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Economics and the Public Purpose based on 0 ratings. 2 reviews.
This was a strange reading experience. A very dated analysis (not therefore invalid) written from the time of my childhood (1960s) and teenage years (1970s), the time of Richard Nixon and just before (or at) the energy crisis. Women were largely presumed to be stay at home. The protests against the Vietnam War were contemporary.Galbraith proposes that what he calls the neoclassical analysis of the economy with its focus on the market which is controlled by consumer demand and cost of production is hopelessly inadequate. This analysis ignores the power of very large corporations to control demand and price through planning. Galbraith sees two economic systems working side by side: the planning system (large corporations) and the normal (from neoclassical point of view) market system. The government is more easily melded with the planning system to the advantage of the planning system and the market is left to its own devices. This results in an abundance of relatively lesser needed products where the market supplies an inadequate supply of other products more useful to the public.Beyond this I dare not go, but I am not sure I can articulate accurately.
In this excellent book, Galbraith examines the economics profession's claim that the current economic system reflects the individual's free choices. For example, the leading orthodox economist Paul Samuelson defines economics as "How . we choose to use scarce productive resources with alternative uses, to meet prescribed ends ." Galbraith comments, "the imagery of choice . means that this choosing - this decision to purchase this product, reject that - is what, when aggregated, controls the economic system. And if choice by the public is the source of power, the organisations that comprise the economic system cannot have power. They are merely instruments in the ultimate service of that choice." So if the consumer has the power, she, not the firm, is to blame for the firm's products or results (e.g. pollution). In theory, the market uses power for the public good; in fact, large corporations use this power for their own purposes. He sums up, "economics . also serves the controlling economic interest." Mainstream economics is a system of ideas that diverts all attacks into channels that are safely futile In analysing the US economy, Galbraith oddly distinguishes what he calls the 'planning system' from the market system. The 'planning system' is composed of the thousand giant firms that run the show. The market system is composed of the roughly twelve millions of small businesses. What does the US economic system produce? "Unequal development, inequality, frivolous and erratic innovation, environmental assault, indifference to personality, power over the state, inflation, failure in inter-industry coordination are part of the system." He shows how mergers usually produce worse performance, higher rewards for executives and job losses for the workers. "On no conclusion is this book more clear: left to themselves, economic forces do not work out for the best except perhaps for the powerful." Galbraith says that the public must take power away from the corporations and use it to plan the economy. He urges us to take responsibility for our society.