Tape 155 - Economics in crisis
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- | Welcome once again as MIT Professor Paul Samuelson | 0:02 |
discusses the current economic scene. | 0:05 | |
This series is produced | 0:07 | |
by Instructional Dynamics Incorporated. | 0:08 | |
This program was recorded June 10th. | 0:11 | |
- | Today I'd like to talk about the current status | 0:15 |
of economics itself, of political economy as a subject, | 0:19 | |
as a scholarly discipline, | 0:24 | |
as a department in | 0:28 | |
every college and university. | 0:31 | |
I'd like to address myself to the question, | 0:36 | |
is there now a crisis in | 0:38 | |
political economy? | 0:44 | |
There was an article, for example, | 0:48 | |
in The New York Times Sunday magazine section, | 0:50 | |
few weeks back, in which the title was something like, | 0:54 | |
A Recession in Economics. | 0:59 | |
If there isn't a crisis in the modern political economy, | 1:02 | |
are we at least at some kind of a climacteric? | 1:05 | |
Is there a loss of nerve, a period of self-doubt | 1:11 | |
among economists and even an identity crisis? | 1:16 | |
Now, it could well be | 1:21 | |
that political economy is in a bad way, | 1:23 | |
but the practitioners within it are unaware of it. | 1:26 | |
It could be a case of Mandarins | 1:31 | |
who don't yet know that their time has come, | 1:33 | |
even though all outsiders can see it. | 1:36 | |
And I suppose that when a | 1:38 | |
scholarly subject goes decadent, | 1:42 | |
sometimes, maybe most often, the last people in the world | 1:45 | |
to realize it are the practitioners within it. | 1:48 | |
It may well have been the case, | 1:53 | |
as one goes back and thinks of classical economics, | 1:55 | |
which began with Adam Smith, which received a brilliant | 2:00 | |
stimulus and heyday in the Ricardian decade, | 2:07 | |
around 1815 to 1825, | 2:12 | |
and which finally came to its close | 2:15 | |
by the middle of the century, culminating | 2:20 | |
in John Stuart Mill's Principles of Political Economy. | 2:24 | |
Well, the final classical economists, | 2:28 | |
people like Cairnes, people like Fawcett, | 2:32 | |
people who were secondary in comparison | 2:39 | |
to the great names that I've mentioned, | 2:41 | |
they probably were at their most confident, | 2:43 | |
just as they were becoming more, most obsolete. | 2:45 | |
Let me say in the beginning | 2:51 | |
that I've asked the questions in a provocative way, | 2:53 | |
but one must say that the evidence is unclear. | 2:56 | |
What is the evidence that there is something | 3:01 | |
of a downturn in economics | 3:05 | |
as a subject? | 3:09 | |
It doesn't seem to be the case | 3:12 | |
that enrollments in economic classes | 3:14 | |
have fallen off sharply; on the contrary. | 3:16 | |
You may have read in some of the weeklies | 3:20 | |
that this last year, there has been an upswing | 3:22 | |
in the elementary economics classroom enrollment. | 3:25 | |
A place like Harvard, just to take it as a typical, | 3:30 | |
has always had the elementary economics course, | 3:33 | |
one of the largest elective courses in the college. | 3:36 | |
That meant typically 800 students | 3:41 | |
each, a year, and that means that almost everybody | 3:45 | |
at one time in his four years at Harvard | 3:49 | |
would be taking economics, well, not almost, | 3:54 | |
everybody but two out of three. | 3:57 | |
Nevertheless, to the surprise of the Harvard department, | 4:00 | |
this last year, the initial enrollment was well over 1,000. | 4:03 | |
And this same story, I'm told, can be duplicated | 4:07 | |
at a number of different places. | 4:10 | |
I don't think we should make very much | 4:13 | |
of these small ups and downs, | 4:14 | |
because at the same time that there is this upswing | 4:17 | |
in the enrollment in economics, elementary economics, | 4:21 | |
there seems to be some indication | 4:24 | |
that intermediate economics has not shared fully in this. | 4:27 | |
And this may simply be a spillover | 4:32 | |
of something which has been noticed in every college, | 4:34 | |
a move towards vocational training | 4:37 | |
so that a very large part | 4:39 | |
of every elite university, | 4:42 | |
in the entering class, | 4:46 | |
thinks it's going to go to medical school. | 4:47 | |
You will get, at places like Stanford, | 4:50 | |
