Tape 22 - Eisenhower
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- | Hello again, and welcome to this week's commentary | 0:02 |
on economics, with Professor Paul Samuelson of MIT. | 0:04 | |
This series is produced weekly | 0:08 | |
by Instructional Dynamics Incorporated of Chicago. | 0:10 | |
Professor Samuelson, the country is still mourning | 0:14 | |
the death of General Eisenhower. | 0:16 | |
Do you have any views about how the history books | 0:18 | |
will judge him in terms of his economic policies and views? | 0:20 | |
- | General Eisenhower was certainly a much beloved man. | 0:23 |
He was a symbol of our leadership in World War II. | 0:28 | |
He was a popular president, and after the presidency | 0:32 | |
he played very well the role of elder statesman | 0:35 | |
and I would add that General Eisenhower will go down | 0:39 | |
in the history books as having played | 0:42 | |
a pivotal role in connection with our two party system | 0:44 | |
because it was through him that the unbroken rule | 0:48 | |
of the Democratic Party was finally broken. | 0:51 | |
But you asked me to comment on his views | 0:56 | |
when it comes to economics, and let me begin | 0:59 | |
by saying there's no reason, really, | 1:05 | |
why a great leader should have to be a profound scholar | 1:07 | |
in economics or in anything else. | 1:11 | |
As a matter of fact, by way of digression, | 1:14 | |
it has been a hobby of mine to study great men | 1:18 | |
in their relationship to economics. | 1:24 | |
Winston Churchill would certainly go down | 1:27 | |
on anybody's list of great men in the 20th century. | 1:30 | |
Yet I think it can be documented throughout | 1:35 | |
Churchill's very long life, that he was | 1:37 | |
very poor at understanding economics. | 1:41 | |
I don't want to dwell on this particular aspect | 1:45 | |
of his career. | 1:48 | |
The most sensational incident in his lifetime biography | 1:49 | |
was the year 1925 when he was Chancellor of the Exchequer | 1:55 | |
and when he was the instrument of England's going back | 2:02 | |
on the pre-war gold standard at the pre-war parity, | 2:07 | |
despite the Cassandra warnings of many economists | 2:11 | |
of the day, and most notably, John Maynard Keynes' warnings. | 2:15 | |
But this was not his last brush with economics. | 2:21 | |
I knew very well one of the top advisors in economics | 2:27 | |
in the British government in the post World War II period, | 2:34 | |
a man who would be, so to speak, | 2:38 | |
the Walter Heller of economics in Britain. | 2:42 | |
And this man was an advisor | 2:47 | |
to the Chancellor of the Exchequer, Butler. | 2:50 | |
RAB Butler, Rab Butler, so called, | 2:54 | |
a very distinguished chancellor. | 2:57 | |
And this man told me the difficulties | 3:01 | |
that Butler had with Prime Minister Winston Churchill. | 3:04 | |
To be sure, Winston Churchill by this time | 3:07 | |
was not a young man, but he still | 3:10 | |
was not the invalid that he later became. | 3:13 | |
And when Butler would put forth the suggestion | 3:18 | |
that taxes be increased in order to control | 3:23 | |
the British post-war inflationary conditions, | 3:28 | |
Winston Churchill would always object | 3:34 | |
and would have to be persuaded anew each time | 3:37 | |
and he would ask plaintively why Butler insisted | 3:39 | |
upon putting this cruel yoke on the British people | 3:44 | |
since nobody likes taxation. | 3:48 | |
Now mind you, he did not have a sophisticated view | 3:50 | |
which someone might today have | 3:53 | |
that the role of fiscal policy has been overplayed. | 3:56 | |
It wasn't anything like that at all, | 4:00 | |
it was just the notion that a tax hurts me, | 4:02 | |
therefore a tax on everybody must hurt everybody | 4:05 | |
when of course the whole notion of taxing | 4:09 | |
in order to prevent inflation is to substitute | 4:12 | |
