from galbraith to krugman and back

FROM GALBRAITH TO KRUGMAN AND BACK Galbraith, Krugman and 'Good Economics' L.A. Duhs University of Queensland 1. Introduction Odd couples are not unknown in economics. Hayek and Myrdal shared an unlikely Nobel Prize in 1974, for example. To paraphrase Myron Sharpe at that time: both Hayek and Myrdal had been taking economics forward for the last 50 years, but since they had been travelling in opposite directions, there had to be some doubt as to whether the Nobel Prize committee could tell any longer which direction is forward. Galbraith and Krugman now present us with another case of an odd couple. In 1994, Krugman disdained to call Galbraith an economist at all, dismissing him as but 'a policy entrepreneur', i.e. as a mere rhetoritician. More recently, however, Krugman has become an advocate for positions which would have warmed the cockles of Galbraith's heart. A case can certainly be made that Galbraith would have been happy to put his name to many of Krugman's New York Times columns of the last few years. Galbraith was of course no stranger to criticism from within the economics profession - having been dismissed by Samuelson as “a good novelist” and by Friedman as “a missionary seeking converts”. In Krugman's case, however, the condemnation is no less biting and comes from closer to home i.e. from another economist in the post-Keynesian tradition who is quite critical of various orthodox, conservative positions, but who nonetheless saw Galbraith as even worse. Despite his links to an evolutionary and institutionalist approach, Galbraith did no better than the very orthodox, notes Krugman (1994), in foreseeing the rise of New Keynesianism, evolutionary economics and the notions of path dependence and QWERTY. For that reason, but not for that reason alone, Krugman's putative metamorphosis to something resembling a Galbraithian position is an interesting case to consider for those interested in the teaching of economics, and its methodology. Given also both a recent poll of heterodox economists and support for Galbraith as one of the most instructive economists of the twentieth century and Boettke's Austrian School dismissal of Galbraith as a “brilliant failure”, significant questions about scientific method in economics are raised. 2. Krugman’s 1990s View of Galbraith In Peddling Prosperity Krugman (1994) viewed Galbraith as a victory of style over substance. He notes that Galbraith has never been taken seriously by his academic colleagues, and that 'policy entrepreneurs', like Galbraith, merely write what politicians want to hear. He ridiculed Galbraith’s New Industrial State, as a book to which history has (rightly) proved unkind. He objects that while Galbraith represents our political process as a faithful representation of the interests of the only part of the electorate that matters – the relatively well-off top 20 percent of the income distribution - the truth is more complicated, and on many (big) issues the reality is that voters do not have a clear vision of where their interests lie (1994:6). For Krugman, a policy entrepreneur is one one who writes for the general public and who offers easy solutions where there are likely to be none, whereas the professoriate writes analytical pieces which must withstand the scrutiny of the scientific community. Certainly there is no suggestion in the 1994 Krugman of acceptance of Myrdal's methodology and his claim that there cannot be a view except from a viewpoint, thus leaving even the 'scientific economists' to reflect some particular viewpoint and set of values. Two years later, in reviewing Galbraith’s The Good Society (1996), Krugman derided Galbraith as a famous but ineffectual liberal unprepared to confront the real dilemmas facing modern liberalism. He identified major flaws in Galbraith's approach, which he described as a vision of the economy in which what is good for social justice invariably turns out to have no unfavourable side effects. He

castigates Galbraith as a very old fashioned Keynesian who is still locked in the primitive macroeconomics of his youth. He again denounces the New Industrial State as offering an image of an economy that was becoming increasingly dominated by General Motors-type corporations (giant firms, freed by their size and power from the rigors of competition, run by technocrats who pursued bureaucratic imperatives rather than serving the interests of the stockholders), whereas the reality is that this has not happened and large corporations in fact now play a considerably smaller role in the economy than they did when Galbraith wrote his book. “Rather than evolving away from a market economy and the constraints it imposes, we are now more firmly ruled by the Invisible Hand than ever before.” As we will see below, this view scarcely seems compatible with the views expressed by Krugman in many of his more recent New York Times columns. Indeed, the new Krugman of the New York Times columns (2000-06) frequently laments the abuses of power by large corporations. Indeed, he has himself now been castigated as the most prolific “policy entrepreneur” of them all (Kuttner 1996). Krugman's 1994 teaching was essentially a New Keynesian teaching that markets don't work as well as 'economic rationalist' or laissez faire economists maintain. There are 'sticky prices' and problems with path dependence and information asymmetry. The case for government intervention is stronger than economic rationalists allow, but his argument is nonetheless not a Galbraithian one of demanding that economic and political systems be looked at as part of one larger integrated social whole. 3. The More recent Krugman of the New York Times Columns 2000-2006 Since 2000, Krugman has embarked on a new career as a journalist. Whether that really reflects a move from scientific economics to policy entrepreneurship may be a matter of judgement (especially given his continuing diatribes against the Bush Administration), but presumably Krugman himself sees it as a necessary contribution to combatting influential but scientifically ill-informed policy entrepreneurs already manipulating popular opinion in the popular media. Even if so, that nonetheless amounts to a tacit concession of Galbraith's claim that there is a major need for someone to play the role of providing 'emancipation of belief'. Is this best done by Galbraith, or by Krugman or by supporters of Hayek, as Boettke claims (below)? Either way, it seems that Krugman and Galbraith now share the view power creates belief and belief creates power, such that a major goal of the socially conscious is to emancipate popular belief from misinformation and disinformation. Indeed, Krugman's columns go further towards a coalescence of views with Galbraith insofar as he commonly complains of corporate abuses, links between corporations and government (as per Galbraith's New Industrial Society, in fact), and the hijacking of public policy by private interests. Evidence to this effect is now presented, on the basis of selected Krugman NYT columns. (a) Enron and Californian Power Supplies In spring 2001 the lights were going out all over California, and the price of electricity was soaring. Vice-President Cheney convened a task force which concluded that the energy crisis was a long-term problem caused by meddling bureaucrats and pesky environmentalists, who weren't letting big companies do what needed to be done. Krugman (“Delusions of Power” (28/3/03)) trumpeted that everything the Cheney taskforce said was wrong, and that “In fact, the California energy crisis had nothing to do with environmental restrictions, and a lot to do with market manipulation.” For Cheney, the solution was to “Scrap environmental rules, and give the energy industry multibilliondollar subsidies... [He] sneeringly dismissed energy conservation as a mere "sign of personal virtue" and scorned California officials who called for price controls and said the crisis was being exacerbated by market manipulation.” For Krugman “There's no longer any doubt: California's power shortages were largely artificial, created by energy companies to drive up prices and profits.” While in 2001 the evidence for manipulation was basically only circumstantial, a new 2003 report from the Federal Energy Regulatory Commission (which until now has discounted claims of market manipulation) offers a mountain of direct evidence of pervasive market manipulation including phone conversations, e-mail and memos. Krugman asks how could Cheney have been so wrong. He answers that Cheney ensured that his task force was staffed only by like minded men, and that another possible answer is

that “Mr. Cheney basically drew his advice about how to end the energy crisis from the very companies creating the crisis, for fun and profit”. And therein lies the rub, both in practical policy terms and in terms of adoption of a Galbraithian position. Few better examples could be given of Galbraith's desire to expose links between corporations and government to corporate advantage and public disadvantage, or of Galbraith's strictures that deductive analysis of the consequences of a given policy is hardly 'scientific economics” if it fails to scrutinise the source of that policy. At a later date Krugman (“Machine at Work” 13/7/04) Krugman went on to note in an overtly Galbraithian way that “If Enron hadn't collapsed, we might still have only circumstantial evidence that energy companies artificially drove up prices during California's electricity crisis. Because of that collapse, we have direct evidence in the form of the now-infamous Enron tapes — although the Federal Energy Regulatory Commission and the Justice Department tried to prevent their release.” Hence we now know that powerful Republican Administration figures (DeLay) “helped Enron to secure energy deregulation legislation, even as its traders boasted to one another about how they were rigging California's deregulated market and stealing millions each day from 'Grandma Millie'." It may have been Galbraith who said that government is sometimes merely the executive arm of powerful corporations, but it is Krugman who provides this contemporary energy sector example. Moreover, Krugnman adds that it is merely fortuitous that the Enron scandal came to light, and there is no ground for thinking that the system is working, and that the public can breathe easy. “Since the politicians who did their bidding haven't paid any price, that climate hasn't changed.” (“Enron and the System” 9/1/04.) For Krugman, as for Galbraith then, only the sanguine or naïve can accept the orthodox neoclassical representation of the government as an independent arbiter. (b) Free to Choose Obesity Krugman laments that in an American landscape of obvious obesity and what medical experts see as an obesity epidemic, there are nonetheless those who portray obesity as a free choice – and therefore an optimal choice – of a willing public. In “Free to Choose Obesity” (8/7/05) Krugman takes an obvious swipe at Friedman's Free to Choose, and concludes that “there are situations in which ''free to choose'' is all wrong -- and that this is one of them”. “How can medical experts who see obesity as a critical problem deal with an ideological landscape tilted in the direction of doing nothing?” As far as Krugman is concerned “only a blind ideologue or an economist could argue with a straight face that Americans were rationally deciding to become obese”. In fact, even many economists know better and he approvingly quotes a 2003 Harvard University analysis of obesity by David Cutler, Edward Glaeser and Jesse Shapiro, which declares that ''at least some food consumption is almost certainly not rational.'' There is evidence that even adults have clear problems with self-control. It follows that consumer sovereignty is a limited concept then, for Krugman, as for Galbraith. Questions of economic psychology and advertising become relevant, and in a highly Galbraithian manner, Krugman adds that the food industry outsources campaigns against medical researchers and disseminates crude anti-anti-obesity propaganda to industry-financed advocacy groups like the Center for Consumer Freedom. Again echoing Galbraith's drive to restore sectoral balance to the American economy by strengthening the public sector in various useful ways, Krugman adds that “we need to ... realize that the history of government interventions on behalf of public health, from the construction of sewer systems to the campaign against smoking, is one of consistent, life-enhancing success”. We therefore need to put aside our anti-government prejudices, and applaud the ability of the public sector to perform useful roles in facilitating the private sector and in re-directing it towards superior social goals (which must in some sense reflect an implicit teleological view). In earlier years Galbraith himself may have focussed on the evils he associated with “the military-industrial complex”, but contemporary 'Galbraithian' critics of neoclassical orthodoxy find equally (?) disturbing examples of the abuse of corporate power or of distortionary corporate-government links in the food, energy and health industries. Krugman offers evidence of deliberate corporate dis-information programs in such places. Indeed, given the level of scientific information now available, the scope for obfuscating truth and confusing consumers in a sea of information asymmetry has grown, not shrunk, and Krugman accordingly expresses concern that it may be harder today for government to turn around obesity

trends than it was in Galbraith's heyday to turn around smoking trends. He notes that the ideological landscape has changed drastically since the 1960's largely because of corporate financing of advocacy groups. Today, proposals to deal with community problems have to contend with a public predisposed to believe (falsely) that the market is always right and that the government always screws things up. Endorsement of the need to restore sectoral balance to the US economy, to recognise the abuse of corporate power and the limitations of consumer sovereignty, stamps Krugman's efforts on the obesity issue as highly Galbraithian. (c) Iraq and Halliburton One of Galbraith's concerns regarding weapons corporations was that they made not only weapons, but foreign policy as well, the better to sell their weapons. Given the political sensitivities in the Middle-East, he expressed similar concerns about the oil majors. Krugman pretty much echoes these concerns in his comments on the situation in Iraq, including the failure of the American reconstruction effort. As Krugman puts it, (“Who's Sordid Now?” 30/9/03) “Cronyism is an important factor in our Iraqi debacle. It's not just that reconstruction is much more expensive than it should be. The really important thing is that cronyism is warping policy: by treating contracts as prizes to be handed to their friends, administration officials are delaying Iraq's recovery, with potentially catastrophic consequences. Galbraith expressed concern about the rotating door policy which saw high level staff working for the Defence Department for a period and then for a weapons corporation (whose profit goals did not necessarily coincide well with the needs of public policy) and then perhaps again for the Defence Department (whose contracts that corporation would now be bidding for). Krugman plainly reprises Galbraith's concerns about such a rotating door policy. It poses problems as to who works for whom. In this context, Krugman notes that Halliburton, the big oil services conglomerate headed by Vice-President Cheney between stints in Bush Administrations, “is again drawing embarrassing headlines over the lucrative contracts it was awarded to service Pentagon operations in Iraq. No wrongdoing has been proven and the company is entitled to the presumption of innocence.” However delicate the wording, Krugman raises question as to how well Vice President Cheney can represent Halliburton's client in Iraq - namely the US military and its paymaster, the US taxpayer – when lucrative contracts in Iraq have been extended to Halliburton in controversial circumstances (“More Questions About Halliburton 31/10/04). In what is a paraphrase of Galbraith (and of notions in his New Industrial State which Krugman so lampooned in 1994) Krugman notes that “there is a reason that big defense contractors often recruit well-connected former government officials as their chief executives. They do not operate in a normal business environment, where companies must compete on the basis of their performance and efficiency. Instead, they sit in a kind of financial wonderland where huge profits can be made with minimal risk. Lucrative contracts are awarded without competitive bidding, and unexpected cost overruns and other dubious charges are simply passed along to the taxpayer.” Krugman laments that most of this is, unfortunately, completely legal – which is effectively why Galbraith called for the nationalisation of defence corporations. Krugman stops short of that, and puts his faith instead in the fact that safeguards do exist to protect the public from being totally fleeced, and that according to the senior civilian contract monitor for the Army Corps of Engineers, Bunnatine Greenhouse, Halliburton may have violated them, and exposed itself to the prospect of legal action. Again, in the Iraqi context, the parallels between Krugman and Galbraith are obvious, and both see corporate abuse of power as capable of placing American security at risk. (d) Global Warming, Al Gore, JK Galbraith, Paul Krugman Another issue of major significance today, which got rather less airplay in Galbraith's heyday is global warming. Galbraith certainly touched upon environmental matters, but the sense of impending crisis from global warming is more recent. Krugman takes up that case, and in an echo of earlier concerns raised by Galbraith, argues that energy companies have manipulated situations and relationships with

governments to produce very profitable results for themselves at public expense (as in the Enron case regarding California electricity supply), and that industry lobby groups finance “independent research groups” to produce disinformation and obfuscate public understanding, just as Gore says in the global warming case. He notes (“A Test of our Character” 26/5/06) that the reaction of energy-industry lobbyists and right wing media organisations to Al Gore's much publicised global warming movie provides Gore [and Galbraith] with the best possible example of corporate disinformation programs. Al Gore's movie-film An Inconvenient Truth is makes the point that scientific experts appear to be quite unanimous that present global climate change has its root in human activities. In consequence, human behavioural change is essential, if a solution is to be found and a disaster avoided. Nonetheless, the non-scientific general community reports no such unanimity, and is much less convinced that it is inappropriate man-made activity which underpins climate change, and tends to be much more sceptical about the need for policy reforms. Just why is the general (non-scientific) community so much at odds with the (expert) scientific community on a matter of such potential importance? Gore's answer in part is that vested interest groups - such as the energy lobby - do not want to see changes in present energy-consuming policies and behaviours. Accordingly they fund “independent research papers” designed to obfuscate community understanding. They thus stand accused of putting their short term profits ahead of long term global viability, and they also stand accused of being both willing and able to deliberately confuse public understanding (or consumer sovereignty). In the global warming case, is there a tipping point beyond which our steps cannot be retraced? Is there an irreversibility applicable to environmental sustainability, which – once passed – has unavoidably disastrous consequences? Is it necessary to accept that while other potential disasters have in fact been forestalled (e.g. we will run out of oil by 19?? or out of arable land before the world can be fed), the scientific facts say “not this time”? The global warming / climate change issue is a public goods issue (or, more aptly, a public bads issue). Indeed it is a global public goods issue, and there is clear evidence that global public goods are becoming a matter of increasing importance to the world (given also the problems of global terrorism, AIDS/SARS/bird flu, species extinction etc). Is there an immediate need for a public policy response? Indeed, is there a need for a global governmental response? Or are market forces and such regulatory processes as we already have quite adequate? Gore's case shows obvious similarities to Galbraith's general position and to Galbraith's recognition that technology and circumstances keep evolving, so economics must adapt too. Accordingly, if corporations do play a role in disseminating disinformation designed to confuse public debate, that is a political economy matter of the gravest concern, more especially if the world environment really does face a point of irreversibility. In effect, the Galbraith-cum-Gore-cumKrugman view is that in a day of scientific complexity and large and powerful corporations, market failures in the information market may be deliberately engineered, and may thereby act as a threat to the economy, to sustainability and to the democratic process. Krugman would doubtless say that media coverage in Australia of Gore's trip and movie, (September 2006), fulfil Gore's contentions. Courier Mail journalist Terry McCrann (12/9/06), for one, lampoons Gore's movie, and suggests that rather than be called “An Inconvenient Truth” the movie should be renamed “A Convenient Untruth”. McCrann and others in the Australian media (eg Andrew Bolt) have attacked the claim that scientists are united in their understanding that global warming is manmade and that it is an urgent problem here, now. McCrann's claim is that it is Gore who is obfuscating the scientific truth, and that he is doing so merely to opportunistically develop a higher political profile, in the hope that he can stand again for the US Presidency. Krugman for his part would presumably seize on McCrann's column as merely another illustration of misinformation and disinformation, in the local Australian context. Furthermore, Krugman quotes an American scientist whose work is cited by the Competitive Enterprise Institute - which is partly funded by the oil industry - as protesting that the Institute's advertisements deliberately misrepresent his scientific findings. In an age of mass media, information is coin. Or, in Galbraith's words, belief conveys power, such that one of his principal goals was to work for “the emancipation of belief”, so that public

policy could be better guided. Control of that information flow to the voting public is therefore of vital importance. A significant political economy question therefore is to decide whether market forces are working well in energy markets and in other markets of environmental importance, and also in media markets, particularly if there is a prospect of soon passing a tipping point beyond which environmental damage is irreversible and disastrous. Put differently, Galbraith has long argued that orthodoxy is remiss for not considering the sources of government policies, and the global warming (environmental) issue is a particularly important case in point. In effect, Galbraith and Krugman are putting their money on expert environmemtal scientists. McCrann and others, including fossil fuel lobbyists (dubbed by Clive Hamilton as 'the Greenhouse Mafia' in the Australian context), prefer to argue an opposite line with great faith in market forces and consumer sovereignty and a willingness to ridicule those who are agitated about impending doom. In effect, the critics of the Galbraith / Krugman / Clive Hamilton / Gore position see no reason for deeming orthodox neoclassical economic analysis to be unequal to the task of dealing with what environmental scientists warn is an impending disaster of unequalled proportions. Gore and Krugman – and presumably Galbraith - don't share that optimism. (e) Hurricane Katrina In The Economics of Innocent Fraud (2004) Galbraith continues to press his case that that we pay a high price for believing various myths of economic orthodoxy, including the notion that government intervention is necessarily costly and ineffective. Krugman (“The Crony Fairy” 9/4/06) replicates this stance in his attack on the Bush Administration for emasculating FEMA, the State emergency rescue organisation, which was so heavily criticised for its poor performance in response to Hurricane Katrina. When it was needed and lives depended on it, FEMA was found to be poorly resourced and poorly managed. It is a State body afterall, notes Krugman, in describing the Bush Administration stance, and therefore one that cannot really be helpful. Infected with this view (or myth or not-soinnocent fraud) the Bush Administration therefore saw no harm in emasculating it, and using it simply as a repository for cronies. For both Krugman and Galbraith, on the other hand, government works when it's run by people who take public policy seriously. As Krugman tells it, FEMA's reputation was poor in the early 1990s, but was then rehabilitated by President Clinton, only to be then emasculated again by the second President Bush, who treated it as a benefaction for cronies. As Krugman tells it the Bush Administration simply did not believe in government intervention as a potentially helpful agent, even in circumstances of national disaster involving elements of public goods or bads. The people of New Orleans paid a high price for that. (f) Health insurance Apart from terrorism and global warming, health insurance ranks as one of the major issues on the American social and political radar screens. Krugman (“First, Do More Harm” 16/1/06) objects that the Bush Administration idea of health care reform is driven by an ideology at odds with reality, leaving the Bush Administration to take an inadequate US health care system and make it worse. In the health insurance market, Krugman (“Death by Insurance” 1/5/06) argues that “For lowerincome working Americans, lack of health insurance is quickly becoming the new normal.... [A recent] survey found that 41 percent of nonelderly American adults with incomes between $20,000 and $40,000 a year were without health insurance for all or part of 2005. That's up from 28 percent as recently as 2001...Many of the uninsured reported spending their entire savings on health care and/or that they were having difficulty paying for basic necessities. And most uninsured adults reported cutting corners on medical care to save money -- failing to fill prescriptions, skipping medications, going without preventative care. ” He laments that rising premiums are causing many traditional employer customers of health insurers to shun or curtail company health benefits, the upshot of which is that the US “health care system [is] driving a growing number of Americans into financial ruin, and in many cases kills them through lack of basic care. In a world of multiple competing medical

insurance companies, Krugman notes that administrative costs are much replicated, and the present system actually costs more to run than would a nationalised scheme guaranteeing health insurance to everyone. That of course would be known as American socialism, and so is ideologically unacceptable to the Bush Administration even if it promises improvements in delivery of health care. Krugman has no doubt that “covering everyone under Medicare would actually be significantly cheaper than our current system”. Again echoing Galbraith's concerns about producer sovereignty and the limitations of the notion of consumer sovereignty, Krugman sees evidence of information asymmetry and market failure in the health market, noting that “In practice, people who are forced to pay for medical care out of pocket don't have the ability to make good decisions about what care to purchase”. Another dimension of the problem is that not only are insurance companies not given incentive to tackle issues of preventative medicine, they are given tax breaks to focus on larger crisis expenditures, even though some such crises might have been averted by smaller preventative expenditures. Krugman illustrates his case in relation to diabetes expenditures, for which podiatry visits are uninsured whereas amputations are. Krugman argues that the thought of a 'single-payer system' should not cause people to see red. The fact is that Medicare works, and the current US system remains inefficient, while imposing financial anxiety and costing some 18,000 unnecessary deaths every year. Galbraith would likewise not have taken fright at the notion of nationalised health insurance or a 'single payer system'. He (Galbraith 1973) may have called for nationalisation of weapons corporations and oil majors, but would have had no reason not to add nationalised health insurance to the list, especially at first sight of a collapse in the traditional American employer-provided health benefits arrangements. At what point in Krugman's estimate does Galbraith cease being a 'policy entrepreneur' and become a 'far sighted economist', in tune with information asymmetry and the limitations of consumer sovereignty? Along with continued recognition of the role of belief and power in generating (and distorting) economic policies, we will see below that there are also traces of Galbraithian ideas of countervailing power in Krugman's position. In the context of the Veterans' Health Administration (VHA) Krugman (“Health Policy Malpractice” 4/9/06) claims that America already has a successful model of health administration for one group of people, yet the Bush Administration does not shout about its success “because they're afraid that allowing a successful government program to expand would undermine their antigovernment crusade and displease powerful business lobbies”. He lauds the efforts of the VHA (“Health Care Confidential” 27/1/06), an integrated provider commonly taking a life-long interest in its clientele, the lesson of which is that “a government agency can deliver better care at lower cost than the private sector – [which is a notion that] runs completely counter to the pro-privatization, anti-government conventional wisdom that dominates today's Washington.” He makes clear that he is no enemy of markets (“Health Economics 101” 14/11/05), but that competitive private shopping around does not provide the best model for health insurance and America's health future. Galbraith would doubtless agree. As far as countervailing power is concerned, Krugman notes that the V.H.A. is an effective bargainer on drug prices, whereas the drug bill forbids Medicare from doing the same. He sees dissonance between the dominant ideology and the realities of health care – just as Galbraith complains of myths in orthodox economics teaching or of innocent frauds – and observes with respect to Medicare drug legislation that it looks as if someone went down a checklist of things that the veterans' system does right, and then did the opposite. Drug companies may gain from such an approach (“D for Debacle” 15/5/06), but consumers will not. Krugman notes that both the insurance industry and the pharmaceutical industry are major campaign contributors, and again notes the existence of a revolving door through which administration officials pass to and fro to positions as lobbyists. Accordingly, he again asks at least tacitly, whether government is the independent arbiter of neoclassical theory, or something more like the executive arm of powerful producer corporations, as Galbraith contends. Krugman also addresses other aspects of America's failing health care system, in a manner entirely compatible with the interdisciplinary social dynamics viewed favoured by Galbraith and other institutionalists. He notes (“Bad For The Country” 25/11/05) that “If the United States had national health insurance, G.M. would be in much better shape than it is”. It seems that last year General

Motors spent $1,500 per vehicle on health care, while by contrast, Toyota spent only $201 per vehicle in North America, and $97 in Japan. Moreover, G.M.'s health care costs are so high in part because of the inefficiency of America's fragmented health care system. We spend far more per person on medical care than countries with national health insurance, while getting worse results. Insofar as GM now slashes employment, many of the health care expenses G.M. will save will simply be pushed off onto taxpayers (via Medicaid or uncompensated care at emergency rooms). As national economic policy, this is poorly thought out, and reflects an ideology-driven need to deny the useful role of public sector health care. One other thing that is clear is that America's semi-privatized welfare state worked in the first place only because we had a stable corporate order. As that stability contracts workers can no longer count on loyalty from their employers, and anxiety will grow (“Age of Anxiety” 28/11/05). We need to make social insurance programs work better, and not merely privatise them, as Conservatives want to do. Worst of all, perhaps, is the present prospect of surgeons being offered lucrative consultancies by corporations producing implant (or similar) devices. Information asymmetry at the patient level then stands potentially compromised at the medical specialist level as well, insofar as consultancy contracts potentially distort choices favoured by surgeons themselves.

