I.

Introduction

Galbraith, John Kenneth (1908-2006), Canadian-born American economist, one of the most influential thinkers of the 20th century.

II.

Early Life and Career

John Kenneth Galbraith was born on October 15, 1908, in Iona Station, Ontario, Canada, into a farming community of Calvinistic Scottish descent. His father, a schoolteacher who later became a farmer, was a politically active liberal. His mother died when he was 14. In 1931 Galbraith graduated with a B.Sc. from Ontario Agricultural College. He then studied at the University of California, Berkeley, graduating in 1932 with an MA in economics and a Ph.D. two years later. From 1934 to 1939 he was an economics tutor at Harvard University, in Massachusetts, where he met his future wife, Catherine Merriam Atwater (Kitty), who was studying comparative literature at Radcliffe College, which was Harvard’s affiliated undergraduate institution for women.

During 1937-1938 Galbraith was a research fellow at Trinity College, Cambridge, during which time he also attended the weekly seminar at the London School of Economics organized by Friedrich Hayek and Lionel Robbins. He became a naturalized American citizen in 1939, and from 1939 to 1942 taught economics at Princeton University, in New Jersey. From 1941 to 1943 he worked for the US government at the Office of Price Administration (first as assistant administrator, and later as deputy administrator) where, using selective and then more general price controls, he oversaw a national inflation rate controlled at around 2 per cent per annum, while production rose by about a third and unemployment remained minimal. Galbraith’s critics later suggested that this success gave him a false impression of the power of state planning and intervention in the economy.

From 1943 until 1948 he was an editor at the business magazine, Fortune, and twice took leave of absence, first to work on a survey of Allied strategic bombing during World War II, and second to serve as the director of the Office of Economic Security Policy in the US Department of State. In 1948 he returned to the economics department at Harvard University, becoming professor of economics in 1949. Although he officially retired from Harvard in 1975, his tenure there was not continuous as during this time he was employed in several significant political roles, variously serving in the administrations of Presidents Harry S. Truman, John F. Kennedy (as US ambassador to India in 1961-1963), and Lyndon Baines Johnson. Other high-profile roles were as chairman of Americans for Democratic Action in 1967-1969 and, his iconoclastic reputation notwithstanding, president of the American Economic Association in 1972. His numerous awards included being twice honoured with the Presidential Medal of Freedom (from Harry Truman in 1946 and from Bill Clinton in 2000), the Order of Canada in 1997, and the Padma Vibhushan, India’s second-highest civilian award, in 2001.

III.

Key Works

Galbraith was a Keynesian and an “institutionalist”, a prolific author who wrote more than 30 books, countless articles, and commentaries, and was an exponent of both television and press as media for presenting his economics to a wide, and non-professional, audience. His books enjoyed popular appeal and many became bestsellers.

His best-known works include the trilogy American Capitalism: The Concept of Countervailing Power (1952), The Affluent Society (1958), and The New Industrial State (1967), and also The Great Crash, 1929 (1954). The common themes in these books had their origin in a critique of what he saw as an increasingly oligopolistic economy in which small businesses were replaced by large corporations and in which long-term contracts were necessary to reduce uncertainty. He coined the phrase “countervailing power” for the reactions of special interest groups, lobby groups, and trade unions.

The Affluent Society changed people’s views of the post-war world. Specifically it argued, somewhat controversially and not without criticism, that businesses advertise to create consumer demand (rather than inform). The book highlighted the irony of a society in which so much “public squalor” co-existed with so much “private affluence”. One of his propositions was that to grow successfully it was necessary to invest significantly in social infrastructure (notably transport and education) financed out of general taxation.

The New Industrial State is noted for expounding the view that few industries if any in a developed economy fit the atomistic, perfectly competitive model of neo-classical economics (see History of Economics). Galbraith believed that the market model and the operation of the “invisible hand” were inapplicable to modern developed economies and, hence, markets were incapable of generating the optimum welfare claimed for them. In The Great Crash, 1929, Galbraith turned his attention to the operations of financial markets and identified how stock-market prices can become disengaged from the economy’s fundamentals in a speculative boom.

These early writings incorporated the common themes that recur through much of Galbraith’s later work: markets are fallible, industries are not perfectly competitive, and many public goods will be under-supplied by markets alone (or not supplied at all), whereas markets will typically over-provide private goods, because advertising artificially increases demand. His later works of note included Economics and The Public Purpose (1973), The Age of Uncertainty (1977), which was also a BBC television series, A Short History of Financial Euphoria (1990), The Culture of Contentment (1992), The Good Society (1996), and The Economics of Innocent Fraud (2004).

IV.

Assessment

Throughout all his writing, Galbraith set out to make economics accessible to a lay readership, but he was not without his critics. Indeed, not all his fellow liberals shared his views on production and consumption (notwithstanding the opposition from those who believed in the free market economy). He sought to change people’s views on society and power in the world of the late 20th century by identifying the ways in which the activities of large organizations could supersede the classical mechanisms of supply and demand. Although some economic ideas have come to be labelled as “Galbraithian”, his particular views lacked momentum for want of a school; there was never a critical mass of graduate students or academic peers willing or prepared to take up the mantle and expound Galbraithian notions within the common paradigm of the economic theorist, namely a mathematical model. Galbraith’s writings are lucid and free of mathematics. This won him praise and a wide audience outside the profession but simultaneously fostered criticism from fellow academics who claimed he over-simplified. That he successfully popularized economics and demonstrated its usefulness in explaining and analysing events, while striving to uphold the highest of intellectual standards, is an achievement. It is not clear whether the criticism originated with his success as a popularizer or because he popularized while defending and promoting a particular liberal view. Galbraith operated within the spheres of political economy and, given his liberality and ready recognition of the limitations and fallibility of markets, was most unsympathetic to the dominant paradigms of the United States and United Kingdom in the 1980s, namely “Reaganomics” and “Thatcherism” (see Thatcher Governments).

Galbraith prided himself on his avoidance of esoteric economics. He remained grounded in practical (exoteric) economics and maintained his prolific publication record into his final years. His writings are characterized by dry wit, appealing (and often new) turns of phrase, and persuasive arguments. He strove to provide novel insights into the workings of political economic systems. That he attracted such criticism is itself some testimony to the messages he promulgated.

John Kenneth Galbraith died on April 29, 2006, in Cambridge, Massachusetts.