a fair and orderly method of taxation | 4:15 | |
for a disorderly inflationary tax | 4:18 | |
with its haphazard incidence. | 4:21 | |
Now, it's remarkable in the case of Winston Churchill | 4:24 | |
because Winston Churchill was not only | 4:27 | |
a great wartime leader, but he was a great historian, | 4:28 | |
he was a great writer, he was a great journalist, | 4:32 | |
he was a great character in many, many respects, | 4:34 | |
but with respect to economics you might say | 4:38 | |
that he was born with a chromosome or a gene | 4:40 | |
which made him tone-deaf to economics. | 4:45 | |
Before getting back to Eisenhower, | 4:49 | |
let me go down my list a little bit. | 4:50 | |
Let's take the name of Albert Einstein. | 4:53 | |
Albert Einstein was certainly one of the most | 4:56 | |
lovable men that ever lived. | 4:58 | |
He was unassuming. | 5:01 | |
He played the violin. | 5:03 | |
He was gentle. | 5:05 | |
He was also one of the greatest minds | 5:06 | |
not only of our age, but of any age. | 5:09 | |
When we name great men of the intellect, | 5:12 | |
we name Isaac Newton and we name Albert Einstein. | 5:15 | |
To a physicist, he was a physicist's physicist. | 5:21 | |
To the public, he was the developer | 5:24 | |
of the esoteric theory of general relativity, | 5:26 | |
which only 12 men were supposed | 5:29 | |
to be able to understand. | 5:30 | |
Well, what about Albert Einstein with respect to economics? | 5:33 | |
I think he well illustrated the dictum | 5:38 | |
of Alfred North Whitehead that when you scratch a man | 5:41 | |
in respect to his philosophy, usually you turn up | 5:47 | |
the philosophy that he learned from his nanny, | 5:50 | |
his nursemaid, at the age of six. | 5:54 | |
Well, Albert Einstein had a sweet, | 5:57 | |
utopian, socialistic view of the world. | 6:01 | |
This did not preclude him from having very strong | 6:07 | |
and adverse opinions about capitalism, | 6:10 | |
but I think I have scrutinized every | 6:13 | |
written line of his on the subject, | 6:15 | |
and I have to report that there isn't a single paragraph | 6:17 | |
that shows any particular sophistication | 6:21 | |
or erudition or even ordinary understanding | 6:24 | |
of the problem. | 6:27 | |
Let me continue down the list. | 6:30 | |
Let's take a great man like Bertrand Russell. | 6:33 | |
And I'm now again not referring to Bertrand Russell | 6:36 | |
who is now in his nineties and who | 6:39 | |
is somewhat the captive of his entourage, | 6:42 | |
but Bertrand Russell in his prime. | 6:45 | |
Russell is one of the greatest mathematical logicians | 6:49 | |
of all time. | 6:52 | |
The Russell-Whitehead Principia Mathematica | 6:53 | |
is a landmark in man's intellect and thought. | 6:57 | |
Now in the case of Bertrand Russell, | 7:02 | |
the problem is a little bit more complicated | 7:04 | |
because Bertrand Russell in the 1890s | 7:06 | |
did study economics for a while, | 7:09 | |
and he actually wrote a book on Marxism | 7:10 | |
which I must say is a pretty good book! | 7:15 | |
It happens to be a book against Marxism | 7:17 | |
but he does touch the Achilles heel of Marxism. | 7:20 | |
But after those wild oats, so to speak, | 7:26 | |
it's very hard to find in Bertrand Russell's writings | 7:30 | |
any very informed views with respect to economics. | 7:34 | |
Let me just illustrate with an example | 7:42 | |
that I used as a quotation in an exercise | 7:44 | |
in my elementary textbook, it's from | 7:49 | |
one of the writings of Bertrand Russell. | 7:51 | |
"Bertrand Russell takes it for granted | 7:53 | |
because he read Dickens as a boy | 7:55 | |
that the Industrial Revolution must have represented | 7:58 | |
an impoverishment of the British working classes." | 8:02 | |
If you take the best testimony | 8:08 | |
of economic historians who study that difficult subject, | 8:10 | |
you can get an argument. | 8:15 | |
