happened as a result. First, a substantial course of economics, to see flaws in its market system—the word capitalism investment—let’s take Japan as the lead- development and correct them, do you has now gone out of fashion—is ing case—in needed infrastructure. Sec- have any hope of continuing recogni- absolutely indispensable; and there are ond, a strong sense that the bureaucra- tion. Though I do not want to exagger- others where the role of the state or the cy is allied with business and in its ate the point, I have never felt all that restraints imposed by the state are support. And third, a government regu- WORLD ECONOMIC AFFAIRS ● SPRING/SUMMER 1997 32 INTERVIEW: JOHN KENNETH GALBRAITH latory structure that is governed—going American economy is that our income ical power of the middle class, is back to our earlier point—by practical distribution is so much worse than that there any reason to expect this to be utility rather than by theory. of the other countries. reversed and, what sort of policies WEA: I once saw reference to the that are politically acceptable to the fact that your books have sold even Income Distribution middle class can bring about such a better in Japan than they have in the in America reversal? United States. Your answer to the last WEA: Let me go right on to discuss Galbraith: I’m not widely optimistic.

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