With the death of John Kenneth Galbraith on April 29, it is perhaps appropriate to reflect about the influence of two economists, Galbraith and Milton Friedman, described by Time magazine in 1975 as the modern world's most important economists along with John Maynard Keynes and Adam Smith. There were remarkable similarities between them. Both strongly influenced government policy. Both wrote prolifically, and for a broader audience than just theoretical economists. Both, of course, lived to see the age of ninety and then some. And despite their sharply contrasting views of political economics (Friedman regarded Galbraith as a socialist), the Friedman's occasionally vacationed with the Galbraith's at the latter's Vermont farm, according to biographer Richard Parker.
Galbraith, in his book The Affluent Society, argued for the importance of fiscal policy in influencing the allocation of resources between rich and poor. This was to be done through the maintenance of a progressive tax system to insure that the wealthy provided their proportionate share of funding to enable government to channel funds to such endeavors as the environment, support for the poor, and the development of the arts. The objective was to create a society that would provide a better standard of living for all.
Friedman, on the other hand, in a book Free to Choose, advocated a minimalist role for government, relying instead on lower tax rates to provide the wherewithal for Americans to decide for themselves how they wished to live and spend their increased take-home pay. In another work coauthored with Anna Jacobson Schwartz, The Monetary History of the United States, he had earlier argued, however, for a significant government role in managing monetary policy to guard against the booms and busts that characterized the early part of the twentieth century. According to this thesis, by regulating the supply of money, governments could have an immediate and important impact on such things as interest rates, inflation, and general economic prosperity.
Galbraith advocated the state's involvement in insuring the defense of the country, education for all, a just society, support for the arts and environment, and most important, a minimum standard of living. Friedman, on the other hand, while advocating a strong government role in maintaining a strong defense and the enforcement of antitrust laws, placed his primary bets on the individual. According to a friend, Ben Stein, "Professor Friedman and his wife stood up for the glory of the rights and choices of the individual. From the individual, not from the state, came creativity, progress, freedom, prosperity. From the state came oppression and stagnation." One illustration of this philosophy was contained in an article written for the New York Times Magazine in which Friedman opposed corporate philanthropy, arguing that corporations should let individual investors choose how to spend or give away their money.
One can argue that both of these economists had an important influence on the political economics of the twentieth century. But what of this century? Which set of views will most shape the policies of governments and our way of life? Or have both served their purpose, only to be forgotten? If so, will we have to relearn them at a later time? What do you think? 