Main writers in the following searched readings: Paul Samuelson, Robert Solow
지은이: Paul Samuelson | 07 Jan 2009 (출처: to be verified)
Economics used to be called "the dismal science." It was Thomas Carlyle, the sour Victorian Scott, who dubbed it that.
But my generation in more recent times thought we had transformed economics into "the cheerful science." This was to be brought about by two reinforcing elements: (1) The efficiencies of a competitive market system would speed up the growth of productivity and thereby elevate the quality and duration of humane human life. (2) Equally important, those instabilities and inequalities inseparable from old-time pure capitalism can be moderated - moderated, not eliminated - by evidence-based government policies of central-bank macroeconomic controls cum tax and expenditure programs that lean against the winds of both excessive inflation and insufficient demands for job seekers.
A pathetic and unrealistic dream of utopian do-gooders? That was a view expressed by libertarian philosophers such as the late Austrian Friedrich Hayek and the late American Milton Friedman. However, economic historians, measuring the macroeconomic performances from 1950 to the present time on four continents, document a different story.
The ‘serfdom’ that both Hayek and Friedman feared would be the outcome from centrist Mixed Economy programs has turned out to be a popular way of life in many democracies. My Harvard mentor Joseph Schumpeter thought that what he called "capitalism in an oxygen tent" would stagnate. Not his first erroneous prediction.
Economic historians document happier scenarios. From the wee island of Mauritius off the African coast to the snowy fields of Finland or the semi-tropics of Eastern Asia, the Mixed Economy has alleviated poverty and lengthened life spans of improved quality. Far, far from perfection, yes. But almost like a controlled experiment in the biology lab, China and India now contrast beneficially with Mao's China or Nehru's India.
Their older antipathies to the market cost them dearly. And at the same time the advanced economies of Western Europe and North America gained naught from the deep sleeps of earlier India and China.
My readers might say, OK, if you were writing those words back in the 1990s. But the realities now - for 2008 and the coming few years - warn that America's new financial engineering gimmicks have jammed up the whole financial system. Centuries ago, bubonic plague spared no one.
Today and tomorrow subprime shenanigans in mortgage and other lending may well foretell a long period of slump and even bankruptcies for many.
If lucky Americans find it hard even to contemplate such pessimism, Japanese observers might help clue them in. Before 1990, Japan had been in her "miracle" of fast development. Within only a few decades, she had grown from a poor, Asian level of living to second place to America as a world economy. In 1990, this came to an abrupt stop.
Older Japanese will remember Japan's long, long post-World War I slump, from 1919 to beyond 1929. Some of that history repeated itself after two bubbles burst in 1989: the Nippon stock market crash and the bursting of Japan's real estate bubble.
One can speak accurately of Japan's subsequent ‘lost decade.’ That might be an understatement. From their overconfident view about a new Japanese pattern of corporate governance - with its decision-making by unanimity and its sought-for pattern of lifetime employment with one firm - there has been a long distance to fall.
Strange to say, when I lecture in various places in the US today, I detect similar beginnings of an American self-identity crisis. Of course, such tides do rise and ebb in recorded history. But this does not mean that all ups and downs are of the same amplitude or duration.
What, then, have the last few years done to dispel the complacencies of Economics the Cheerful Science described in my opening paragraphs?
I suspect that honest contemporary economists will be asking themselves increasingly: At the Bank of England and the Federal Reserve, did we become over-focused on the topic of "inflation targeting"?
Did the Bank of England forget that a Northern Rock Bank had no insurance for its depositors such as what US banks have had since the 1930s? And yet it watched, without raising an eyebrow, when Northern Rock was doing the stupid, risky things that gigantic Citibank, Bank of America and American Insurance Group were then doing.
Human nature always seeks a scapegoat. The jury, after hanging at random a few of us MIT creators of financial engineering temptresses, will have to pin major blame on the post-1980 Reagan Republican Party deregulators.
When lobbyists' election gifts paralyzed their consciences, the Reagan-Bush-Bush crowd emasculated Securities Exchange Corporation controls against dishonest accounting practices. They had to know that if you dangle a loophole before a CEO - be he human or chimpanzee or robot - he will reach for it.
Millions around the world have been the victims. But most CEOs - at least those who don't go to jail - can smile all the way to the bank after cashing in their golden-umbrella severance pay and stock options. Alas.
© 2008 Paul Samuelson. Distributed by Tribune Media Services, Inc.
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지은이: Robert M. Solow (출처: The New Republic, some day in 2007)
리뷰 제목: Heavy Thinker
Robert Solow reviews Prophet of Innovation: Joseph Schumpeter and Creative Destruction, by Thomas K. McCraw:
I knew Joseph Schumpeter only in the last five years of his life, from 1945 until his death in 1950, at the age of sixty-six. To say that I knew him is actually a bit of an exaggeration..., I attended his courses on advanced economic theory and the history of economic thought. The theory lectures bordered on incoherent ... The history lectures were also disappointing. ...