An older generation, in particular the Hammonds, | 8:16 | |
husband and wife team, thought | 8:20 | |
of the Industrial Revolution as having | 8:22 | |
lowered the standard of living somewhat | 8:23 | |
but the revisionist to that view | 8:26 | |
have swung around to the opinion | 8:29 | |
that, bad as things were in the London and Manchester | 8:31 | |
of Charles Dickens' time, the previous period | 8:38 | |
had also been very bad | 8:43 | |
and perhaps even worse, as can be demonstrated | 8:45 | |
by cost of living and wage calculations. | 8:48 | |
But Bertrand Russell was as innocent | 8:52 | |
of this controversy and of this literature | 8:54 | |
as his nanny or nursemaid might have been. | 8:57 | |
Well, I could go on having a field day | 9:04 | |
with respect to scientists. | 9:07 | |
I want though to be fair-minded | 9:09 | |
and call the shots as they fall. | 9:13 | |
There are contrasts. | 9:16 | |
I have met scientists who seem to me | 9:17 | |
to be good, intuitive, natural economists. | 9:20 | |
I can name them from both the left and the right. | 9:25 | |
Patrick Blackett, the Nobel Prize winner in physics | 9:30 | |
from Manchester, who was one of the founders | 9:34 | |
of operation research and a strong left-wing | 9:36 | |
figure in Britain, seemed to me to have | 9:41 | |
a very good grasp of economics | 9:43 | |
in the few times that I talked to him | 9:46 | |
and in the writings of his that I have read. | 9:49 | |
Leo Szilard, who was a genius in physics | 9:54 | |
and was one of the men who helped persuade | 9:59 | |
President Roosevelt to start the Manhattan Project | 10:03 | |
which culminated in the atomic bomb, | 10:06 | |
discovered after the war, more or less for himself, | 10:12 | |
the beauties of the pricing system | 10:17 | |
and he became quite a sophisticated economic analyst. | 10:19 | |
I think the knowledge came to him late | 10:24 | |
and therefore he tended to attach | 10:26 | |
a little too much importance to it, | 10:29 | |
but that's another matter. | 10:31 | |
Still another name, and this may make | 10:33 | |
some of my listeners a little bit furious, | 10:35 | |
is the insidious, notorious Herman Kahn, formerly of RAND, | 10:38 | |
the think tank out on the West Coast, | 10:45 | |
and now head of his own Hudson Institute. | 10:47 | |
Herman Kahn is the chap who writes books | 10:50 | |
in which he discusses this policy or that | 10:54 | |
and says policy A will result in the destruction | 10:58 | |
by a nuclear holocaust of 173 million Americans | 11:02 | |
and policy B will only result in the destruction | 11:08 | |
of 143 million Americans, and the difference | 11:12 | |
between 173 and 143 is 40, so there's | 11:16 | |
40 million Americans who survive | 11:21 | |
under one policy and not under the other. | 11:25 | |
Well, this kind of writing which he does partly | 11:27 | |
to shock, but which I can assure you | 11:31 | |
he does in all seriousness too, | 11:33 | |
just absolutely infuriates some people. | 11:36 | |
How can a man even think in such terms? | 11:38 | |
And the reviews that his books have received | 11:42 | |
have been apoplectic, by and large. | 11:47 | |
Well, Herman Kahn, although not a trained economist | 11:52 | |
has studied economics somewhat | 11:56 | |
and is able to appreciate some of the niceties | 11:59 | |
and he used to go around and ask his friends | 12:02 | |
who were not economists whether they could imagine | 12:05 | |
under any circumstances being against | 12:07 | |
a so-called reasonable minimum wage. | 12:13 | |
"Could you," Herman Kahn would ask | 12:18 | |
of a, let's say a sophisticated physicist, | 12:20 | |
"Could you imagine it being a bad thing | 12:23 | |
"to have a two dollar minimum wage | 12:26 | |
"in the United States, this most affluent nation?" | 12:27 | |
And most of his friends just regard | 12:30 | |
