john k galbraith 88.
(photo credit: AP)
The Ethics at Work column is devoted to looking at current economic and workplace issues with an ethical perspective. It is thus appropriate to devote this week's column to the legacy of John Kenneth Galbraith, the economist and social critic who passed away early this week at the age of 97. Galbraith was probably the most perceptive and influential advocate of tempering economic theory with ethical principles, common sense and more than a dash of irreverent humor.
One reason for Galbraith's influence was that he did not denigrate the insights of classical economics. He recognized the power and benefit of markets, and was himself a distinguished economist who was once president of the American Economic Association. However, Galbraith was always ready to acknowledge the limits of economic theory and to revise its prescriptions by subjecting them to a reality test.
I cited one example in a recent column. Conservative economists are quick to point out that welfare programs tend to promote idleness among recipients. Galbraith never denied this, but he did point out that this outcome is not all bad. With typical acerbic humor, he pointed out that leisure is considered a positive thing when enjoyed by the rich, and for some reason was deplorable only when experienced by the poor.
Likewise, Galbraith never denied that high taxes had some negative impact on private production, though he certainly thought that conservatives overestimated the cost. He just felt that in a wealthy society like the US in the late twentieth century, public goods like good schools, safe cities and a clean environment were worth a lot more, and that the relatively modest cost in private production was a bargain. (This was one major theme of his most influential book, The Affluent Society, written in 1958. Galbraith wrote scores of books, the last one in 1999 when he was already over 90 years old.)
Galbraith's broad outlook, common sense and quick wit made him difficult to overmatch in public debate. One prominent critic was the renowned Austrian-born English economist Freidrich von Hayek, who thought he got the better of Galbraith but, in my opinion, never really did.
One of Galbraith's more influential coinages was the "dependence effect." In today's affluent society, asserted Galbraith, most needs are "synthesized," meaning that they are not independent with the individual but rather dependent on, and created by, the surrounding culture and, particularly, by advertising. A hungry person knows that he would like food, but a person doesn't know he needs a plasma screen until a marketer tells him.
Characteristically, Galbraith never claimed that this made these needs unimportant. He just asserted that they should logically take second place to more primary needs like education and a healthy environment.
Von Hayek wrote a spirited riposte entitled, "The Non Sequitur of the Dependence Effect." He pointed out that many of our most noble needs are synthetic. After all, a person who has never been exposed to literature or art also never feels the lack until he is educated to appreciate these accomplishments of culture.
While conservatives are always ready to cite Von Hayek's "refutation" of Galbraith, they seldom notice that there is really no refutation at all. Von Hayek amply demonstrates that the Dependence Effect is a non sequitur; the fact that needs are synthetic doesn't prove that they are trivial. But he never makes a convincing case that Galbraith was actually wrong. After all, many "needs" created by modern marketing are not for high culture but for goods which are essentially trinkets.
Another famous Galbraith coinage is "countervailing power." While neo-classical economists are quick to assume that markets are competitive, and radical ones are quick to assume that they are exploitative, Galbraith injected a bit of common sense and pointed out that when one side of the market got too powerful, the other side often was able to enlist its own, countervailing power. For example, monopolistic employers are more vulnerable to labor unions, which thus serve as a countervailing power; monopolistic sellers are more likely to galvanize consumers to fight their power through boycotts, regulation, and so on.
I think that Galbraith had many shortcomings, as well. His criticisms of the ideological Right were often well placed, but I feel he was remarkably uncritical of the liberal camp to which he belonged. (The exception was when he was scolding them for not displaying enough spine in their conflict with the conservatives.) You would never know from reading his works that liberals have their own ideological blinders no less opaque than those of conservatives.
Galbraith was also far better at showing flaws than he was at suggesting effective remedies. And, on occasion, he got carried away with his gift for rhetoric and allowed form to short change content. Galbraith was right to insist that annoying details don't always dictate the best policy, but he had a tendency to neglect the fact that sometimes they really do.
Galbraith was a giant in many ways. His great physical stature (about two meters), his amazing energy (he wrote scores of books and innumerable articles), his unmatched experience (he served as an advisor to Presidents Roosevelt and Kennedy, and was an informal advisor to Clinton) - all of these towered over his contemporaries. Irrespective of whether we agree with his values and analysis, his works remind us that while theory and ideology are important, they need constant reconciliation with good ethics and good sense.
The writer is research director at the Business Ethic Center of jerusalem (www.besr.org), an independent institute in The Jerusalem College of Technology. He also is a rabbi.