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).