(g) Inequality For Galbraith, and for Myrdal too, inequality was an ever present theme. Krugman takes up that theme in a contemporary setting and notes that economic inequality is rising in America. He argues (“Wages, Wealth and Politics” 18/8/06) that this is far from a market inevitability and that it matters a lot which political party is in power in Washington, and which political ideology holds sway. As he presents it, 25 years of policy have systematically reduced workers' bargaining power. In the four inequality eras he sees since the 1920s he observes that what happened in each era reflected the prevailing political orthodoxy of the day. Under the New Deal workers did well. Since the 1980s the the rich have seen their incomes soar, as the US political scene has been dominated by conservatives wedded to the view that what is good for the rich is good for America. While technological change, globalisation and other factors were also at work, Krugman contends that it is likely that government policies played a big role in America's growing economic polarisation, not only via tax breaks for the rich but also via a shift in Labor Department policy from protection of worker rights to tacit support for union bashing. In practical terms this is a reprisal of Galbraith's views that power is belief and belief is power, and that in the absence of some countervailing power employees will be less effective than employers in wage negotiations. Indeed, Krugman (“Class War Politics” 19/6/06) goes so far as to assert that what is really at issue in the bitterness of the contemporary partisan divide is class war. Citing new books on the subject, he accepts that “for the past century, political polarization and economic inequality have moved hand in hand”. Accordingly, it is possible to hear what Galbraith called “the drumbeat of inequality” marching through this column. There is no tension with Galbraith's views in Krugman's observation (“The War Against Wages” 6/10/06) that employer power in concert with national industrial relations organisations have combined to cut workers' bargaining power. After- tax profits are up because productivity is up, but workers' wages are not. Krugman (“No Bubble Trouble” 2/1/06) touches on another part of the inequality story, in terms of the housing market, in respect of which he says “we should think of America as two countries”. He estimates that slightly under 30 percent of Americans live in the land-premium zone, which comprises most of the Northeast Corridor, coastal Florida, much of the West Coast and a few other locations, while the rest live where land prices are much more stable and predictable. (h) GDP Growth and Happiness In “Our Sick Society” (5/5/06) Krugman asks if “being an American bad for your health?” The United States has achieved a sort of inverse miracle: we spend much more per person on health care than any other nation, yet we have lower life expectancy and higher infant mortality than Canada, Japan and most of Europe. What isn't clear is exactly what it is that causes this stunningly poor performance. He asks: How much of America's poor health is the result of our failure, unique among wealthy nations, to guarantee health insurance to all? How much is the result of racial and class divisions? How much is the result of other aspects of the American way of life? Krugman inclines to the view that there is something about American society that makes Americans sicker than they should be. While lack of health insurance is surely a factor in the poor health of lower-income Americans, who are often uninsured (while everyone in England receives health care from the government), another possibility is that Americans work too hard and experience too much stress. “Full-time American workers work, on average, about 46 weeks per year; full-time British, French and German workers work only 41 weeks a year. I've pointed out in the past that our workaholic economy is actually more destructive of the ''family values'' we claim to honor than the European economies in which regulations and union power have led to shorter working hours. Maybe overwork, together with the stress of living in an economy with a minimal social safety net, damages our health as well as our families. These are just suggestions.”

In effect, Krugman here replicates Galbraith's argument that growth of the GDP is not the same thing as improvement in the quality of life, or - as it would now be put in the new 'happiness' literature – not the same thing as increased happiness. In Galbraith's words, output not art has become the index of system fulfilment, and qualitative judgements about lifestyle have been swamped by quantitative measures. Either way, international comparisons show that something about the American way of life is seriously bad for American health. He further notes that while there has been great technological progress, the question yet remains as to whether the middle class is really a bit better off now than it was a generation ago. In effect, he replicates Galbraith's question in The Good Society as to whether political and economic policy allows the widespread progress which technology should make possible. (i) Cronyism Krugman continually lambasts the Bush Administration for cronyism (“A False Balance” 30/1/06; “The Way It Is” 30/9/05; “Find the Brownie” 26/9/05). In the context of the Abramoff affair, he says scandals have been brought to light on a scale that dwarfs anything in living memory. He again alludes to the need to secure “emancipation from belief”, however, insofar as he adds his objection to the reporting of the scandal as a bipartisan matter, on the ground that funds had been directed to both the Republican and Democratic Parties. He objects to this on the twin grounds that while the Democrats continued to receive some funds from Abramoff clients, the practical impact of Abramoff's direction was to reduce the flow to Democrats and greatly increase it towards Republicans. Krugman sees nothing bipartisan about this. What he does see is danger in allowing the situation to be portrayed that way, since if voters are persuaded by such misreporting they are likely to feel helpless and become passive, instead of demanding reform. In the Hurricane Katrina / FEMA context he notes the even greater danger that “a culture of cronyism and corruption can have lethal consequences.” (j) Taxation and the DeLay Principle Krugman (“The DeLay Principle” NYT 9/6/06) wonders at the DeLay principle (to the effect that nothing is more important in a war than cutting taxes), and in particular at the practical extension of it to mean that nothing is more important in the face of a war than cutting taxes for very, very wealthy people, like the tiny minority of Americans who are heirs to really big estates. Krugman points out, rather in disbelief in the context of a global war on terrorism, that on one side, a measure that would have increased scrutiny of containers entering U.S. ports, at a cost of $648 million, has been dropped from a national security package being negotiated in Congress, despite the fact that almost five years after 9/11, only about 5 percent of containers entering the U.S. are inspected. But our Congressional leaders, in their wisdom, decided that improving port security was too expensive. Yet, on the other side, Bill Frist, the Senate majority leader, tried yesterday to push through elimination of the estate tax, which the nonpartisan Tax Policy Center estimates would reduce federal revenue by $355 billion over the next 10 years. He fell three votes short of the 60 needed to end debate, but promised to keep pushing. ''Getting rid of the death tax,'' he said, ''is just too important an issue to give up so easily.'' A national security expense of a few hundred million dollars is too expensive but a tax break of several hundred billion dollars to the very rich is essential. Krugman adds that “It's interesting, by the way, that advocates of estate tax repeal apparently aren't interested in a genuine compromise -- raising the estate tax exemption from its current value of $2 million to $3.5 million while leaving the tax rate on estate values in excess of $3.5 million unchanged -- even though such a compromise would preserve most of the revenue from the estate tax while exempting 99.5 percent of estates from taxation.” Is this column (merely) a political or normative piece? Krugman himself does not appear to think so, and adds in explanation that “the political coalition that controls the state, and depends on campaign contributions to maintain that control -- owes a peculiar obligation to men of great wealth. And nothing is more important than cutting these men's taxes, even in the face of a war.” In short, just as Galbraith long emphasised that neoclassical orthodoxy is deficient and misleading insofar as it omits from its analysis the sources of policy, and thus elides the role of power from view, Krugman now stresses the importance of considering the lobbying process as a source of (distorted) US policy, more

especially if tax cuts for the rich can be sought and sold on the ground that even at a time of a war on terrorism nothing is more important than tax cuts. In effect, Krugman is paraphrasing Galbrith's “Why Friedman's Witchcraft Won't Work in Britain”, with an equivalent “Why Bush Tax Cuts -or the DeLay Principle – Will Not Win the War on Terrorism”. 4. A Coalescence of Views? Apart from continually expressing an unmistakable distaste for the Bush Administration, Krugman's NYT columns echo Galbraith's arguments about the extension of corporate power into public policy, and raise question about what should be called 'economic science' and question as to what good economics teachers should teach. Krugman lampoons the neoclassical notion that the state should be represented as an independent arbiter (in acceptance of one of Galbraith's major themes in the much derided New Industrial State), and likewise draws attention to the need to study the sources of government policy and of consumer tastes. He is explicit that cronyism is an important factor in America's Iraqi debacle, contributing to both cost blowouts and the warping of policy. He explicitly complains about the hijacking of public policy by private interests. He complains that a new Medicare bill is a huge subsidy for drug and insurance companies, coupled with a small benefit for retirees, while the energy bill barely even pretends to be anything other than corporate welfare. He objects that hardly a day goes by without an administrative decision that just happens to confer huge benefits on favored corporations, at the public's expense. In contradistinction to providing a put-down of Galbraith's concerns about a military-industrial complex, Krugman (26/12/05) not only echoes Galbraith's sentiment in the Iraq context but also finds reason to add serious concern about a similar energy lobby and a health care lobby. All in all, the picture Krugman now paints is greater than the sum of its parts - just as is the case for Galbraith - and interdisciplinary understanding is imperative. Could Galbraith have written this any better? Would he have written it any differently? The contention here is that Galbraith could happily have signed his name to many of Krugman's columns. Add in Krugman's swipe at consumer sovereignty in 'Free to Choose Obesity', and the seeming coalescence of views is even more complete. In effect, Krugman here at least tacitly undermines the framework of utilitarianism, and implicitly questions the fact/value dichotomy and the claims of positivistic method. It may be that in denouncing Galbraith's New Industrial State – for example in the words (1994:14): “need it be pointed out that none of this was remotely on target?” Krugman sought to focus on Galbraith's claim that big powerful corporations could make themselves immune to the vagaries of the market by exercising control over market forces, rather than by exerting influence over government. Galbraith allowed both sources of power, however, and Krugman now at least allows the one. He can scarcely now deny his acceptance of the exercise of corporate power over government. Indeed, even if on a more qualified scale than endorsed by Galbraith, the obesity case makes it apparent that he adds at least a limited acceptance of the inadequacies of the notion of consumer sovereignty. Galbraith's criticisms of the neoclassical orthodoxy have long focussed on assumptions about (a) consumer sovereignty (b) the goal of profit maximisation in modern corporations in which there is a divorce of ownership and control (c) the state as independent arbiter. Given the foregoing representation of Krugman's current views, it seems plain that there is much Galbraith in Krugman.

(i) Galbraith, consumer sovereignty 5. Krugman and Scientific Method (ii) profit maximisation (note the corporate scandals of the 1990s) (iii) the state as independent arbiter the role of power in the economy

According to Galbraith much "contrived nonsense" is taught in economics. According to Krugman (1996), on the other hand, Galbraith's Affluent Society and other early books had a strong following in the 1950s but have since been abandoned by nearly all researchers in the face of logic, evidence, and experience. Indeed, Krugman (1996) wonders if Galbraith himself is still a Galbraithian. The upshot of this paper is to do likewise and ask if Krugman is still a Krugmanian, and whether he still forcefully argues that history simply disconfirms Galbraith's New Industrial State and its prognostications? Even Krugman's economic history of the USA of the last few decades now says that much public policy has been exercised in the private interest, to the general detriment. Somewhat like Krugman, Boettke (a 2006 Hayek fellow at LSE) dismisses Galbraith as a literary figure, not a scientific one. He concedes (2006) that from his early undergraduate days he was taught to view Galbraith as the enemy of those who believe in free markets and limited government, and he continues to view Galbraith's economics and politics as about as wrong-headed as an intellectual can produce. For Boettke, the ideas of Marx, Veblen and Keynes were wrong when they were first articulated and they remain wrong in their derivative formation in the hands of Galbraith. As Boettke sees it, those ideas cannot understand why markets work the way they do, and they cannot understand why the policies of social control they inspire don't work as planned. Galbraith embodied their intellectual failings, and is accordingly excoriated as providing a bad framework for analysis, a poor tool for a policy of social control, and a distorted view of history. Indeed, Boettke contends that the collapse of European socialist regimes in 1989 killed off Galbraith's influence as a policy economist. (That claim can obviously be disputed, however, given the putative revival of Galbraith's influence in Krugman's NYT columns or in the perceptions of Parker and others. Indeed, Boettke himself allows that Parker makes a persuasive case that many of Galbraith's analytical ideas in economics are making a comeback in the name of behavioral economics, in which the rarified neoclassical model of utility maximisation and pure competition are challenged as models of how man really acts and how markets really perform.) Boettke allows that Galbraith provides a certain rendering of market society. His complaint is that alternative, superior critiques of that neoclassical rendering of market society are available, but remained essentially ignored by both Galbraith and Parker. Hayek, for example, did not rely on a model of man engaged in relentless maximizing nor of the market as ruthlessly efficient. The question to ask is by what criterion does Boettke 'know' that these alternative renderings of social reality are in fact 'better'? Does Boettke 'know' or merely affirm that policies of government intervention always (or at least normally) misfire? For Boettke the roots of Galbraith's position in Veblen, Keynes et al were always wrong, whereas the roots of an alternative critique of the neoclassical model in Hayek and Austrian economics are apparently correct. From a methodology perspective, the question we are led to is whether there is an inevitable a priori, as Myrdal argues, and whether there is reason to accept the Boettke a prioris as scientifically valid. In this context, it is worth noting McCloskey (1986:75), who approvingly quotes Richard Rorty's affirmation that “It is pictures rather than propositions, metaphors rather than statements, which determine most of our philosophical [and economic] convictions.” McCloskey (1986:184) accordingly adds that the assaults on Friedman or on Galbraith “have a bitterness beyond reason”, and that if one cannot reason about values, and if most of what matters is placed in the value half of the fact/value dichotomy, then it follows “that one will embrace unreason when talking about things that matter.” Specifically commenting on Krugman, McCloskey (1986:157) further notes that in writing about PPP Krugman accepts that there are several ways in which we might try to evaluate PPP as a theory. Krugman betrays his justified unease by referring to “in some sense”. McCloskey's point is that there is no 'absolute sense' in which a description is good or bad; the sense must be comparative to a standard, and the standard must be argued. Samuels (1984) claims to demonstrate that Galbraith has made a significant contribution to our understanding of the relation of belief to power. Galbraith presents economics not just as a body of truth, but also as a system of social belief. Those beliefs are themselves able to govern attitudes, behavior and policy. As Samuels puts it (1984:63) “Indeed, the ideology of positivism itself

comprises a belief or set of beliefs”. In the same Galbraith Symposium, Breit (1984:28) concludes that the Friedman and Galbraith versions are two conflicting, right versions of actual worlds, and there are still others. Is Krugman's one of those, or is it no longer significantly different from Galbraith's? Moreover, in terms of 'scientific' methodology, some critics of the mainstream view object (e.g. C.K.Wilber p148) that while positivists assert that failure to maintain the fact/value dichotomy will result in “a disastrous slide into relativism”, anti-positivists contend that it is precisely the pretense of value neutrality in positivistic social science that is itself the real harbinger of just such a disastrous slide into relativism. In terms of the fact/value dichotomy, three responses are possible. One is to maintain the dichotomy, and argue that all values are relative. Another is to deny that all values are simply relative, while maintaining that they are nonetheless historically constrained. A third possibility is to affirm that there are value absolutes. Galbraith locates himself in the middle category. Methodological individualists place themselves in the first group, and can hardly incline themselves to either Galbraith or Krugman, whose commitment to positivistic method now seems more tenuous. A final observation relates to James Galbraith (2000). Commenting on the Boston AEA annual meeting in January 2000 James Galbraith attacks the self congratulatory nature of the economics profession, and complains that leading members of the profession have formed themselves into a “kind of politburo for correct economic thinking”. This, he says, has left them predicting disasters where there are none, and denying the possibility of events that then do happen. To James Galbraith “No young economist better exemplifies the club spirit than MIT's Paul Krugman. Krugman has once or twice taken useful policy positions – he demolished the Wall Street Journal's effort to deny the rising inequality problem some years back, and he defended capital controls when Malaysia imposed them in 1997. But he has never seriously dissented from the core orthodoxies of his peers. Krugman is concerned, first and foremost, with his own standing among the club's leaders. And he has come to function as a kind of guard dog for their dogma ...while remaining generally quiet, if not always completely silent, about acts of illogic committed inside the profession.” James Galbraith adds a scathing condemnation of Krugman's efforts in his new career as an Op-Ed writer for the NY Times. “His priorities were on display in his opening column” says James Galbraith, adding that the column is filled with “one banality after another, grimly through to the end”. Galbraith the younger describes the column as a typical Krugman flourish “in which the economists are pitted against a ruffian fringe” regarding globalisation and free trade (recalling the 1994 rhetoric regarding economists versus policy entrepreneurs). As far as James Galbraith is concerned, “the defence of orthodoxy comes first” for Krugman, and a subsequent column just a few days later attacks those associated with a backlash against globalisation. As seen by James Galbraith in 2000 then, Krugman is pro-orthodoxy and prorigorous models, and normative only insofar as he argues that policy entrepreneurs and ratbags ought to be ignored. Would he say the same in 2006? 6. Conclusions: According to Stephen Dunn, writing in The Journal of Post-Keynesian Economics in 2002, ''The distinctiveness of [Galbraith’s] contribution appears to be slipping from view''. That seems at least somewhat questionable if there is as much Galbraith in Krugman as is contended herein, even when the avowed view of the author is to disdain to recognize Galbraith as worthy of the title ‘economist’. If a ‘policy entrepreneur’ is merely a writer of normative journalistic pieces, does the Krugman of the NYT columns fall into that category? Has Krugman forsaken his role as a scientific economist in order to have a second career as a (mere) journalist? Or has Krugman undergone a Pauline conversion, on the road to New York if not to Damascus, and adopted what he now regards as a more nuanced conception of ‘scientific method’, along the lines of Myrdal’s strictures that a value-neutral social science is a logical impossibility? It may be that part of the distance between Galbraith and Krugman was always more apparent than real, insofar as both were reacting in some way to the same stimulus, best described by Stiglitz in his 1994 critiques of the fundamental theorems of welfare economics. Stiglitz made clear that the first fundamental theorem of welfare economics – which links competition to efficiency – is ill-appreciated if reduced to glib support for laissez-faire policy, since it is underpinned by a significant set of assumptions. To a large extent, those assumptions reduce to

two: (i) all the markets that should exist, do; and (ii) all the markets that should not exist, don't exist. Galbraith highlighted the role of these assumptions and the frequent departures from them by use of metaphor in a political economy context, while Krugman relied on the more orthodox route of formal modelling. Nonetheless, beyond that, there is at least an extent to which Galbraith, more so than most in economics, also calls for a recognition along Sen's (1987) lines, that Pareto optimality is neither necessary nor sufficient as a criterion for social optimality. To some it seems that that makes Galbraith a threat to economics as science, while to others it makes him a welcome critic of a flawed conception of social science. The submission made here is that Krugman's more recent columns echo Galbraith's arguments about the extension of corporate power into public policy to such an extent that they also raise question about what should be called 'economic science' and what should good economics teachers teach. Galbraith may have died (2006) but it seems that his influence lives on, sometimes in unexpected places. Reference List Boettke, P. 2006, “Review of Richard Parker, John Kenneth Galbraith: His Life, His Politics, His Economics, New York: Farrar, Straus and Giroux, 2005. x + 820 pp.” HES posting. EH.Net. Breit, William, "Galbraith and Friedman: Two Versions of Economic Reality", Journal of PostKeynesian Economics, Galbraith Symposium, Fall, Vol.7/1, (1984):18[-]29. Friedman, Milton, “From Galbraith to Economic Freedom”, Institute of Economic Affairs (Great Britain), Occasional Papers No. 49, 1977. Galbraith, J.K. 1958, The Affluent Society, Boston, Houghton Mifflin. Galbraith, J.K. 1967, The New Industrial State, Boston, Houghton Mifflin. Galbraith, J.K. 1970, "Economics as a System of Belief", American Economic Review, May, pp. 469478. Galbraith, J.K. 1973, Economics and the Public Purpose, Boston, Houghton Mifflin. Galbraith, J.K. 1973, "Power and the Useful Economist", American Economic Review, March/June. Galbraith,J.K.1978, "The Defence of the Multinational Company", Harvard Business Review, Vol.56. Galbraith, J.K. 1996, The Good Society: The Humane Agenda, Boston, Houghton Mifflin. Galbraith, J.K. “Annals of an Abiding Liberal”, ................................. Galbraith, J.K 2004, The Economics of Innocent Fraud, Houghton Mifflin, Boston. Galbraith, James, “How the Economists Got It So Wrong”, The American Prospect, Vol. 11/7. Krugman, Paul 1996, “Review of JK Galbraith's 'The Good Society': The Humane Agenda” viewed 6/8/05 http://www.pkarchive.org/cranks/GalbraithGoodSociety.html Krugman, Paul 1994, Peddling Prosperity, Norton, New York. Krugman, Paul, New York Times columns, various dates as specified in text, 2000- 2006.

Kuttner R 1996 “Peddling Krugman”, American Prospect, viewed 14/8/05 http://www.pkarchive.org/others/28kutt.html McCloskey, D. 1986, The Rhetoric Of Economics, Harvester Wheatsheaf, Sussex . Meade, James, “Is ‘The New Industrial State’ Inevitable?”, Economic Journal, June, Vol.78/310, (1968):372[-]392. Samuels, W. 1984, “Galbraith on Economics as a System of Professional Belief”, Journal of Post Keynesian Economics, Galbraith Symposium, Fall, Vol.7/1, (1984):61[-]76. Sen, Amartya 1987, On Ethics and Economics, Blackwell. Sharpe, Myron, John Kenneth Galbraith and the Lower Economics, White Plains, NY, International Arts and Sciences Press,1973. Yenkin J 1994, “At 85 JK Galbraith Finds his Ideas back in Vogue”, the asociated press, viewed 14/8/05 http://global.factiva.com.ezproxy.library.uq.edu.au/en/eSrch/ss_hl.asp

How do his contemporary NYT columns stack up against this earlier ridicule of NIS? Do Krugman's acerbic comments re the Bush administration and Enron and Halliburton contradict or echo Galbraith's NIS prognostications? Did Krugman say in 1994 that the large corporation actually plays a significantly lesser role nowadays. Would Krugman still be in a position to say that history has not treated NIS kindly? Compare Krugman's recent NYT columns to his earlier denunciations of Galbraith as writer not an economist. Kuttner describes Krugman as the greatest “policy entrepreneur” of them all. the hijacking of public policy by private interests.

J.K. Galbraith's heyday was in the 1950s, 1960s and 1970s. His influence spanned decades and extends into the twenty first century with the 2004 publication of his The Economics of Innocent Fraud. He has been one of the most cited economists of his time, president of the American economics association and US ambassador to India. He has also been much derided for his views. Friedman, for example, dismissed him as “a missionary seeking converts” rather than an economist. Samuelson – whose intellectual position is closer to Galbraith's – quipped that “as an economist Galbraith is a good novelist”. And more recently, Krugman castigated Galbraith as “a policy entrepreneur”. None of these three critical views reflects well on Galbraith as an 'economic scientist'. Each dismisses him as a rhetoritician. Nonetheless, what is conspicuous in Krugman's more recent writings - notably his series of New York Times columns – is the extent to which Krugman's interpretation of economic affairs now echoes Galbraith's. Galbraith is nearing his 100th birthday and would presumably be pleased to have written many of the columns that Krugman has recently published, and pleased to have passed the batton to another, younger 'infant terrible'. Has Krugman abandoned writing rigorous academic scientific papers in his capacity as a prominent academic for the purpose of writing normative pieces in his new guise as a journalist, or has he moved 'forward' rather than backward towards a more mature and nuanced understanding of what scientific method really means in the social sciences? He leaves no doubt as to the depth of his dislike of the Bush Administration. That much may be normative journalism, but in swiping at Friedman in 'Free to Choose Obesity' he is directly attacking the notion of consumer sovereignty. That notion is not sacrosanct for him, as it is for Chicago School writers. At least tacitly he undermines the framework of utilitarianism. He implicitly questions the fact/value dichotomy and the claims of positivistic method. There is no doubt that the earlier Krugman upheld the usual notions of science through mathematical model building. Is he now a mere journalist or is he now an advocate of pluralist methods in economics or ...? QUIPS Missionary seeking converts etc a good novelist Krugman's dismissive reference to Galbraith as but a “policy entrepreneur” as against an economist But voted #3 in the Lee poll

''The distinctiveness of his contribution appears to be slipping from view,'' Stephen P. Dunn wrote in The Journal of Post-Keynesian Economics in 2002. Mr. Galbraith, a revered lecturer for generations of Harvard students, nonetheless always commanded attention. Robert Lekachman, once described the quality of his discourse as ''witty, supple, eloquent, and edged with that sheen of malice which the fallen sons of Adam always find attractive when it is directed at targets other than themselves.'' He once said, ''Economists are economical, among other things, of ideas; most make those of their graduate days last a lifetime.'' Nearly 40 years after writing ''The Affluent Society,'' Mr. Galbraith updated it in 1996 as ''The Good Society.'' In it, he said that his earlier concerns had only worsened: that if anything, America had become even more a ''democracy of the fortunate,'' with the poor increasingly excluded from a fair place at the table. Amartya Sen, a Nobel Prize-winning economist, maintains that Mr. Galbraith not only reached but also defined the summit of his field. In the 2000 commencement address at Harvard, Mr. Parker's book recounts, Mr. Sen said the influence of ''The Affluent Society'' was so pervasive that its many piercing insights were taken for granted. ''It's like reading 'Hamlet' and deciding it's full of quotations,'' he said.

Krugman's criticisms of Galbraith: Krugman's emphatic disendorsement of Galbraith comes in his 1994 Peddling Prosperity. Krugman lampoons Galbraith's New Industrial Society as having been revealed by history to have widely missed its mark. Krugman's metamorphosis:

26/12/05: Paralleling Complex”, Galbraith's Krug earlier Krugman attentions ow to “the military-industrial complex” Krugman now 26/12/05: nownotes Paralleling Galbraith's earlier attentions to the “military-industrial complex” Krugman now notes that to But to get health reform right, we'll have to overcome wrongheaded ideas as well as powerful special interests. For decades we've been lectured on the evils of big government and the glories of INSERT “Krugman here private sector. Yetsummaries” health reform is a job for the public already pays decisions most of the reformthe health policy “a powerful medical-industrial complex” that sector, seeks towhich influence doctors' needs to be bills directly or indirectly and special sooner interests or later will willhave havetotobemake key in decisions about recognised and confronted. Powerful overcome a world of highmedical technology treatment. modern medicine. In a world of considerable information asymmetry, the power of advertising is enhanced and Krugman comments that drug companies spend more marketing their products to doctors than they do developing those But products the firstreform place, right, and cases reported in which wrongheaded surgeons systematically use devices produced by to getin health we'llarehave to overcome ideas as well as powerful companies which pay them consulting fees. In such circumstances Krugnman sees little or no prospect that specialisinterests. For decadeswhat we've lectured on the and evilswhat of bigshould government and the glories of health What 'good economics', is been 'economic science', good economics teachers policyteach? andprivate the control ofYet medical can 'thethe magic of sector, the than market'. For him, as for Galbraith, health care the Galbraith's sector. view health iscosts that reform thebe issocial aleft jobtowhole for ispublic greater which the sum already of the pays parts, most such of the that is a public interdisciplinary bills responsibility. directly or understanding indirectly and issooner imperative. or laterThe willeconomic have to and makepolitical key decisions systems about are notmedical separate and independent of each other. Moreover, the important thing to understand is the process of social treatment. 16/12/05: In the or same context Krugman furtherthan notesstatic that conflicts interest may be bothofmedical dynamics change over time, rather efficiencyofseen against thedistorting background fixed research and health care in general. the much publicised case oftoMerck and the of its painexogenous influences. What Citing good economics teaching needs do is close thewithdrawal gap between reality killingand drug Vioxx in 2004 following accusations that the drug company had played down evidence that Vioxx its perception within orthodox economics. That means addressing the questions of the sources of increased the risk of heart attacks, Krugman concludes that “crucial scientific research and crucial medical decisions consumer tastes and of government policies, instead of merely asssuming those tastes and policies to have to considered suspect because ofthe financial medical companies, medicaltoresearchers and health bebegiven. It means recognising realitiesties of among corporate power, and the extent which producer care providers”. Krugman is adamant thatonnoconsumers less could and be expected the rise the “medical-industrial power manages to stamp its values the largergiven society. Theoforthodox claim to 'value complex” “in the last 25 years” whichshould has seentherefore conflicts of become and the norm as deep financial linksof neutral economic science' beinterest questioned, jettisoned in favour emerged between doctors, hospitals and research institutions on the one hand and drug companies and equipment makers on the other hand. Plainly enough, this is pretty much the same picture that Galbraith painted in 19?? in describing the military-industrial complex and in arguing a case for nationalisation of the weapons corporations. Galbraith's view was that especially in the Cold War climate cost overruns were paid by the public sector anyway, because of the perceived urgency of the

....................??????????????? Krugman's 1994 teaching was essentially a New Keynesian teaching that markets don't work as well as 'economic rationalist' or laissez faire economists maintain. There are 'sticky prices' and problems with information asymmetry(??). The case for government intervention is stronger than economic rationalists allow (??). Nonetheless his argument is not a Galbraithian one of demanding that economic and political systems be looked at as part of one larger integrated social whole(??). Krugman's contemporary New York Times columns go further. Apart from continually expressing an unmistakable distaste for the Bush Administration, his more recent columns echo Galbraith's arguments about the extension of corporate power into public policy and raise question about what should be called 'economic science' and question as to what good economics teachers should teach.