Maybe it is just as well to slide over Schumpeter's failings at the end. He was past his peak; and the economics profession was moving in a direction--rigorous theory couched in mathematical terms--that he had always professed to admire but simply could not practice himself. ...
In 1940 Schumpeter seriously contemplated leaving Harvard to accept a ... more attractive offer from Yale. His senior colleagues at Harvard--some able, more of them drab--sent him a letter urging him to stay; it said the right things, but was perhaps a little perfunctory. A much more urgent, heartfelt, and mind-felt letter was signed by twenty-six junior faculty and advanced graduate students. The authors included the flower ... of the future of American economics. You have to admire the man who evoked those words from those people.
I wish I had known him then. It is to Schumpeter's eternal credit that, at a time when mediocrity often cottoned to mediocrity in Harvard economics, he stood always for intellectual quality and energy, regardless of ideology, ethnicity, or social position. McCraw makes this very clear, and understands its importance.
In recollecting Schumpeter, it is hard to tear oneself away from the exotic manner, the dubious politics, the carefully crafted image, the hidden self-doubts, the convoluted life story... McCraw covers all these in great and often fascinating detail. He makes full use of Schumpeter's diaries, which is where we learn of his self-doubt; it certainly was not evident in his public manner. ... Still, what really matters are Schumpeter's writings--the books and a couple of essays; and that is where I have something to add. ...
In my view--and that of most contemporary economists, I believe--Schumpeter's most original and most lastingly significant book was Theory of Economic Development, which appeared in 1911 (and was translated into English in 1934). It was at the University of Czernowitz, ... that he worked out his conception of the entrepreneur, the maker of "new combinations," as the driving force and characteristic figure of the fits-and-starts evolution of the capitalist economy. He was explicit that, while technological innovation was in the long run the most important function of the entrepreneur, organizational innovation in governance, finance, and management was comparable in significance.
Innovation is not the same thing as invention. Anyone can invent a new product or a new technique of production. The entrepreneur is the one who first sees its economic viability, bucks the odds, fights or worms his way into the market, and eventually wins or loses. Each win means profit for the entrepreneur and his backers, and it also means a jog upward for the whole economy. In the course of this process, which cannot possibly run smoothly, many businesses, individuals, and institutions, themselves founded on earlier successful innovations, will be undermined and swept away. Schumpeter called this birth-and-death process "creative destruction," and realized before anyone else that it was the main source of economic growth. There is no feasible alternative for capitalism; this is capitalism. ...
The picture generated by classical and neoclassical economics had none of this dynamism, turbulence, and intrinsic uncertainty. (Malthus was perhaps a partial exception.) Smooth trends and stationary states, equilibria of one kind or another, predominated. ...
Schumpeter derived from this analysis a lasting bias in favor of big business. "American opinion is so anti-big business," he wrote, "precisely because big business has made the country what it is...: who is not a part of big business feels he does not meet the standard and by compensation turns against it." Clearly a successful innovation confers, in his view, at least a temporary monopoly. Without the lure of those monopoly profits, there would be no incentive for anyone to bear the risks of entrepreneurship. Schumpeter believed that large firms were both the source and the result of successful innovation; and so tampering with them would be dangerous. ...
I think that this is Schumpeter's main legacy to economics: the role of technological and organizational innovation in driving and shaping the growth trajectory of capitalist economies. Whole subfields of economics now pursue the subject of the care, feeding, and consequences of innovation...
I agree with [McGraw] that the two-volume Business Cycles of 1939 was a massive failure... Schumpeter probably intended it as his entry in a competition with Keynes's General Theory, which appeared three years earlier, but it made no visible impression on the profession or the public. ...
McCraw does not really discuss the main piece of new intellectual machinery that Schumpeter hoped to impose on the jumble of business-cycle history to convert it into a comprehensible tale. That was a system of three oscillations or waves superimposed on one another: a forty-month Kitchin cycle, a roughly ten-year Juglar cycle, and a long Kondratieff cycle of about fifty years. (Kitchin and Juglar were economists of considerable obscurity, and Kondratieff only a little less.) I don't suppose that anyone under the age of eighty remembers any of this, though there remain a few devotees of the Kondratieff cycle. ...
This three-cycle scheme is a pointer to the main theoretical flaw in the book. Schumpeter wanted to place the entrepreneurial innovation process at the heart not only of episodic growth but also of the repetitive "business cycle" (or at least of the two longer species of cycles). McCraw seems to go along. But it does not work. After considerable experimentation, economics has given up on any such periodicities. .... Instead, "the business cycle" has become shorthand for the series of irregular, short-run, aggregative fluctuations of varying duration, magnitude, and--probably--causation...