a third to a half of the freshmen | 4:52 | |
alleging that they are pre-med students. | 4:56 | |
Now, we know, and they will learn | 5:01 | |
by the time they're seniors that most of them | 5:02 | |
won't get into a medical school. | 5:05 | |
And so it goes, even with the crack Harvard class, | 5:06 | |
presumably the cream of applicants | 5:11 | |
from all over the country | 5:15 | |
that each year at commencement, | 5:17 | |
you find that there are 200 members of the class | 5:20 | |
who wanna go to medical school, | 5:24 | |
but over 100 have not yet gotten in anywhere, | 5:25 | |
and they now have lost their pride | 5:30 | |
and will apply at 17 different medical schools. | 5:33 | |
But there are only so many medical schools, | 5:38 | |
and since there's quite a premium these days | 5:41 | |
upon having, at least on a token basis, | 5:43 | |
women in medical school and minority, | 5:46 | |
blacks, Chicanos, in medical school, | 5:51 | |
the chances for a random good student | 5:56 | |
who did only B+ in organic chemistry are not too great. | 6:00 | |
Well, the escape valve, in a sense, | 6:05 | |
for those who can't get into medical school | 6:09 | |
is the law school. | 6:12 | |
And you've had a great increase | 6:14 | |
in would-be applicants to law schools. | 6:16 | |
Now, the economics of the law school is entirely different | 6:19 | |
from the economics of the medical school. | 6:22 | |
Each medical school student costs much more | 6:24 | |
than any tuition he will ever pay. | 6:27 | |
And since there's a very heavy subsidy | 6:29 | |
from the university and from the state | 6:31 | |
and from the hospital patient to the medical student, | 6:34 | |
there are severely limited number of places. | 6:39 | |
It's one of the reasons why analysts of that industry | 6:42 | |
explain the great increase in salaries, | 6:49 | |
professional earnings of physicians | 6:54 | |
relative to just about every other profession, | 6:57 | |
including relative to law. | 7:00 | |
But the economics of law school is very different. | 7:03 | |
Law schools by and large break even just from tuition. | 7:05 | |
They're taught in large classes | 7:10 | |
so that having one more person | 7:14 | |
sitting in that classroom | 7:18 | |
is not too costly on an incremental basis, | 7:20 | |
and yet you get his full tuition. | 7:24 | |
The result is that almost everybody | 7:27 | |
can go to some law school. | 7:29 | |
It suggests to me, just without having made any study of it, | 7:32 | |
that there's a real problem ahead | 7:37 | |
in terms of an oversupply of lawyers, | 7:40 | |
which will tend to depress the earnings of lawyers, | 7:42 | |
but more important, it will tend to create | 7:46 | |
a considerable amount of unemployment among lawyers | 7:50 | |
or underemployment among lawyers. | 7:53 | |
And I have no doubt that you will find many of these people | 7:54 | |
after they have graduated from law school, | 7:58 | |
even if they pass the bar examination, | 8:00 | |
will gradually filter out of the practice of law | 8:03 | |
and into other occupations, many of which | 8:07 | |
will benefit somewhat from their legal training, | 8:10 | |
but they will not be operating as lawyers. | 8:12 | |
Well, that law school, and I should add, | 8:16 | |
business school enrollment upswing | 8:20 | |
does result in almost a captive audience for economics | 8:23 | |
because people are told, oh, well, | 8:27 | |
economics is a great training | 8:29 | |
for somebody who wants to go to business school | 8:31 | |
or somebody who wants to go to the law | 8:34 | |
or somebody who is vocationally-minded, | 8:35 | |
in these days, | 8:39 | |
several years after unrest on the campus | 8:41 | |
when students are keeping their noses to the grindstone | 8:45 | |
and looking for a paycheck. | 8:50 | |
But still review the evidence. | 8:55 | |
It's sometimes said that graduate students | 8:56 | |
don't have the old vim and vigor. | 8:58 | |
I guess the answer to that might be, | 9:01 | |
well, they never did. | 9:02 | |
Professors have been saying that | 9:04 | |
for years and years and years. | 9:07 | |
It may simply indicate that professors are older | 9:09 | |
than they were when they were graduate students. | 9:12 | |
And as Byron said, the days of our youth | 9:15 | |