30/9/03 “Who's Sordid Now?” Cronyism is an important factor in our Iraqi debacle. It's not just that reconstruction is much more expensive than it should be. The really important thing is that cronyism is warping policy: by treating contracts as prizes to be handed to their friends, administration officials are delaying Iraq's recovery, with potentially catastrophic consequences.

KRUGMAN, POLITICAL ECONOMY AND THE QUESTION OF WHETHER GALBRAITH'S VIEWS STILL HAVE CURRENCY In 1994 (Peddling Prosperity) Krugman lampooned Galbraith as but a “policy entrepreneur”, whose predictions in The New Industrial State and elsewhere had proved far from accurate. Nonetheless, some of Krugman's more recent New York Times Op-Ed columns show remarkable parallels to Galbraith's earlier arguments. Galbraith's criticisms of neoclassical orthodoxy highlighted complaint that the State was not really an independent arbiter, but an active player in the economic game (to the advantage of elite members of government and corporations), that public policy often served the private interest rather than the public interest, that corporate power is a reality that orthodox economics rushes to overlook, and that the sources or determinants of government policy and of consumer tastes should also be deemed proper matter for study by economists. Consider the similarity between those views of Galbraith's and the following Krugman extracts.

13/7/2004 “Machine at Work”: If Enron hadn't collapsed, we might still have only circumstantial evidence that energy companies artificially drove up prices during California's electricity crisis. Because of that collapse, we have direct evidence in the form of the now-infamous Enron tapes — although the Federal Energy Regulatory Commission and the Justice Department tried to prevent their release. Now, e-mail and other Enron documents are revealing why Tom DeLay, the House majority leader, is one of the most powerful men in America. As far back as 1996, one analyst described Mr. DeLay as the "chief enforcer of company contributions to Republicans." Some of that cash has flowed through Americans for a Republican Majority, called Armpac, a political action committee Mr. DeLay founded in 1994. By dispensing that money to other legislators, he gains their allegiance; this, in turn, allows him to deliver favors to his corporate contributors. Four of the five Republicans on the House ethics committee, where a complaint has been filed against Mr. DeLay, are past recipients of Armpac money. Enron, which helped launch Armpac, was happy to oblige, especially because Mr. DeLay was helping the firm's effort to secure energy deregulation legislation, even as its traders boasted to one another about how they were rigging California's deregulated market and stealing millions each day from "Grandma Millie."... But you shouldn't conclude that the system is working. Mr. DeLay's current predicament is an accident. The party machine that he has done so much to create has eliminated most of the checks and balances in our government. Again and again, Republicans in Congress have closed ranks to block or emasculate politically inconvenient investigations. If Enron hadn't collapsed, and if Texas didn't still have a campaign finance law that is a relic of its populist past, Mr. DeLay would be in no danger at all. The larger picture is this: Mr. DeLay and his fellow hard-liners, whose values are far from the American mainstream, have forged an immensely effective alliance with corporate interests. And they may be just one election away from achieving a long-term lock on power.

9/3/2004 “Delusions of Power”: In spring 2001 the lights were going out all over California. There were blackouts and brownouts, and the price of electricity was soaring. The Cheney task force was convened in the midst of that crisis. It concluded, in brief, that the energy crisis was a long-term problem caused by meddling bureaucrats and pesky environmentalists, who weren't letting big companies do what needed to be done. The solution? Scrap environmental rules, and give the energy industry multibillion-dollar subsidies. In fact, the California energy crisis had nothing to do with environmental restrictions, and a lot to do with market manipulation. In 2001 the evidence for manipulation was basically circumstantial. But now we have a new report from the Federal Energy Regulatory Commission, which until now has discounted claims of market manipulation. No more: the new report concludes that market manipulation was pervasive, and offers a mountain of direct evidence, including phone conversations, e-mail and memos. There's no longer any doubt: California's power shortages were largely artificial,

5/12/03 “Looting the Future”: What really makes me wonder whether this republic can be saved, however, is the downward spiral in governance, the hijacking of public policy by private interests. The new Medicare bill is a huge subsidy for drug and insurance companies, coupled with a small benefit for retirees. In comparison, the energy bill — which stalled last month, but will come back — has a sort of purity: it barely even pretends to be anything other than corporate welfare. And it's not just legislation: hardly a day goes by without an administrative decision that just happens to confer huge benefits on favored corporations, at the public's expense. For example, last month the Internal Revenue Service dropped its efforts to crack down on the synfuel tax break — a famously abused measure that was supposed to encourage the production of alternative fuels, but has ended up giving companies billions in tax credits for spraying coal with a bit of diesel oil. The I.R.S. denies charges by Bill Henck, one of its own lawyers, that it buckled under political pressure. Coincidentally, according to The Wall Street Journal, Mr. Henck has suddenly found himself among the tiny minority of taxpayers facing an I.R.S. audit. Awhile back, George Akerlof, the Nobel laureate in economics, described what's happening to public policy as "a form of looting." Some scoffed at the time, but now even publications like The Economist, which has consistently made excuses for the administration, are sounding the alarm. To be fair, the looting is a partly bipartisan affair. More than a few Democrats threw their support behind the Medicare bill, the energy bill or both. But the Bush administration and the Republican leadership in Congress are leading the looting party. What are they thinking?

5/3/04 “Social Security Scares”: The biggest risk now facing Social Security is political. Will those who hate the system use scare tactics and fuzzy math to bring it down? After Alan Greenspan's call for cuts in Social Security benefits, Republican members of Congress declared that the answer is to create private retirement accounts. It's amazing that they are still peddling this snake oil; it's even more amazing that journalists continue to let them get away with it. Yesterday in The Wall Street Journal, a writer judiciously declared that "personal accounts alone won't cure Social Security's ills." I guess that's true; similarly, eating doughnuts alone won't cause you to lose weight. Why is it so hard to say clearly that privatization would worsen, not improve, Social Security's finances? Should we consider modest reforms that reduce the expenses or widen the revenue base of Social

Security? Sure. But beware of those who claim that we must destroy the system in order to save it. KUTTNER ON KRUGMAN: His latest book, Pop Internationalism, published in March, is a collection of articles from Foreign Affairs, Science, Scientific American, the Wilson Quarterly, New Perspectives Quarterly, and the American Economic Review. In these, he continues his fondness for the contrarian view, explaining why competitiveness is "a dangerous obsession," why Asia's economic miracle is largely a myth, why it is important in economics education to "vaccinate the minds of our undergraduates against the misconceptions that are so predominant in what passes for educated discussion about international trade." [cf Galbraith re emancipation of belief] In his introduction, he embellishes his theme of economic illiterates dominating economic debate, in this case on trade: "Serious discussion of world trade," he warns, has been replaced by "pop internationalism." Krugman has a remedy: What I eventually realized was that an effective answer to pop internationalism would require a new kind of writing. I would have to write essays for non-economists that were clear, effective, and

even entertaining--otherwise nobody would read them. . . . [T]he target reader was someone who might think he knew a lot about economics but had never been exposed to the real thing. . . . And finally, the essays would have to be right--no intellectual cheap shots, because after all, letting the world see what real economic analysis was like was the whole point of the exercise. So Krugman has become the most prolific policy entrepreneur of them all. He may be peddling fatalism rather than activism, but he is no less a peddler. Alas, Krugman's earlier counsel is correct. It is very difficult to be both a conscientious academic and an effective policy entrepreneur. There aren't enough hours in the day, and you begin to make mistakes. Your own glibness becomes your worst enemy. In his high-professor role, Krugman equates "anecdote" with unscientific. This apparently leads him to conclude that when in anecdotal, policy-entrepreneur mode, you don't need to look things up. And as for intellectual cheap shots, well, you can read him yourself. There is more than a little projection in Krugman's caricature of policy peddlers. Krugman certainly has every right to publish for a mass audience, as do Thurow, Reich, and the rest of his targets. But he has long since peddled away his right to cast stones. Copyright © 1996 by The American Prospect, Inc. Readers may redistribute this article to other individuals for noncommercial use, provided that the text, all HTML codes, and this notice remain intact and unaltered in any way. This article may not be resold, reprinted, or redistributed for compensation of any kind without prior written permission from the author. If you have any questions about permissions, please contact The Electronic Policy Network ([email protected]), or by phone at (617) 547-2950.

Dear Professor Krugman I note that in your columns you often refer to issues of power in the context of economic policy, and I write to ask if your reflections on practical policy matters has modified your position towards JK Galbraith's earlier attempts to do something similar.

In 1994 (Peddling Prosperity) you lampooned Galbraith as but a “policy entrepreneur”, whose predictions in The New Industrial State and elsewhere had proved far from accurate. Nonetheless, some of your more recent New York Times Op-Ed columns show remarkable parallels to Galbraith's earlier arguments. Galbraith's criticisms of neoclassical orthodoxy highlighted complaint that the State was not really an independent arbiter, but an active player in the economic game (to the advantage of elite members of government and corporations), that public policy often served the private interest rather than the public interest, that corporate power is a reality that orthodox economics rushes to overlook, and that the sources or determinants of government policy and of consumer tastes should also be deemed proper matter for study by economists. In your NY Times columns of the last few years it seems to me that you go close to replicating some of these views eg (i) 5/12/03 re the "hijacking of public policy by private interests" (ii) 30/9/04 re cronyism in Iraq reconstruction (iii) 28/3/04 re Cheney and the California energy crisis (iv) 13/7/04 re deLay (v) exorbitant corporate executive pay packages. Is it fair to conclude that you are now less dismissive of the Galbraith approach than you were in 1994? With thanks Alan Duhs

Galbraith 2004 Economics of Innocent Fraud (advertiser blurb on net) Description: John Kenneth Galbraith has long been at the center of American economics, in key positions of responsibility during the New Deal, World War II, and since, guiding policy and debate. His trenchant new book distills this lifetime of experience in the public and private sectors; it is a scathing critique of matters as they stand today. Sounding the alarm about the increasing gap between reality and "conventional wisdom" -- a phrase he coined -- Galbraith tells, along with much else, how we have reached a point where the private sector has unprecedented control over the public sector. We have given ourselves over to self-serving belief and "contrived nonsense" or, more simply, fraud. This has come at the expense of the economy, effective government, and the business world. Particularly noted is the central power of the corporation and the shift in authority from shareholders and board members to management. In an intense exercise of fraud, the pretense of shareholder power is still maintained, even with the immediate participants. In fact, because of the scale and complexity of the modern corporation, decisive power must go to management. From management and its own inevitable self-interest, power extends deeply into government -- the so-called public sector. This is particularly and dangerously the case in such matters as military policy, the environment, and, needless to say, taxation. Nevertheless, there remains the firm reference to the public sector. How can fraud be innocent? In his inimitable style, Galbraith offers the answer. His taut, wry, and severe comment is essential reading for everyone who cares about America's future. This book is especially relevant in an election year, but it deeply concerns the much longer future.

26/12/05: Paralleling Galbraith's earlier attentions to “the military-industrial complex”, Krugman now that26/12/05: Paralleling Galbraith's earlier attentions to “the military-industrial complex”, Krugman now notes

hat to Kevin Drum's interview with Paul Krugman. The interview begins with a lengthy quote from Krugman's new book, "The Great Unraveling: Loosing our way in the new century" that basically accuses the Bush Administration of being more radical than it seems to be.�Here's the key paragraph: In fact, there's ample evidence that key elements of the coalition that now runs the country believe that some long-established American political and social institutions should not, in principle, exist....Consider, for example....New Deal programs like Social Security and unemployment insurance, Great Society programs like Medicare....Or consider foreign policy....separation of church and state....The goal would seem to be something like this: a country that basically has no social safety net at home, which relies mainly on military force to enforce its will abroad, in which schools don't teach evolution but do teach religion and � possibly � in which elections are only a formality...

Viewing from the libertarian perspective, the ideas sound very right, except that President Bush is hardly a libert or minarchist, and isn't going to downsize his administration anytime soon. On the contrary, he might even embr

the welfare state, or have done so already.

In spring 2001 the lights were going out all over California. There were 29/3/03: blackouts and brownouts, and the price of electricity was soaring. The Cheney task force was convened in the midst of that crisis. It concluded, in brief, that the energy crisis was a long-term problem caused by meddling bureaucrats and pesky environmentalists, who weren't letting big companies do what needed to be done. The solution? Scrap environmental rules, and give the energy industry multibillion-dollar subsidies. In fact, the California energy crisis had nothing to do with environmental restrictions, and a lot to do with market manipulation. In 2001 the evidence for manipulation was basically circumstantial. But now we have a new report from the Federal Energy Regulatory Commission, which until now has discounted claims of market manipulation. No more: the new report concludes that market manipulation was pervasive, and offers a mountain of direct evidence, including phone conversations, e-mail and memos. There's no longer any doubt: California's power shortages were largely artificial, created by energy companies to drive up prices and profits. The Cheney task force drew its advice from the very companies they were supposedly investigating and got it wrong wrong wrong.

5/12/03:Krugman accepts (with Akerlof) that what is going on in public policy is a form of looting. What really makes me wonder whether this republic can be saved, however, is the downward spiral in governance, the hijacking of public policy by private interests. The new Medicare bill is a huge subsidy for drug and insurance companies, coupled with a small benefit for retirees. In comparison, the energy bill — which stalled last month, but will come back — has a sort of purity: it barely even pretends to be anything other than corporate welfare. Did you hear about the subsidy that will help Shreveport get its first Hooters restaurant? And it's not just legislation: hardly a day goes by without an administrative decision that just happens to confer huge benefits on favored corporations, at the public's expense.

16/12/03: re Halliburton, profiteering and the Iraq war

ast week there were major news stories about possible profiteering by Halliburton and other American contractors in Iraq.

Krugman The Great Unraveling:Losing our Way in the New Century – essentiually a collection of past NYT columns. As against Galbraith re Innocent Fraud, Krugman's critique of the Bush Admin is essentially an accusation of not so innocent fraud in Washington government. Krugman also re electoral fraud and FEMA re Hurricane Katrina Via 1100 student 2005 Krugman points out major flaws in Galbraith's the Good Society. Krugman says Galbraith's vision of the economy is one without shadows in which what is good for social justice invaribaly turns out to have no unfavourable side effects. He continues and alludes to Galbraiths primitive macroeconomics of his youth, thus leaving him unprepared to confront the real dilemmas facing modern liberalism. Compare Krugman's recent NYT columns to his earlier denunciations of Galbraith as writer not an economist. Kuttner describes Krugman as the greatest “policy entrepreneur” of them all.

Krugman 1994 described a policy entrepreneur as one who writes for the public and who offers easy solut where there are likely to be none. He viewed Galbraith as a victory of style over substance. Krugman ridi NIS? How do his contemporary NYT columns stack up against this earler ridicule of NIS? Do Krugman' acerbic comments re the Bush administration and Enron and Halliburton echo or contradict Galbraith's N prognostications? Did Krugman say in 1994 that the large corporation actually plays a significantly lesser nowadays. Would Krugman still be in a position to say that history has not treated NIS kindly? the hijacking of public policy by private interests.

Humbert 2004 With JK Galbraith: A 'Political and Moral Philosophy' Conception to Study Economic Activities; JK Galbraith International Symposium 2004, Paris 22-25 September Krugman Peddling Prosperity Krugman 1996 “Political Booknotes” Washington Monthly Sept 96, 28/9 p55 Krugman 1996 Review of JK Galbraith's 'The Good Society”: The Humane Agenda” viewed http://www.pkarchive.org/cranks/GalbraithGoodSociety.html Krugman

6/8/05

Kuttner R 1996 “Peddling Krugman”, American Prospect, viewed 14/8/05 http://www.pkarchive.org/others/28kutt.html Yenkin J 1994, “At 85 JK Galbraith Finds his Ideas back in Vogue” the asociated press, viewed 14/8/05 http://global.factiva.com.ezproxy.library.uq.edu.au/en/eSrch/ss_hl.asp James Galbraith – comments re Krugman re he has had ½ ideas....

Kuttner's attack on Krugman: PEDDLING KRUGMAN SYNOPSIS: Claims Krugman is a Economic do-nothing, twiddling thumbs while America burns. Liberalism should be more active. By Robert Kuttner Published in the American Prospect, 9.96 “So Krugman has become the most prolific policy entrepreneur of them all.”

Krugman review of Galbraith's Good Society: published 9/96 http://www.pkarchive.org/cranks/GalbraithGoodSociety.html Review of John Kenneth Galbraith's 'The Good Society: The Humane Agenda' SYNOPSIS: John Kenneth Galbraith has apparently not been briefed on new developments in macreconomic theory since 1950. To be both a liberal and a good economist you must have a certain sense of the tragic--that is, you must understand that not all goals can be attained, that life is a matter of painful tradeoffs. You must want to help the poor, but understand that welfare can encourage dependency. You must want to protect those who lose their jobs, but admit that generous unemployment benefits can raise the long-term rate of unemployment. You must be willing to tax the affluent to help those in need, but accept that too high a rate of taxation can discourage investment and innovation. To the free-market conservative, these are all arguments for government to do nothing, to accept whatever level of poverty and insecurity the market happens to produce. A serious liberal does not reply to such conservatives by denying that there are any trade-offs at all; he insists, rather, that some trade-offs are worth making, that helping the poor and protecting the unlucky may have costs but will ultimately make for a better society. The revelation one gets from reading John Kenneth Galbraith's The Good Society is that Galbraith--who is one of the world's most celebrated intellectuals, and whom one would expect to have a deeper appreciation of the complexity of the human condition than a mere technical economist would--lacks this tragic sense. Galbraith's vision of the economy is one without shadows, in which what is good for social justice always turns out to have no unfavorable side effects. If this vision is typical of liberal intellectuals, the ineffectuality of the tribe is not an accident: It stems from a deep-seated unwillingness to face up to uncomfortable reality. Admittedly, Galbraith did at one time have a distinctive economic theory that might perhaps have justified his disbelief in painful choices. A generation ago, in The New Industrial State, he offered an image of an economy that was becoming increasingly dominated by General Motors-type corporations--giant firms, freed by their size and power from the rigors of competition, run by technocrats who pursued bureaucratic imperatives rather than serving the interests of the stockholders. In effect, he argued that capitalism would soon cease to be a market system in any meaningful sense, and that the trade-offs inherent in such a system would therefore soon be irrelevant. But time has not been kind to that theory. We have not become an economy of GM-sized corporations; in fact, large corporations play a considerably smaller role in the economy now than they did when he wrote his book, and for that matter GM itself is a lot less immune from market pressures than it used to be. Rather than evolving away from a market economy and the constraints it imposes, we are now more firmly ruled by the Invisible Hand than ever before. And indeed one wonders if Galbraith himself is still a Galbraithian; while a few turns of phrase from The Affluent Society and The New Industrial State resurface in The Good Society, for the most part the book is very old-fashioned Keynesianism. Again and again, the book espouses views that had a strong following in the 1950s but have since been abandoned by nearly all researchers in the face of logic, evidence, and experience. Galbraith does not bother to argue that the old conventional wisdom was right and that the new conventional wisdom is wrong; often it seems that he is simply unaware that other people's ideas have changed. One key example among many: In the chapter on inflation he mentions the "clear choice--the trade-off-between high employment and inflation as against unemployment and relatively stable prices," then adds, "This trade-off is present in all accepted thought." The fact is that it has been a long time since any substantial number of economists believed in a significant long-run trade-off between unemployment and inflation. This archaism matters, because Galbraith's continuing adherence to the primitive macroeconomics of his youth leaves him unprepared to confront the real dilemmas facing modern liberalism. Consider, for example, what he has to say about the interlinked issues of monetary policy, saving, and budget deficits. Galbraith, remarkably,

regards the Federal Reserve as a largely powerless institution; he dismisses the idea that the Fed can end a recession by cutting interest rates as a "[q]uasi-religious conviction" that "triumphs over conflicting experience." Really? Skepticism about the effectiveness of monetary policy was common 40 years ago, but the Fed's role in sparking recoveries in 1971, 1975, 1982, and 1992--together with impressive demonstrations of the power of monetary policy in many other countries--has put such doubts to rest. Because Galbraith believes monetary policy cannot increase demand, however, he has a sort of Depression-era vision of an economy[cont. on p.58] in which anything that increases spending is good. Should we worry about America's low savings rate or its government deficits? Of course not: These are good things, because they increase demand. And so Galbraith is oblivious to the most serious problem facing modern liberalism: reconciling social justice with full employment. In the real world this is a terrible dilemma; even Sweden, with its powerful sense of community and overwhelming consensus for the welfare state, has found itself suffering from an acute case of Eurosclerosis. But in Galbraith's world there is no dilemma at all: Unemployment is merely a problem of inadequate demand, to be cured by New Deal-type public works programs and redistribution of income away from rich people who save too much. There is no issue more painful for the serious liberal than immigration, which inevitably pits the interests of poorly paid workers in advanced countries against those of even worse-paid workers in the Third World. Yet Galbraith waves it all away with the airy remark that "admission must, no doubt, be related to the availability of jobs"--as if the number of jobs for low-skill workers were a fixed number, not something that depends on their wage rate. Suppose the United States were to allow $2-an-hour sweatshops to operate freely on our soil; undoubtedly, we could then gainfully employ tens of millions of immigrants, who would be eager to take those jobs. Our decision not to allow such sweatshops, to deny those potential immigrants that opportunity because we want to protect the wages of those already here, is a harsh choice that involves valuing some people's economic interests over others. The truth is that constructing and maintaining a good society has turned out to be far more difficult than anyone imagined a generation ago. To be a serious liberal, one must confront that difficulty, make hard choices, and persuade others to do the same. It is therefore a cause for sadness that America's most famous liberal economist has produced a manifesto that simply assumes most of the difficulties away. Originally published, 9.96

GALBRAITH THEMES: 1. consumer sovereignty 2. profit maximisation (separation of ownership and control; cf modern CEO salary packages; Enron etc) 3. state as independent arbiter (cf Clive Hamilton re greenhouse mafia) 4. omit the reality of power 5. inequality, including sectoral inequality (as reaffirmed in 1998?) (Qld health crisis 2006 etc) 6. output not art as the index of happiness (ie the link corporate advertising seeks to establish between goo and happiness) (so relate to the Headey et al literature in the happimess literature. G may not have spawned this happiness literature but he is largely consistent with it (albeit it is not really a Krugman i re becoming more like G) 7. ... 8. ... 9. .. 10. . 11. he whole is greater than the sum of the parts 12. dynamics matter more than static efficiency

Relate to Krugman columns on 1...

2.... 3... 4....

Relate to Samuels re scientific method and whether economists are free to believe what they want within l ... Note that K is not really onto a positional goods issue

Note the Briet paper re Friedman and Galbraith 1984 and relate it now to Friedman and Krugman. W Breit, “Galbraith and Friedman: Two Versions of Economic Reality”, JPKE Fall, 7/1: pp 18-29. Breit: “laboyuring under the pleasant conceit that they are scientists searching for thruth, economists clai that they can resolve disputes among themselves throufgh empirucal testing of theories...but the grand sys of Adam Smith, karl Marx, Thorstein Veblen, John Maynard Keynes, John Kenneth Galbraith and Milto Friedman will not be overthrown by empirical testing.”

Stiglitz re odious debts etc (case for govt to provide equity, and .........rectify imbalance in power asymmetr

GENERAL CRITICISMS of Galbraith for being non scientific, over-generalised and non empirical; ie no backed by specific refutable hypotheses. But does econometric testing bring theoretical disputes to an end KRUGMAN'S SPECIFIC 1994 CRITICISMS: “but a policy entrepreneur” ie rhetoric unbacked by demonstrable evidence. Has the 2006 Krugman swung from formal models and econometric evidence to interdisciplinary political economy commentary?

KRUGMAN columns: 13/7/04 re Enron says Enron used its power to “buy” favourable rulings on deregulation legislation, while DeLay and the republicans used Enron donations to help give their party greater power. Such argument about political power of corpoartions and the style of writing prett7y much replicate the gaqlbraith of whom K was so dismissive just 10 years earlier. Is Krugman therefore now but a lightweight “policy entrepreneur”, or is he – as he himself apparently fee now doing better social science (whether backed by econometrics or not?) Has K become more scientific o less scientific? Does McCloskey have a point and is story tellin g what really sweeps even professional groups along?

Check this G source: But I do think a great deal of the men who originated these ideas. The shortcomings of economics are not original error but uncorrected obsolescence. The obsolescence has occurred because what is convenient has become sacrosanct. (Galbraith 1958, pg.4)

Also check this source and cf Krugman: He thinks that left to themselves, economic forces do n work out for the best except maybe, for the powerful. (Galbraith, 1973, pg.13) Also this ECON1100 source: One of the reasons Paul Krugman dismissed Galbraith as a po entrepreneur is because some of Galbraith's predictions have not been right. Krugman als mentioned how Galbraith's ideas are still overly simplistic and do not reflect the truth of t world's economy. He said Galbraith merely has the style and popularity but not substance According to Krugman, "he has never been taken seriously by his academic colleagues." Krugman also pointed out that the former President of the USA was wise for choosing rea economists or professors as his advisors rather than mere policy entrepreneurs, thus appointing Galbraith as Ambassador to India so that Galbraith could be "as far from econo policy as possible." (Krugman, 1994)

CONCLUDE: Is G still relevant? Was he ever relevant? Check John Lodewijks re the P McGuiness orbituary he mentioned which apparently dismisses g as irrelevant. Other orbituaries eg on 1100 blackbo site.

