The Economy: The Pragmatic Professor

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Artificial Appetites. Growth is more than a political promise that now has to be kept: it has become the central preoccupation and challenge of U.S. economics. During the 1950s, it became inescapably evident to U.S. economists that several foreign economies were growing a lot faster than the U.S.'s. The cold war has drawn special attention to Russia's postwar growth rate of 6% or so,* but the economies of several free world countries, notably West Germany and Japan, have grown even faster. In a TV panel show last week, M.I.T.'s Paul Samuelson said that these rapid growth rates have been the most surprising economic phenomenon of the postwar years, a development that no economist "could possibly have predicted."

By comparison, the U.S.'s growth rate of about 3% a year seemed downright sluggish. To many economists it seems an urgent task to get the U.S. economy growing faster—partly because economic growth is an element of cold war competition with Communism, but also because the U.S. economy, for all its wealth, is not abundant enough to meet the growing demands of public expenditures. With federal, state and local governments already absorbing more than 25% of the national income, with taxes burdensomely heavy, the clamor rises nevertheless for more spending to meet public needs for national defense, education, urban renewal, etc.

In The Affluent Society, the most talked-about book on economics in many a year, Harvard's John Kenneth Galbraith offered his own special plan for allocating resources between the well-fed "private sector" and the hungry "public sector." Consumers, argued Galbraith, do not really need all those consumer goods, and would not even want them all if advertisers did not stir up artificial appetites. Accordingly, he proposed to levy sales taxes on consumer goods and use the funds raised in this way for such public needs as schools, playgrounds and air-pollution controls. But most economists, including Walter Heller, reject the Galbraith approach to "allocation." They do not believe that the private sector is so very affluent ("Consumer satiety is a myth," says Heller), and the liberals a among them, including Heller, consider sales taxes "regressive."

Look Ahead. Speeded-up U.S. economic growth offers a more amiable solution than Galbraith's. With faster growth, more funds would be available for the public sector and for consumers, too, with no increases in taxes. "One of the chief arguments for a more positive program for economic growth," says Walter Heller, "is that it is far easier to achieve many of our common goals by enlarging the size of our economic pie than by transferring income and wealth from one group to another." Faster economic growth would also ease another economic worry that has bothered economists in the last few years: lingering unemployment, even at times when the economy, by other yardsticks, was performing adequately.

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