the question as ridiculous. | 12:33 | |
How could there be but one answer? | 12:34 | |
Any man in good will must be for a two dollar minimum wage | 12:36 | |
because you can't live even on three, four | 12:40 | |
or five dollars, so two dollars would be barely enough. | 12:43 | |
Well, you know, I think listeners | 12:48 | |
of this tape would generally know, | 12:51 | |
that economists both of the right and the left | 12:54 | |
and the middle realize that there are very grave | 12:56 | |
dangers in raising a minimum wage | 13:00 | |
to what seem like humanitarian levels. | 13:02 | |
I mean dangerous not to the employer, | 13:05 | |
but dangers to the impoverished group, | 13:07 | |
in particular ghetto youth unemployed | 13:12 | |
from not letting them have a job | 13:17 | |
unless they can qualify for a two dollar job. | 13:19 | |
This at a time when some of them | 13:21 | |
would love to get dollar and 60 cent jobs | 13:25 | |
but there do not seem to be in the marketplace | 13:29 | |
any employers to whom they are worth | 13:32 | |
a dollar and 60 cents. | 13:35 | |
Well, so it goes, some people | 13:40 | |
understand economics well, some people don't. | 13:43 | |
I should say that Franklin Roosevelt | 13:47 | |
was very disappointed in President Roosevelt | 13:49 | |
when he talked to him in the Great Depression | 13:52 | |
in the 1930s, because he had expected more sophistication. | 13:54 | |
I think that's a story on John Maynard Keynes, | 13:58 | |
not on Franklin Roosevelt. | 14:01 | |
Franklin Roosevelt had I would say | 14:03 | |
very good, pragmatic instincts in the field | 14:06 | |
even though he didn't understand | 14:08 | |
the intricacies of the multiplier. | 14:09 | |
One last name, since I'm engaged in naming names. | 14:12 | |
My good friend, Arthur Schlesinger Junior, | 14:15 | |
who is a brilliant historian and who I believe | 14:18 | |
has won a couple of Pulitzer Prizes, | 14:22 | |
one for his youthful book on the age of Jackson | 14:25 | |
and the other for his multi-volumed biography | 14:29 | |
of Franklin Roosevelt, The Age of Roosevelt. | 14:32 | |
Well, Arthur Schlesinger is one of the smartest | 14:36 | |
people that I have ever known, | 14:38 | |
by almost any test that I can apply. | 14:39 | |
I said by almost any test that I can apply, | 14:43 | |
but I have to exclude economics. | 14:45 | |
He really is not good at mastering the intricacies | 14:49 | |
as a historian sometimes has to, | 14:52 | |
of, say, the Social Security trust accounting, | 14:54 | |
and his Age of Jackson, which made his original reputation, | 14:58 | |
was full of howlers from the standpoint of economics. | 15:01 | |
I may say, his Roosevelt books are better | 15:06 | |
but I attribute this to the fact | 15:08 | |
that his friends Seymour Harris of Harvard, | 15:10 | |
late of Harvard, now of La Jolla in California, | 15:14 | |
and John Kenneth Galbraith vetted out | 15:18 | |
the new books so that most of the howlers are gone. | 15:22 | |
He just doesn't come naturally to it, | 15:25 | |
whereas I think of another historian | 15:27 | |
who is a more pedestrian figure than Arthur Schlesinger, | 15:29 | |
who has a much lower IQ, who writes less speedily | 15:34 | |
and reads less speedily and is less profound, | 15:37 | |
I would say, and let on the same kind of problem | 15:40 | |
he seemed to be able to get them pretty well. | 15:43 | |
Well, back now to General Eisenhower. | 15:45 | |
I said that he wasn't a very profound scholar | 15:52 | |
in economics, but he didn't have to be, | 15:56 | |
but I really mean a little bit more than that. | 15:59 | |
What I meant to say is that General Eisenhower | 16:02 | |
did represent a culmination of a tradition. | 16:04 | |
You might even see an atavistic return to a tradition. | 16:08 | |
In my view, Eisenhower represents the culmination | 16:13 | |