1. Does the obvious problem re Oz infrastructure mean that there is an obvious sectoral imbalance in Oz economy? Likewise USA and FEMA after Hurricane Katrina and concerns re coverage of med insurance ? 2. Is recent explosion of CEO packages confirmation of G? 3. Is increasing concern re global public goods a form of acceptance of G's point that the public sector has been decried too much? 4. Note Todaro re consumer sovereignty is always questionable etc.... 5. Note Stiglitz re global inequality of wealth, income, power, information etc 6. is there agreement as to what scientific method is? Will empirical evidence end political economy dispu Is the lack of definitive a priori definition of such basic terms as “freedom” “ equality of opportunity”, “money” “unemployment” etc such that reinterpretaion of econometric evidence is always possible? Is “story” ie the integrataion of the various political, psychological and economic parts the really importa thing? 7.

CHIKA-San re Whately and Dugald Stewart: re JSA Mill on methodology re the seapartion of theory and practice “Each undervalues the part of the materials thought with which he is not familiar. The one despises all comprehensive views, the other neglects details” (1836:334). Modernity distinguishes sharply between the philsosphher and the practical man. Dugald Stewart contrasted political economists and political arithmeticians. For Stewart political arithmeticians low compared to political economists. He considred that political arithmeticians look at facts which “are merely particular results” (EPHM ii: 331) Whately wanted separation of all branches of sciences so that eaxch got separate attention ie he emphasised the autonomy of each discipline. For Wahetely as opposed to Stewart, it was the independence rather than the interdependence of respective disciplines that was the primamry asumption. Add Heilbroner re ideology in economics.

QUT:

This Friday, September 22, at 10:30 in Colin Clark Room 112, Ben Hermalin will present the paper "A framework for asses corporate governance reform". Benjamin E. Hermalin is the Willis H. Booth Professor of Banking & Finance in the

University of California, Berkeley's Haas School of Business. He is the Chair (Head) of the Department of Economics in the University of California, Berkeley's College of Letters & Science. Professor Hermalin receive Ph.D. from MIT in 1988 and his A.B. summa cum laude from Princeton University in 1984. His current areas of research are corporate governance and industrial organization. His web page is http://faculty.haas.berkeley.edu/hermalin/. Paper title: A Framework for Assessing Corporate Governance Reform (work joint with Michael S. Weisbach)

Abstract: In light of recent corporate scandals, numerous proposals have been introduced for reforming corporat governance. This paper provides a theoretical framework through which to evaluate these reforms. Unlike various ad hoc arguments th have been made, this framework recognizes that governance structures arise endogenously in response to

constrained optimization problems faced by the relevant parties. Consequently, we show that many propose reforms are likely to have harmful unintended consequences. The paper concludes with general theoretical discu drawn from contract theory as to why reforms may fail to improve welfare.

***************************************************************** Renée Adams Professor of Finance UQ Business School The University of Queensland Brisbane, QLD 4072 Australia

E-mail: [email protected] Phone: +61 7 336 57285 Webpage: http://www.business.uq.edu.au/

SSRN webpage: http://papers.ssrn.com/sol3/cf_dev/AbsByAuth.cfm?per_id=248065 *****************************************************************

See Finance and Development June 2006 “Economist as Crusader” Arvind Subramanian interviews Paul Krugm

“Over the past five years, Krugman the columnist has overshadiwed Krugman the economist. Krugman counts as jornalistic successes: revealing market manipulation by insiders as the real cause of the Calif energy crisis some years before anyone else; challenging Alan Greenspan's iconic status when he appeared to ble Bush's tax cuts; .... Some fellow economists are somewhat disparaging about his current polemics. So is he now just a journalist and polemicist or is he now an economist with a different perspective on what constitutes good and useful economics Does his earlier contribution to model building re international trade etc – which allowed models to replace meta as the basis for analysis – mellow in reflection of some realisation that some significant political determinants ar difficult to model but central to real world outcomes? Does he stick to the earlier view that without models gues is all we can go on, and guessing disciplined by models is more reliable than anything else? Or does he now reflect a tacit acceptance of a more pluralistic position re method? K could hardly be accused of telling the Bush Admin what it wants to hear. He earlier condemned “policy entrepreneurs” as intellectually dishonest self proclaimed experts who tell politicians what they want to hear.

Is he now merely a policy entrepreneur himself? Or, if not (as he would presumabbly claim) is his new position r political economy not only akin to Galbraith but reflective of a newer nuanced position as to what constitutes

scientific method in economics. Is that why, as he says, you begin to doubt the value of one more academic pape even if it reaches a good journal? Heilbroner (“The Embarrassment of Economics”) concludes that (a) economics is shot through with ideological considerations (b) in economics, the use of ideology is primarily designed to defend capitalism from criticism rather than to defend the scientific aspirations of economists (c) both (a) and (b) (d) economics is indeed a science, and it unquestionably provides the most penetrative vision among the social sciences and humanities. ANS: (a ) Global Warming, Al Gore, JK Galbraith, Paul Krugman and Fred Hirsch Former US Vice President Al Gore now travels the world on an environmental campaign designed to raise awareness of the risks of global warming. His movie-film An Inconvenient Truth is now available (September 2006), and makes the point that scientific experts appear to be quite unanimous that present global climate change has its root in human activities. In consequence, human behavioural change is essential, if a solution is to be found and a disaster avoided. Nonetheless, the non-scientific general community reports no such unanimity. The general community is much less convinced that it is inappropraite man-made activity which underpins global warming or other aspects of climate change, and tends to be much more sceptical about the need for policy reforms. Why is the general (non-scientific) community so much at odds with the (expert) scientific community on a matter of such potential importance? Gore's answer in part is that vested interest groups - such as the energy lobby - do not want to see changes in present energy-consuming policies and behaviours. Accordingly they fund “independent research papers” designed to obfuscate or confuse community understanding. They thus stand accused of putting their short term profits ahead of long term global viability, and they also stand accused of being both willing and able to deliberately confuse public understanding (or consumer sovereignty). Al Gore's message includes the implication that many individuals who feel some degree of concern may nonetheless choose to believe that the problem is too big for them, such that any “sacrifice” they made would hurt them without achieving any worthwhile overall benefit for the community at large. In the global warming case, is there a tipping point beyond which our steps cannot be replaced? Is there an irreversibility applicable to environmental sustainability, which – once passed – has unavoidably disastrous consequences? Is it necessary to accept that while other potential disasters have in fact been forestalled (e.g. we will run out of oil by 19?? or out of arable land before the world can be fed), the scientific facts say “not this time”? In the jargon of economics, note that the global warming / climate change issue is a public goods issue (or, since it is a negative 'benefit' / threat, a public bads issue). Indeed it is a global public goods issue, and there is clear evidence that global public goods are becoming a matter of increasing importance to the world (given also the problems of global terrorism, AIDS/SARS/bird flu), species extinction etc). Is there an immediate need for a public policy response; indeed, is there a need for a global governmental response? Or are market forces and such regulatory processes as we already have quite adequate? Note too the similarities between Gore's case and ECON1100 points raised earlier by Galbraith, Hirsch and Krugman. In Galbraith's case, Galbraith objected in his 1996 The Good Society that today we have impressive technology, and that if we are failing to produce the good life for ourselves, the failing lies not in technology but in politics and economics. Accordingly, if corporations do play a role in disseminating disinformation designed to confuse public debate, that is a political economy matter of the gravest

concern, more especially if the world environment really does face a point of irreversibility. In effect, the Galbraith-cum-Krugman view is that in a day of scientific complexity and large and powerful corporations, market failures in the information market may be deliberately engineered, and may thereby act as a threat to the economy, to sustainability and to the democratic process. In Fred Hirsch's case, the issue is whether we have a prisoner's dilemma situation here, such that self-interested behaviour by individuals will not produce a socially optimal result (ie it isn't worth my doing anything unless everybody else does something etc). Likewise, it isn't worth doing anything today because these things build up slowly over time. In short, a citizen may have some concerns but self-interest says it isn't worth changing his/her own behaviour. In Krugman's case - echoing earlier concerns raised by Galbraith - energy companies have manipulated situations and relationships with governments to produce very profitable results for themselves at public expense (as in the Enron case regarding California electricity supply), and industry lobby groups finace “independent research groups” to obfuscate public understanding (just as Gore says in the global warming case).. In his NYT column (“A Test of Our Character”) of 26 May 2006, Krugman adds that the reaction of energy-industry lobbyists and right wing media organisations to Gore's movie provides Gore with the best possible example of corporate disinformation programs. Krugman would doubtless say that media coverage in Australia of Gore's trip and movie, (September 2006), fulfil Krugman's expectations. Terry McCrann, (well known journalist writing in Queensland's Courier Mail 12 September 2006), for one, lampoons Gore's movie, and suggests that rather than be called “An Inconvenient Truth” the movie should be renamed “A Convenient Untruth”. . McCrann and others in the Australian media (eg Andrew Bolt) have attacked the claim that scientists are united in their understanding that global warming is man-made and that it is an urgent problem here, now. McCrann's claim is that it is Gore who is obfuscating the scientific truth, and that he is doing so merely to opportunistically develop a higher political profile, in the hope that he can stand again for the US Presidency. Hence McCrann's claim that it is Gore who is spreading an untruth which is convenient to his own political aspirations. Krugman for his part would evidently seize on McCrann's column as merely another illustration of misinformation and disinformation, in the local Australian context. As further evidence, Krugman also quotes a USA scientist whose work is cited by the Competitive Enterprise Institute (which is partly funded by the oil industry) as protesting that the Institute has placed advertisements which deliberately misrepresent his scientific findings. In an age of mass media, information is coin. Control of that information flow to the voting public is thererfore of vital importance. A significant political economy question therefore is to decide whether market forces are working well in energy markets and in other markets of environmental importance, and in media markets, even if scare mongers sometimes succeed in getting some people upset about possible environmental disasters, or whether this time there really is a significant external diseconomy – an environmental discontinuity in the making – such that immediate action is needed if the world is to thwart the prospect of soon passing a tipping point beyond which environmental damage is irreversible and disastrous, if that point has not in fact already been passed. Put differently, Galbraith has long argued that orthodoxy is remiss for not considering the sources of government policies, and the global warming (environmental) issue is a particularly important case in point. In effect, Galbraith and Krugman are putting their money on expert environmemtal scientists. McCrann and others, including fossil fuel lobbyists (dubbed by Clive Hamilton as 'the Greenhouse mafia' in the Australian context: see ECON1100 Reader), prefer to argue an opposite line with great faith in market forces and consumer sovereignty and a willingness to ridicule those who are agitated. In effect, the critics of the Galbraith / Krugman / Clive Hamilton / Gore position see no reason for deeming orthodox neoclassical economic analysis to be unequal to the task of dealing with what environmental scientists warn is an impending disaster of unequalled proportions. Galbraith and Krugman don't share that optimism.

JK Galbraith “A Look Back: Affirmation and Error” JEI XXIII / 2 June 1989 pp413 -416. 1.His main concern is to teach that neoclassical economics does not adjust to the world as it is but rather adjusts the reality to itself (413) 2. He advocates a bi-modal view of modern capitalism – one which accepts the role of the classical entrepreneur and the market but which stresses the large and dominant role of the great organised bureaucracy. 3. With the great enterprise comes the exercise of power, and its rewards. 4. With the large enterprise we see the invasion of consumer sovereignty. 5. Galbraith recognises the corporate and social sources of wants. 6. We need to see clearly the relationship between the modern corporation and the state “and the unique role of neoclassical economics in disguising that relationship” (415) 7. What is taught is that the economic enterprise is the captive of the market, without power to deploy in the larger polity, but everyone including the teachers knows this to be untrue. The modern corporation has a major influence on the shaping of pubic opinion and political attitudes. 8. The power of the modern corporation also conveys a perverse advantage to the private sector over socially more urgent public goods and services. 9. Galbraith says that orthodoxy also ignores the varied relationships of large business enterprises and the state. Mainstream macroeconomic theory has no place for state supported sector of the economy, including the military-industrial complex. [In a more contemporary context – 2006 – such concern would now also need to focus on the energy lobby – as in the California electricity crisis and as in the Clive Hamilton claims re Oz and the Greenhouse mafia and as re Krugman and Halliburton in Iraq. 10. Galbraith observes that if an enterprise is large enough it is no longer allowed to fail. Is this an error? ie note the massive failures of Enron etc in the 1990s and early 2000s. Even if so, is this the sort of error for which Krugman lampooned Galbraith in 1994? 11. Neoclassical economics as now taught “comes perilously close to being a design for concealing the reality of political and social life from successive generations of students”. 12. Galbraith notes that Heilbroner agrees with theb general validity of his points but objects that Galbraith has fallen short in terms of quantification and formal theory. Galbraith responds that he would like to persuade Heilbroner that “formal theory can be, and is, an escape from truth” (415). Krugman “ War Against Wages” NYT 6/10/06 Should we be cheering over the fact that the Dow Jones Industrial Average has finally set a new record? No. The Dow is doing well largely because American employers are waging a successful war against wages. Economic growth since early 2000, when the Dow reached its previous peak, hasn't been exceptional. But after-tax corporate profits have more than doubled, because workers' productivity is up, but their wages aren't -- and because companies have dealt with rising health insurance premiums by denying insurance to ever more workers. Since 1935, U.S. workers considering whether to join a union have been protected by the National Labor Relations Act, which bars employers from firing workers for engaging in union activities. For a long time the law was effective: workers were reasonably well protected against employer intimidation, and the union movement flourished. In the 1970's, however, employers began a successful campaign to roll back unions. This campaign depended on routine violation of labor law: experts estimate that by 1980 employers were illegally firing at least one out of every 20 workers who voted for a union. But employers rarely faced serious consequences for their lawbreaking, thanks to America's political shift to the right. And now that the shift to the right has gone even further, political appointees are seeking to remove whatever protection for workers' rights that the labor relations law still provides. The Republican majority on the National Labor Relations Board, which is responsible for enforcing the law, has just declared that millions of workers who thought they had the right to join unions don't. You see, the act grants that right only to workers who aren't supervisors. And the board,

ruling on a case involving nurses, has declared that millions of workers who occasionally give other workers instructions can now be considered supervisors. Major employers like Wal-Mart have decided that their interests are best served by treating workers as a disposable commodity, paid as little as possible and encouraged to leave after a year or two. And these employers don't worry that angry workers will respond to their war on wages by forming unions, because they know that government officials, who are supposed to protect workers' rights, will do everything they can to come down on the side of the wage-cutters.

DEWEY find brief note re Dewey written at UQ on 5 or 6 October 2006 R Tilman “New Light on John Dewey, Clarence Ayres and the Development of Evolutionary Economics” JEI XXIV / 4 Dec 1990 Darwinism had a pervasive influence on both Dewey and Ayres 967 Both Dewey and Ayres were searching for a deeper understanding of instrumentalism 973

M Kanne “John Dewey's Conception of Moral Good” JEI XXII/4 Dec 1988 Quotes Dewey 1213 “we set up this end and that end to be reached, but the end is growth itself”. Change is nature's only constant. “Growth itself is the only moral 'end' “1216. Dewey denied fixed ends. The 'end' is growth itself. Says that for Dewey shared experience is the highest form of growth.

J Wible “The Instrumentalisms of Dewey and Friedman” JEI XVIII/4, Dec 1984 “The institutional school has philosophical roots in the instrumental philosophy of John Dewey” 1049. Commons, Mitchell, and Ayres all acknowledged a debt to Dewey. 1051. Dewey offered an evolutionary view of human thought – analogous to biological evolution. Dewey this disbelieved in all kinds of idealism” (1055) Popper said realists are right, versus instrumentalists (1056). As Popper put it, when out theories clash with reality, it reminds us there is a reality, and “something to remind us of the fact that our ideas may be mistaken. And this is why the realist is right.” 1056 quoting Popper 1965:117. Wible says both Dewey and Friedman use the term instrumentalism but have different conceptions of science in mind. Relate this to Krugman versus Galbraith and apparent disputes there and apparent convergence re what is valid scientific method. Is 'instrumentalism' a 'reduced form' conception of science – that places ontological and epistemological issues beyond the purview of “science”. (1058). Compare Wible here with my view re Krugman / Galbraith. P Mirowski “The Philosophical Basis of Institutional Economics” JEI XVI / 3, Sept 1987 Economic 'science' maintains a vain facade of having repudiated philosophical preconceptions.(1001), Says that there has been a failure to comprehend that institutional economics was the o9ffspring of an entirely distinct philosophical tradition from that which gave rise to neoclassical economics. “These two traditions have a profound conflict over their respective images of a 'science', and therefore profoundly incompatible images of 'economic man' and 'rationality' “ (1002-1003 Dewey's pragmatism found a sympathetic audience in the USA. Dewey maintained Peirce's hostility to

utilitarianism (1017). He became associated with groups opposed to laissez faire notions, and advocated that classical liberalism had avoided all the hard questions regarding the definition of order. PD Bush “Philosophical and Methodological Issues in Institutional Economics” JEI XXV /2,June 1991 Bush 329 notes that attacks on positivism are launched from a variety of philosophical perspectives, but a theme common to most is the increasing awareness of the normative significance of the methodological criteria even in matters of scientific description and prediction. Bush says that a clear understanding of these matters and their implications has been a diagnostic characteristic of institutionalist methodology since Ayres integradetd the pragmatic philosophy of Dewey with the institutional analysis of Veblen. P Klein “Why Be an Economist: Remarks Upon Receipt of the Veblen-Commons Award”, JEI XXV / 2 June 1991 Institutionalists regrad theory as a never ending challenge to derive from the flawed performance of the ongoing system useful guidelines as to how its performannce can be brought more closely into line with evolving societal values. There is no rationalisation of failure by deferrence to some equilibrium that comes in the very long term but which tolerates gross human misery – as revealed by even a superficial application of current values - in the meantime. Note this re Krugman / Galbraith. J Wisman and J Rozansky “The Methodology of Institutionalism Revisited” JEI XXV / 3, Sept 1991 Heterodox economists are more relativist. They note that Veblen characterised a Darwinian conception of social change as “a scheme of blindly cumulative causation, in which there is no trend, no final term , no consummation”. Contemporary institutionalists may not be quite as extreme 713 but cumulative change continues to be understood as not predictable. On p725 they add that the philosophical work of Dewey, William James and Charles Peirce forms the basis of “instrumental valuation” or “social value theory”. Whereas positivists applaud Schumpeter's vision that the rules of scientific procedure crush out ideological values from analytical work, institutionalists see the positivistic theory/ value distinction as untenable. They don't believe that values can be crushed out by the practice of economic science, and if that is the case it is best that those values be stated explicitly (a la Myrdal). Again cf Krugman / Galbraith. Duhs and Alvey “Schumacher's Political Economy” IJSE 10/6 1989 For Cropsey welfare economics reduces to the sovereignty of the individual's passions. Schumacher contends that the three philosophies of Locke , Dewey and Marx which respectively underscore the three recognised perspectives of orthodox, institutionalist and Marxist economics are all deficient. As far as Schumacher is concerned the conceptions of the nature of man, and of what it is to be “rational' “virtuous' and 'good' all fall short of the metaphysical reconstruction which he regards ads the task of our age. 72. Instead of finding a solution to human problems in the evolutionary philosophies of Dewey and Darwin, Schumacher finds an unacceptable historicism instead. Dewey's evolutionary perspective decries the notion of a fixed species and of “fixed ends”. While Schumacher would agree with Dewey that much production merely swells the senseless bulk, he nonetheless seeks to take his bearings from a conception of “the nature of man” while Dewey sees no such innate nature and thus appeals to evolutionary standards. Note the chance versus choice point. Institutionalists generally seek to replace one dimensional economic man with multi dimensional socio economic person. Institutionalist thought is emphatically holistic, evolutionary and democratic. Its philosophical underpinnings are largely supplied by Dewey, who -like Schumacher – was hostile to utilitarianism. Nonetheless , despite some similarities, Schumacher ultimately is iunable to follow in Dewey's direction eg when Dewey objects that traditional political philosophy has been engaged in a

misguided search for “fixed species and essences” (see Horwitz 752-3). the safeguard Dewey finds in pluralism is no safeguard for Schumaacher but merely another concession to historicism and lifedestroying metaphysics.. (68)

13. FROM Frank Stilwell's 2006 pluralism paper: Use some comments re Galbraith / Krugman Pluralism as a ‘Way Station’ One reason for adopting the pluralist approach is the pre-scientific (some say inherently nonscientific) nature of the discipline of economics. This view emphasises the underdeveloped state of economic analysis and the need for some modesty in the claims made on its behalf. From this perspective, pluralism is a ‘way station’ on the road (hopefully) to a more incisive and comprehensive understanding of the economic characteristics of the world around us. Because we cannot reasonably claim to have discovered the universal ‘laws of motion’ determining how the economy functions as a system (or even if it is a coherent system), we should keep an open mind for alternative possibilities. Students need to be introduced to the study of economics as a process of exploration. Pluralism then is the appropriate pedagogy for a discipline that seems to be continually struggling in the attempt to provide clear guidelines for understanding a complex and changing world. Whether this inadequacy of the economics discipline is a temporary situation or a permanent state of affairs is understandably a matter on which reasonable people can reasonably disagree. The aspiration to make progress through the application of scientific method is of long standing. Neoclassical economics was driven from the outset by that aspiration. Indeed, the use of the term ‘economics’ in place of the older ‘political economy’ signalled the concern to emulate the scientific status of physics (Toohey 1994: pp. 6, 19). The continued mathematicalisation of the discipline – evident both in the professional journals and in the teaching syllabus – is also indicative of this on-going ambition. As Mirowski (1989) emphasised, the attempt to formulate economics as ‘social physics’ was fraught with contradictions from the outset. Its achievements to date have been notably modest, judging by both the explanatory capacity and the predictive power of orthodox economic models (Fullbrook 2004). It is doubtful that economics can ever be a science in the same sense as the physical sciences. This is partly because of the interdependence between the behaviour of subject and object – between the observer and the observed – throughout all of the social sciences. Moreover, as McCloskey (1985) has pointed out, economic inquiry in practice actually proceeds by way of ‘conversations’ in which an eclectic mix of modes of investigation and argument is adopted. If this is indeed ‘what economists do’, it is appropriate that students be introduced to the discipline by looking at a plurality of possible approaches through which further progress may be sought. Pluralism and the Politics of Economics

A second argument for pluralism is rather different, emphasising the essentially political character of economics as a discipline. Of course, the existence of political elements in the development of economic thought is not a novel observation: the distinguished Swedish economist Gunnar Myrdal was expounding that view half a century ago (Myrdal 1969). Contrary to the view presented by mainstream textbooks, value judgements and political ideologies pervade economic thought, influencing the topics selected for investigation, the nature of simplifying assumptions and the uses made of economic analysis. In that sense, economics always has been political economy, notwithstanding the change in the preferred label for the discipline. That being the case, the best way of introducing students to a thorough economics education is by a frank acknowledgement of this inexorable link between economics and politics. In practice, this means teaching neoclassical theory as a body of analysis representing the market economy in a manner that aligns with the principles of economic liberalism – emphasising methodological individualism, self interest as the principal driver of economic activity, competitive markets as the ideal economic environment, and caution about (if not antipathy to) a substantial role for the state in economic affairs. This neoclassical stance can be contrasted with the Keynesian approach which rests upon a more aggregated view of the economy and a more positive view of the capacity of the state to act as an instrument for social betterment (O’Donnell 1999). The different values and assumptions embodied in institutional and Marxian analyses of the capitalist economy can then be discussed in the process of developing students’ understandings of those alternative, and more unsettling, ‘ways of seeing’ or ‘thinking like a (different type of) economist’. In this way, students can be introduced to conservative, reformist and radical viewpoints in the discipline of economics. They come to see that particular modes of analysis lead to conclusions and policy prescriptions that mesh with different political ideologies and interests. Given that the dominant economic orthodoxy currently has such a strong association with the political practices of neoliberalism, the advocacy of pluralism has an obvious association with the politics of the left. The case for pluralism, from this perspective, has a counter-hegemonic rationale, challenging the theoretical underpinnings of neoliberal ideology and policies. Academic economists of a radical inclination might even regard it as a ‘second best’ to an economics curriculum more comprehensively oriented towards, say, institutionalist or Marxian political economy. However, one cannot properly resolve the current problem of right-wing political bias by substituting a different bias. Any curriculum dominated by a single perspective – whether neoclassical theory in capitalist nations or Marxism-Leninism in the former USSR – invites the accusation of dogmatism. Pluralism is the antidote: it is the hallmark of education in an ‘open society’.

Pluralism and Disciplinary Progress A third set of arguments for pluralism in economics centres on the nature of progress in the discipline itself. This is different from the two preceding arguments because it represents pluralism not as a means of coping with the inadequacies of ‘economics as a science’ but, more positively, as a means of improving it. The core proposition, as Fullbrook (2003, p.118) succinctly puts it, is that “real science is pluralist”. So, pluralism in teaching is a prerequisite for pluralism in research methods which, in turn, is conducive to disciplinary progress. This position is not universally accepted. As Screpanti (1996, p.298) argues, both realist and postmodernist approaches to social science should reject methodological pluralism as desirable in principle. From both of these perspectives, the case for pluralism is more pragmatic. Realists, believing in some notion of objective reality, would say that pluralism has to be reluctantly accepted only as a second-best because of the pre- scientific status of the discipline. Postmodernists, on the other hand, reject the advocacy of pluralism as a methodological precept because “it is not possible, from outside science, to … say that many methods are better than just a few” (Screpanti 1996, pp.3045). So, as Samuels (1996, p.75) argues, “the rationale of methodological pluralism is that, in the absence of meta-criteria by which one methodology can be shown unequivocally to be superior to all others, analyses should not be rejected solely on the basis of methodological considerations.” On this reasoning, pluralism is necessary because openness to alternative methodologies is more conducive to developing an understanding of the world around us. The case for this inclusive methodological stance is buttressed by observations about how progress in knowledge actually occurs. One influential view has been Thomas Kuhn’s notion of a dominant paradigm characterised by ‘normal science’ that undergoes periodic revolution when confronted with an accumulation of anomalies (Kuhn 1962). As Fullbrook (2003, p.120) points out, however, “in social sciences conditions rarely, if ever, exist for a revolution in the way Kuhn describes.” Rather, changes in social, political and economic conditions – what Galbraith (1974, p.283) calls “the march of circumstances” – are likely to be more influential. The challenge in practice is to create a professional practice whereby those changing circumstances are subjected to critical scrutiny from different perspectives. For this purpose one must learn to think in diverse analytical frameworks, continually juxtaposing them, judging their effectiveness in explaining what needs to be understood, and forging new concepts and analyses in the process. This is the case for regarding economics, or

indeed any discipline, as “not a body of doctrine but an activity… [whose] work consists essentially of elucidations” (Wittgenstein, quoted in Fullbrook 2003, p.121). The key issue then becomes how to prepare for that activity. A pluralist education can be seen as a necessary, albeit not sufficient, condition. In other words, the required fluidity and flexibility of thought for progress in analysis and research is more likely to derive from an introduction to alternative ‘ways of seeing’ rather than from studying a more monolithic orthodoxy. The additional requirements of capacity for synthesis, innovation or sound judgement are a ‘tall order’ in any context, of course, but more likely to be fostered in an educational environment in which students are encouraged from the outset to address analytical puzzles in an open-ended manner, rather than to solve ‘set-piece’ puzzles within an established orthodoxy. 14. 15. Q 31 2002 J.K. Galbraith objects to the Chicago School view of how economies operate, because: a) b) c) d) e)

Friedman’s remedy fits an ideal world, but that ideal world does not actually exist. orthodox economics ignores the realities of power, and market forces do not work for the best – except perhaps for the powerful. the US economy is now (1996-2001) troubled by a sectoral imbalance but the economy has evolved and this was not an issue in 1956. all of the above. (a) and (b) only.

