-Caveat Lector-
>From Sean:
Well. My senior honors government/economics class is
well into the first chapter now, and something's
disturbed me about our textbook. Section 3 of the
book gives a basic run down of different economic
systems and how they work. There is a section for
Democratic Socialism, it states how it works, gives
some of the pros, then a few cons. There is a
section on Communism, it states how it works,
gives a couple pros, and a buttload of cons. Then
there is a section on capitalism. Capitalism is
described at length as far as it's basic functions
and how it relates to the state, then it lists a
whole shitload of pros...but zero cons. With bias
and propaganda even in simple school textbooks, it's
no wonder that we have such a hard time getting people
to listen to us. This is part of the root of out
problem, and it needs to be fought.
MJ:
Would be interested in WHAT iis described as Capitalism,
especially with the 'relates to the state' ideal.
William Hugh Tunstall:
Ah yes the ol' textbook = capitalist propaganda thing.
Yep that is what they are for unfortunately. It is
difficult to find a textbook at for high school that
doesn't laud the "great" achievements of capitalism.
And usually with the textbook you get teachers that
just repeat what the holy book has given them.
MJ:
With all due respect, you have it backwards. It is socialism
and the maligning of the Free Market which is prevalent and
preached.
from The Freeman -- www.fee.org
Samuelson's Last Hurrah
"Ours is the 'ruthless economy.'" --PAUL A. SAMUELSON,
"Valediction," Economics (1998)
Paul A. Samuelson, the MIT professor and Nobel laureate who
introduced Keynesian economics to millions, has just published
the 50th anniversary edition of Economics (Irwin/McGraw-Hill,
1998, 16th edition). It is the most popular textbook of any
kind ever written: it has sold over 4 million copies and has
been translated into 46 languages. The new edition may be his
last.
Back to the Future: From Keynes to Adam Smith
As readers of The Freeman know, this column has documented
the dramatic changes in Samuelson's thinking over the past
few years. Along with the rest of the economics mainstream,
he has shifted gradually from standard Keynesian analysis to
the Classical model of Adam Smith. In the new edition,
Samuelson replaces the old anti-saving doctrine known as
the "paradox of thrift" with a major section bemoaning the
low saving rate in the United States. Deficit spending, a
perennial policy recommendation in earlier editions, is now
anathema. Today monetary policy dominates fiscal policy.
"The growing orientation toward the market," writes
Samuelson, "has accompanied widespread desire for smaller
government, less regulation, and lower taxes" (p. 735).
The 16th edition is remarkable in many ways. Samuelson
and his coauthor, Yale professor William D. Nordhaus,
cite free-market economists Gary Becker and Julian
Simon. They include a major biographical sketch of
Joseph A. Schumpeter, an Austrian-born economist who
later became one of Samuelson's valued professors at
Harvard. (Schumpeter is best known for his emphasis
of the role of the entrepreneur, criticism of the
welfare state, and defense of big business.) And
Samuelson finally admits that lighthouses were
originally privately owned in Great Britain, after
long maintaining that they were public goods that
the free market could not provide.
Not Enough Friedman
However, his conversion to Classical freemarket
economics has often been grudging and incomplete.
Take his treatment of Milton Friedman, the most
influential free-market economist of the twentieth
century. While Samuelson's new edition contains
biographies of Adam Smith, John Maynard Keynes,
Karl Marx, and even his colleague Robert Solow,
there's none on Milton Friedman. Friedman cannot
be ignored, of course, and he is cited briefly for
his contributions to monetarism, the Phillips Curve
debate, the natural rate of unemployment hypothesis,
and the negative income tax. But nowhere does
Samuelson credit him for his most important
contribution, for which he won the Nobel Prize:
his monumental work (coauthored with Anna J. Schwartz),
A Monetary History of the United States, 1867-1960
(Princeton University Press, 1963). In particular,
Friedman demonstrated that government (the Federal
Reserve), not free enterprise, caused the Great
Depression by permitting the money supply to
decline by one-third from 1929 to 1933.
Why did Samuelson deliberately omit Friedman's vital
contribution? Because the old Keynesian cannot break
with his mentor, Keynes, whom he proclaims as "this
century's greatest economist" (p. 734). Samuelson
still clings to the old-fashioned Keynesian view
that blames the Great Depression on unbridled
laissez-faire capitalism. His newest edition gives
only the Keynesian interpretation of the 1930s. In
his introductory remarks, "A Golden Birthday," he
asserts: "The Great Depression of 1929-1935 had
finally been licked by forceful programs that threw
out the window the old orthodoxies of do-nothing
monetary and fiscal policies" (p. xxiv). I'd hardly
call tight-money deflation of the Fed, massive tax
increases, and Smoot-Hawley tariffs as "do-nothing"
policies!
Friedman and other economic historians have demonstrated
quite powerfully that inane government policies, not the
free workings of the marketplace, are the cause of the
debacle of the 1930s.
Classical vs. Keynesian Models: Which Comes First?
Samuelson and Nordhaus have also kept the Keynesian
model first and foremost ahead of the Classical model.
The Keynesian shortterm model of business cycles
(aggregate supply and demand or AS-AD) is introduced in
Part 5 of Economics, and the Classical long term model
of economic growth is in Part 6. have pointed out that
long-term growth i more important than short-term
business cycles (see The Freeman, August 1997), but
Samuelson and Nordhaus are determined tc stick with
this traditional approach. Gregory) Mankiw's new
popular textbook, Economics (Dryden Press, 1997) does
just the opposite-it puts the Classical model first as
the "general'' theory, and the Keynesian model last as
the "special" case. By making this counterrevolutionary
change, Mankiw, who considers himself a New Keynesian,
has essentially betrayed Keynes.2 But Samuelson and
Nordhaus refuse to do so.
Samuelson ends his 50th anniversary edition on a sour
note. He senses that his view of economics has gradually
lost out to the new dynamic forces of the global marketplace.
He lashes out at the "ruthless" economy characterized by the
"relentless pursuit of profits." He complains of the "growing"
inequality of incomes and the "harsh" competitive environment
where "old-fashioned loyalty to firm or community counts for
little." I guess he's never read David Packard's The HP Way
or noticed the growing number of firms offering profit-sharing
and 401(k) plans. He admits there's a "silver lining behind
this ruthlessness"--millions of new jobs in the dynamic U.S.
economy versus rising unemployment in welfare-statist Europe.
But does this new competitiveness generate "good jobs,
adequate income, and a safe environment"? He doubts it.
Throughout his career, Samuelson has always praised the
glories of the "mixed economy,'' free-market capitalism
with a heavy dose of government interventionism. Now he
must be content with what he unenthusiastically labels
the "limited mixed economy."
1. See my columns in The Freeman, March 1994; October
1995; February 1996; September 1997. See also my
article, "The Perseverance of Paul Samuelson's
Economics," The Journal of Economic Perspectives
(Spring 1997).
2. See my article, "Keynesianism Defeated," Wall Street
Journal, editorial page, October 9, 1997.
Regard$,
--MJ
Underlying most arguments against the free market is a lack of
belief in freedom itself. -- Milton Friedman
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