Economics and nursery rhymes
"Economic policy-making -- that of my generation -- was a wonderfully pleasant time," John Kenneth Galbraith reminisced recently. "Economists met with the president to decide, in effect, who would have more."
The economy was like a pie that got plumper and juicier every year, and the economist's delightful task was to recommend a strategic slicing of portions to stimulate the jolly pie-eaters toward general mouth- watering so that an even plumper, even juicier pie would be guaranteed the following year.
Gross National Product! That phrase, reverently capitalized, was the only term a layman needed to understand. A growing GNP meant a better America -- that was the beginning and, surely, the end of it.
Now the Commerce Department has just reported that the GNP rose a negligible 0.6 percent during the first quarter -- hardly enough pie for a self-respecting mouse. Suddenly the layman is hearing a different, shriveled rhetoric from the economists, featuring less- than-plump words like "no-growth" and "zero-sum."
How can we poor economic ignoramuses understand the new dialectic of the '80 s? One elementary approach is to divide economists into Jack Horners and Simple Simons, those heroes of other primers.
The Jack Horners, loyal to the unexpurgated American Dream, believe that the GNP (Great National Pie) would still be growing plumper and juicier every year if only those busybody kitchen inspectors -- otherwise known as federal bureaucrats -- would just leave the world's freely enterprising bakers alone.
All of us will be sticking in our thumbs and pulling out plums again, provided we elect Ronald Reagan. This is the message of the Jack Horners around the candidate, including Jude Wanniski.
Now the nursery rhyme begins to get complicated, so let's pay close attention , fellow economic illiterates.
Wanniski -- a former editorial writer for the Wall Street Journal -- is an inseparable friend of the phrase the "Laffer Curve," named after the economist Arthur Laffer. In the words of Wanniski, the Laffer Curve says that "you can raise a tax rate to a point where individuals are discouraged from producing." On the other hand, if you cut taxes, the Great National Pie grows again, thus solving your revenue problem at the same time. And so the Laffer Curve allows Reagan to promise a 20 percent reduction in taxes while calling for a higher defense budget, and even managing a second chorus of "What a good boy am I!"
Rightly is it called a curve, sneer the Simple Simons, who argue that nobody ever gets a piece of pie at the fair unless he pays the pieman for it. Their spokesman, at the moment, is Lester C. Thurow, a professor of economics at MIT and author of "The Zero-Sum Society" (Basic Books, $12.95). "Our economic problems are solvable," Thurow writes."But all these solutions have the characteristic that someone must suffer large economic losses." He concludes with little fear of contradiction: "No one wants to volunteer for this role."
The Jack Horners are masters of addition and multiplication. The Simple Simons specialize in subtraction.
What, if anything, do Jack Horner and Simple Simon have in common? They both love pie. And they will demand it a la modem if you let them. Thurow suggests that what Americans produce most successfully are "new wants." Given a little time, these "wants become necessities." Then, if people's "income rises less rapidly than someone else's, or less rapidly than they expect, they may even feel poorer as their income rises."
Wanniski puts it more bluntly: "We all want to live like Frank Sinatra."
Jack Horner can never pull out enough plums. Simple Simon can never sample enough of the pieman's wares. Are there no alternatives to the itch of affluence or the sting of frustration?
Nobody wants to be the Old Woman in the Shoe. And all economists certainly prefer the metaphor of cutting up the pie to spooning out fair shares of curds and whey. Still, must goodies be the prime purpose of life?
We cannot ask economists to supply an alternative. Goodies are their business. It would be hypocritical to pretend one is indifferent to needs and wants. It would be lacking in compassion to behave with indifference toward the needs and wants of others. But surely it is self-defeating to make consumerism the high road to a happy and good life at this -- or any other -- time, and those of us who are not economists should keep reminding ourselves of the fact.For it is a fact.
As everybody knows who has gotten even a small slice, pie is the romance; pie exists mostly in the sky anyway. About three o'clock in the morning you could ask Frank Sinatra.