Answer (e). Galbraith revisited his Affluent Society 40 years later and stressed that the sectoral imbalance which troubled him in 1956 continued to do so. Option (c ) is untenable, but both (a) and (b) are central points for Galbraith. Q33 2002 In offering an appreciation of J.K. Galbraith’s work, Warren Samuels (1984) characterises Galbraith’s position as follows: a) b) c) d)

economic and social phenomena are so complex that empirical tests are scarcely able to tie matters down and within a considerable range economists are permitted to believe what they please. positivism is itself non-ideological and is free of implicit beliefs. neoclassical economics serves no political function but has neutralised any suspicion that the State is the executive arm of the giant corporations. all of the above.

Answer (a). For Galbraith neoclassical economics is guilty of denuding economic theory of the reality of power. As such it tends to serve the interests of the powerful rather than the common consumer. Hence his need to reconstruct economics as Economics of the Public Purpose. Option (c ) is therefore

incorrect for Galbraith. Option (b) is also unacceptable to Galbraith (and to Samuels) on the ground that a value neutral position is a logical impossibility. Values or beliefs are involved in the choice or problem to be studied and in the choice and interpretation of relevant data and method of analysis.

Q45 2002 By the QWERTY-ness of the economy Krugman means that: a) b) c) d) e)

the outcome of market competition often depends crucially on historical accident or on “path dependence”. historical accidents combined with increasing economies to scale can generate virtuous circles that allow international competitive advantages to be self-reinforcing in certain industries. both (a) and (b). Krugman therefore endorses strategic trade theory, as justified by the economics of QWERTY. all of the above.

Answer (c ). Krugman means to endorse the notion of path dependence. Once on a particular path certain options that might otherwise have existed and now closed off. Accordingly, historical accident – which may result in a “first mover advantage”, for example - might feed upon itself and create a virtuous circle of national competitive advantage in particular industries. Thus the USA may have a comparative or competitive advantage in aircraft production essentially because of World War II and the fact that the War pushed the USA into becoming a major aircraft producer. It learned by doing, and has retained (or extended) its competitive advantage since that time.

Q46 2002 According to Krugman (in Peddling Prosperity, 1994) Keynesianism is basically right a) b) c) d) e)

and the idea that recessions represent a market failure that can be corrected by government action can indeed be right. because there is no evidence of the inflexibility of prices in the wake of exchange rate movements. because there is prima facie evidence of the sort of price stickiness that old Keynesians asserted and that New Keynesians have tried to explain. (a) and (c) only. (a), (b) and (c).

Answer (d). Krugman's 1994 account is that New Keynesianism is the only game left in town. Conservative macroeconomic theories (monetarism; rational expectations models etc) have been tried and found wanting. What distinguishes the Keynesian approach is the acceptance of price stickiness in certain significant markets, including in the context of exchange rate movements. Option (b) is therefore untenable for Krugman.

SEE NYT column 29/3/05 re What's Going On' re the terri Sciavo case and the religious right See if it gives place for comment re K Vs GAlso check this source and cf Krugman: He thinks that left to themselves, economic forces do not work out for the best except maybe, for the powerful. (Galbraith, 1973, pg.13) Also this ECON1100 source: One of the reasons Paul Krugman dismissed Galbraith as a policy entrepreneur is because some of Galbraith's predictions have not been right. Krugman also mentioned how Galbraith's ideas are still overly simplistic and do not reflect the truth of the world's economy. He said Galbraith merely has the style and popularity but not substance. According to Krugman, "he has never been taken seriously by his academic colleagues." Krugman also pointed out that the former President of the USA was wise for choosing real economists or professors as his advisors rather than mere policy entrepreneurs, thus appointing Galbraith as Ambassador to India so that Galbraith could be "as far from economic policy as possible." (Krugman, 1994)Introduction: J.K. Galbraith's heyday was in the 1950s, 1960s and 1970s. His influence spanned decades and extends into the twenty first century with the 2004 publication of his The Economics of Innocent Fraud. He has been one of the most cited economists of his time, president of the American economics association and US ambassador to India. He has also been much derided for his views. Friedman, for example, dismissed him as “a missionary seeking converts” rather than an economist. Samuelson – whose intellectual position is closer to Galbraith's – quipped that “as an economist Galbraith is a good novelist”. And more recently, Krugman castigated Galbraith as “a policy entrepreneur”. None of these three critical views reflects well on Galbraith as an 'economic scientist'. Each dismisses him as a rhetoritician. Nonetheless, what is conspicuous in Krugman's more recent writings - notably his series of New York Times columns – is the extent to which Krugman's interpretation of economic affairs now echoes Galbraith's. Galbraith recently dies just short of his 100th birthday and would presumably be pleased to have written many of the columns that Krugman has recently published, and pleased to have passed the batton to another, younger 'infant terrible'. Galbraith's criticisms of orthodox economics: For Galbraith there is a gulf between perception and reality in the modern American economic system. He has long argued that managers hold the real power in our system, not consumers or shareholders as orthodox economics suggests. Capitalism has given way to corporate bureaucracy--"a bureaucracy in control of its task and its compensation. Rewards that verge on larceny." He argues that the public realm is effectively controlled by the private sector. The arms industry is one example of this. While the Pentagon nominally remains in the public sector, corporate power plays a significant role in its decisions. For Galbraith then the gap between reality and 'conventional wisdom' continues to grow and what is taught in orthodox economics remains much in need of correction. What he earlier referred to as the major 'myths' of orthodox economics, he now refers to as 'innocent frauds'. Uppermost amongst these is the extent to which power has been elided from the system. Corporate power is real and pervasive and undermines the orthodox teaching that consumers are sovereign in their judgements and, perhaps more significantly still, undermines the notion that the State is an independent umpire merely dispassionately upholding the rules of the system. Galbraith's reality is one in which the private sector has unprecedented control over the so-called public sector, and in which corporate management is largely able to indulge its own self interest. The extension of corporate power into public policy is of particular importance not only in the case of military policy but also in the cases of environmental policy, taxation policy and ??????.

Krugman's criticisms of Galbraith: Krugman's emphatic disendorsement of Galbraith comes in his 1994 Peddling Prosperity. Krugman lampoons Galbraith's New Industrial Society as having been revealed by history to have widely missed its mark. Krugman's metamorphosis:

26/12/05: Paralleling Complex”, Galbraith's Krug earlier Krugman attentions ow to “the military-industrial complex” Krugman now 26/12/05: nownotes Paralleling Galbraith's earlier attentions to the “military-industrial complex” Krugman now notes that to But to get health reform right, we'll have to overcome wrongheaded ideas as well as powerful special decades we've been lectured on thethat evilsseeks of big and the glories of reform healthinterests. policy “aFor powerful medical-industrial complex” to government influence doctors' decisions needs to be INSERT “Krugman summaries” here the private sector. Yet health reform is a job for the public sector, which already pays most of the recognised and confronted. Powerful special interests will have to be overcome in a world of high technology bills directly In oraindirectly and sooner information or later willasymmetry, have to make key decisions aboutis medical modern medicine. world of considerable the power of advertising enhanced and treatment. Krugman comments that drug companies spend more marketing their products to doctors than they do developing those products in the first place, and cases are reported in which surgeons systematically use devices produced by companies pay them consulting fees. have In such Krugnman sees or noasprospect that health But towhich get health reform right, we'll to circumstances overcome wrongheaded ideaslittle as well powerful policyWhat and the controleconomics', of costs can be left to 'the magic of the Forgood him,economics as for special Formedical decades we've lectured on the and evils ofmarket'. bigshould government and theGalbraith, glories ofhealth care isinterests. 'good what is been 'economic science', what teachers is a public responsibility. teach? the private Galbraith's sector. Yet view health is that reform theissocial a job whole for the ispublic greater sector, thanwhich the sum already of the pays parts, mostsuch of the that interdisciplinary imperative. systems about are notmedical separate bills directly or understanding indirectly and issooner or laterThe willeconomic have to and makepolitical key decisions 16/12/05: In the same context further notes conflicts of interest may beisdistorting bothofmedical and independent of eachKrugman other. Moreover, the that important thing to understand the process social treatment. research and health care in general. Citing the than muchstatic publicised case of Merck and the paindynamics or change over time, rather efficiency seen against the withdrawal backgroundofofitsfixed killingexogenous drug Vioxxinfluences. in 2004 following accusations that the drug company had played down evidence that Vioxx What good economics teaching needs to do is close the gap between reality increased risk of heartwithin attacks, Krugman concludesThat that means “crucialaddressing scientific the research and crucial medical of decisions and the its perception orthodox economics. questions of the sources have to be considered because of financial among companies,those medical researchers andtohealth consumer tastes suspect and of government policies,ties instead of medical merely asssuming tastes and policies care providers”. adamant that less could be expected givenand the the rise extent of the “medical-industrial be given. Krugman It means is recognising theno realities of corporate power, to which producer complex” “in the last 25 years” which has seen conflicts of interest become the norm as deep financial links power manages to stamp its values on consumers and the larger society. The orthodox claim to 'value emerged between doctors, hospitals research institutions the one hand and jettisoned drug companies and equipment neutral economic science' and should therfore be on questioned, and in favour of makers on the other hand. ....................??????????????? Plainly enough, this is pretty much the same picture that Galbraith painted in 19?? in describing the military-industrial complex and in arguing a case for nationalisation theKeynesian weapons corporations. viewwork was as that especially Krugman's 1994 teaching was essentially a of New teaching that Galbraith's markets don't well in the as Cold War climate cost overruns were paid by the public sector anyway, because the perceived urgency of the 'economic rationalist' or laissez faire economists maintain. There are 'stickyofprices' and problems defence implications, and accordingly for The Galbraith the government weapons corporations were part of the publ with information asymmetry(??). case for intervention is already strongereffectively than economic sectorrationalists allow (??). Nonetheless his argument is not a Galbraithian one of demanding that anyway in all but name. Krugman's is similar arguing that jhealth policy issocial likewise too important to be economic and political systemscase be looked at asinpart of one larger integrated whole(??). playedKrugman with in the name of private profit, given the obvious layers of information asymmetry involved. points out major flaws in Galbraith's the Good Society. Krugman says Galbraith's visionWaepons of systems prescription (and high tech medical devices) share same characteristic beingout expensive to theand economy is onedrugs without shadows in which what is good forthe social justice invaribalyofturns to develop, with low side marginal costs production an additional unit along with macroeconomics relatively high profits on have no relatively unfavourable effects. Heof continues andofalludes to Galbraiths primitive sales of of marginal his youth,units. thus leaving him unprepared to confront the real dilemmas facing modern liberalism. Just asCompare Merck was accused recent of 'scientific misconduct' theearlier question arises as toofwhat constitutes 'scientific Krugman's NYT columns to his denunciations galbraith as writer not aneconomics' here. economist. Is this merely one more case ofKrugman market failure on grounds of entrepreneur” information asymmetry and market power – or Kuttner describes as the –greatest “policy of them all. is more involved? Is Galbraith right to argue that he is not guilty of imposing his values on others but is merely tryingKrugman to protect society from having powerful corporations impose values? Is apublic positivistic, value neutral 1994 described a policy entrepreneur as one whotheir writes for the and who offers easy solut social where sciencethere a logical impossibility, as Myrdal argued? Just as Galbraith argued that over the tools of persuasion for ridi are likely to be none. He viewed Galbraith as a victory of style substance. Krugman corporations extended beyond advertising to forms of influence over governments and the formation or selection of NIS? How do his contemporary NYT columns stack up against this earler ridicule of NIS? Do Krugman' publicacerbic policies,comments so Krugman nowBush writesadministration that the tools ofand persuasion for drug companies goor beyond normalGalbraith's N re the Enron and Halliburton echo contradict commercial advertising toDid direct financialsay inducements to surgeons others. This soundsplays pretty much like lesser prognostications? Krugman in 1994 that the largeand corporation actually a significantly Galbraith's observations the extent power of producer nowadays. Wouldabout Krugman still of becorporate in a position to and say the thatrise history has sovereignty to displace consumer sovereignty thos eparts of the economy charaterised by technological complexity (and thus information not treated NISin kindly? asymmetry). Krugman perhaps remains more optimistic than Galbraith that things don't have to stay that way and that reform ofofbad policies canbysee the extent of conflicts of interestJ.K. reduced. Nonetheless it is in striking that it19 thethe hijacking public policy private interests. Introduction: Galbraith's heyday was the 1950s, is Galbraith, as distinct from Friedman, sees and the possibilty of soljutions democraaic reforms. Friedman, and 1970s. His influence spannedwho decades extends into the twentyinfirst century with the 2004 publication of despiteThe hisEconomics faith in markets elsewhere, apparently has less in most political and concludes that even if 'the of Innocent Fraud. He has been onefaith of the citedmarkets economists of his time, president of the right people' are elected they will soon be subject to interest group pressures and will soon therefore do 'the wrong American economics association and US ambassador to India. He has also been much derided for his views. thing' Friedman, just like their for predecssors. example, dismissed him as “a missionary seeking converts” rather than an economist. Samuelson [There is an implicit teleological message in Galbraith and now perhaps in Krugman, but not of course in orthodox economics. The Galbraith/Krugman evolution implies the need for good economics teachers at least to raise the consequences of such teleological implications.]

whose intellectual position is closer to Galbraith's – quipped that “as an economist Galbraith is a good novelist”. more recently, Krugman castigated Galbraith as “a policy entrepreneur”. None of these three critical views refle well on Galbraith as an 'economic scientist'. Each dismisses him as a rhetoritician. Nonetheless, what is conspicuous in Krugman's more recent writings - notably his series of New York Times columns – is the extent to which Krugman's interpretation of economic affairs now echoes Galbraith's. Galbraith is nearing his 100th birthday and would presumably be pleased to have written many of the columns that Krugman has recently published, and pleased to have passed the batton to another, younger 'infant terrible'. Galbraith's criticisms of orthodox economics: For Galbraith there is a gulf between perception and reality in the modern American economic system. He has long argued tthat managers hold the real power in our system, not consumers or shareholders as orthodox economics suggests. Capitalism has given way to corporate bureaucracy--"a bureaucracy in control of its task and its compensation. Rewards that verge on larceny." He argues that the public realm is effectively controlled by the private sector. The arms industry is one example of this. While the Pentagon nominally remains in the public sector, corporate power plays a significant role in its decisions. For Galbraith then the gap between reality and 'conventional wisdom' continues to grow and what is taught in orthodox economics remains much in need of correction. What he earlier referred to as the major 'myths' of orthodox economics, he now refers to as 'innocent frauds'. Uppermost amongst these is the extent to which power has been elided from the system. Corporate power is real and pervasive and undermines the orthodox teaching that consumers are sovereign in their judgements and, perhaps more significantly still, undermines the notion that the State is an independent umpire merely dispassionately upholding the rules of the system. Galbraith's reality is one in which the private sector has unprecedented control over the so-called public sector, and in which corporate management is largely able to indulge its own self interest. The extension of corporate power into public policy is of particular importance not only in the case of military policy but also in the cases of environmental policy, taxation policy and ??????. Krugman's criticisms of Galbraith: Krugman's emphatic disendorsement of Galbraith comes in his 1994 Peddling Prosperity. Krugman lampoons Galbraith's New Industrial Society as having been revealed by history to have widely missed its mark. In 1996 he went on to belittle Galbraith's The Good Society. Galbraith's view is that the social whole is greater than the sum of the parts, such that interdisciplinary understanding is imperative. The economic and political systems are not separate and independent of each other. Moreover, the important thing to understand is the process of social dynamics or change over time, rather than static efficiency seen against the background of fixed exogenous influences. What good economics teaching needs to do is close the gap between reality and its perception within orthodox economics. That means addressing the questions of the sources of consumer tastes and of government policies, instead of merely asssuming those tastes and policies to be given. It means recognising the realities of corporate power, and the extent to which producer power manages to stamp its values on consumers and the larger society. The orthodox claim to 'value neutral economic science' should therefore be questioned, and jettisoned in favour of ....................???????????????

From Galbraith to Krugman and Back Abstract J.K. Galbraith's heyday was in the 1950s, 1960s and 1970s. His influence spanned decades and extends into the twenty first century with the 2004 publication of his The Economics of Innocent Fraud. He was one of the most cited economists of his time, president of the American Economics Association and US ambassador to India. He was also much derided for his views. Friedman, for example, dismissed him as “a missionary seeking converts”, rather than an economist. Samuelson quipped that “as an economist Galbraith is a good novelist”. And more recently, Krugman castigated Galbraith as “a policy entrepreneur”. None of these three critical views reflects well on Galbraith as an 'economic scientist'. Each dismisses him as a rhetoritician. Nonetheless, in Krugman's more recent writings - notably his series of New York Times columns – what is conspicuous is the extent to which Krugman's interpretation of economic affairs now echoes Galbraith's. In his later years Galbraith would presumably have been pleased to have written many of the columns that Krugman published during 2000-20006, and pleased to have seen the batton picked up by another, younger 'infant terrible'. Galbraith's theme was that there is a gap between reality and 'conventional wisdom' – a gap that continues to grow so that what is taught in orthodox economics remains much in need of correction. He objected that power has been elided from the system. He questioned consumer sovereignty and described a reality in which the private sector has unprecedented control over the so-called public sector, and in which corporate management is largely able to indulge its own self interest. Krugman's gave an emphatic dis-endorsement to Galbraith in his 1994 Peddling Prosperity. He lampooned Galbraith's New Industrial Society as having been revealed by history to have widely missed its mark. In 1996 he added a dismissal of Galbraith's The Good Society. In short, he castigated Galbraith as a 'policy entrepreneur', meaning one who writes for the public and who offers easy solutions where there are likely to be none. He dismisssed Galbraith as a victory of style over substance. Yet the 2000-2006 Krugman of the New York Times columns undergone a metamorphosis. This newer Krugman in fact appears to replicate much of what Galbraith wrote, and to champion similar caiuses. This newer Krugman questions consumer sovereignty, bemoans the power of producers, questions the uses to which State power is put, worries about an energy lobby if not a Galbraithian militaryindustrial complex as such, and laments the hijacking of public policy by private interests. Galbraith must have felt both vindicated and flattered. Apart from the whatever interest there is in this evolution of thought within the broadly institutionalist camp, there is a question of scientific method here. Is the new Krugman merely a journalist, who has left model building and scientific economics behind? Or is he a more mature political economist whose increasingly outspoken commentary reflects a deepened understanding of what constitutes science in economics? The journey from Galbraith to Krugman and back serves as a good vehicle for addressing the question of what constitutes 'good economics', what is 'economic science', and what should good economics teachers teach.

>1. Via Austrian (Boettke) response (so include some critique of the Austrian position??) >

>The ideas of Marx, Veblen and Keynes were wrong when they were first >articulated by those thinkers, and they were wrong in the derivative >formation in the hands of Galbraith. The intellectual paradigm of >Marx-Veblen-Keynes cannot understand why markets work the way they do, and >they cannot understand why the policies of social control they inspire >don't work as planned. The Marx-Veblen-Keynes agenda not only provides a >bad framework for analysis and a poor tool for a policy of social control, >but when utilized as an interpretive framework it produces a distorted >view of history. Galbraith embodied all three intellectual failings. > >Is the Krugman transition in terms of a movement towards >marx-veblen-keynes? or towards something else?? Is there a teleological >difference? is Boettke blind to that? Is acceptance of utiliarianism / >hedonism scientifically based? or Hayek re social atavisms etc? > >Cite Hayek quote re you can be a physicist etc..... > >2. 2100 student Did Rawlsian theory cause many to start questioning >utilitarian theory? Did Rawls at least revive the interest in studying >broader underlying political philosophy? Is Galbraith / Krugman doing >that? Or is it at least reviving interest in philosophy of science >questions in economics? Did Rawlsian theory at least show that >utilitarian theory needed improvement? Did Galbraith at least show that >certain methodological issues needed improvement even if he himself was >the brilliant failure that Boettke says he was. Did G at least give rise >to a re-questioning of basic assumptions? > >Consider Hume's problem and Popper's 'solution'. Can I relate that to G/K? Note the Lee list og Galbraith at #3 and hayek at #? reminisecent of the shared hayek / myrdal prize

>>>>----------------- HES POSTING ---------------->>>>------------ EH.NET BOOK REVIEW ------------->>>>Published by EH.NET (November 2006) >>>> >>>>Richard Parker, _John Kenneth Galbraith: His Life, His Politics, His >>>>Economics_. New York: Farrar, Straus and Giroux, 2005. x + 820 pp. $35 >>>>(cloth), ISBN: 0-374-28168-8. >>>> >>>>Reviewed for EH.NET by Peter J. Boettke, Department of Economics, >>>>George Mason University. >>>> >>>> >>>>During my undergraduate days I was taught to despise John Kenneth >>>>Galbraith as the arch-enemy of those who believed in the free market >>>>economy and limited government. In fact, Galbraith embodied everything >>>>that was wrong with the "eastern establishment" of academics and >>>>intellectuals. But while my main economics professor in undergraduate >>>>school left no doubt about his judgment on Galbraith's contribution to

>>>>the field, he did encourage us to read Galbraith. My library to this >>>>day has almost a complete set of Galbraith's paperbacks that were >>>>purchased as an undergraduate. Besides my basic education in the >>>>classics in free market thought such as Smith, Bastiat, and Mises, I >>>>read Galbraith. I must admit that I read works like _The Affluent >>>>Society_ and _The New Industrial State_ with an intent to indict rather >>>>than to learn. But I did study them. >>>> >>>>When I headed off to graduate school I was asked immediately to prepare >>>>a paper responding to recent discussions in the professional journals. >>>>I headed off to the library and looked through the _AER_, _JPE_, and >>>>_QJE_ but nothing caught my imagination. Just as I was about to leave >>>>the library, I looked at the _Journal of Economic Issues_ and there was >>>>a long essay in it on John Kenneth Galbraith and in the article the >>>>claim was made that Galbraith had clearly defeated the economic ideas >>>>of F. A. Hayek. I was captivated by the argument in that paper, and >>>>though certainly not equipped to be a scholar of economics yet, I was >>>>in lawyerly mode and I decided to take on Hayek as my defendant and to >>>>make his case against the prosecution of Galbraith. After many >>>>revisions, and an entire shift in focus, this paper eventually became >>>>my paper assessing the commonalities and divergences between the >>>>Austrian School and the Old Institutionalists that was published in >>>>_Research in the History of Economic Thought and Methodology_. >>>> >>>>I respect Galbraith's ability to write, and I respect his desire to see >>>>economic policy as a force for good in society, but I do think that his >>>>economics and his politics are about as wrong-headed as an intellectual >>>>can produce, except to be completely bonkers. I am telling the reader >>>>this upfront because Richard Parker's biography of Galbraith is both >>>>outstanding and hagiographic. There is no doubt that Galbraith lived a >>>>fascinating life, far more exciting than any other economist of his >>>>generation except perhaps Milton Friedman, and even there Galbraith's >>>>brush with politics in the Kennedy Administration gives him a dimension >>>>to his life story that Friedman does not have. Even if we include >>>>Friedman's intellectual sway in both the Nixon and then Reagan >>>>administrations, he did not hold a public office the way Galbraith did. >>>> >>>>Galbraith's ability to write as an economist, again only rivaled by >>>>Friedman, put him at the cutting edge of policy discourse from 1950 >>>>through the 1970s. So he lived a fascinating public life that touched >>>>on the major debates in public policy during the post-World War II >>>>period and through the social change of the 1960s and the crisis of >>>>confidence in the political system in the 1970s. But by the 1980s, >>>>Galbraith's influence was waning and that of Friedman's was on the >>>>ascendancy. When the real-existing socialist system collapsed in 1989 >>>>and then in 1991, Galbraith's influence as a policy economist was >>>>relegated to the past. >>>> >>>>Parker makes the case, actually quite persuasively, that many of >>>>Galbraith's analytical ideas in economics are making a comeback in the >>>>name of behavioral economics. Men are not lightning calculators of >>>>pleasure and pain (as Veblen pointed out), but instead are caught >>>>between alluring hopes and haunting fears, susceptible to pressures >>>>from peers and the institutions within which they act, and confused

>>>>over the options they face and the best course of action which presents >>>>itself. The rarified neoclassical model of utility maximization and the >>>>mode of perfect competition cannot explain how man really acts or how >>>>markets function in modern society. Galbraith's work, Parker suggests, >>>>anticipated these modern criticisms of the model of man, and the model >>>>of the market. >>>> >>>>That may, in fact, be so. Galbraith combined a smoothed-over Marxism >>>>with a watered-down Veblenism, to produce a wonderfully readable >>>>critique of a certain rendering of the market society and offer a mild >>>>form of Keynesian socialism as a solution to the instability and >>>>inhumanity of modern finance capitalism. But there are alternative >>>>critiques of that neoclassical rendering of market society which >>>>neither Galbraith nor Parker consider in any detail. The dreaded F. A. >>>>Hayek, for example, did not rely on a model of man engaged in >>>>relentless maximizing nor of the market as ruthlessly efficient. But >>>>Hayek's work is nowhere engaged in a subtle way by either Galbraith nor >>>>Parker in this biography. It is Hayek who was haunted by Galbraith, >>>>certainly not the other way around (despite the gratuitous slaps at >>>>Hayek that one can read in Galbraith). >>>> >>>>Parker writes his biography from the point of view of Galbraith's >>>>obvious intellectual victory and thus the political tides turning >>>>against his form of Progressivism in the 1980s is a reflection of the >>>>world gone mad rather than Galbraith's arguments (and those of Marx, >>>>Veblen and Keynes on which his arguments were based) being proven wrong >>>>analytically and empirically. With such confidence of ultimate >>>>vindication, Parker writes a biography that sees Galbraith's >>>>contributions as unassailable and the ebbs and flows of his >>>>intellectual influence as being an issue of politics and never one of >>>>the force of the argument. >>>> >>>>Clearly Galbraith possessed a great skill to write essays in >>>>persuasion. These essays were especially persuasive to those untrained >>>>in economic reasoning, yet desiring to offer opinion on economic >>>>policy. The claim that his ideas will have a lasting influence in >>>>economics must be judged to be dubious. First, his originality as an >>>>economic thinker is not obvious. His ideas are derivative of Marx, >>>>Veblen and Keynes and in a fundamental sense he did not advance the >>>>argument beyond where he inherited it from them. Second, his writings >>>>were directed at the general public more than they were his peers in >>>>the academy so that his economic history as well as his intellectual >>>>history work is quite suspect as exercises in scholarship and cannot >>>>withstand scrutiny. >>>> >>>>Galbraith's lasting legacy will be in the idea of the economist as >>>>public intellectual. Perhaps no economist has ever been able to write >>>>better than Galbraith. Moreover, he was an extremely charming man. >>>>Several years ago, when the HES meeting were held at Babson College, >>>>Lawrence Moss arranged for me to sit next to Galbraith at dinner. I was >>>>a young upstart Austrian economist and I think Larry got a kick out of >>>>the idea of me sitting next to Galbraith for the evening. I have never >>>>been more taken with an individual over dinner conversation that the >>>>great John Kenneth Galbraith. I was regaled with stories of FDR, the