Schumpeter had a rise-and-fall mechanism in mind. The monopoly profits collected by a successful entrepreneurial firm attract imitators and competitors, many of which are financed by fresh credit. This activity eventually erodes the initial profits; and then the time is ripe for another innovation, if one comes along. There is obvious truth to this story, but it is far from being a theory of economy-wide fluctuations.
Business Cycles was surely a great disappointment to its author. ... It must have used up a dreadful amount of even his enormous energy. And the world of economics just kept on arguing about Keynes.
In 1942, Schumpeter published Capitalism, Socialism, and Democracy, which was reprinted and translated many times. It was his most successful book by a wide margin.... McCraw thinks of it as a landmark of twentieth-century social science... I do not think it comes close to being that important; but I have to admit that I have a general distrust of ambitious, overarching attempts to capture a whole socioeconomic system in a few grand generalizations.
The book reiterates the standard Schumpeterian vision of capitalist turmoil and transformation, with the entrepreneurs as the indispensable heroes. This time he suggests a mechanism within capitalist society that (inevitably?) causes it to undermine itself. The children and grandchildren of successful entrepreneurs, precisely the people with the right DNA, are seduced by inherited wealth into intellectual pursuits, the arts, aristocratic habits, perhaps even into left-wing or at least anti-capitalist ideologies. It is not the proletariat that blows up the capitalist edifice, which is in fact good for the proletariat. It is the second generation of successful entrepreneurs that lets the ground floor decay. ...
Which brings us to the "democracy" in Schumpeter's title. He was not a democrat by instinct or by reflection. He had little confidence in the ability of the average citizen to vote intelligently... His book asks if democratic socialism is possible. The conclusion is that perhaps it is possible in principle, but almost surely not in practice. Democratic capitalism is what we have, but democratic resentment and democratic ignorance tend to work against capitalist success, either by accepting socialism or by fostering over-regulation.
For these reasons, Schumpeter could not conceive that a permanent mixed economy was a viable proposition. He called it “capitalism in an oxygen tent.” For him, capitalism is the civilization of a few family fortunes and broad inequality. Democracy, he thought, must turn out to be "laboristic," and therefore inimical to capitalist success. This conclusion was a major error, as McCraw says. It has been soundly contradicted empirically by the sixty years and counting since World War II. ...
I will not discuss History of Economic Analysis, edited and published after his death by his wife Elizabeth Boody Schumpeter. It is very long and very recondite. ...
[I]n his later years, he thought about writing a treatise that would summarize "Schumpeterian economics." Most especially he contemplated a "preliminary volume" that would summarize the treatise to come, and would tell his story in a style that could reach a broader professional and non-professional audience. This was clearly intended as his answer to Keynes. The internalized rivalry with Keynes, his exact contemporary, for the title of World's Leading Economist seems to have nagged frequently at Schumpeter.
But he seemed not to understand what Keynesian economics was about, or why it won over the younger generation. For example, he described Keynes as the apostle of consumer spending (in contrast to his own emphasis on innovational investment). But in fact consumer spending is passive in Keynes's General Theory. The driving force of the aggregate economy is actually investment spending; and Keynes put great causal weight on "animal spirits" and "the state of long-run expectations," both of which are much more akin to entrepreneurial drive.
Similarly, Schumpeter charged Keynes with being a "stagnationist" (in contrast to his own belief that there was no natural limit to entrepreneurial energy and innovation). This is a more complicated matter. The Keynesian framework could accommodate stagnationist ideas about the drying-up of profitable investment opportunities; and in other hands it did. Keynes certainly did not admire "money-grubbing," and he would have classified a hot-to-trot Schumpeterian entrepreneur as a money-grubber. That is not stagnationism. It is probably more accurate to say that Keynes erred in a different way, by thinking that consumers might become satiated as their incomes rose...
It is possible to see Keynesian and Schumpeterian ideas as complementary. Keynes is about short-run economic fluctuations brought about by erratic variations in the willingness of investors and governments to spend; Schumpeter is about the long-run trajectory driven by the erratic march of technological progress. This complementarity only became clear later, after both men had died, when economic growth became an explicit objective of public policy and topic of systematic analysis. Schumpeter was left frustrated by the younger generation's affinity for his rival. In any case, the "preliminary volume" never materialized. ...
Today, some sixty years after their deaths, Schumpeter's star probably outshines Keynes's. The business cycle has receded in importance, partly because the large industrial economies have sprouted a more stable structure, and partly because the lessons that Keynes taught have been learned by central banks and finance ministries. Instead, long-term economic growth has moved to the top of the political and intellectual agenda, and that was Schumpeter's topic. As Robert Lucas memorably put it, once you have begun to think about economic growth, it is hard to think about anything else. It is a pity that troubled old Schumpeter did not live to see the triumph of his obsession. ...
