Free Marketers Miss Opportunity; M. Skousen

-Olivier Blanchard "A reduction in the federal deficit is short term expansionary." -Alan Blinder T he two statements above, made on Jan uary 7, 1997, at the American Economic Association meetings in New Orleans, con trast the "old" and the "new" visions of economic policy. MIT professor Olivier Blanchard, reflect ing old-style Keynesian thinking, blamed the 1990-1991 recession on excessive saving in stead of higher taxes and tight money. Alan Blinder, Princeton economist and former Fed official, represented new classical thinking when he declared that increased deficit spending was bad for the economy and that a deliberate policy of cutting the deficit was expansionary because it would mean a decline in interest rates. Keynes must be turning over in his grave! Both statements were made at a well attended meeting titled, "Is there a core of practical macroeconomics that we should all believe?" The participants were all main stream economists from established instituDr. Skousen is an economist at Rollins College, Department of Economics, Winter Park, Florida 32789, and editor of Forecasts & Strategies, one of the largestinvestment newslettersin the country. The third edition of his book Economics of a Pure Gold Standard has recently been published by FEE.

tions, yet they could not agree on many fundamental issues. Blanchard (MIT) was antisaving and John Taylor (Stanford) was pro-saving. Some said the Phillips tradeoff between inflation and unemployment was real, others said it was chimera. Supply-side economics was not represented. No one ad vocated tax reduction in an age of high tax burdens. The debate could have been much more lively if the organizers had invited economists from outside the mainstream, such as Marx ists and Austrians. But in most cases unor thodox thinkers are not invited to the sessions sponsored by the AEA. What to do? Most outcasts offer their own programs, side by side with the regular AEA sessions. Where Were the Free-Market Advocates? The Marxists are particularly well orga nized-the Union for Radical Political Econ omists sponsored over 30 sessions of their own. The "Growth and Gender" session was especially unprecedented: All five members of the panel were from the University of Utah's economics department, which has ap parently been taken over by Marxists. Imag ine, a Marxist revolution in the center of conservative Utah!

Why the free-market schools don't offer their own agenda at these national meetings is a mystery. The Society for the Development of Austrian Economics has its own program at the annual meetings of the Southern Eco241 242 THE FREEMAN • APRIL 1997 nomic Association; why not sponsor sessions at the annual AEA meetings? In the exhibit hall, where thousands of academic econo mists mingle and search for alternative books and materials, there were hardly any repre sentatives of free-market economics. The American Enterprise Institute was there, but that was about it. My Debate with Paul Samuelson Quite by accident, I ran into Paul Samuel son, the famed MIT economist and Nobel Prize winner. We had recently been corre sponding over an article I wrote entitled, "The Perseverance of Paul Samuelson's Econom ics." It is a rather unfriendly review of all 15 editions of Samuelson's famed textbook.

(The article, along with a rebuttal by Sam uelson, appears in the Spring 1997 issue of The Journal of Economic Perspectives.) I ac cuse Samuelson of, among other things, an antisaving mentality. But Samuelson denied the charge, saying that he regularly appeared before Congressional committees advocating a higher saving rate to stimulate economic growth. In response, I said it was too bad he didn't inform his students of his views in his textbook. Instead they got the "paradox of thrift." What Will Stimulate Long-Term Growth? One of the more interesting sessions I attended was a discussion about the 50th anniversary of the Employment Act of 1946. Murray Weidenbaum (Washington Univer sity) and Martin Feldstein (Harvard) repre sented the free-market viewpoint, while Rob ert Eisner (Northwestern) represented the Keynesian approach. Andrew Brimmer, a former Fed official, chaired the panel.

The Employment Act of 1946 established three economic policygoals: full employment, stable purchasing power of money, and eco nomic growth. Most of the panel agreed that all three policies had been achieved in the 1990s-employment was dynamic and grow ing, inflation was low, and recession had been avoided. However, there was an uneasy feel ing that economic growth could be substan tially higher than the current 2-3 percent rate. In a recent Business Week column (Septem ber 2, 1996), MIT professor Rudi Dorbusch advocated two structural reforms in the United States that would substantially in crease economic growth: privatize Social Se curity and privatize education. I asked the panelists what they thought of these propos als. Surprisingly, everyone on the panel except Eisner endorsed them. The Dismal Science Comes to China Most of the agenda at AEA meetings is pretty plain fare, although I encountered a few exceptions. One was a paper presented by K. K. Fung, who teaches at the University of Memphis. "Dying for Children" advocates the buying and selling of "birth rights" as a way of solving China's population problem.

Each Chinese married couple would have the right to one child, plus an additional child if a parent or grandparent died. Or they could buy a birth right in the marketplace from an elderly Chinese who chooses to "exit early" (commit suicide). Accordingly, "hopelessly ill" grandparents would be encouraged to "exit early" in order to create another grand child. According to Fung, suicide would then be viewed as beneficial-allowing a child to be born! Brigham Young University's Larry Wimmer, who presided over the session, called the paper "grim," a proposal that "sets families against parents and grandparents." It amounts to a "social program of euthanasia." Apparently the dismal science has a long way to go before solving the world's problems. D BOOKS Business as a Calling: Work and the Examined Life by Michael Novak The Free Press. 1996 • 246 pages. $22.50 Reviewed by Raymond J. Keating T he relationship between economics, business, philosophy, and theology periodically received serious attention from the time of Adam Smith into the early twentieth century. Albeit with a handful of very valuable exceptions, this discussion unfor tunately has been on a general decline ever since.