Dismissed as iconoclast, Galbraith truly a seer

"As regards the United States and all political entities, there should be a diminution in concern about economic well being. I'm for a socially pain-free, decently egalitarian society."

The Globe and Mail
May 1, 2006

Dismissed as iconoclast, Galbraith truly a seer
Shawn McCarthy

NEW YORK — John Kenneth Galbraith produced no elegant mathematical models to support his economic analysis; there is no Galbraithian school that has applied his theories to the 21st-century world of globalized markets and complex financial derivatives.

But knowingly or not, skeptics about current conventional economic wisdom and non-believers in the self-correcting mechanisms of the market owe an enormous debt to the Canadian-born, Harvard-bred economist.

Mr. Galbraith died Saturday at the age of 97 in a hospital in Cambridge, Mass.

His most recent contribution to the dismal science came just two years ago with The Economics of Innocent Fraud, a short book that challenged modern orthodoxy by questioning the ability of markets to regulate themselves and of corporations to govern themselves.

It was a theme Mr. Galbraith had been advocating publicly since the publishing of his bestseller The Affluent Society in 1958.

In his numerous books, the economist, who began his career as a New Deal bureaucrat during modern capitalism's worst crisis, anticipated speculative bubbles like the dot-com frenzy — and the unsustainable froth in the current real estate market — as well as corporate scandals of the Enron and WorldCom variety far better than most mainstream economists have.

His insight that a well-functioning economy requires "countervailing powers" — enunciated in his 1952 opus, American Capitalism — anticipated the passage of the Sarbanes-Oxley Act of 2002, aimed at reforming corporate governance in the aftermath of the scandals.

Still, modern business economists tend to dismiss Mr. Galbraith as an iconoclast, a political economist whose critiques may be somewhat cogent but whose progressive prescriptions are wholly unworkable.

He is compared unfavorably to his long-time rival, Milton Friedman, the conservative University of Chicago economist who won the Nobel Prize in 1976 for his work on consumption analysis, monetary history and the complexity of economic stabilization policies.

But then Mr. Galbraith tended to dismiss modern economics and its reliance on mathematical models that he believed failed to account for human nature, less-than-perfect market information or unequal power relationships.

And in his life-long battle with conventional wisdom — a phrase he coined — Mr. Galbraith appeared to rarely doubt the superiority of his own vision.

In an interview at his Cambridge home last year after the publication of a biography by Harvard University colleague Richard Parker, the long-time lecturer retained his authoritative tone, delivering answers to questions as if imparting lessons to an undergraduate.

But he frankly acknowledged his own arrogance, leavening it with self-deprecating humour and epigrammatic sarcasm. "Humility," he once quipped, "is not always compatible with the truth."

A central concern of Mr. Galbraith's life work was the need in a healthy society for a proper balance between private consumption and public good. It is a theme that echoes today as governments and global institutions look beyond gross domestic product per capita to educational opportunity and environmental health in comparing quality of life among countries.

Mr. Galbraith achieved his pre-eminence in the optimistic years of the 1960s, when he advised the Democratic administrations of John F. Kennedy and Lyndon B. Johnson on government programs aimed at eradicating poverty.

Asked to sum up a half-century of his work in a sentence or two, he refrained from sarcasm and took a mechanically assisted breath before uttering what would sound to many a modern ear as an anachronistic philosophy.

"As regards the United States and all political entities, there should be a diminution in concern about economic well being. I'm for a socially pain-free, decently egalitarian society."

But for the last 30 years of his life, Mr. Galbraith was increasingly a voice in wilderness, as the conventional wisdom grew ever more skeptical of the ability of government to intervene constructively in the economy, and ever more confident in the marketplace.

In writing Mr. Galbraith's biography, Mr. Parker was candidly aiming to reclaim the economist's status as one of the great thinkers of the 20th century.

Mr. Parker named several current economists who — like Mr. Galbraith before them — stretched the bounds of mainstream economics to rethink mainstream models and axioms and look to human behavioural theory to explain distribution of scarce resources.

Chief among them is Harvard University professor Amartya Sen, a Nobel Prize winner for his work on development economics. Prof. Sen credited Mr. Galbraith's American Capitalism for helping him appreciate the great importance of competing powers in societies.

Prof. Sen has compared Mr. Galbraith's impact on modern economics with William Shakespeare's influence on the English language.

"It's like reading Hamlet and deciding it's full of quotations," he is quoted as saying. "You realize where they came from."

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