지은이: Paul Samuelson (출처: The Independent, 19 January 2009)
It is an old story when an up bubble in real estate is followed by a down bubble. Maybe soon after humans left their caves, that cyclical process began.
However, what caused chaotic meltdown in Wall Street and around the globe this time was an utterly new factor – namely that this bust in home construction and mortgage borrowing impinged on the new Frankenstein inventions of mathematical financial engineers.
Virtually no pundits in Wall Street understood the strange things that were happening from week to week. Investment banks like Goldman Sachs and Morgan Stanley, as well as huge ordinary banks like Bank of America, suddenly discovered that their debts had soared way above their available assets.
Oddly, actions on Main Street, where people look for jobs and hope to earn enough income to save for both rainy days and eventual retirement, were slow to fall much in 2007 and 2008. But by now, as sure as the sun sets at night, Main Streets all over the world are hurting a lot. Their hurts are directly traceable to the Wall Street shenanigans. According to forecasters at the International Monetary Fund and the World Bank, the worst is still to come; and it may last longer than anything since the 1929-1939 years of the Great Depression.
As a macroeconomist, I try to keep an eye on financial markets and on how central banks – the US Federal Reserve and the European Central Bank, as well as the centuries-old Bank of England – react to try to lean against the adverse winds of speculative markets. That occupies my mathematical mind. But more importantly, what occupies my heart as a scholarly economist is what's likely to happen to families in the first years of Barack Obama's presidency. How will he repair the damage from eight years of George Bush's bungling?
I must agree that government bailouts were necessary to forestall a complete economic collapse. President Franklin Roosevelt discovered that in his first 1933 post-inauguration week. But as the New Deal leader who saved the capitalistic system, Roosevelt learned that those bankers, after being saved, firmly refused to venture into making loans to risky businesses and families.
How then did the New Deal succeed in wiping out most unemployment by 1939? Today's economists under 60 years of age have forgotten the answer to that question – if indeed they ever did know the true answer. Even Fed Chief Ben Bernanke, a prize scholar at Harvard and MIT, was unduly influenced by the late Milton Friedman's crude monetarism when he wrote his PhD dissertation on the Great Depression in 1979.
Actually, neither the Federal Reserve nor the Bank of England did the heavy lifting that restored high employment and healthy growth in real Gross National Product by 1939. Why not? Early on and for much of the 1930s, central bank interest rates had dropped to nearly zero.
Obama starts out in a "liquidity trap" much like that which has been keeping Japan in a 1991-2008 slowdown. During a liquidity trap, the smart thing to do is hoard money and not spend it on labour or consumer goods. Go back and read the 1987-2006 speeches of Alan Greenspan or Mervyn King at the Bank of England. Maybe they were away from school the day that concept was taught?
To hone in on my main point, current evidence and past economic history suggests strongly that during the Obama presidency it will be massive doses of deficit fiscal spending that will pull Europe, America and Asia out of the post-meltdown slump. Only after that will the Federal Reserve's normal tools begin to be restored to potency.
The new president will be splashed with contradictory advice. Here is my suggestion:
Seek the middle way by being a centrist. That's not because you can't make up your mind. On the left are the failed notions of Marx, Lenin, Stalin, Castro and Mao. All of these were like idiotic Keystone cops when it came to organising any large economy. On the right are the extremist libertarian views of the post-Reagan crowd. Yes, market systems alone can preserve this millennium's affluence and progress.
However, unregulated markets will generate their own demise, as we have seen.
Centrists are doomed to have to make compromises. In good times, it can be folly to keep bumbling Detroit auto companies in business. (Harvard's Joseph Schumpeter called this "capitalism in an oxygen tent.") When rates of unemployment swell to 10 per cent or above, a different decision might be justifiable.
Dropping newly printed greenbacks from helicopters can be one way to generate growth. Such new currency will get spent rather than being hoarded or saved.
However, spending that new currency on roads to somewhere will be better than roads to nowhere.
In Japan, construction-industry lobbyists determined where public spending should be directed. In America we can do better, provided that the old Bush gang has become only an unpleasant memory.
Moral: Be centrist in your decisions about helping the poor as well as the middle classes. Females and Hispanics and others who come late to the feast deserve justice in the centrist court.
Those who presume to give advice become boring fast. Still, I will offer a final important caveat. A centrist must, of necessity, be a "limited" centrist. A centrist can be successful only in a limited degree to lessen the inequalities that are inevitable in a market system. That's far from abolishing most inequality.
To pursue that unobtainable, quixotic goal would be a sure way to plunge the modern world back into the past stages of stagnation.
The author, former professor of economics at the Massachusetts Institute of Technology, won the Nobel Prize in Economics in 1970.
© 2008 Paul Samuelson
Distributed by Tribune Media Services, Inc.