Galbraith is probably most comparable to Polanyi out of the texts we’ve read so far. He starts by establishing history and facts, in order to establish background knowledge for the common reader, and perhaps to set himself up as an ethos move. He establishes the idea of “conventional wisdom” (a highly problematic chapter as we discussed in class) that seems to suggest that Galbraith believes we are stuck in modes of thought that may not be pertinent to our present time. As an example, he challenges our obsession with production over all other considerations.
Chapters 10 presents an alternative argument to the paramount position of production (never mind that a catastrophic march of events is what is required to overturn conventional wisdom, not more arguments). Galbraith says we must justify the flow of goods that result from production, taking into account that we buy things like cars, exotic food, and “erotic clothing” (115). The rationalization of these commodities has to do not with society but with economic science. He says, “the urgency of wants does not diminish appreciably as more of them are satisfied” (117) meaning once basic needs are taken care of there will always be further, psychological needs to satisfy. However, the concept of diminishing marginal utility implies that the 100th piece of bread is less valuable than our first after we’re satiated, and furthermore, that if we move on from bread to yachts, the yacht was less important than the last piece of bread we decided to buy. The effect of this is that with rising affluence and fulfillment of needs is to reduce the importance of production and productivity—the goods we move on to produce are getting less and less important.
However, he presents the counterargument that in order to defend production, which he called the “anchor” of economic thought, the theorist must “divorce economics from any judgment on the goods” (120). It is impossible to say one man’s bread provides more utility than another man’s yacht, and hence cannot say the production that supplies yachts is of lesser urgency.
We’ve arrived at a dichotomy here. On one hand, we can blast the paramount position of production by saying that an ever-onward quest for productivity will result in unnecessary goods, and instead we should focus our resources on supplying immediate needs with the highest utility, and maybe knock out unemployment and build a public school or something too. On the other hand, we can divorce economic theory from social or moral judgment and continue to defend the fact that more goods and more production tends to make everyone happy, and everyone better off. The second option, while attractive and makes the most sense (of course we should apply sound theory to the real world!), is problematic if we consider the fact that the theory must separate itself completely from real world considerations (moral and social) if it is to apply to these condition (moral social conditions) at all. We can create a perfectly elegant economic theory but if it is independent of human concerns, it is a castle in the sky. One man might derive the same amount of utility from a yacht as a man might from a piece of bread—in terms of theory, that is a perfectly valid reason to argue for why we should produce yachts as well as bread. Morally, it would be an outrage for a man to get a yacht while another starves, implying that, while we have starving children in Africa, the entire yacht industry is the devil. Galbraith attempts to ground the castle in the sky to moral and societal concerns by saying that utility derived from owning a yacht would never have existed had one never known yachts to exist. Essentially, the production creates the demand for the product. In such a case, since it is not a naturally desired good, it is not on the same moral level as say bread is needed. Hence the need for production is defended at the same time as we can be satisfied that economic theory is good and moral and will make everyone in society really happy! However, Galbraith never really gets into why a naturally desired good is better than a contrived desire for a yacht because, surprise! Yachts exist! And it’s too late to ignore them so I guess the industry is still the devil if we don’t get rid of it.
Galbraith’s challenge was to tie down an elegant, theoretical, economic system to real world morals and society, and his solution to navigating that dichotomy was to create an arbitrary combination of the two systems (some wants are contrived and therefore less valid), in order to avoid a more distasteful mash-up of the two (that some wants are less valid if you’re rich). I may have missed his point somewhere but essentially my thoughts are that there is an interesting dichotomy between pure, utilitarian economic theory where the economist just wants to maximize utility, and the system that we use on Earth where we would be angry if all utility were the same and we were purely utilitarian. This dichotomy leads to an interesting paradox, where if economic theory is to exist or succeed at all, it must necessarily divorce itself from the very societal considerations it seeks to solve. Imagine the economist who tries to publish a theory, but his friend asks him, “hey I really need an advance on my paycheck cause of circumstances beyond my control and I’m a really good guy and deserve it whereas this asshole stole my ipod the other day, so give guys like me a little boost in your solution for our economy. Thanks bud.” It would never work. Rand would agree and she would be right for once. Economic theory is divorced from what it tries to solve. How does Galbraith navigate that paradox? How does he establish the connection or legitimacy of his theorizing and the way that it will play out in reality? How can he justify a book that goes against the “conventional wisdom”? I’d say he doesn’t quite succeed in all of these points, but he does do a good job of exposing those problems in a way that impresses us, then sidesteps them (while we are entranced by his grandfatherly genius) in a way that makes us believe he is settling them.
I’d love to hear if perhaps I misinterpreted his argument, or missed something.