On this day in 1908, the great economist John Kenneth Galbraith was born. He was an important thinker in institutional economics — a field that seems largely to have been abandoned at least among “educated opinion.” Rather than look at economies as a bunch of markets, it looks at markets as the result of interacting institutions such as business, government, individuals, and so on. Galbraith rejected the neoclassical approach to economics that economies could be modeled based upon assuming such things as completely rational individuals.
Galbraith is better know, of course, as a popularizer of economics. He was the Paul Krugman of his day. Unfortunately, in his day, there was also the anti-Galbraith: Milton Friedman. Friedman contended that Galbraith was paternal. Of course, Friedman’s idea of liberty was that the government make no decisions regarding people’s lives. He completely ignored the effects of private forces on people’s lives. To me, this is all very simple. In your day to day life, what is it that most gets in your way: the government or businesses? For me and everyone I know, it isn’t even close. I have almost no direct interactions with the government. But any day now, the AT&T bill will arrive and I will have to waste yet another couple of hours fighting over the stuff I thought we agreed to last month. For most people, it is their employer that is most invasive. Regardless, people who claim the government is what is most interfering with their liberty are either independently wealthy or lying.
But if you want to get an idea of just how important and farsighted Galbraith was, check out the following section from Wikipedia on what he wrote about the American economy. Notice how much we’ve reverted:
His 1954 bestseller The Great Crash, 1929 describes the famous Wall Street meltdown of stock prices and how markets progressively become decoupled from reality in a speculative boom. [Sound familiar? -FM] The book is also a platform for Galbraith’s humor and keen insights into human behavior when wealth is threatened. It has never been out of print.
In his most famous work, The Affluent Society (1958), which also became a bestseller, Galbraith outlined his view that to become successful, post-World War II America should make large investments in items such as highways and education, using funds from general taxation. [Which we did to great success; we could never do it today. -FM]
Galbraith also critiqued the assumption that continually increasing material production is a sign of economic and societal health. Because of this Galbraith is sometimes considered one of the first post-materialists. In this book, he coined and popularized the phrase “conventional wisdom.” Galbraith worked on the book while in Switzerland and had originally titled it “Why the Poor Are Poor,” but changed it to “The Affluent Society” at his wife’s suggestion. The Affluent Society contributed (likely to a significant degree, given that Galbraith had the ear of President Kennedy) to the “war on poverty,” the government spending policy introduced by the administrations of Kennedy and Johnson.
It’s not that a lot of people haven’t learned what Galbraith had to teach. It is just that our political elites have no interest in hearing it. On this point, Galbraith was clear too. He noted early on that when people got too rich, they stopped voting for the common good. Of course, at that time, they didn’t have Fox News and other propaganda machines to convince a bunch of poor people to follow them.
Happy birthday John Kenneth Galbraith!