Monday, May 21, 2018

Review: The End of Normal, by James K. Galbraith

New York: Simon & Schuster, 2014, pp. 304.

One of the principal points of interest (and certainly, the object of his most striking prose) in James K. Galbraith's work is his debunking of the orthodoxies (pretensions?) prevailing among academic economists—as with, for example, his answer to the question of "Just what is a market?" in the view of conservative economic thinkers in The Predator State.1

His 2014 book The End of Normal is no exception. Perhaps its most memorable passage is his retort to Paul Krugman's excuse that economists' obsession with econometric models that have distorted understanding of their subject was (among other things) a matter of economists having been seduced by "beautiful mathematics":
Economists using mathematical expressions . . . may believe that their work is beautiful. Outsiders see instantly that it isn't . . . no one with a sense of aesthetics would take the clumsy algebra of a typical professional economics article as a work of beauty.
Rather, Galbraith observes, the math is there
not to clarify, or to charm, but to intimidate. And the tactic is effective. An idea that would come across as simpleminded in English can be made "impressive looking" with a sufficient string of Greek symbols. A complaint about the argument can be deflected, most easily, on the grounds that the complainer must not understand the math.
(Anyone who would doubt that this is the case ought to check on just what exactly wins you a "Nobel Prize" in the field.)

The book's target is larger than the very severe limitations of econometrics, however, or even the multitude of explanations of the source of the crisis of 2008 so far proffered—the mealy-mouthed declarations of "experts" that "No one could have seen this coming," or the narrowly journalistic accounts of exactly who said and did what (Galbraith's round-up of which takes up roughly the first third of the book). Rather than some minor, surface event such as (to use his father's famous phrase) the "conventional wisdom" holds it to be, after which growth might be expected to return to pre-crisis norms, the world economy is experiencing a much more fundamental slowdown. As Galbraith argues, the expectation of rapid economic growth as an eternal norm is largely an outgrowth of the highly unusual experience of the post-World War II boom, and its generation of 4 percent a year expansion of American GDP (while much of the world, catching up from well behind, grew much faster than that)—and indeed, a highly simplistic reading of that experience, which took such hugely important variables as natural resources and technology totally for granted. Finance was taken for granted, too, and so was the effectiveness of military effort as a way of securing desired political (and economic) outcomes—or even stimulating a national economy.

The conditions that permitted such a shallow and intellectually lazy reading of the situation to look passable, however, simply ceased to exist. Resources became scarcer and more expensive, which had a "choke-chain" effect on growth (as demonstrated by the energy crisis of the 1970s). Technology's disruptive effects became harder to ignore—precisely because the most dynamic area of technological change, digital computing and communications, was unprecedentedly oriented toward replacing labor old activities with less labor-intensive new versions of them (the traditional bookstore with Amazon), which arguably contributes less to economic growth than earlier technologies which more clearly opened up fundamentally new lines of product and activity, while undermining it again with its impact on unemployment. The financial sector, which from the 1930s to the 1960s was kept under relatively tight control, along with its capacity for generating crisis, was unleashed—with destabilizing and often disastrous results (epitomized today in the 2008 crisis and the aftermath with which we are still living). At the same time, military power has become less efficacious at everything from regime change to providing economic stimulus (as the costly and frustrating experience of the U.S. in Iraq demonstrated).

So where does this leave us? Instead of enduring ecological, financial, military disaster in the pursuit of growth rates we simply cannot achieve in the foreseeable future, the book argues, we should focus on the slow growth that may be achievable, and at the same time, socially and ecologically sustainable.

The book's strongest points are its critique of the grave weaknesses in the conventional economic wisdom up to our time, and at least in its broad outlines, its reading of what we should do now—a simple return to yesteryear not an option. However, the study has significant limitations as well. Galbraith's discussions of heterodox economic thinking and its presumed failures to account for the present situation were far less impressive than his analysis of orthodox, neoclassical economics' failures. (Ultimately he raises some of the Marxist discussion of how the crisis of 2008 happened—and then does little more than dismiss Marxist analysis altogether. His handling of the Marxist case aside, his references to The Limits to Growth gave me the impression that he knew the study mainly by its detractors' mischaracterizations. For that matter, he also gives the ideas of Robert Gordon less than their due.)

Additionally his explanation of how we got from the easy growth of the World War II period to the present stagnation leaves something to be desired. It seems a grab-bag of ideas about it—hitting many of the key issues to be sure (resources, information technology, finance), but not always handling them as thoroughly, fluidly or comprehensively as he might, often but not always because of his aforementioned weaker use of heterodox ideas. (The discussion of the connection between military spending and growth and how this changed over time seemed to me especially underdeveloped.) Still, his incisive and often witty discussion of the intellectual failures of the past three generations of mainstream economic thinking, the insights he displays into some of the major problems we now face in making economic progress, and the case he ultimately makes for a change in thinking and policy (if less complete or satisfying than it might be) make The End of Normal well worth the read.

1. His answer is that the market is a "negation . . . the nonstate . . . a cosmic and ethereal space, a disembodied decision maker . . . that, somehow and without effort, balances and reflects the preferences of everyone making economic decisions . . . a magic dance hall where Supply meets Demand, flirts and courts; a magic bedroom where the fraternal twins Quantity and Price are conceived. It can be these things precisely because it is nothing at all. Because the word lacks any observable, regular, consistent meaning, marvelous powers can be assigned"—and indeed, are assigned, which is the point of his discussion. See Galbraith, The Predator State (New York: Free Press, 2008), 19-20.

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