are the days of our glory, and we always have the illusion | 9:20 | |
of a golden age just passed when we were young. | 9:23 | |
But I believe if you could go below the surface, | 9:29 | |
you will find that there is some change | 9:33 | |
in morale and attitude | 9:38 | |
among the graduate students in economics. | 9:41 | |
I think, though, it's only fair to point out | 9:44 | |
that what I'm talking about transcends | 9:47 | |
and goes far beyond economics. | 9:50 | |
It would seem to be true in some degree | 9:52 | |
of all sciences and disciplines. | 9:56 | |
It would be true from physics to philology. | 9:59 | |
There has been some reduction | 10:03 | |
in complacency and self-esteem | 10:06 | |
of the modern scientist and scholar. | 10:11 | |
It may once have been the case | 10:16 | |
when the public expected | 10:18 | |
that think tanks like RAND | 10:20 | |
would solve all the problems of the world, | 10:23 | |
or the Hudson Institute would solve all the problems | 10:25 | |
of the future, or Los Alamos would apply its brains | 10:29 | |
not to swords and bombs and warfare, | 10:34 | |
but to the problems of peace, | 10:39 | |
and that the problems of the world would yield to this. | 10:42 | |
But there has been, among the physical scientists, | 10:46 | |
a certain amount of manifest guilt from the atomic bomb, | 10:50 | |
from Hiroshima and Nagasaki. | 10:55 | |
And some of that guilt still permeates physicists | 10:59 | |
and has rubbed off onto all science and all scientists. | 11:04 | |
Now, I don't know how strong this trend is, | 11:11 | |
and the experience of history certainly suggests | 11:15 | |
that by and large, you win bets in office pools | 11:18 | |
by fading people who have a strong belief | 11:23 | |
that the end of the world is at hand. | 11:26 | |
Chicken Little, so to speak, generally dies bankrupt. | 11:29 | |
However, as a corrective to this notion | 11:34 | |
that you'll generally win | 11:38 | |
if you bet against a dramatic change, | 11:40 | |
let me remind you of the old story | 11:43 | |
about the old hand in the British Foreign Office | 11:46 | |
who was retiring. | 11:50 | |
And he was briefing his replacement. | 11:52 | |
And he said, now, I've been here | 11:56 | |
in the Foreign Office 40 years, and I want to tell you | 11:58 | |
that the big occupational disease here | 12:00 | |
is losing your nerve and getting the wind up | 12:03 | |
and worry about things. | 12:07 | |
For example, people are always saying | 12:09 | |
that there's going to be a war, a war's going to break out. | 12:11 | |
And from 1900 | 12:14 | |
until now, the present date, | 12:19 | |
1942, that's 42 long years, | 12:22 | |
I've been telling people, oh, there isn't going to | 12:26 | |
be a war, a war won't break out. | 12:31 | |
And he said, you know, I've only been wrong twice | 12:33 | |
in all this time, of course, | 12:36 | |
World War I and World War II. | 12:38 | |
Well, when you're wrong on a matter like that, | 12:42 | |
even though with the only very low probability | 12:46 | |
will you be wrong, then you are making a colossal mistake. | 12:50 | |
And so the world does change, and even though | 12:55 | |
you don't see the changes take place generally, | 12:59 | |
they're like the movements of the small hand of a clock, | 13:03 | |
don't for a moment think that the clock | 13:07 | |
is not moving. | 13:12 | |
Part of the | 13:16 | |
lack of joie de vivre | 13:20 | |
among students and scholars | 13:22 | |
may be due to something which is | 13:26 | |
a new phenomenon. | 13:31 | |
Let me explain what I have in mind. | 13:34 | |
There exists, at my institution, at MIT, | 13:38 | |
something called Institute Professors. | 13:42 | |
These are distinguished professors | 13:44 | |
who transcend any departmental boundaries. | 13:45 | |
They're very high-paid. | 13:50 | |
This is supposed to be a mark of distinction. | 13:52 | |
Generally, they have nothing in common | 13:55 | |
except that in their special fields, | 13:57 | |
they're regarded as outstanding people. | 14:01 | |
But at MIT, the Institute Professors | 14:04 | |
do meet occasionally | 14:08 | |
because they belong to the same clubs, | 14:11 | |
so to speak, for dinner. | 14:12 | |
And I was at one such meeting a couple of years ago, | 14:14 | |
and I was struck by the fact that everybody, | 14:18 | |
whether it was somebody from physics, | 14:23 | |