>>>>Kennedy family (especially Jacqueline) and his debates with William >>>>Buckley and Milton Friedman. At the end of the evening it was me who >>>>was running to get coffee and Boston cream pie for Galbraith. He was a >>>>phenomenal dinner partner. However, it is important to remember that >>>>when he rose to address the History of Economic Society that evening, >>>>he didn't address a concern with the intellectual history of economics, >>>>but instead the importance of economic history as a discipline. I >>>>understand that Galbraith was a very old man at this time, but in a >>>>fundamental sense he just never got the idea of economic scholarship >>>>throughout his career. He got the idea of economic persuasion, and >>>>economic policy -- and with that political struggles in a democratic >>>>society. But he did not understand economic argument, institutional >>>>analysis, and empirical examination at a standard that would be >>>>acceptable to his peers. He was an economic journalist who happened to >>>>teach at Harvard. Galbaith was an extremely talented journalist, and >>>>obviously a very brilliant public intellectual. But he was a literary >>>>figure, not a scientific one. >>>> >>>>Parker has written a biography of Galbraith without acknowledging this >>>>fact. So while Parker's biography is fantastic and comprehensive, it is >>>>ultimately flawed from the point of view of critically assessing >>>>Galbraith's life as an economist. Galbraith as a subject is outstanding >>>>because he was so involved with the history of American liberalism from >>>>FDR's "New Deal" to Johnson's "Great Society" -- and we cannot forget >>>>his fundamental place within the Camelot years of the Kennedy >>>>Administration. Galbraith's personal story is also fascinating -- how a >>>>man from rural Canada could become perhaps the symbol of the urbane >>>>liberal intellectual in America in the twentieth century is a >>>>fascinating tale to tell. But the ideas of American liberalism ran >>>>afoul of a refractory reality. The ideas of Marx, Veblen and Keynes >>>>were wrong when they were first articulated by those thinkers, and they >>>>were wrong in the derivative formation in the hands of Galbraith. The >>>>intellectual paradigm of Marx-Veblen-Keynes cannot understand why >>>>markets work the way they do, and they cannot understand why the >>>>policies of social control they inspire don't work as planned. The >>>>Marx-Veblen-Keynes agenda not only provides a bad framework for >>>>analysis and a poor tool for a policy of social control, but when >>>>utilized as an interpretive framework it produces a distorted view of >>>>history. Galbraith embodied all three intellectual failings. >>>> >>>>Despite the charm, despite the skill at writing, and despite his >>>>stature as a professor at Harvard, Galbraith must be judged to have >>>>been a brilliant intellectual failure. Parker is unable to see that. He >>>>has written as good a biography of Galbraith as any follower of >>>>Galbraith could have hoped for. It is well-written, deeply researched, >>>>and full of information which any reader will benefit from. What it >>>>isn't is a critical assessment of Galbraith the economist and his place >>>>in the discipline of political economy. >>>> >>>> >>>>Peter J. Boettke is a Professor of Economics and Director of Graduate >>>>Studies in Economics at George Mason University. Boettke recently was >>>>the 2006 Hayek Fellow at the London School of Economics. His list of >>>>books and journal publications can be found at:

>>>>http://www.gmu.edu/departments/economics/pboettke. >>>> >>>>Copyright (c) 2006 by EH.Net. All rights reserved. This work may be >>>>copied for non-profit educational uses if proper credit is given to the >>>>author and the list. For other permission, please contact the EH.Net >>>>Administrator ([email protected]; Telephone: 513-529-2229). >>>>Published by EH.Net (November 2006). All EH.Net reviews are archived at >>>>http://www.eh.net/BookReview. >>>> >>>>-------------- FOOTER TO EH.NET BOOK REVIEW ------------->>>>EH.Net-Review mailing list >>>>[email protected] >>>>http://eh.net/mailman/listinfo/eh.net-review >>>> >>>>----------------- FOOTER TO HES POSTING ---------------->>>>[email protected] >>>>http://eh.net/mailman/listinfo/hes >>

Scientific Method: What is it that Austrians hold to be “scientific” and why does Galbraith fall short by that standard? What does Galbraith tacitly hold to be scientific and why does Austria fall short by that standard?

Is the difference between Galbraith and say Rothbard as much teleological as technical? Is the Austrian School 'scientific' in adopting an a-teleological position? Given Hayek's own acceptance that you can be a physicist and only a phy .................................................................................................................................................................................... ..........................it is reasonable to ask if Hayek or his supporters are themselves guilty of 'scientism' in the way they dismiss philosophical debate as extraneous and wrong headed? Is that effectively or tacitly what Galbraith – and now Krugman – contended? Is that effectively what Heilbroner contends in ...? Has Krugman now moved closer to Galbraith – and further from Austria – not only in his appraisal of how real world markets work and in respect of the role of power within those markets, but also with respect to issue of teleology and “rationality”? In the Myrdal / Hayek schism mentioned in the Intro, Myrdal' methodological position was that a value neutral social science was a logical impossibility, while Hayek's position was that orthodoxy claimed too much for itself and that ................................................................ In the present context Galbraith has long argued that truth ........and that economics is not neutral.......... while the 1994 Krugman has pinned his faith in the model building approach of contemporary economics science. The 2000-2006 NYT Krugman however seems to have forsaken belief that truth lies in the insights of formal models and adopted what some see merely as the journalists' line in rhetoric.

Is economics merely a matter of story telling (McCloskey) and Galbraith merely a good story teller? If no economics really is an ideology free social science, then Galbraith's strength as a story teller is a dangerous weapon and one likely to distract us from analytical truth. In part the resolution of this issue/debate depen whether the Austrian or Chicago School approaches can indeed be deemed ideology free analysis........................ Does Austria / Hayek / G / K present economics as a servant of politics or vv? Does Austria /G ? K

present an impoverished view of human relationships eg is man a social animal but presented as sui generis individualism by Austria? Etc?

The question of what is good economics is inseparable from the question of what is good methodology which is itself inseparable from the question of what questions are deemed relevant / applicable. Are questions of ontology and teleology relevant? If so, those who brush such questions under the rug as “received theory” are themselves transgressing. If not – as Austria might contend – how is it possible for Austria to demonstrate 'scientifically' that their own implicit or explicit stance on these issues is inviolate. Is this not what Boettke and Rothbard implicitly claim? ie do that not claim that methodological individualism scientific truth, and as such an ideology free proposition. If they are right, then they have a case for their dismissal of Galbraith as a 'brilliant failure”. If not, then maybe part of Krugman's movement towards Galbraith is essentially a move on methodological grounds to an acceptance – previously denied – that if economics is to be of service to the betterment of social life, then such questions must be admitted and must be admitted to be incapable of definitive or scientific resolution. In that case, Galbraith has a claim to respond to Boettke by castigating the Austrian School as “failed brilliance”.

For Galbraith economics is not neutral but a class biassed system for benefitting those who have power in the extant arrangement. In Samuels' words, within limits, the economist is free to believe whatever he like matters of ontology and teleology are in fact legitimate concerns within economics that Samuels statement is necessarily correct, since we are not about to see a definitive, 'scientific' resolution of those matters.

Wheelwright Capitalism, Socialism or Barbarism? ANZ Book Company 1978 pp2-5 states that Galbraith tells us that orthodox economics is not neutral but is a “new despotism” in the academy requiring conformity to the beliefs of those who are already there and the teaching of neoclassical economics operating to the advantage of t with power in the present system.

Blaug The Methodology of Economics CUP 1980 refers to Austria in terms of the Senior- Mill- Cairnes tradition [cf Galbraith re marx veblen ? Tradition] This Austrian group was inspired by Hayek's attack on 'scientism' and b emphasis on methodological individualism. For Mises the notion of the verification of assumptions in economic unnecessary. So this Saustrian group including Rothbard takes methodological individualism as an unchallengab priori (p92), plus a scepticism towards econometrics. If the Austrian School deserves credit for shifting emphasis from equilibrium to evolution, does Galbraith also deserve credit for shifting emphasis to the institutional context causally connected to the evolution of preference themselves?

Via AJEE ec phil paper: J.S. Mill is also acknowledged as a foundational influence in liberalism, and here too there are significantly conflicting interpretations. Friedman is emphatic that government intervention is commonly not just ineffective b actually counterproductive, and that – in accordance with his understanding of J.S. Mill - the only legitimate rest that government may impose upon individual freedom is one designed to prevent us from impeding the freedom others. In short, government has no legitimate role whatsoever in protecting us from ourselves. Gildin (1964), however, reads Mill differently. He disputes this common interpretation of J.S. Mill, and its implications for the acceptability of State intervention. While Chicago School economists stress that for Mill individual liberty is the surest source of social progress, Gildin stresses that the question therefore remains as to whether Mill's chief goa individual liberty (as in Chicago teaching) or social progress (with its teleological implications and consequent receptivity to certain State interventions). Critics therefore give pause as to whether Friedman and Chicago may fact have misinterpreted both Smith and Mill, thereby institutionalising a conception of metaphysical issues in (imperialist) economics which neither of their putative intellectual fathers would themselves have been willing to accept. Heilbroner too (1996b: 129-157) notes that Mill came to accept that it is the proper end of government t seek to divert human energies “to the legitimate employment of the human faculties, that of compelling the powe nature to be more and more subservient to physical and moral good”. The Mill who started by saying every depa

from the principle of laissez-faire, unless required by some great good, is a certain evil, ends up with a bold visio government that respects any undertakings by government which are beneficial to the general interests of mankin (such as provision of free or almost free primary education), but which have not been undertaken through private initiative (Heilbroner, 1996b). For Mill, the individual who is so prior to the state may thus be seen as the moral educated individual, not merely the present individual. In accepting that the only unfailing source of progress is liberty, Mill thus intimates that it is social progress that is the real goal. Friedman (cited in Nevile 1998:173) acknowledges that “As Liberals, we take freedom of the individual...as our ultimate goal”. What is made plain b study of economic philosophy, however, is that the meaning of that 'freedom' is not unambiguous. In standard presentations little or no question is raised about the interpretation of Smith, or of Mill or of the meaning of 'free yet the case for laissez-faire extracted from these sources can indeed be questioned, as Sen, Wilber, Streeten (19 231-233; 344-346; 239; 282) and others contend. Critics of Chicago School economics place more stress on Smi notions of 'prudence' and 'sympathy', and Sen, Etzioni, Cropsey, Hirsch, Schumacher, Wilber and others object t orthodox received theory omits the original moral roots of Smith's formulation (see Hirsch 1977:137 and Sen 1987:22-28). Accordingly, for them, the notion of economics as science and as imperialist science suffers from shortcomings of both an excessively narrow self-interest interpretation of Smith's teaching and a determination t view economics in isolation from its broader philosophical bases. As Samuels puts it (1990) neoclassical econom is itself a form of economic science instructed by moral discipline – i.e. the moral discipline of utilitarian calcula and of justice as enshrined in the notion of Pareto optimality given extant entitlements. Accordingly, institutiona and other critics do not accept that the Locke / Smith conception of what is natural to man at the root of orthodox neoclassical economics is a settled issue or that it ushered in rationalism so much as relativism. In a word, Etzio Schumacher, Hirsch, Sen and others stop short of accepting that Locke said the last word in defining the nature o man, and stop short of accepting that neoclassical economists have adopted unchallengable definitions of 'man', 'freedom', equality of opportunity, or of rational human behavior. The Chicago School definition of individual freedom is certainly not the chief desideratum for Sen, Schumacher, Cropsey, Austrian School economic personalists or the Pope. For them, other metaphysical matters impinging on teleology and the conception of the nature of humankind are more fundamental (see Table 1 regarding 'freedom', the philosophical conception of the nature of man, and 'rationality'). For them, the Chicago definition of individual freedom is mere licence, unrestrained or unguided by any recognition of whatever inheres in common in the human species, and by any consequently attendant teleological implications. Accordingly, it is important to recognise that Friedman's a-teleological goal, and definition of freedom, are not necessarily the goal acceptable to, and implicit in, the economic theories adopted by other economists. Indeed, Friedman's statement of what constitutes 'our ultimate goal' is emphatically rejected by various sub-groups, although it is doubtful that many economics students ever confront such issues head-on. Plainly enough, the a priori conceptions of “man”, equality of opportunity, freedom, rationality and teleology within the institutionalist perspective (as adumbrated in Table 1) are distinctly different from those accepted by orthodox neoclassical economists.A fourth illustrative example is provided by a recent Paul Krugman column in the New York Times (“Free to Choose Obesity?” 8/7/2005). Given the prevalence of obesity in the United States and in Australia, Krugman parodies Friedman's Free to Choose (1976) by asking if this epidemic of obesity merely represents the free choice of many people to become obese. According to Krugman, only ideologues or economists could believe that. For him, there is therefore some implicit limit on consumer sovereignty and on utilitarianism, and in circumstances in which he judges that consumers have failed to exercise sufficient self-discipline to act in their own best interests, Krugman is willing to call for some corrective government intervention. What are the limits to the acceptability of consumer sovereignty? From where do such limits derive, if they exist? Krugman and Friedman are obviously at odds on this point, yet in principle both could claim to be deriving their positions from J.S. Mill. In Friedman's case that is from the Mill who wrote that every departure from laissez faire is a certain evil, whereas in Krugman's case the implication is that it is from the later Mill who wrote of the need to recognise

qualitative distinctions between the pleasures and who putatively attached more significance to “social progress” than to individual liberty. At least tacitly, Krugman is adopting a set of a prioris about the nature of man and ontology and teleology which sets him at odds with the value-relativism and a-teleological approach of Chicago School economics. The implicit presence of relativism, positivism and historicism in contemporary social science introduces a strong metaphysical teaching, to which Myrdal, Cropsey, Joan Robinson, Heilbroner, Schumacher, Etzioni and Sen have all attempted to draw critical attention. In one way or another they have their objections to value relativism, and to positivist methodology. They do not accept the relativist doctrine that all human values should necessarily be accepted as being of equal value. It is from this root that they see an ideological element in economic “science”, and for this reason that they see critical importance in the teaching of economic philosophy. It is by the importation of relativism, positivism and historicism that welfare economics has come to celebrate individual psychology over political philosophy. The core point of these philosophical critics of orthodoxy is encapsulated in Cropsey's words that “every logic presupposes a metaphysic”. This sentiment reappears in Myrdal in the more prosaic words “there can't be a view, except from a viewpoint.” Those who see significance in such understandings are naturally compelled to see the teaching of economic philosophy as a matter of primary importance. SO: is the G versus K issue one of implicit ec philosophy in terms of movement towards Mill or towards an acceptance of a Dewey style historical relativism etc? Do we simply not have enough evidence yet to conclude anythiung specific about the differences that remain between G and K (and Friedman etc) and the extent to which some previous differences have shrunk? Krugman 3 Nov 2006 Re Bechtel Engineering company pulling out of Iraq. K says the reconstruction has been wasteful and a a failure, because there was no accountability or incentive to do it well. As for how this could have happened, that's easy: major contractors believed, correctly, that their political connections insulated them from accountability. Halliburton and other companies with huge Iraq contracts were basically in the same position as Donald Rumsfeld: they were so closely identified with President Bush and, especially, Vice President Cheney that firing or even disciplining them would have been seen as an admission of personal failure on the part of top elected officials. As a result, the administration and its allies in Congress fought accountability all the way. Administration officials have made repeated backdoor efforts to close the office of Mr. Bowen, whose job is to oversee the use of reconstruction money. Just this past May, with the failed reconstruction already winding down, the White House arranged for the last $1.5 billion of reconstruction money to be placed outside Mr. Bowen's jurisdiction. And now, finally, Congress has passed a bill whose provisions include the complete elimination of his agency next October.

D McCloskey The Rhetoric Of Economics, Harvester Wheatsheaf, Sussex 1986. McCloskey (1986:75) approvingly quotes Richard Rorty's affirmation that “It is pictures rather than propositions, metaphors rather than statements, which determine most of our philosophical [and

economic] convictions.” Galbraith, notes McCloskey (p75), is an obvious example of a writer who self consciously thinks metaphorically. McCloskey (1986:184) adds that the typical economist is “harshly, if unreflectively dogmatic, demanding that students or colleagues be members in good standing of this or that church.” McCloskey argues that the extent of real disagreement between economists is exaggerated, leaving the venom they bring to minor disputes the more puzzling. Hence McCloskey says that the assaults on Friedman or on Galbraith “have a bitterness beyond reason” (p184). If one cannot reason about values, and if most of what matters is placed in the value half of the fact/value dichotomy, then it follows “that one will embrace unreason when talking about things that matter.” [Of course not everyone accepts McCloskey's position that one cannot reason about values eg see Sen's attack on 'rational fools' or Cropsey's critique of welfare economics.] McCloskey (1986:157) adds in the same context that in writing about PPP Krugman writes that there are several ways in which we might try to evaluate PPP as a theory, noting that Krugman's comments include reference to “in some sense” and betray his justified unease. McCloskey's point is that there is no 'absolute sense' in which a description is good or bad; the sense must be comparative to a standard, and the standard must be argued. According to McCloskey (xix) economics does not very well understand itself – its own rhetoric. Roughly speaking the credo of scientific methodology is 'positivism' (p5), which he says is perhaps better known more generally as 'modernism' (derived from Descartes). Modernism views science as axiomatic and mathematical and separate from the realm of value, goodness etc. While there is now broad reaction to modernist theory and the reach of the idea that argument is more than syllogism is now long, that reach has not extended far into economics. Certainly, Austrians and institutionalists have attacked certain parts of positivism as the basis for economic knowledge, but they have accepted other parts with fervour. (p7) McCloskey (1986:11) observes that modernism is poor method. - even if the news of the decline of positivism has not reached all ears in economics. Krugman, Peddling Prosperity, Norton, NY, 1994 Krugman begins (p xi) by accepting that mathematical elaboration is a time-honoured way of dressing up a banal idea, and that there is without doubt too much mathematics in economics journals. He describes himself as a liberal (p xiv) who seeks to tax the rich to help the poor and unlucky. {Galbraith would describe himself likewise and in his – ie Galbraith's Annals of an Abiding Liberal says ...} Krugman (1994:6) comments that “Current mythology has it that politicians simply do the bidding of interest groups. The popular vision has politicians bought and sold by the lobbyists in Washington. Other observers, like J.K. Galbraith, see our political process as a faithful representation of the interests of the only part of the electorate that matters – the relatively well-off top 20 percent of the income distribution.” But the truth is more complicated, says Krugman, and on many (big) issues the reality is that voters do not have a clear vision of where their interests lie (p6). So what politicians try to do is define that interest for them in a way that rebounds to their own benefit. In the 1980s US conservatives succeeded in defining a vision of what is wrong with America (i.e. Reagan was successful in projecting his metaphors). In this context Krugman splits economists into the professors and the policy entrepreneurs. He notes that neither Lucas nor Romer ever appeared on a public affairs TV program. What you get there are (just) the policy entrepreneurs. K notes that most of the papers written by the professors are not worth reading and are often incomprehensible anyway. Krugman adds that you don't progress as an economics professor by solving the real problems of the real economy, at least not directly. Often involves putting new wine in old bottles, just to convince your colleagues that you are clever. Yet academic economists still achieve some worthwhile things re how to avoid hyper-inflations etc. yet there is plenty they cannot cure. The problem politicians have with the professors is one of failure to say what the politicians want to hear; and so another group – the policy entrepreneurs – has arisen to fill that gap (p10).

Hence Krugman is effectively lambasting Galbraith at the outset as one whose 'contribution' is to be opportunistic enough to say what politicians want to hear. Whereas a professor writes for other professors – knowing that his comments will be disciplined by their scrutiny - the policy entrepreneur writes for a broader audience, and tend to offer unambiguous diagnoses even when the professors are unsure. They offer easy answers where there are none. [In short they are rhetoriticians, or the second hand car salesman of the academic industry.] What the public gets from policy entrepreneurs usually plays to its preconceptions (p12). Myrdal would say, somewhat differently, that what the professors offer, stems from their own preconceptions. [Also Nevile, Samuels]. In effect Galbraith claims not to be seeking to impose his own values but to liberate others from the values imposed on them by others. It seems that it is easiest to become a policy entrepreneur if your mind is not clouded by too much knowledge of economics (12). Presumably Krugman now holds himself up as an exception to that rule. The entrepreneurs are themselves invariably insecure – hankering after intellectual respectability. Take the case of Galbraith- who has never been taken seriously by his academic colleagues despite his Chair at Harvard. Galbraith's New Industrial State achieved popular acclaim b ut was met with indifference by the academics. The academics were right: “History has not treated the book kindly” (13). Galbraith contended that we were being pushed into an age of ever greater dominance by giant corporations. {sounds pretty much like what K now say re Enron and the energy lobby etc and Halliburton in Iraq etc and the general affairs of the Bush Administration] These corporations would be able to predict and control demand for their products; they would be run by technocrats increasingly independent of stockholders, and would be virtually immune to the vagaries of market forces. {Again Krugman's attack on Enron is basically that it succeeded in distancing itself from free market forces; and that technocrats managed to keep stockholders employees and others in the dark.} The 1994 Krugman asks (14): “need it be pointed out that none of this was remotely on target”? Krugman adds that the role of giant corporations has been shrinking in the US economy 1970-90, as measured by job growth. Seers and IBM have been anything but autonomous; nor have the auto companies been insulated from the market. [Of course employment growth is not the only way of measuring the influence of the giant corporations; and there is a question as to whether Krugman is selecting examples which fit his case to the exclusion of other examples which fit Galbraith's case eg Enron ie is he guilty of saying what someone wants to hear rather than what the facts as a whole warrant?] Krugman says that the important point is not that Galbraith was wrong, but that he then turned to increasingly bitter attacks on his fellow professors. Galbraith's rise was a marker of the growing dominance of style over substance in American political discourse (14). Within the Kennedy Administration real economic policy was in the hands of real professors including Tobin, Solow et al. It was only later, in the 1970s, that the policy entrepreneurs started to be taken more seriously. {note Galbraith's reprisal of the Affluent Society 40 years on, and its apparent congruence with some more recent Krugman columns] JPKE Fall 1984 Vol VII No. 1 Arthur Schlesinger Jr JPKE p16 says that Galbraith had the Keynesian faith in the power of ideas: “the emancipation of belief is the most formidable of the reform tasks of reform and the one on which all else depends” [Galbraith 1973:223 cited by Schlesinger 1984:16] The free market model reigned in the popular imagination and after 1980 through Reagonomics.