of the McKinley-Coolidge era in contrast, say, | 16:16 | |
to the present President Nixon time | 16:20 | |
which to my initial reading represents | 16:25 | |
a continuation of the Roosevelt-Kennedy eras. | 16:28 | |
This doesn't mean that President Nixon | 16:32 | |
is whole-heartedly in favor of everything | 16:34 | |
that Franklin Roosevelt was in favor of. | 16:37 | |
It doesn't mean that he joyfully does many | 16:39 | |
of the things which John F Kennedy | 16:43 | |
would have done with some joy, | 16:46 | |
but it does mean that he carries on | 16:49 | |
in that tradition, having his marginal influence | 16:52 | |
to be sure, but nevertheless having agreed | 16:54 | |
to many things which would surprise | 16:58 | |
turn of the century presidents | 17:03 | |
like William Howard Taft or President McKinley. | 17:05 | |
Now, when I say that Eisenhower then | 17:10 | |
was an atavistic figure, a return to an earlier tradition, | 17:12 | |
I want to make clear I don't say this | 17:17 | |
by way of criticism. | 17:19 | |
Actually, if there were any blame in this matter, | 17:21 | |
this time just a couple of weeks after his death | 17:24 | |
would not be the seemly time to speak of it. | 17:30 | |
But I think that if we understand | 17:33 | |
that President Eisenhower was insulated | 17:38 | |
from civilian life, from 1912 until 1952, | 17:41 | |
we see that we have preserved | 17:51 | |
in his person the ideology of an earlier period. | 17:53 | |
Let me illustrate with some examples. | 17:59 | |
First, to declare my hand that this is not | 18:02 | |
in any sense partisan. | 18:08 | |
I, as a democrat, would have been delighted | 18:11 | |
either in 1948 or in 1952 | 18:13 | |
to have had General Eisenhower run | 18:16 | |
on the democratic ticket. | 18:20 | |
So the events and times that I'm speaking of are times | 18:22 | |
when Eisenhower had only recently become | 18:29 | |
known as a republican. | 18:35 | |
When he returned from NATO to Abilene, Kansas | 18:37 | |
to declare his candidacy, he was asked | 18:42 | |
by one of the reporters there | 18:46 | |
what his opinion was of the Social Security system. | 18:48 | |
And in that frank manner which he had, | 18:50 | |
he said, "What is that? | 18:53 | |
"I don't really understand it." | 18:55 | |
He had been out of the country in 1937 | 18:57 | |
when Social Security went into effect. | 19:00 | |
He was in the army. | 19:02 | |
He had never had a Social Security Number, | 19:04 | |
he had never had a payroll deduction, | 19:07 | |
he did not understand what it was. | 19:10 | |
He had no knowledge of it. | 19:14 | |
Now, that couldn't have been possible | 19:18 | |
of a Nixon at a comparable stage of development | 19:20 | |
who has been in the mainstream of American life throughout. | 19:25 | |
So Eisenhower took over as president really | 19:32 | |
with a clean slate. | 19:36 | |
He might have been a democrat, | 19:37 | |
he might have been a republican, | 19:38 | |
all he really had were his intuitions and his instincts. | 19:41 | |
Now, given that fact, I think it's remarkable | 19:47 | |
how successful economically Eisenhower's first term was. | 19:50 | |
I like to distinguish between the first 1952 to 1956 term | 19:56 | |
of General Eisenhower and his 1956, 1960 second term. | 20:03 | |
We might call the first term the term | 20:11 | |
of Arthur Burns and Eisenhower. | 20:13 | |
Arthur Burns took over an almost defunct counsel | 20:15 | |
of economic advisors and he rebuilt its stature | 20:19 | |
on a one-man basis. | 20:24 | |
He was in a close and intimate relationship | 20:26 | |
with President Eisenhower, whom he had known | 20:29 | |
as president at Columbia University. | 20:32 | |
And Eisenhower very early on in 1953 | 20:35 | |
just as we were going into a recession, | 20:38 | |
stated that, and this is a very non-McKinley-like, | 20:42 | |
non-Coolidge-like statement, | 20:46 | |