or whether it was somebody from engineering, | 14:26 | |
and from the most diverse sciences, | 14:30 | |
mathematics, for example, each person was saying | 14:33 | |
that things aren't as exciting in his field | 14:37 | |
as they used to be. | 14:41 | |
When I said, you mean they're not as exciting | 14:43 | |
for you as a professor who's already arrived, | 14:46 | |
they said, oh, no, that's not what we mean. | 14:49 | |
What we mean is it's not as exciting | 14:52 | |
for our graduate students as it was | 14:54 | |
at the time when we were graduate students. | 14:56 | |
Well, it occurred to me that that simply meant | 14:59 | |
that the action had moved away from physics, | 15:02 | |
for example, to molecular biology. | 15:06 | |
And there is some truth to that, | 15:10 | |
but I was assured by the biologist | 15:11 | |
that within that thriving field, | 15:15 | |
there was something of the same sentiment. | 15:18 | |
And then Viki Weisskopf, a very distinguished physicist, | 15:22 | |
gave an explanation, | 15:27 | |
which I've thought a lot about since then. | 15:29 | |
He said there's an explosion of numbers in science. | 15:32 | |
When you pick up just mathematical reviews, | 15:36 | |
you would never dream of reading | 15:39 | |
all the reviews. | 15:42 | |
You don't even read all the reviews | 15:45 | |
in your one little specialty, | 15:46 | |
let's say if you're a probability theorist, | 15:48 | |
you don't read all the reviews there. | 15:51 | |
And no chemist could possibly | 15:53 | |
read a fraction of the articles that appear | 15:56 | |
in any issue of the chemical magazine. | 15:59 | |
Well, what's the matter with that? | 16:02 | |
We have more magazines because the propensity to write | 16:04 | |
is about the same. | 16:07 | |
But Viki said it means | 16:08 | |
that each budding young scholar | 16:13 | |
can hardly see the increment | 16:18 | |
which is attributable to him. | 16:22 | |
And he said how different that is | 16:24 | |
from when there were a lot fewer physicists, | 16:26 | |
and all the physicists knew each other. | 16:31 | |
And I have to agree that there's a lot in that. | 16:33 | |
If you look at the faculty of the University of Paris | 16:37 | |
at the turn from the 18th century to the 19th century | 16:41 | |
at 1800 in the Napoleonic Period, | 16:45 | |
you suddenly see that on that one faculty | 16:49 | |
are all the great names | 16:51 | |
of French mathematics you've ever heard of, | 16:52 | |
Lagrange and Legendre and Laplace, | 16:55 | |
Cauchy, and so it goes. | 16:59 | |
Now, is it that they were blessed | 17:02 | |
with an eruption of genius at that time? | 17:07 | |
Is it that deans were smarter then, | 17:10 | |
and they always picked the right people? | 17:13 | |
Or is it just the fact | 17:16 | |
that in the old aristocratic tradition, | 17:17 | |
a few people, by excellence | 17:21 | |
and also a little bit of luck, | 17:25 | |
arrived, and they were the action? | 17:27 | |
Certainly, something like that was true in economics | 17:31 | |
at the time of Alfred Marshall in England | 17:33 | |
when the Economic Journal was founded | 17:36 | |
at the turn of the century. | 17:38 | |
If you go through the back issues of the Economic Journal, | 17:39 | |
you will see again and again the same names, | 17:44 | |
the same book reviewers. | 17:48 | |
So it was with the American Economic Association. | 17:51 | |
Now when you go to the American Economic Association | 17:54 | |
annual meetings, there are 5,000, | 17:57 | |
10,000 people. | 18:01 | |
The association has 20,000 people. | 18:04 | |
It still has only one official journal, | 18:07 | |
still has only one president. | 18:09 | |
Your chance of becoming president is less and less. | 18:10 | |
But think of the good old days | 18:14 | |
of the American Economic Association | 18:16 | |
when they would meet at, let's say, | 18:18 | |
by Cayuga's waters at Cornell, at a university, | 18:21 | |
and 75 people would turn up. | 18:25 | |
Well, most of those were eventually going to | 18:28 | |
become president of the American Economic Association. | 18:30 | |
And so this feeling that | 18:34 | |
you are inundated by numbers, | 18:39 | |
it may be something that, for a scholar, | 18:42 | |
is akin to the way rats feel | 18:44 | |
when they're brought up in cages in too great congestion, | 18:48 | |
