Just Curious

John Kenneth Galbraith

I have just written a short bio piece for Professor John Kenneth Galbraith on the internet movie database, since aside from being a maverick economist at Harvard, Mr. Galbraith was also a commentator on a number of very well-made documentaries.

I did that after reading his smallish book, The Affluent Society (1958), a book that earned him perennial enmity from his professional colleagues. It was in this book that he coined the term "conventional wisdom."

Born in Ontario, Canada, Mr. Galbraith received his early and college education in that country, graduating with a B.S. degree from the Ontario Agricultural College in 1931. Being thrust into a society plagued with the Great Depression, he wasn't able to secure a job and consequently he went back to school, culminating with a Ph.D. in economics from Berkeley in 1934.

He quickly joined the staff of the Office of Price Control and the Social Security Administration under the FDR administration, and gained a sterling reputation as the staunchest supporter of Keynesian economics and a fearless crusader against poverty. He was offered an assistant professorship at Princeton in 1939, and within a mere decade he rose to become Paul M. Warburg Professor of Economics at Harvard.

In 1952, he published his first important post-war treatise, American Capitalism: The Concept of Counvervailing Power, in which he made a proposition that almost literally shook the profession. He claimed that the prosperity of America lays not in the fact that her free markets have helped people to get the price level "right" (in the classical economic sense) and hence satisfying the preferences of all; it really lays in the fact that oligopolies were able to mark-up prices (and hence ensuring a "wrong" price level) and accumulate vast amount of capital, which enables them to conduct scientific research that no single competitor in a perfectly competitive market could afford. Nevertheless, to prevent these oligopolies from turning into all-powerful tyrannical forces in the American society, countervailing powers are needed to keep them in check. These powers include an ever-suspicious populace at large; a very active government that has no qualm using fiscal policies to achieve short and long run goals; and trade and labor unions that have enough bargaining power.

In 1958, he published The Affluent Society, which challenged many of the conventional wisdoms and assumptions used by professional economists, including the idea of diminishing marginal utility; of the use of production level as measure of human satisfaction; of various precepts about income equality and security; and of the nature of the human want for luxury goods.

Together with Dr. Robert L. Heilbroner (b.1919), professor at the New School for Social Research, Galbraith represented the last dissenting voice in economics from the American Institutionalists. American Institutionalism is an ecclectic school of thought, which could trace its roots in the English and German Historical Schools. It stresses the interaction between economic and noneconomic, for example, cultural, institution; and the role played by noneconomic factors in shaping economic systems. Leading respresentatives include Thorstein Veblen (1857-1929) , John Maurice Clark (1884-1963) and Karl Polanyi (1886-1964). Leading works include The Theory of the Leisure Class (Veblen, 1899), The Engineers and the Price System (Veblen, 1921), The Affluent Society (Galbraith, 1958), American Capitalism: The Concept of Countervailing Power (Galbraith, 1952); The Making of Economic Society (Heilbroner, 1963); The Worldly Philosophers (Heilbroner, 1955); The Nature and Logic of Capitalism (Heilbroner, 1979); The Great Transformation (Polanyi, 1944).
 
An interesting aspect of Institutionalist economists is their liberal use of Marxian concepts. Make no mistake: these people are not Marxists for they believe that the "System" is able to survive. Nevertheless, they borrow freely insights provided by the Marxists. They also have some link to evolutionary economics, a school led by Joseph Schumpeter (1883-1950), who wrote Capitalism, Socialism and Democracy.

A detailed book review on The Affluent Society will soon be posted.

posted by James Chang @ 8:19 AM