that he would use every power of government | 20:48 | |
to ensure that we not have a repetition | 20:51 | |
of any Great Depression. | 20:54 | |
And I can recall from personal experience | 20:56 | |
that Arthur Burns was doing everything possible | 21:00 | |
in the last months of 1953 and then the first months of 1954 | 21:05 | |
to increase total aggregate dollar demand. | 21:11 | |
He was using unconventional fiscal policy, | 21:16 | |
not conventional fiscal policy. | 21:20 | |
He was putting such pressure as he could put | 21:22 | |
upon the Federal Reserve to make money easy | 21:24 | |
in order to lessen the impact of the 1953, 54 recession. | 21:30 | |
And as a matter of fact, I like to think of 1955 | 21:39 | |
as Arthur Burns' finest year because he predicted | 21:42 | |
at the end of 1954, against the testimony | 21:46 | |
of all of his own staff and almost all | 21:51 | |
of the experts in the country that 1955 | 21:55 | |
would be a very strong year of expansion. | 21:57 | |
And indeed it turned out to be the case. | 22:00 | |
Well, Eisenhower had his heart attack in 1955 | 22:04 | |
in September, and there are some of his advisors | 22:10 | |
who think that he was never really the same man. | 22:14 | |
It shows that in history we are at the mercy, still, | 22:16 | |
of the gods and of the elements. | 22:22 | |
And so George Humphrey, the Secretary of Treasury, | 22:27 | |
the businessman from Ohio who would have fit in very well | 22:32 | |
with the McKinley era, was much stronger in fact, | 22:38 | |
I'm not now speaking in terms of articulated ideology | 22:43 | |
but in fact, in that second term period. | 22:46 | |
And his successor, Robert B Anderson, | 22:50 | |
nominally a Southern democrat from Texas | 22:53 | |
but who represented what I would call | 22:57 | |
the conventional unwisdom was very much | 23:00 | |
in the saddle in the second term. | 23:05 | |
And Maurice Stans as Director of the Bureau of Budget | 23:08 | |
and who was an unreconstructed fiscalist budget balancer | 23:14 | |
was very much in the saddle and there was no Burns | 23:21 | |
in Washington and no one of his stature | 23:24 | |
and influence to stop them | 23:28 | |
and the country, in my judgment, suffered. | 23:31 | |
Now I say in my judgment but you can find | 23:34 | |
in the writings of some of the people | 23:38 | |
in that same government who look back | 23:44 | |
and with the advantage of hindsight have themselves declared | 23:47 | |
that the war against inflation was overdone | 23:50 | |
in the late 1950s, and this is what cost the country | 23:54 | |
a great deal of real product and vigorous growth | 23:59 | |
and it created great problems of unemployment | 24:03 | |
which even seemed to look like structural unemployment | 24:07 | |
in those days, and finally, | 24:10 | |
it probably cost Richard Nixon the presidency in 1960 | 24:14 | |
in his close, hard-fought competition | 24:20 | |
with John F Kennedy. | 24:24 | |
The prime casualty of the almost sadistic policy | 24:28 | |
of empty inflation at the expense of unemployment | 24:33 | |
was Richard Milhouse Nixon. | 24:37 | |
So we realize that when it comes to political economy, | 24:42 | |
simple instincts of what is right and what is wrong | 24:51 | |
are learned at one's mother's knee, | 24:56 | |
so-called church-sleeve economics | 24:59 | |
or McGuffey Reader economics, is not these days enough. | 25:01 | |
- | Professor Samuelson, before we leave today, | 25:07 |
we have a question which you might try and tackle | 25:09 | |
in the couple of minutes we have left. | 25:12 | |
The stock market has a readjustment every so often. | 25:13 | |
People lose a few dollars. | 25:18 | |
Then why, says this question, in our country | 25:19 | |
is it such a calamity to have budget adjustment; | 25:22 | |
that is, slight recession downturn every so often? | 25:25 | |