[Note that this is different from just an attack on historical inaccuracies in NIS, even if K himself seems to have revised his opinion about some of those inaccuracies} Galbraith claimed that the profession rejected socially inconvenient lines of analysis – less so because of vested corporate interests than because of vested intellectual interests [which is what Heilbroner also says in his Embarrassment Of Economics piece]. Hence Galbraith saw a need to engage a larger public and force the issue on the profession ie hence Galbraith went over the heads of the profession in attempt to teach not only something specific about a particular case eg the power of auto corporations but also about scientific method. While Krugman has obviously now addressed in NMYT various specific cases eg Enron he is less forthcoming in terms of making a declaration about where this leaves him in terms of pluralism or statements of what constitutes scientific method. We are left to infer that. Galbraith did argue that there was a tendency to base social diagnosis on convenience of remedy- as in the Nature Of Mass Poverty. He says that instead of proceeding from cause to remedy , policy makers tend to garvitate towards the remedy that least disturbs cherished ideas and interests and then deduces cause from the available remedy. {Is that what K says re Iraq?] W Breit “Galbraith and Friedman: Two Versions of Economic Reality” accepts (p23) that Galbraith effectively uses metaphor to carry his case. Does that make him right or does that make him wrong? McCloskey's answer is that ..................Myrdal effectively says that a prioris are inevitably involved even if commonly ignored. Metaphor may be helpful and legitimate in highlighting this aspect of attack on positivism which Myrdal describes as logically impossible and which Galbraith ...... Breit notes that Friedman stresses freedom, which is not the key word for Galbraith – who stresses welfare, reductions in inequalities and the role of power. Breit says that Friedman s greatest asset was his ability to convey the impression that he is a 'precise' scientist (26) ie value neutral. For Friedman the Good News is that government intervention is not necessary for the stability and prosperity of the economy. Breit concludes that the Friedman and Galbraith versions are two conflicting right versions of actual worlds (28) and there are still others. [Is Krugman's one of those? Or is it no longer distinctly different from the Galbraith version?] In his trilogy Galbraith paints a world in which he questions some key myths (innocent frauds) of economics: (iv) consumer sovereignty (v) profit maximisation (note the corporate scandals of the 1990s) (vi) the state as independent arbiter (vii) the role of power in the economy

W. Samuels “Galbraith on Economics as a System of Professional Belief” Samuels says that he hopes to demonstrate that Galbraith has made a significant contribution to our understanding of the relation of belief to power. Galbraith is saying that economics is a system of social belief – and those beliefs are themselves able to govern attitudes, behavior and policy ie it is not just a body of truth. As Samuels puts it (63) “Indeed, the ideology of positivism itself comprises a belief or set of beliefs”. Is this different from Cropsey's “every logic presupposes a metaphysic” etc? Is there anything in Krugman on these lines? Galbraith (1958 Affluent Society:7 cited by Samuels 1984: 63) “Within a considerable range he is permitted to believe what he pleases.” Samuels adds in explication of Galbraith (64) that the belief system of economics “comprises a cosmology, a metaphysics, a set of goal;s, an apologia, a vision” and it serves functionally to influence belief and thus action. Consequently Galbraith views economics as having been important as a supporting faith and not just as a science - {Is Krugman now coming to

this position?}- especially via “the exclusion of lines of thought that are hostile or unsettling to the discipline or, a related matter, to an influential economic or political community”. So what is accepted as economic theory and passes for economic knowledge, is largely but not entirely a matter of belief. Ward, Schumacher, Etzioni and others – including Sen really – would agree that orthodoxy has frozen out some lines of thought hostile to the extant orthodoxy. S0o there are two questions really. Was Galbraith right on this point re economics as a system of belief (in part) and has Krugman moved to accept that position? Krugman has certainly moved to stress the role of power in the system, in echo of Galbraith – and the issues of economics as belief and the treatment of power are connected. For Galbraith economics has served a political function via its employment not as a science but as a supporting faith. {Does this now fit Krugman?} For Galbraith the established power structure depends on a system of belief (65). In 1973 Economics and the Public Purpose Galbraith argues that power disappears from economics in an emphasis on self regulating markets, so that economics provides a cloak for self interest and obfuscates power (Samuels 67). So it is economic belief which provides the myth which obscures part of reality. {Krugman seems to now fit with this view}Denying the place of power thereby strengthens power. Such an economics is not neutral. If the state is the executive arm of the producer corporations “it is partly because neoclassical economics is its instrument for neutralising suspicion that this is so.” (G 1973:11) Power serves belief and belief serves power. Galbraith's purpose is to redefine economic reality. [If economics is more than syllogistic mathematical deduction – and involves vaguer areas of interdisciplinary assumptions – there must be some scope for this,] Hence Galbraith calls for the emancipation of belief – which seems to be what Krugman now calls for too. Galbraith wants to reorient the belief system in favour of enhanced power of the educational and scientific estate [note that global warming and Iraq war would provide two critical examples] – which implies that Galbraith wants to abet change in the power structure and attendant belief system , and a change which at least plausibly is quite distinct from economic orthodoxy on teleological grounds. {Do we conclude that Krugman goes someway towards Galbrith but leaves himself in a more inchoate position on this teleological level?] Samuels (71, citing NIS 370) concludes that there is a dialectic of power and belief and that at the least Galbraith “stands for a pluralism regarding social purpose” Galbraith dismissed the widespread pursuit of the technically esoteric as a venture in quest of prestige “to establish the credentials of a learned and priestly circle and to exclude the unwashed” (Samuels 72 citing Galbraith's autobiography) In short Galbraith reverses Krugman's 1994 dichotomy. For Krugman the professors are the scientists and the policy entrepreneurs the mere rhetoriticians, whereas for Galbraith the professors are pretending to science in a chase for personal status while it is left to the heretics to keep feet on the ground and appeal to common sense. In economics scientific truth often is “what can be handled by seemingly scientific methods” (NIS 1967 146, cited in Samuels 73] The higher economics has greater prestige but the lower economics has greater realism. Has Galbraith successfully sought to render respectable the study of belief? Insofar as Myrdal et al are right to say that there are inevitable a prioris there is good reason to study belief systems and their implications. Has Krugman now joined this club? Galbraith (1958 Affluent Society:7 cited by Samuels 1984: 63) “Within a considerable range he is permitted to believe what he pleases.” Samuels adds in explication of Galbraith (64) that the belief system of economics “comprises a cosmology, a metaphysics, a set of goal;s, an apologia, a vision” and it serves functionally to influence belief and thus action. Consequently Galbraith views economics as having been important as a supporting faith and not just as a science - {Is Krugman now coming to this position?}- especially via “the exclusion of lines of thought that are hostile or unsettling to the discipline or, a related matter, to an influential economic or political community”. So what is accepted as economic theory and passes for economic knowledge, is largely but not entirely a matter of belief.

In such a context it follows that for Sen (2000: 280), “the role of values cannot but be crucial”. It also follows that orthodoxy has a lot to answer for. The metric of exchange value assigns zero value to everything except commodity holdings (e.g. rights, morbidity, education), and there is at least a crypto-teleogical theme in Sen that sets him apart from the neoclassical orthodoxy. Economics is not the all-powerful imperialist social science for him, but one which needs to be supplemented by careful thought about matters exogenous to economics, including the understanding of human capabilities and thus the understanding of the nature of humankind, human well-being, human development, and human teleology. Sen's concern is to show that the standard propositions of modern welfare economics depend on (merely) combining self-seeking behaviour with willingness to judge social achievement by some utility based criterion. This is the root position of the way in which values, ethics and issues of social optimality are apprehended in orthodox economics, but as Sen depicts it, it is no more than a representation of the way the world would look if those underpinning assumptions held true. For Sen (as also for Schumacher, Myrdal, Cropsey, Etzioni, Higgins and Nevile) it is apparent that significant political or philosophical assumptions have been silently imported into orthodox economics. CK Wilber Moreover, in terms of 'scientific' methodology, he further objects that while positivists assert that failure to maintain the fact/value dichotomy will result in “a disastrous slide into relativism” (p148), anti-positivists contend that it is precisely the pretense of value neutrality in positivistic social science that is itself the real harbinger of just such a disastrous slide into relativism. Wilber observes that a certain shared 'world view' shapes the analysis offered by neoclassical economists, and this view reflects a set of (contestable) value judgements, primarily including (a) that people are rational and self-interested; (b) that the goal of life is to pursue happiness as understood in utilitarian, relativistic terms; and (c) that competition and market forces lead to efficiency and optimal outcomes.

KRUGMAN COLUMNS: 1. Enron – corp power over govt 2. Katrina – re government always fails 3. health Insurance 4. Iraq and Halliburton 5. Free to Choose Obesity – c'er sov is sometimes silly; reflects prod sovereignty 6. Inequality in USA – Wahington ideology does matter to this; govt helps increase polarisation 7. Global warming and Al Gore – corp power and disinformation Clive Hamilton re energy mafia Note that while Krugman's endless attacks on the Bush Administration might lend themselves to a description of normative theory or political journalism, BUT (i) acceptance of the limitations of consumer sovereignty, (ii) the use of corporate disinformation programs to exploit information asymmetries or consumer/voter powerlessness, (iii) corporate links with government, (iv) the attack on the idea that government has no place and always fails

(v).. all add up to a Galbraith style attack on orthodox economics and on elements of its presumptive scientific method. GALBRAITH J K Galbraith Breit, William, "Galbraith and Friedman: Two Versions of Economic Reality", Journal of PostKeynesian Economics, Galbraith Symposium, Fall, Vol.7/1, (1984):18[-]29. Friedman, Milton, “From Galbraith to Economic Freedom”, Institute of Economic Affairs (Great Britain), Occasional Papers No. 49, 1977. Galbraith, J.K., The Affluent Society, Boston, Houghton Mifflin, 1958. Galbraith, J.K., The New Industrial State, Boston, Houghton Mifflin, 1967. Galbraith, J.K., Economics and the Public Purpose, Boston, Houghton Mifflin, 1973. Galbraith,J.K., "The Defence of the Multinational Company", Harvard Business Review, Vol.56/2, (1978): Galbraith, J.K., The Good Society: The Humane Agenda, Boston, Houghton Mifflin, 1996. Gruchy,A.G., Contemporary Economic Thought: The Contribution Of Neo-Institutional Economics, Clifton, Kelley, 1972. Meade, James, “Is ‘The New Industrial State’ Inevitable?”, Economic Journal, June, Vol.78/310, (1968):372[-]392. Samuels, Warren, "Galbraith on Economics as a System of Professional Belief", Journal of PostKeynesian Economics, Galbraith Symposium, Fall, Vol.7/1, (1984):61[-]76. Sharpe, Myron, John Kenneth Galbraith and the Lower Economics, White Plains, NY, International Arts and Sciences Press,1973.

[]GALBRAITH rose to prominence in 1958 with the publication of The Affluent Society, in which he argued that American society had come to see an imbalance between its private and public sectors: an imbalance between “private opulence and public squalor”. He accordingly argued that American society was being distorted by corporate power, via advertising, and by the nexus thereby established between goods (or materialism) and happiness. Galbraith objected that orthodox economics failed to

deal adequately with what he saw as the self-evident power of the corporate sector and its advertising. []BREIT acknowledges that The Affluent Society influenced an entire generation on the question of sectoral imbalance. []In 1967 GALBRAITH pushed his theme further in his New Industrial State, in which he argued that the cornerstones of orthodox economic theory were more myth than reality. Thus Galbraith made famous his heterodox claim that corporate power had now grown to the point where producer sovereignty had replaced consumer sovereignty.

He similarly argued that the divorce between

corporate ownership and control meant that it was no longer reasonable to assume that profit maximisation was the goal of the firm, since the technostructure actually controlling the firm had an interest in pursuing other goals as well, including size, growth, and the quiet life. A third orthodox assumption lampooned by Galbraith was the assumption that the State acted as an independent arbiter. For Galbraith, the State acted as executive arm of the producer corporations by virtue of interconnections between corporate and State hierarchies. While corporate planning was well designed to serve corporate goals, Galbraith argued that society as a whole was nonetheless left with significant planning lacunae, which helped undermine the quality of life and left American cities with excessive problems of crime and environmental degradation. []GALBRAITH completed his principal trilogy of critiques of economic theory and practice with the publication of Economics and the Public Purpose, in which he further developed his theme that economics was not value-neutral science, but a set of beliefs which produces conclusions convenient to the big corporations. As distinct from Friedman, Galbraith’s argument was that market forces don’t work for the best, except for the powerful. Accordingly Galbraith continued to press the view that orthodox economics is obsolete, that it omits to consider the role of power, that it omits to consider the sources of both government policy and consumer tastes. By implication significant reforms were needed in government policy formation, including reduced reliance on monetary policy, nationalisation of weapons corporations and the oil majors (which had unwelcome influence over US foreign policy, not just the economy), and wage/price controls to stem the inflationary spiral. Also needed was what Galbraith called "the emancipation of belief" from the misconceptions of orthodoxy,

along with recognition that the anti-trust laws are "admirably innocuous”. Galbraith's emphatic theme was that the competitive model and modern technology are simply incompatible. He therefore argued that although Friedman’s theory is consistent with Friedman’s ideal world, Friedman’s ideal world no longer exists. In defending the multinational company- despite his earlier objections to the problematic power of the corporate sector- Galbraith accordingly accepted the reality of economies of scale and argued that the exercise of such power is simply inevitable. Properly guided it is socially useful. MNCs have led to reduced tariff barriers, for example, and enhanced global efficiency. [] MEADE provided an early, balanced review of The New Industrial State. Meade conceded points of truth in Galbraith - regarding corporate planning, producer sovereignty, corporate links with government, and a less direct concern for profit, while arguing that Galbraith is too much of a technological determinist in arguing that technical progress underpins the whole tone of society. Government action is not always a response to the technostructure. It is afterall possible to tax advertising, if the power of advertising is felt to be excessive. Moreover, Galbraith overlooked the relevance of general equilibrium. []FRIEDMAN and subsequent critics have caustically dismissed Galbraith’s work as unrealistic, oversimplified and overgeneralised. They object that he simply makes sweeping generalisations, much repeated, without adducing much empirical support for them. They dismiss Galbraith as nonscientific in that he rarely formulates specific, refutable hypotheses. To Friedman Galbraith was not an economist but a missionary seeking converts. []SAMUELS takes Galbraith's message to be that "economics is a system of belief, not a body of truth", causing Galbraith to affirm that "within a considerable range [the economist] is permitted to believe what he pleases”. Professional pursuit of the technically esoteric- what SHARPE calls "the higher economics"- is what Galbraith condemns as an attempt to establish the credentials of " a priestly circle", whereby to exclude the inconvenient and disturbing. Samuels commends Galbraith for his interest in the sociology of professional belief and concludes that Galbraith's analysis warrants the attention of others.

[]GRUCHY notes that Galbraith and other neo-institutionalists distinguished themselves from conventioanal economists by disagreeing as to what should be included within the province of economics. Galbraith’s position of prominence – of controversial but respected gadfly – has now faded. []KRUGMAN is utterly dismissive of Galbraith as but a “policy entrepreneur”, as distinct from an economic scientist. While the general public thinks of Galbraith as an important economist "he has never been taken seriously by his academic colleagues". Krugman notes that history has not been kind to The New Industrial State and that Galbraith was not even remotely on target in arguing his case about the increasing dominance of giant corporations, technocratic managers increasingly independent of shareholders, and corporate immunity to market forces. []Unbowed by such criticism, GALBRAITH'S own views have continued to evolve. In his 1996 The Good Society: The Humane Agenda Galbraith effectively recurs to The Affluent Society in arguing that Western societies continue to pay a high price for the views that the public sector is harmful and a burden. He likewise argues that we pay a high price for the increasingly prevalent views that balanced budgets are necessary and important; that unemployment must be tolerated for fear that faster growth will lead to the grater evil of inflation; and that certain market mechanisms have gained the status of unassailable wisdom. He continues to object that markets produce bads as well as goods, thus necessitating regulation to keep the bads to a minimum. Externalities remain a real problem in Galbraith’s view of markets, as do employer-employee power imbalances. Many social economists continue to adopt similar views.

L.A. Duhs GALBRAITH

13. Friedman’s remedy is consistent with his ideal world – it is just that his ideal world doesn’t exist. 14. Orthodox economics is obsolete

Ignores power Ignores the sources of government policy Ignores the sources of consumer tastes 15. Orthodox economics prefers elegant error to complex reality. 16. Orthodox economics is a system of belief (apologetics). 17. Market forces do not work out for the best – except perhaps for the powerful. 18. In Galbraith’s world wants depend on output, rather than vice versa. 19. In The Affluent Society – and still today – Galbraith complains of imbalance in affluent societies ie of private affluence sitting beside public squalor (ie underfunded public sectors featuring long delays before court cases etc). 20. Galbraith objects to several myths in orthodox economics: 1. consumer sovereignty, versus producer sovereignty 2. that big business single-mindedly pursues profit maximization 3. that the State is independent 4. that freely competitive markets still widely exist. 21. Within limits the economist is free to believe what he likes (ie econometric testing will not bring an end to disagreement). CRITICS say: As an economist, Galbraith is a good novelist (Samuelson) Galbraith must be regarded as a missionary seeking converts (Friedman)

GALBRAITH Institutionalists draw on orthodox theory, while highlighting its perceived limitations. They stress 8. that there is a need to look at broad socio-economic dynamics, rather than just at static economic efficiency, and 9. that the social whole is greater than the sum of the parts. Interconnections between the component parts of a social system matter and are themselves subject to change over time. They consider orthodox economics to have become over-concerned with the techniques of marginalist analysis, at the expense of studying long run non-marginal change. J.K. Galbraith considers economics to be a system of belief, not a body of truth, at least within broad limits. That is to say, he considers it to be less scientific and definitive than it claims to be, and he is highly critical of the neglect of the analysis of power relationships in orthodox economics. In summary, his argument in his major works focuses on: 2. The Affluent Society 1958: In the modern affluent society a gap has grown between human needs and wants. With an increasing proportion of consumer spending on more ephemeral “wants”, advertising becomes a more potent weapon, and the power of large corporations grows. On the other hand the public sector, taxpayer funded as it is, is less willing to provide – or advertise the need for – important public services, including the police service, court houses, parks etc. In consequence, an imbalance has grown between public sector output and private sector output. While they may be greater affluence as time goes by , in terms of growing per capita income, there is also more crime and environmental pollution. Galbraith thus speaks of “private affluence and public squalor”. Hence quality of life may be declining as quantity of measured GDP grows. [Note here the anticipation of what is now called “happiness research”, as in the 2002 Frey and Steltzer paper which argues that GDP per capita has grown consistently over the last 30/40 years but subjectively measured self-estimated “happiness” has stayed about constant.] Galbraith notes a nexus between goods (advertising) and happiness. He contends that advertisers advertise not only specific goods eg cars but also a general nexus between possession of goods and the keys to happiness. Friedman complains that The Affluent Society purports to be about the way to help the poor, but Friedman sees it as really being about how to increase the powers of government. Galbraith’s response is that while his critics say he is trying to impose his values upon society, the truth is really the opposite and he is really just trying to show how powerful corporations are already imposing their values on society. In brief, his theme is that there is a significant imbalance within the economy – an imbalance between the public and private sectors (both of which are necessary). Note that in 1998 – 40 years after publishing The Affluent Society – Galbraith continues to argue that the gap between needed public services and affluent private consumption remains a problem and indeed that gap has become larger. He continues to stress the unfortunate position of the poor, including not only the domestic poor but also the poor of the Third

World. Inequality and power relationships thus remain his theme. 2. The New Industrial State 1967: Within the industrial sector of the modern economy technology continues to become more complicated, and consumers become less well able to tell which product or brand is suitable for their purposes. Consumer sovereignty becomes a myth, as producer sovereignty becomes more of a reality. In addition, as corporations become larger and more dependent on a managerial group divorced from the owners (shareholders), an elite “technostructure” takes over control of those corporations, and profit maximisation ceases to be the dominant corporate goal. Given this emerging divorce between ownership and control, profit, size, power, growth, secrecy, and the quiet life all come to have a place in the hierarchy of corporate goals, under the emerging managerial structure. [Note that critics quickly objected that if corporate managers downplayed profit maximization as a corporate goal they would soon be in trouble as their share price would fall and they would be exposed to increased risk of takeover. Security and power would thus be jeopardized not strengthened. Corporate scandals in 2001/02, however, suggest otherwise. That is, the Enron and Worldcom scandals in the USA, and HIH, One.Tel and other cases in Australia cause contemporary critics to argue - Galbraith style - that the idea of paying executives with salary packages including share options did not work out well as a device for overcoming a principalagent problem (caused by the divorce between ownership and control), as is apparent in the fact that many executives continued to get multi-million dollar salary packages even as the company share price slumped to the point of ending the company.] A third significant theme of this book – along with producer sovereignty and the demise of profit maximization as a corporate objective - is Galbraith’s assertion that the State should not be viewed as an independent arbiter (as in orthodox theory) but should be viewed as an executive arm of powerful producer corporations. Governments thus tend to act in the interests of the powerful, rather than in the interests of the overall community. Hence, Galbraith would say, the reluctance to develop new, improved public transport systems in US cities. General Motors and Ford have more to gain from the construction of urban freeways. In short, as far as Galbraith is concerned, Friedman’s remedy is consistent with Friedman’s ideal world, but times have changed and that ideal world simply doesn’t exist anymore. 22.

Economics and the Public Purpose:

This book completes the trilogy of works at the core of Galbraith’s critique of orthodox economics. He continues to stress inequality and its relevance to power relationships and thus its relevance to the source of economic policies. He argues that the government in fact contributes to the inequality of development, by responding to the needs of powerful corporations. He objects that in keeping with these power realities we hear much more about how wasteful farm subsidies are than about subsidies for airlines etc (which are apparently much more appropriate!). In modern capitalism 500 large corporations dominate the economic system, and that includes a disproportionate ability to influence government to provide the policies that those corporations want. Public funds arte thus readily available for weapons but not for the court system. Likewise, public regulatory bodies tend to become captives of the firms they ostensibly regulate. Needed reforms therefore include: (viii) Galbraith condemns the anti-trust laws as “admirably innocuous”. A government can’t simply declare half the economic system illegal. Modern technology requires economies of scale. Large

and therefore powerful corporations are therefore to be expected, if consumers in fact want the benefits of large scale production. (ix)

End the reliance on monetary policy, because it works unevenly and hurts the weakest most.

(x)Nationalize (or at least increase the public accountability of) the major weapons corporations, and oil majors, since they have too great an interest in shaping foreign policy for their own ends. (xi) Emancipate student belief from the errors of orthodox economic analysis (including consumer sovereignty, profit maximization and the State as independent arbiter). (xii) Provide machinery for some form of coherent social planning ( as per Leontief’s argument). The pace of technological progress is now so great that either it is planned for or there is serious social disruption. Likewise better land-use planning is required to make our communities more livable, and to deal with environmental issues

All in all – as in In Defence of MNCs (1978) – Galbraith accepts the inevitability of the large modern corporation. Somewhat paradoxically, he argues that the only durable defence of MNCs is to concede that they exercise power but accept that this is inevitable. He continues to argue that there is an imbalance in the USA economy – between public and private sectors – which needs to be addressed. As in IMF Survey 2/8/1999, he continues to complain of uncorrected instability within the capitalist system, of the defects of GDP as a measure of the attainments of the system, of the underemphasized problems of the poor within the system and of growing income inequality. Thus in 1996 he was still concerned to push his vision of The Good Society, which as the title suggests, carries on his critical concern with the qualitative (versus quantitative) merits of the American capitalist system. His critics argue that 8. he rarely formulates specific refutable hypotheses, and is therefore essentially non-scientific. 9. That he makes sweeping generalizations, much repeated, without much empirical evidence. 10. If corporations are so powerful, he does not explain why there are still so many regulations over corporations. 11. That he is too historicist ie too willing to believe that there is an inevitability about the course of history. Meade, for one, stresses that if advertising is deemed to be too powerful, it is possible to change the tax laws relating to it, so as to discourage advertising. Meade nonetheless concedes that Galbraith has points of truth in his argument. Whatever his critics have argued, Galbraith remains an institutionalist critic of the neoclassical orthodoxy and of the Chicago School zeal for “economic rationalism”. His case is pretty much concluded in his 1996 The Good Society, in which he stresses 16. that it is a nonsense to present the public sector as harmful and a burden. Rather it is a necessary supplement to the public sector. 17.

That it is a nonsense to argue that balanced budgets are necessary and important.

18. That higher priority should be given to curing unemployment (relative to the priority given to inflation). 19. That free markets are not a panacea. Markets produce bads as well as goods and regulation is needed.

20. That investment in education and health should not be treated as a current budgetary expense but as an investment in the future of the country.

In short, Galbraith continues to find fault in orthodox economics in relation to both its means and its ends.

1. Via Austrian response (so include some critique of the Austrian position??) > >The ideas of Marx, Veblen and Keynes were wrong when they were first >articulated by those thinkers, and they were wrong in the derivative >formation in the hands of Galbraith. The intellectual paradigm of >Marx-Veblen-Keynes cannot understand why markets work the way they do, and >they cannot understand why the policies of social control they inspire >don't work as planned. The Marx-Veblen-Keynes agenda not only provides a >bad framework for analysis and a poor tool for a policy of social control, >but when utilized as an interpretive framework it produces a distorted >view of history. Galbraith embodied all three intellectual failings. > >Is the Krugman transition in terms of a movement towards >marx-veblen-keynes? or towards something else?? Is there a teleological >difference? is Boettke blind to that? Is acceptance of utiliarianism / >hedonism scientifically based? or Hayek re social atavisms etc? > >Cite Hayek quote re you can be a physicist etc..... > >2. 2100 student Did Rawlsian theory cause many to start questioning >utilitarian theory? Did Rawls at least revive the interest in studying >broader underlying political philosophy? Is Galbraith / Krugman doing >that? Or is it at least reviving interest in philosophy of science >questions in economics? Did Rawlsian theory at least show that >utilitarian theory needed improvement? Did Galbraith at least show that >certain methodological issues needed improvement even if he himself was >the brilliant failure that Boettke says he was. Did G at leat give rise >to a re-questioning of basic assumptions? > >Consider Hume's problem and Popper's 'solution'. Can I relate that to G/K? Note the Lee list og Galbraith at #3 and hayek at #? reminisecent of the shared hayek / myrdal prize

Galbraith, Krugman and Methodology: Samuels says Stilwell says Krugman is less explicit about methodological issues in his columns, but ,,, Krugman's 1994 and subsequent NY Times columns might be reconciled through an appreciation of Stiglitz's 1994 critique of the fundamental theorems of welfare economics. Krugman could be construed as lambasting the Bush Administration for a naïve view of the first fundamental theorem, linking competition to efficiency. As Stiglitz highlights, the first fundamental theorem does not really say what it often taken to say i.e. That laissez faire is the route to efficiency, as Bush might represent it to be, but says that that is the case of a large set of underpinning assumptions hold true. In brief, those assumptions can be reduced to two: (i) all the markets that should exist, actually do exist (ii) all the markets that should not exist (including bribery), do not exist. The later Krugman might be interpreted as staying true to his earlier emphasis on the need for rigorous models, while now stressing the sort of underpinning assumptions that Stiglitz draws so much attention to. Is this in fact different from what Galbraith has himself done over a longer period. Yes, it is, insofar as Galbraith did not cast his argument in such formal terms and the fundamental theorems of welfare economics, but no, it isn't, insofar as Galbraith's contention that within limits the professional economist is free to believe what he chooses is tantamount to saying that varying degrees of emphasis on the significance of assumptions about incomplete, imperfect and missing markets remain possible, and some act of judgement is inevitable. Galbraith used metaphor to highlight some of these underpinning assumptions. Stiglitz uses a more abstract and conventional presentation. But to a large extent, they say much the same. And Galbraith started saying it earlier than most critics of what might be called naive orthodoxy. Presented as a convergence to an acceptance of the Stiglitz critique of the assumptions underpinning the formal theorems of welfare economics, it seems unlikely that the recent Krugman of the NY Times would have much call to contest his convergence to a Galbraithian view of contemporary economics. Lawrence Summers NYT Friedman orbituary 19/11/06 notes that he first regarded Friedman as a devil figure, but then came to have grudging respect and then great admiration for him and his ideas. He applauds Friedman's “to scientifically examining evidence and to identifying policies that will make societies function better”. Summers nonetheless adds that Friedman “gave too little weight to considerations of social justice and was far too cynical about the capacity of collective action to make people better off. I believe that some of the great challenges we face today, like rising inequality and global climate change, require that the free market be tempered instead of venerated. And like any economist, I have my list of areas where I believe Mr. Friedman oversimplified or was simply wrong.” Krugman is effectively saying something similar about Galbraith: once a devil figure, there is now recognition that there is something there to admire in the forceful and persuasive recognition that there are still today circumstances in which the free market needs to be tempered rather than revered, in the interests of making societies function better. The main bugbear with a willingness to pay homage to Galbraith is probably the fear that somehow Galbraith the principles of “scientifically examining evidence”. Is the requisite definition

of scientific method in the social sciences so clear that Galbraith is unambiguously left on the wrong side of the divide? Why was Krugman so caustic in the first place? They shared similar social views, but it seems that K saw himself as the defender of scientific standards (a la Heilbroner). Was personal animus involved? Has there now been a meeting of true minds? Even if so, on which side of the scientific method divide did those minds meet?

For such reasons, Galbraith argued in his 1996 The Good Society that today we have impressive technology, and that if we are failing to produce the good life for ourselves, the failing lies not in technology but in politics and economics. Al Gore's message includes the prisoner's dilemma implication that many individuals who feel some degree of concern may nonetheless choose to believe that the problem is too big for them, such that any “sacrifice” they made would hurt them without achieving any worthwhile overall benefit for the community at large. In “The Big Disconnect” (1/9/06) Krugman adds that “Why have workers done so badly in a rich nation that keeps getting richer? That's a matter of dispute, although I believe there's a large political component: what we see today is the result of a quarter-century of policies that have systematically reduced workers' bargaining power.” In “Progress or Regress” (15/9/06) Krugman notes

(h) GDP Growth and Happiness: In “Our Sick Society” (5/5/06) Krugman asks if “being an American bad for your health?”