or what happens to lemmings when they go berserk | 18:50 | |
and start on their hegira. | 18:55 | |
It's, by the way, in the case of lemmings, | 18:58 | |
probably a very sensible thing | 18:59 | |
to jump into the sea and start swimming | 19:01 | |
because if you don't have food where you are, | 19:03 | |
you should try to get somewhere else, | 19:05 | |
even in a random way, although it's tough doughnuts | 19:07 | |
if you happen to have just jumped into a fjord. | 19:10 | |
Well, economics is part of that. | 19:15 | |
But I think that | 19:18 | |
there's something extra in our field, | 19:21 | |
and there's some extra problems, | 19:24 | |
which have to do with the times. | 19:26 | |
And so let me try to review for you | 19:28 | |
what the position and prestige has been | 19:31 | |
of the professor in American university life in the 1920s | 19:35 | |
and in particular economic professors. | 19:38 | |
If you go back and read the essays of H. L. Mencken, | 19:42 | |
you see that he regarded the professor | 19:46 | |
as an object of fun and derision. | 19:49 | |
He was kind of an underpaid spinster-like person | 19:52 | |
who was absentminded and impractical | 19:57 | |
and not even very creative in the field of scholarship. | 19:59 | |
I think that that was also true of economics. | 20:04 | |
And to tell the truth, economics | 20:08 | |
was not in a great creative phase | 20:09 | |
in the 1920s. | 20:12 | |
But then came the Great Depression. | 20:15 | |
And paradoxically, the worst off the world is behaving, | 20:18 | |
the more you wanna sent for the doctor, | 20:22 | |
and the more our doctors, and I should add medicine men, | 20:24 | |
are valued so that the stock of economists began to rise. | 20:28 | |
We were a counter-cyclical industry, so to speak. | 20:33 | |
And this is about where I came into the profession, | 20:36 | |
and I found that I didn't make a sacrifice | 20:39 | |
by going into academic life. | 20:41 | |
On the contrary, jobs were so few | 20:43 | |
and so poor in the industry | 20:45 | |
that had I been inclined to go into industry, | 20:46 | |
I think self-interest would probably have compelled me | 20:50 | |
to stay in the university, | 20:54 | |
which I may add, I was very happy to do, | 20:56 | |
and not simply out of dollar and cents | 21:01 | |
self-interest. | 21:05 | |
Beyond that, great progress was made | 21:08 | |
in the field of economics during the Great Depression. | 21:10 | |
The most dramatic representation of that, | 21:13 | |
the thing that's known to all men of affairs, | 21:17 | |
is the so-called Keynesian Revolution. | 21:22 | |
This culminated actually in legislation | 21:25 | |
in the Employment Act of 1946 | 21:28 | |
showing the lag between | 21:31 | |
the genesis of new ideas | 21:35 | |
and their actual implementation in practice, | 21:38 | |
even though the objective conditions were | 21:43 | |
right and ripe for the Keynesian message. | 21:47 | |
Of course, the textbooks have such a long and variable lag | 21:52 | |
that it really wasn't until the end of the 1940s | 21:55 | |
that a person like myself was able | 21:59 | |
to make something of a killing | 22:02 | |
by bringing that revolution in the techniques | 22:03 | |
of macroeconomics into the elementary textbook, | 22:08 | |
where it hadn't been in the 1920s or in the 1930s | 22:12 | |
and even in the last part of the '30s, | 22:16 | |
in the heyday of simple Keynesianism. | 22:18 | |
Moreover, during the war itself, | 22:23 | |
economists turned out to be very successful | 22:25 | |
as civil servants, as mobilizers of the economy. | 22:28 | |
There was a famous debate at the beginning of the 1940s | 22:32 | |
as to what the capacity of the American economy was | 22:35 | |
to expand, and the economists, | 22:38 | |
primarily Keynesian-like economists, | 22:41 | |
said that there was a lot more expansion possible. | 22:45 | |
The practical businessmen said there wasn't. | 22:47 | |
And lo and behold, it turned out or seemed to be the case | 22:49 | |
that there was that expansion. | 22:53 | |
At the same time, a committee, so to speak, | 22:55 | |
was creating the atomic bomb. | 22:59 | |
There were great breakthroughs | 23:01 | |
in the production of penicillin. | 23:03 | |
I know that just as the war was coming to an end, | 23:07 | |
