Re: Giving Paul a break, and other subjects

["James K. Galbraith" <lpgc403@xxxxxxxxxxxxxxxxxxx>]

Returning from 36 hours out of town, I find at least that many messages from
pkt, including quite a few on disputes involving me. Can't hope to answer
them all, even if I had burning new points to make, which I don't.


On Keynes's Marshallian roots, Paul's exposition is very helpful, and of
course I agree with David Colander's comment on Marshall v. Walras. Keynes
clearly has a Marshallian, not a Walrasian, equilibrium concept, and after
demolishing the classical labor supply function ("second postulate") he does
introduce labor supply as a function of money wages and prices separately,
as Paul indicates (Sandy Darity and I describe and deal with both of these points
in our textbook). If I could tax Paul's authority in this area a bit
further, it would be to ask from where, precisely, if not from Marshall, does
Keynes draw his portrait of the classical postulates for the opening pages
of the GT?


On the question of the influence of ortho economists, Randy Wray re-stated
my point clearly. Of course the various notables mentioned are influential,
in the sense that they hold high position and get quoted in the press.
And they would not be influential, in this sense, if they had not previously
scaled the heights of the academic economics profession. But, as Randy and
others have stated, their policy contributions are undistinctive. By and
large, we could not easily distinguish the policy work of this group from,
say, the prescriptions of an average group of economic journalists writing
for newsmagazines, the Times, or the Wall Street Journal. There is neither
sharp critique of prevailing wisdom, nor the design of innovative economic
policies in this group's work so far. If they left, and were replaced by say
a group of textbook writers, no one would notice.

I'll make two exceptions, so the point is even more clear. Laura Tyson has
broken with professional orthodoxy in important respects on trade and
technology policy. It is no accident that the administration is working
on market-opening initiatives in Japan and on finding GATT-approved ways of
promoting R&D in certain technology fields -- positions which the orthodox
in trade theory (Bhagwati, for example) disapprove. That is influence, albeit
in a very limited policy domain and one not likely to have a measurable
effect on the real wage any time soon.

My second exception will generate more controversy. Jeff Sachs has recently
authored acerbic and telling attacks on the dead hand of orthodoxy and
bureaucratic incompetence at the World Bank and IMF. In this effort, he has
greatly raised the public visibility of certain deep problems at those
institutions, well known to their critics for many years. That too, is a
constructive use of high intellectual position, an exercise of true
influence, and I'd give Sachs credit for it.

The intervention on policy in New Zealand is another good contrast, even
though the consequences were miserable. In that case, at least, someone
interjected a previously unfamiliar idea into the policy discussion. Design
of heterodox stabilization programs in Latin America over the past decade is
another good example where (heterodox) economists actually made a difference
to policy, with somewhat better results.

Nothing like that is going on at Treasury or OMB these days. It is of no
particular interest to hear that Larry Summers is defending Greenspan
or that Alice Rivlin wants to cut the budget. An economist in government
whose comments are perfectly predictable and in line with the
well-established political role of his or her agency is, well, just
functioning as a functionary. As Bob Reischauer said in partial defense of
Rivlin's notorious "Big Choices" memo, now the subject of Republican attack
ads around the country, well, if she weren't doing that sort of thing she
wouldn't be doing her job.

Finally, I'm gratified to see the raft of messages on conservation
principles, acknowledged and implied, in economics. They DO exist, Herb!
Mirowski is of course fully aware that quantum physics has moved beyond the
strict conservation of energy. But this hardly means, by itself, that
Mirowski's critique is only historical. To the contrary, Phil argues that
the dominant formalisms in economics have remained trapped in a conceptual
arena whose physics emulation predates quantum mechanics, as well as relativity and other
developments -- that is, an arena which requires a conservation principle of
some sort, but which has failed to specify a coherent version of same.
****

James Galbraith
The University of Texas at Austin
LPGC403@xxxxxxxxxxxxxxxxxxx
fax (512) 471-1835