The Economy: The Pragmatic Professor

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Bubbling with excitement at the opening of a new frontier in economics. Heller points to a new concept, with "vast implications for public policy," that came into economics within the past two years: the idea that "human capital" (knowledge, skills, invention) contributes more to economic growth than "tangible capital" (factories, machinery). This notion might be suspect as a liberal rationalization for federal aid to education, except that the pioneering statistical studies on the economic value of human capital were carried out at conservative Arthur Burns's National Bureau of Economic Research and at the University of Chicago, the U.S.'s No. 1 stronghold of conservative economics. Says the University of Chicago's Milton Friedman, regarded as the most brilliant conservative economist in the U.S.: "We have begun to see that stressing only physical capacities does not pay off. We have begun to question just how much of economic growth is based on increases in the quantity of physical capital. In the final analysis, the answer is technology, and this means the removal of ignorance."

Frayed Hopes. Amid their plans for achieving faster growth, the new Administration's confident economists probably do not pause to reflect how the Eisenhower Administration's high hopes of cutting federal expenditures got badly frayed when they rubbed up against gritty realities. A gritty reality of another sort facing the new Administration is the prospect that Congress, especially the House, will be reluctant to give the New Frontier all the added funds its programs ask for. The House's wariness reflects a widespread public wariness toward the new economic goals. Aside from the unemployed, the public generally seems pretty satisfied with the economy's performance during the Eisenhower years—or at least seems more concerned about price upcreep than about growth rate. Dwight Eisenhower's sermons on economics got across to the American public—as Walter Heller knows. "There has been a metamorphosis in the Congress and the people," says he with a touch of bitterness in his voice. "The strain of fiscal conservatism has become strong, perhaps because it has been so well nurtured during the last eight years. There is a deep strain of conservative bias built into the congressional system."

At the Levers. It was no mean achievement to educate a democracy to the need for economic restraint, and Ike's short course came at a time when the realities of international competition and the gold drain would have made spiraling inflation a calamity. Ike's stress on community and individual responsibility, while it may have left some things undone, provided a reversal of a philosophy of centralization that had gone unbroken for a generation.

The Eisenhower heritage persuades Washington's new economists that they must re-educate the U.S. to make the most of its economy. As they sit down to the levers of control, they hold that it is their intent to make the free-market economy operate more freely. Many former skeptics, having taken the measure of the men and their motives, think they deserve a chance to try.

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