By John Kenneth Galbraith
Mariner Books -- 316pp -- $16 paper
John Kenneth Galbraith, who turned 93 on Oct. 15, was perhaps America's most influential economist in the three decades following World War II. The Harvard University professor was both a well-connected Democratic policy adviser and a prolific and successful author. His 1958 book, The Affluent Society, was the top-selling economic study of its time--and remains in print today. Now, a new book--his 31st--reminds us why he was so well-regarded.The Essential Galbraith offers 21 essays and excerpts, all but two of which were written between 1952 and 1976. The selections are culled from eight books, some now out of print. Only the last chapter, written in 1999, has not been published before. Still, Galbraith's wisdom on the constructive abilities of government could not be more timely, since Washington is struggling to avoid a deep recession and to rethink the public sector's role in the wake of the September 11 attacks.
In fact, most of the selections have enduring value, even though many economists have been slow to incorporate Galbraith's insights into their works. "The Myth of Consumer Sovereignty," for example, takes note of the power of advertising and marketing to shape buying preferences. Yet decades after that essay appeared as a chapter in The Affluent Society, economic theory still rests heavily on the notion that independent consumer choice governs what gets produced. Changes in the "conventional wisdom," a term Galbraith coined in the 1950s, often come at a glacial pace.
The best essay is "The Case for Social Balance," in which Galbraith explains why the government tends to underinvest in public goods and services--education, transportation, and the police. Public-sector needs grow with an expanding economy, he argues. But since taxation involves coercion, conventional economics promotes the belief that private spending is "inherently superior" to government spending. As a result, public needs often go unmet. Anyone who wonders how the U.S. could have skimped so disastrously on air-passenger security should read this piece.
Speculative excess is a theme that appears in many chapters. Galbraith reports that herd behavior has caused booms and financial crashes many times since the Dutch tulip mania of the 1600s. Each time, there are people who think the rise in asset values is permanent, and others who hope only to ride the wave and get out before the collapse. But the fall usually comes quickly, and few investors sell in time, Galbraith warns. In his 1999 essay, "The Unfinished Business of the Century," he adds that the slump that follows "can be painful" and that restoring prosperity is likely to require government deficit spending. Washington is coming to the same conclusion at the moment, even though Galbraith seems to prefer greater spending on the environment and urban poverty, not on more weapons or additional tax cuts.
The number of economists thinking seriously about public investment, mass psychology, and other Galbraithian concerns has been rising in the past decade. Still, nobody has matched the detailed analyses that Galbraith provided regularly in the 1950s-70s. Perhaps a reader of The Essential Galbraith will be inspired to take on the challenge. By Charles J. Whalen