Why must we continue to offset these business downturns? | 25:28 | |
If a shake-out is good for an overpriced stock market | 25:31 | |
then why not have a shake-out in the business economy | 25:34 | |
for an over-sluggish market? | 25:36 | |
Why are we not able to sell the idea | 25:39 | |
that a slight recession is good for the economy | 25:41 | |
in the long run? | 25:43 | |
We support farmers, businessmen, students et cetera, | 25:44 | |
why not support stockholders against such adjustments? | 25:47 | |
- | First, I think the question probably | 25:50 |
refers to some remarks I made earlier | 25:53 | |
in which I said that the stock market | 25:55 | |
could decline rather substantially | 25:57 | |
without having serious macro-economic effects | 25:59 | |
upon the economy. | 26:02 | |
I want to stand by that factual statement. | 26:05 | |
Second, if various groups are to be heard | 26:09 | |
if we make it a matter of equity, | 26:13 | |
as the questioner has seemed to do, | 26:15 | |
I would certainly like to have the hurt | 26:18 | |
go to people who can stand it the best. | 26:22 | |
I would rather see middle income | 26:24 | |
and high income holders of stock, | 26:27 | |
of whom there are only about 25 million | 26:29 | |
in this country, take it on the chin | 26:31 | |
for a little while than to have ghetto youth | 26:34 | |
who already experience high unemployment | 26:39 | |
and great social disorganization, | 26:42 | |
to have them be thrown out of jobs and subjected | 26:44 | |
to higher rates of unemployment. | 26:47 | |
However, I don't see any need for a trade-off, | 26:51 | |
and so let me turn to a third aspect of the question. | 26:53 | |
It was a popular view in my youth | 26:56 | |
that the recession phase of the business cycle | 26:59 | |
was like a catharsis. | 27:03 | |
It was a Crime and Punishment theory | 27:05 | |
of the business cycle. | 27:07 | |
You drank too much on Saturday night | 27:08 | |
and you paid for it for the hangover on Sunday | 27:11 | |
and it was necessary to purify your system | 27:14 | |
of the collected obnoxious fluids. | 27:16 | |
And so, a teacher like Professor Schimpader at Harvard | 27:21 | |
often spoke of how great recessions | 27:25 | |
and depressions were in giving that catharsis to capitalism. | 27:30 | |
I don't think that we have much stock in that today. | 27:35 | |
There can be distortions of a real-estate boom | 27:40 | |
in Florida or in Arizona which can be cured | 27:44 | |
only by a setback, but I don't know | 27:47 | |
that the recession of 1953, 54, or 1957, 58, or 1961, | 27:52 | |
particularly left the body politic | 28:01 | |
in better fighting trim. | 28:06 | |
On the contrary, in some ways it just | 28:09 | |
makes the situation worse. | 28:12 | |
There is one respect in which a let-up | 28:14 | |
would be a good thing, and that is in the trade-off | 28:17 | |
between fast growth and inflation. | 28:19 | |
If we slow things down a little bit, | 28:27 | |
we can get a better short-run Phillips Curve behavior | 28:29 | |
and indeed, the only way that we can bring our current rate | 28:34 | |
of more than 4% inflation down toward 3%, | 28:41 | |
in my judgment, there is no magic substitute, | 28:45 | |
is by in some degree slowing down the rate of growth | 28:49 | |
of the real economy, taking, to be sure, | 28:55 | |
as a cost, some increase in unemployment. | 29:01 | |
So my view is not step on the accelerator all the time, | 29:06 | |
sniff the Benzedrine, let's take the speed | 29:11 | |
and drive our bodies and our political economy | 29:15 | |
as fast as possible. | 29:20 | |
- | Thank you very much Dr. Paul Samuelson, | 29:22 |
Professor of Economics at MIT. | 29:24 | |
If you have questions of comments, write | 29:26 | |
Instructional Dynamics Incorporated, Chicago 60611. | 29:28 |
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