when I worked on the Bush Secretariat, | 23:11 | |
the Bush Committee on Science, | 23:14 | |
it was essentially our report, | 23:16 | |
our activities, I speak as a member of the secretariat | 23:20 | |
who drafted a lot of the report, | 23:24 | |
but of course it was a report | 23:26 | |
of the full members of the committee, | 23:28 | |
which set up the National Science Foundation. | 23:30 | |
And money became rather plentiful from the government | 23:33 | |
for science. | 23:36 | |
We then came to the age of Sputnik, | 23:39 | |
and every schoolkid was supposed to learn | 23:41 | |
how to handle a slide rule. | 23:43 | |
And we were able to put man on the moon, | 23:46 | |
and people are still asking why is it | 23:49 | |
that we can't cure the common cold | 23:52 | |
if we can put man on the moon and so forth? | 23:54 | |
I should add one very important thing. | 23:58 | |
The fact that Hitler | 24:01 | |
was creating minorities in Europe | 24:03 | |
sent to our shores a brilliant group of refugees. | 24:07 | |
They, probably more than anybody else, | 24:11 | |
were responsible for the creation of the atomic bomb. | 24:14 | |
I think of people like Fermi and like Born | 24:18 | |
who worked at Los Alamos, and Hans Bethe, | 24:21 | |
and their numbers legion, | 24:26 | |
although we had some very good scientists | 24:28 | |
like Arthur Compton and Native Americans here. | 24:31 | |
But this particular group | 24:37 | |
happened to be extremely dedicated to science. | 24:39 | |
And they lifted the whole scientific tradition | 24:42 | |
within the United States. | 24:45 | |
Let me, since my time is getting short, | 24:48 | |
come now to economics itself. | 24:51 | |
The new economics was riding probably at its highest | 24:53 | |
in the 1960s. | 24:58 | |
We had a rather stagnant decade of the 1950s, | 25:00 | |
the Eisenhower years. | 25:05 | |
There were, as I remember it, | 25:07 | |
no less than three National Bureau recessions | 25:09 | |
during Eisenhower's two terms of office. | 25:13 | |
The new economics was not very much in fashion | 25:17 | |
within the administration, although it was gaining | 25:20 | |
in Congress. | 25:22 | |
And so, when John F. Kennedy came to office | 25:24 | |
on a platform of getting the country moving again, | 25:29 | |
then the new economists seemed to come into their own. | 25:32 | |
I think of the age in Washington | 25:36 | |
of Walter Heller and James Tobin | 25:38 | |
and Kermit Gordon, | 25:41 | |
the Council of Economic Advisors in Camelot, | 25:45 | |
Douglas Dillon at the Treasury. | 25:51 | |
It was like that fatuous remark of Lincoln Steffens, | 25:54 | |
"I have seen the future, and it works." | 25:58 | |
The world could see the present | 26:01 | |
and could see it working. | 26:05 | |
I suggest you look up Walter Heller's Godkin lectures | 26:07 | |
at Harvard given in 1965, | 26:11 | |
which I think represent the high watermark | 26:14 | |
of complacency. | 26:19 | |
I heard the lessons, the lectures. | 26:22 | |
They're very good lectures, very witty, very insightful, | 26:24 | |
but I told Walter Heller at the time, | 26:29 | |
they were somewhat self-satisfied, | 26:34 | |
but I said that's all to the good | 26:36 | |
because you'd better be self-satisfied now | 26:39 | |
while you're ahead of the game and in season | 26:42 | |
because it probably won't continue this rosy. | 26:44 | |
Well, I can't profess to have correctly prophesied | 26:49 | |
just how much of a deflating and debunking | 26:54 | |
of the new economics or of economics itself | 26:57 | |
was to take place in the years that followed. | 27:01 | |
What has contributed, I think, most | 27:07 | |
to any dissatisfaction on the part of the public | 27:11 | |
with economics has been the | 27:15 | |
cost push, inflation unemployment, | 27:22 | |
a dilemma. | 27:27 | |
What we have, and it isn't necessary for me | 27:30 | |
to enlarge on that now, because I've been talking about that | 27:32 | |
on these tapes for month after month, | 27:37 | |
what we have as a cold brutal fact | 27:41 | |
is that no mixed economy anywhere in the world | 27:44 | |
seems to have the ability or the knowledge | 27:49 | |
or the political willingness | 27:52 | |
to maintain | 27:57 | |
high employment with reasonably stable prices. | 28:01 | |
This is a defect which the public | 28:06 | |