The United States has achieved a sort of inverse miracle: we spend much more per person on health care than any other nation, yet we have lower life expectancy and higher infant mortality than Canada, Japan and most of Europe. What isn't clear is exactly what it is that causes this stunningly poor performance. He asks: How much of America's poor health is the result of our failure, unique among wealthy nations, to guarantee health insurance to all? How much is the result of racial and class divisions? How much is the result of other aspects of the American way of life? Krugman inclines to the view that there is something about American society that makes Americans sicker than they should be. While lack of health insurance is surely a factor in the poor health of lower-income Americans, who are often uninsured (while everyone in England receives health care from the government), another possibility is that Americans work too hard and experience too much stress. “Full-time American workers work, on average, about 46 weeks per year; full-time British, French and German workers work only 41 weeks a year. I've pointed out in the past that our workaholic economy is actually more destructive of the ''family values'' we claim to honor than the European economies in which regulations and union power have led to shorter working hours. Maybe overwork, together with the stress of living in an economy with a minimal social safety net, damages our health as well as our families. These are just suggestions.” In effect, Krugman here replicates Galbraith's argument that growth of the GDP is not the same thing as improvement in the quality of life, or - as it would now be put in the new 'happiness' literature – not the same thing as increased happiness. In Galbraith's words, output not art has become the index of system fulfilment, and qualitative judgements about lifestyle have been swamped by quantitative measures. Either way, international comparisons show that something about the American way of life is seriously bad for American health. He further notes that while there has been great technological progress, the question yet remains as to whether the middle class is really a bit better off now than it was a generation ago. In effect, he replicates Galbraith's question in The Good Society as to whether political and economic policy allows the widespread progress which technology should make possible.

In effect, Krugman is calling for an emancipation from false belief, just as Galbraith did. In effect, he joins Galbraith here in the claim that power is belief and belief is power. Just as he argues in relation to drug prescriptions (20/1/06) that while lobbyists and corporations got what was good for them, the news for the public was all bad. 17/10/03 “The Sweet Spot” notes that the 2001 and 2003 tax cuts were designed to benefit the rich, with some selective cuts to help middle income families so that the Administration could point to gains for “typical families”.

GALBRAITH Institutionalists draw on orthodox theory, while highlighting its perceived limitations. They stress (i) that there is a need to look at broad socio-economic dynamics, rather than just at static economic efficiency, and (ii)

that the social whole is greater than the sum of the parts. Interconnections between the component parts of a social system matter and are themselves subject to change over time.

They consider orthodox economics to have become over-concerned with the techniques of marginalist analysis, at the expense of studying long run non-marginal change. J.K. Galbraith considers economics to be a system of belief, not a body of truth, at least within broad limits. That is to say, he considers it to be less scientific and definitive than it claims to be, and he is highly critical of the neglect of the analysis of power relationships in orthodox economics. In summary, his argument in his major works focuses on: 1. The Affluent Society 1958: In the modern affluent society a gap has grown between human needs and wants. With an increasing proportion of consumer spending on more ephemeral “wants”, advertising becomes a more potent weapon, and the power of large corporations grows. On the other hand the public sector, taxpayer funded as it is, is less willing to provide – or advertise the need for – important public services, including the police service, court houses, parks etc. In consequence, an imbalance has grown between public sector output and private sector output. While they may be greater affluence as time goes by , in terms of growing per capita income, there is also more crime and environmental pollution. Galbraith thus speaks of “private affluence and public squalor”. Hence quality of life may be declining as quantity of measured GDP grows. [Note here the anticipation of what is now called “happiness research”, as in the 2002 Frey and Steltzer paper which argues that GDP per capita has grown consistently over the last 30/40 years but subjectively measured self-estimated “happiness” has stayed about constant.] Galbraith notes a nexus between goods (advertising) and happiness. He contends that advertisers advertise not only specific goods eg cars but also a general nexus between possession of goods and the keys to happiness. Friedman complains that The Affluent Society purports to be about the way to help the poor, but Friedman sees it as really being about how to increase the powers of government. Galbraith’s response is that while his critics say he is trying to impose his values upon society, the truth is really the opposite and he is really just trying to show how powerful corporations are already imposing their values on society. In brief, his theme is that there is a significant imbalance within the economy – an imbalance between the public and private sectors (both of which are necessary). Note that in 1998 – 40 years after publishing The Affluent Society – Galbraith continues to argue that the gap between needed public services and affluent private consumption remains a problem and indeed that gap has become larger. He continues to stress the unfortunate position of the poor, including not only the domestic poor but also the poor of the Third World. Inequality and power relationships thus remain his theme. 2.

The New Industrial State 1967:

Within the industrial sector of the modern economy technology continues to become more complicated, and consumers become less well able to tell which product or brand is suitable for their purposes. Consumer sovereignty becomes a myth, as producer sovereignty becomes more of a reality. In addition, as corporations become larger and more dependent on a managerial group divorced from the owners (shareholders), an elite “technostructure” takes over control of those corporations, and profit maximisation ceases to be the dominant corporate goal. Given this emerging divorce between ownership and control, profit, size, power, growth, secrecy, and the quiet life all come to have a place in the hierarchy of corporate goals, under the emerging managerial structure. [Note that critics quickly objected that if corporate managers downplayed profit maximization as a corporate goal they would soon be in trouble as their share price would fall and they would be exposed to increased risk of takeover. Security and power would thus be jeopardized not strengthened. Corporate scandals in 2001/02, however, suggest otherwise. That is, the Enron and Worldcom scandals in the USA, and HIH, One.Tel and other cases in Australia cause contemporary critics to argue - Galbraith style - that the idea of paying executives with salary packages including share options did not work out well as a device for overcoming a principalagent problem (caused by the divorce between ownership and control), as is apparent in the fact that many executives continued to get multi-million dollar salary packages even as the company share price slumped to the point of ending the company.] A third significant theme of this book – along with producer sovereignty and the demise of profit maximization as a corporate objective - is Galbraith’s assertion that the State should not be viewed as an independent arbiter (as in orthodox theory) but should be viewed as an executive arm of powerful producer corporations. Governments thus tend to act in the interests of the powerful, rather than in the interests of the overall community. Hence, Galbraith would say, the reluctance to develop new, improved public transport systems in US cities. General Motors and Ford have more to gain from the construction of urban freeways. In short, as far as Galbraith is concerned, Friedman’s remedy is consistent with Friedman’s ideal world, but times have changed and that ideal world simply doesn’t exist anymore. 3. Economics and the Public Purpose: This book completes the trilogy of works at the core of Galbraith’s critique of orthodox economics. He continues to stress inequality and its relevance to power relationships and thus its relevance to the source of economic policies. He argues that the government in fact contributes to the inequality of development, by responding to the needs of powerful corporations. He objects that in keeping with these power realities we hear much more about how wasteful farm subsidies are than about subsidies for airlines etc (which are apparently much more appropriate!). In modern capitalism 500 large corporations dominate the economic system, and that includes a disproportionate ability to influence government to provide the policies that those corporations want. Public funds arte thus readily available for weapons but not for the court system. Likewise, public regulatory bodies tend to become captives of the firms they ostensibly regulate. Needed reforms therefore include: (i)

Galbraith condemns the anti-trust laws as “admirably innocuous”. A government can’t simply declare half the economic system illegal. Modern technology requires economies of scale. Large and therefore powerful corporations are therefore to be expected, if consumers in fact want the benefits of large scale production.

(ii) (iii) (iv) (v)

End the reliance on monetary policy, because it works unevenly and hurts the weakest most. Nationalize (or at least increase the public accountability of) the major weapons corporations, and oil majors, since they have too great an interest in shaping foreign policy for their own ends. Emancipate student belief from the errors of orthodox economic analysis (including consumer sovereignty, profit maximization and the State as independent arbiter). Provide machinery for some form of coherent social planning ( as per Leontief’s argument). The pace of technological progress is now so great that either it is planned for or there is serious social disruption. Likewise better land-use planning is required to make our communities more livable, and to deal with environmental issues

All in all – as in In Defence of MNCs (1978) – Galbraith accepts the inevitability of the large modern corporation. Somewhat paradoxically, he argues that the only durable defence of MNCs is to concede that they exercise power but accept that this is inevitable. He continues to argue that there is an imbalance in the USA economy – between public and private sectors – which needs to be addressed. As in IMF Survey 2/8/1999, he continues to complain of uncorrected instability within the capitalist system, of the defects of GDP as a measure of the attainments of the system, of the underemphasized problems of the poor within the system and of growing income inequality. Thus in 1996 he was still concerned to push his vision of The Good Society, which as the title suggests, carries on his critical concern with the qualitative (versus quantitative) merits of the American capitalist system. His critics argue that (i) (ii) (iii) (iv)

he rarely formulates specific refutable hypotheses, and is therefore essentially nonscientific. That he makes sweeping generalizations, much repeated, without much empirical evidence. If corporations are so powerful, he does not explain why there are still so many regulations over corporations. That he is too historicist ie too willing to believe that there is an inevitability about the course of history. Meade, for one, stresses that if advertising is deemed to be too powerful, it is possible to change the tax laws relating to it, so as to discourage advertising. Meade nonetheless concedes that Galbraith has points of truth in his argument.

Whatever his critics have argued, Galbraith remains an institutionalist critic of the neoclassical orthodoxy and of the Chicago School zeal for “economic rationalism”. His case is pretty much concluded in his 1996 The Good Society, in which he stresses (i) (ii) (iii) (iv) (v)

that it is a nonsense to present the public sector as harmful and a burden. Rather it is a necessary supplement to the public sector. That it is a nonsense to argue that balanced budgets are necessary and important. That higher priority should be given to curing unemployment (relative to the priority given to inflation). That free markets are not a panacea. Markets produce bads as well as goods and regulation is needed. That investment in education and health should not be treated as a current budgetary expense but as an investment in the future of the country.

In short, Galbraith continues to find fault in orthodox economics in relation to both its policy means and its policy ends.

Krugman points out major flaws in Galbraith's the Good Society. Krugman says Galbraith's vision of the economy is one without shadows in which what is good for social justice invariably turns out to have no unfavourable side effects. He continues and alludes to Galbraith’s primitive macroeconomics of his youth, thus leaving him unprepared to confront the real dilemmas facing modern liberalism. Compare Krugman's recent NYT columns to his earlier denunciations of Galbraith as writer not an economist. Kuttner describes Krugman as the greatest “policy entrepreneur” of them all.

Krugman 1994 described a policy entrepreneur as one who writes for the public and who offers easy solut where there are likely to be none. He viewed Galbraith as a victory of style over substance. Krugman ridi NIS? How do his contemporary NYT columns stack up against this earlier ridicule of NIS? Do Krugman acerbic comments re the Bush administration and Enron and Halliburton echo or contradict Galbraith's N prognostications? Did Krugman say in 1994 that the large corporation actually plays a significantly lesser nowadays. Would Krugman still be in a position to say that history has not treated NIS kindly? the hijacking of public policy by private interests.

CK Wilber Moreover, in terms of 'scientific' methodology, he further objects that while positivists assert that failure to maintain the fact/value dichotomy will result in “a disastrous slide into relativism” (p148), anti-positivists contend that it is precisely the pretense of value neutrality in positivistic social science that is itself the real harbinger of just such a disastrous slide into relativism. (Samuels 72 citing Galbraith's autobiography) In short Galbraith reverses Krugman's 1994 dichotomy. For Krugman the professors are the scientists and the policy entrepreneurs the mere rhetoriticians, whereas for Galbraith the professors are pretending to science in a chase for personal status while it is left to the heretics to keep feet on the ground and appeal to common sense. In economics scientific truth often is “what can be handled by seemingly scientific methods” (NIS 1967 146, cited in Samuels 73] The higher economics has greater prestige but the lower economics has greater realism. Has Galbraith successfully sought to render respectable the study of belief? Insofar as Myrdal et al are right to say that there are inevitable a prioris there is good reason to study belief systems and their implications. Has Krugman now joined this club? Galbraith (1958 Affluent Society:7 cited by Samuels 1984: 63) “Within a considerable range he is permitted to believe what he pleases.” Samuels adds in explication of Galbraith (64) that the belief system of economics “comprises a cosmology, a metaphysics, a set of goals, an apologia, a vision” and it serves functionally to influence belief and thus action. Consequently Galbraith views economics as having been important as a supporting faith and not just as a science - {Is Krugman now coming to this position?}- especially via “the exclusion of lines of thought that are hostile or unsettling to the discipline or, a related matter, to an influential economic or political community”. So what is accepted as economic theory and passes for economic knowledge, is largely but not entirely a matter of belief. What is it that Austrians hold to be “scientific” and why does Galbraith fall short by that standard? What does Galbraith tacitly hold to be scientific and why does Austria fall short by that standard?

Is the difference between Galbraith and say Rothbard as much teleological as technical? Is the Austrian School 'scientific' in adopting an a-teleological position? Given Hayek's own acceptance that you can be a physicist and only a phy .................................................................................................................................................................................... ..........................it is reasonable to ask if Hayek or his supporters are themselves guilty of 'scientism' in the way they dismiss philosophical debate as extraneous and wrong headed? Is that effectively or tacitly what Galbraith – and now Krugman – contended? Is that effectively what Heilbroner contends in ...? Has Krugman now moved closer to Galbraith – and further from Austria – not only in his appraisal of how real world markets work and in respect of the role of power within those markets, but also with respect to issue of teleology and “rationality”? In the Myrdal / Hayek schism mentioned in the Intro, Myrdal' methodological position was that a value neutral social science was a logical impossibility, while Hayek's position was that orthodoxy claimed too much for itself and that ................................................................ In the present context Galbraith has long argued that truth ........and that economics is not neutral.......... while the 1994 Krugman has pinned his faith in the model building approach of contemporary economics science. The 2000-2006 NYT Krugman however seems to have forsaken belief that truth lies in the insights of formal models and adopted what some see merely as the journalists' line in rhetoric.

Is economics merely a matter of story telling (McCloskey) and Galbraith merely a good story teller? I and

economics really is an ideology free social science, then Galbraith's strength as a story teller is a dangerous weapon and one likely to distract us from analytical truth. In part the resolution of this issue/debate depen whether the Austrian or Chicago School approaches can indeed be deemed ideology free analysis........................ Does Austria / Hayek / G / K present economics as a servant of politics or vv? Does Austria /G ? K present an impoverished view of human relationships eg is man a social animal but presented as sui generis individualism by Austria? Etc?

The question of what is good economics is inseparable from the question of what is good methodology which is itself inseparable from the question of what questions are deemed relevant / applicable. Are questions of ontology and teleology relevant? If so, those who brush such questions under the rug as “received theory” are themselves transgressing. If not – as Austria might contend – how is it possible for Austria to demonstrate 'scientifically' that their own implicit or explicit stance on these issues is inviolate. Is this not what Boettke and Rothbard implicitly claim? ie do that not claim that methodological individualism scientific truth, and as such an ideology free proposition. If they are right, then they have a case for their dismissal of Galbraith as a 'brilliant failure”. If not, then maybe part of Krugman's movement towards Galbraith is essentially a move on methodological grounds to an acceptance – previously denied – that if economics is to be of service to the betterment of social life, then such questions must be admitted and must be admitted to be incapable of definitive or scientific resolution. In that case, Galbraith has a claim to respond to Boettke by castigating the Austrian School as “failed brilliance”.

For Galbraith economics is not neutral but a class biassed system for benefitting those who have power in the extant arrangement. In Samuels' words, within limits, the economist is free to believe whatever he lik matters of ontology and teleology are in fact legitimate concerns within economics that Samuels

statement is necessarily correct, since we are not about to see a definitive, 'scientific' resolution of those matters.

Wheelwright Capitalism, Socialism or Barbarism? ANZ Book Company 1978 pp2-5 states that Galbraith tells us that orthodox economics is not neutral but is a “new despotism” in the academy requiring conformity to the

beliefs of those who are already there and the teaching of neoclassical economics operating to the advantage of t with power in the present system.

Blaug The Methodology of Economics CUP 1980 refers to Austria in terms of the Senior- Mill- Cairnes tradition [cf Galbraith re marx veblen ? Tradition] This Austrian group was inspired by Hayek's attack on 'scientism' and b emphasis on methodological individualism. For Mises the notion of the verification of assumptions in economic unnecessary. So this Saustrian group including Rothbard takes methodological individualism as an unchallengab priori (p92), plus a scepticism towards econometrics. If the Austrian School deserves credit for shifting emphasis from equilibrium to evolution, does Galbraith deserve credit for shifting emphasis to the institutional context causally connected to the evolution of preferences themselves?

Via AJEE ec phil paper: J.S. Mill is also acknowledged as a foundational influence in liberalism, and here too there are significantly conflicting interpretations. Friedman is emphatic that government intervention is commonly not just ineffective b actually counterproductive, and that – in accordance with his understanding of J.S. Mill - the only legitimate rest that government may impose upon individual freedom is one designed to prevent us from impeding the freedom others. In short, government has no legitimate role whatsoever in protecting us from ourselves. Gildin (1964), however, reads Mill differently. He disputes this common interpretation of J.S. Mill, and its implications for the acceptability of State intervention. While Chicago School economists stress that for Mill individual liberty is the surest source of social progress, Gildin stresses that the question therefore remains as to whether Mill's chief goa individual liberty (as in Chicago teaching) or social progress (with its teleological implications and consequent receptivity to certain State interventions). Critics therefore give pause as to whether Friedman and Chicago may fact have misinterpreted both Smith and Mill, thereby institutionalising a conception of metaphysical issues in (imperialist) economics which neither of their putative intellectual fathers would themselves have been willing to accept. Heilbroner too (1996b: 129-157) notes that Mill came to accept that it is the proper end of government t seek to divert human energies “to the legitimate employment of the human faculties, that of compelling the powe nature to be more and more subservient to physical and moral good”. The Mill who started by saying every depa from the principle of laissez-faire, unless required by some great good, is a certain evil, ends up with a bold visio government that respects any undertakings by government which are beneficial to the general interests of mankin (such as provision of free or almost free primary education), but which have not been undertaken through private initiative (Heilbroner, 1996b). For Mill, the individual who is so prior to the state may thus be seen as the moral educated individual, not merely the present individual. In accepting that the only unfailing source of progress is liberty, Mill thus intimates that it is social progress that is the real goal. Friedman (cited in Nevile 1998:173) acknowledges that “As Liberals, we take freedom of the individual...as our ultimate goal”. What is made plain b study of economic philosophy, however, is that the meaning of that 'freedom' is not unambiguous. In standard presentations little or no question is raised about the interpretation of Smith, or of Mill or of the meaning of 'free yet the case for laissez-faire extracted from these sources can indeed be questioned, as Sen, Wilber, Streeten (199 231-233; 344-346; 239; 282) and others contend. Critics of Chicago School economics place more stress on Smi notions of 'prudence' and 'sympathy', and Sen, Etzioni, Cropsey, Hirsch, Schumacher, Wilber and others object t orthodox received theory omits the original moral roots of Smith's formulation (see Hirsch 1977:137 and Sen 1987:22-28). Accordingly, for them, the notion of economics as science and as imperialist science suffers from shortcomings of both an excessively narrow self-interest interpretation of Smith's teaching and a determination t view economics in isolation from its broader philosophical bases. As Samuels puts it (1990) neoclassical econom is itself a form of economic science instructed by moral discipline – i.e. the moral discipline of utilitarian calcula and of justice as enshrined in the notion of Pareto optimality given extant entitlements. Accordingly, institutiona and other critics do not accept that the Locke / Smith conception of what is natural to man at the root of orthodox neoclassical economics is a settled issue or that it ushered in rationalism so much as relativism. In a word, Etzio Schumacher, Hirsch, Sen and others stop short of accepting that Locke said the last word in defining the nature o man, and stop short of accepting that neoclassical economists have adopted unchallengable definitions of 'man', 'freedom', equality of opportunity, or of rational human behavior. The Chicago School definition of individual freedom is certainly not the chief desideratum for

Sen, Schumacher, Cropsey, Austrian School economic personalists or the Pope. For them, other metaphysical matters impinging on teleology and the conception of the nature of humankind are more fundamental (see Table 1 regarding 'freedom', the philosophical conception of the nature of man, and 'rationality'). For them, the Chicago definition of individual freedom is mere licence, unrestrained or unguided by any recognition of whatever inheres in common in the human species, and by any consequently attendant teleological implications. Accordingly, it is important to recognise that Friedman's a-teleological goal, and definition of freedom, are not necessarily the goal acceptable to, and implicit in, the economic theories adopted by other economists. Indeed, Friedman's statement of what constitutes 'our ultimate goal' is emphatically rejected by various sub-groups, although it is doubtful that many economics students ever confront such issues head-on. Plainly enough, the a priori conceptions of “man”, equality of opportunity, freedom, rationality and teleology within the institutionalist perspective (as adumbrated in Table 1) are distinctly different from those accepted by orthodox neoclassical economists.A fourth illustrative example is provided by a recent Paul Krugman column in the New York Times (“Free to Choose Obesity?” 8/7/2005). Given the prevalence of obesity in the United States and in Australia, Krugman parodies Friedman's Free to Choose (1976) by asking if this epidemic of obesity merely represents the free choice of many people to become obese. According to Krugman, only ideologues or economists could believe that. For him, there is therefore some implicit limit on consumer sovereignty and on utilitarianism, and in circumstances in which he judges that consumers have failed to exercise sufficient self-discipline to act in their own best interests, Krugman is willing to call for some corrective government intervention. What are the limits to the acceptability of consumer sovereignty? From where do such limits derive, if they exist? Krugman and Friedman are obviously at odds on this point, yet in principle both could claim to be deriving their positions from J.S. Mill. In Friedman's case that is from the Mill who wrote that every departure from laissez faire is a certain evil, whereas in Krugman's case the implication is that it is from the later Mill who wrote of the need to recognise qualitative distinctions between the pleasures and who putatively attached more significance to “social progress” than to individual liberty. At least tacitly, Krugman is adopting a set of a prioris about the nature of man and ontology and teleology which sets him at odds with the value-relativism and a-teleological approach of Chicago School economics. The implicit presence of relativism, positivism and historicism in contemporary social science introduces a strong metaphysical teaching, to which Myrdal, Cropsey, Joan Robinson, Heilbroner, Schumacher, Etzioni and Sen have all attempted to draw critical attention. In one way or another they have their objections to value relativism, and to positivist methodology. They do not accept the relativist doctrine that all human values should necessarily be accepted as being of equal value. It is from this root that they see an ideological element in economic “science”, and for this reason that they see critical importance in the teaching of economic philosophy. It is by the importation of relativism, positivism and historicism that welfare economics has come to celebrate individual psychology over political philosophy. The core point of these philosophical critics of orthodoxy is encapsulated in Cropsey's words that “every logic presupposes a metaphysic”. This sentiment reappears in Myrdal in the more prosaic words “there can't be a view, except from a viewpoint.” Those who see significance in such understandings are naturally compelled to see the teaching of economic philosophy as a matter of primary importance.

SO: is the G versus K issue one of implicit ec philosophy in terms of movement towards Mill or towards an acceptance of a Dewey style historical relativism etc? Do we simply

not have enough evidence yet to conclude anythiung specific about the differences that remain between G and K (and Friedman etc) and the extent to which some previous differences have shrunk? Galbraith, Krugman and Methodology: Samuels says Stilwell says Krugman is less explicit about methodological issues in his columns, but ,,, Krugman's 1994 and subsequent NY Times columns might be reconciled through an appreciation of Stiglitz's 1994 critique of the fundamental theorems of welfare economics. Krugman could be construed as lambasting the Bush Administration for a naïve view of the first fundamental theorem, linking competition to efficiency. As Stiglitz highlights, the first fundamental theorem does not really say what it often taken to say i.e. That laissez faire is the route to efficiency, as Bush might represent it to be, but says that that is the case of a large set of underpinning assumptions hold true. In brief, those assumptions can be reduced to two: (iii) all the markets that should exist, actually do exist (iv) all the markets that should not exist (including bribery), do not exist. The later Krugman might be interpreted as staying true to his earlier emphasis on the need for rigorous models, while now stressing the sort of underpinning assumptions that Stiglitz draws so much attention to. Is this in fact different from what Galbraith has himself done over a longer period. Yes, it is, insofar as Galbraith did not cast his argument in such formal terms and the fundamental theorems of welfare economics, but no, it isn't, insofar as Galbraith's contention that within limits the professional economist is free to believe what he chooses is tantamount to saying that varying degrees of emphasis on the significance of assumptions about incomplete, imperfect and missing markets remain possible, and some act of judgement is inevitable. Galbraith used metaphor to highlight some of these underpinning assumptions. Stiglitz uses a more abstract and conventional presentation. But to a large extent, they say much the same. And Galbraith started saying it earlier than most critics of what might be called naive orthodoxy. Presented as a convergence to an acceptance of the Stiglitz critique of the assumptions underpinning the formal theorems of welfare economics, it seems unlikely that the recent Krugman of the NY Times would have much call to contest his convergence to a Galbraithian view of contemporary economics.

Galbraith's criticisms of orthodox economics: For Galbraith there is a gulf between perception and reality in the modern American economic system. He has long argued that managers hold the real power in the system, not consumers or shareholders as orthodox economics suggests. Capitalism has given way to corporate bureaucracy--"a bureaucracy in control of its task and its compensation. Rewards that verge on larceny." He argues that the public realm is effectively controlled by the private sector. The arms industry is one example of this. While the Pentagon nominally remains in the public sector, corporate power plays a significant role in its decisions. For Galbraith then the gap between reality and 'conventional wisdom' continues to grow and what is taught in orthodox economics remains much in need of correction. What he earlier referred to as the major 'myths' of orthodox economics, he now refers to as 'innocent frauds'. Uppermost amongst these is the extent to which power has been elided from the system. Corporate power is real and pervasive and undermines the orthodox teaching that consumers are sovereign in their judgements and, perhaps more significantly still, undermines the notion that the State is an independent umpire merely dispassionately upholding the rules of the system. Galbraith's reality is one in which the private sector has unprecedented control over the so-called public sector, and in

which corporate management is largely able to indulge its own self interest. The extension of corporate power into public policy is of particular importance not only in the case of military policy but also in the cases of environmental policy, taxation policy and – as Krugman indeed argues – health policy. Galbraith's criticisms of neoclassical orthodoxy highlighted complaint that the State was not really an independent arbiter, but an active player in the economic game (to the advantage of elite members of government and corporations), that public policy often served the private interest rather than the public interest, that corporate power is a reality that orthodox economics rushes to overlook, and that the sources or determinants of government policy and of consumer tastes should also be deemed proper matter for study by economists.

There should be another column re links between surgeons and corporations producing surgical devices a