has not failed to notice. | 28:09 | |
And it leads to a great deal of discontent. | 28:12 | |
People feel that when they get a raise, | 28:17 | |
in money terms, that raise is coming to them. | 28:22 | |
They feel it's due to their cleverness as workers. | 28:26 | |
It's due to the justice | 28:29 | |
that they should have that increase in wages. | 28:32 | |
And then when they come to spend that money, | 28:34 | |
and they find that prices have risen, | 28:37 | |
they feel cheated. | 28:41 | |
They may be growing just as fast in real income | 28:43 | |
as in a typical period of high employment | 28:46 | |
with reasonable price stability. | 28:49 | |
But there is this, | 28:51 | |
I guess we have to call it money illusion. | 28:54 | |
Now, since this frustration is so widespread, | 28:56 | |
I think it has to be regarded as real. | 28:58 | |
Perhaps it can be reasoned with, | 29:01 | |
and you can explain it to people, | 29:03 | |
but it's no easy task. | 29:05 | |
Now, you may say that's a defect of the mixed economy. | 29:08 | |
Why should that be held against the economists? | 29:12 | |
You don't shoot the piano player | 29:15 | |
if he's doing the best he can. | 29:17 | |
We laugh at the Ancient Greek Kings | 29:19 | |
who used to slay the messengers who brought bad news. | 29:23 | |
But if the piano player takes credit | 29:27 | |
for charming the snakes, he must be prepared | 29:30 | |
to accept a certain amount of discredit | 29:34 | |
or disillusionment, at least, | 29:37 | |
for not being able to charm away | 29:39 | |
the thunder. | 29:45 | |
And I don't suppose that a committee of doctors | 29:47 | |
who can't cure cancer | 29:51 | |
are held in quite the same esteem and adulation | 29:54 | |
as a hypothetical committee of doctors | 29:58 | |
who would be able to | 30:01 | |
do these wonderful things. | 30:04 | |
Now, it happens to be the case | 30:06 | |
that there does not exist, inside of economics, | 30:09 | |
any agreed upon therapy | 30:13 | |
for the problem of creeping inflation | 30:16 | |
which is plaguing all the mixed economies of the world. | 30:20 | |
And so, although this is a challenge to the economists, | 30:23 | |
it's a reason, perhaps, for drawing more resources | 30:26 | |
into the field of economics. | 30:29 | |
It inevitably has resulted in a certain amount | 30:32 | |
of disillusionment with economists. | 30:37 | |
Now, I have to say, in all justice, | 30:42 | |
that the disagreement among economists | 30:47 | |
is not as large as the outside lay public | 30:51 | |
thinks it is, at least it's not as large in its disagreement | 30:56 | |
about cause and effect relationships. | 30:59 | |
There are, naturally, value judgment differences | 31:02 | |
among the different economists | 31:06 | |
and quite a number of those value judgment differences | 31:07 | |
explain the differences in therapy. | 31:10 | |
Actually, from within the profession, | 31:16 | |
what's wrong, say, with the field of economic forecasting | 31:19 | |
is not that economists don't agree | 31:23 | |
and that the forecaster's so very far off, | 31:25 | |
but as I've had reason to report again and again | 31:27 | |
on these tapes, it's remarkable, | 31:31 | |
the degree to which the fashionable forecasters | 31:34 | |
forecast like each other. | 31:38 | |
And they really | 31:40 | |
show less spread than they oughta show | 31:43 | |
in terms of the actual uncertainty of the problem. | 31:47 | |
Well, I think that, | 31:52 | |
I have not been able to exhaust this subject. | 31:57 | |
I haven't, for example, talked about the criticism | 31:58 | |
of mainstream economics from the left, | 32:02 | |
from radical economists. | 32:05 | |
I haven't talked about the Galbraithian critique, | 32:07 | |
nor have I talked about, | 32:12 | |
from within economics itself, | 32:15 | |
as a scientific discipline, the criticism | 32:18 | |
of what might be called simple Keynesian economics | 32:22 | |
by the Chicago school, by monetarists. | 32:25 | |
But some other time, we can go into that. | 32:30 | |
- | If you have any comments or questions | 32:35 |
for Professor Samuelson, address them | 32:36 | |
to Instructional Dynamics Incorporated, | 32:38 | |
450 East Ohio Street, | 32:41 | |
Chicago, Illinois 60611. | 32:43 |
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