Thursday, September 27, 2012

Walter W. Heller Kept Keynesian Economics Alive

Among other things, Walter W. Heller was the Chairman of Economic Advisers from 1961 to 1964, and helped to formulate the increasing role of the federal government in the US economy under Kennedy and Johnson.  He was the architect of the "War on Poverty" and, for a time, the leader of Keynesian economic theory in the country.  After leaving the Johnson administration he returned to his previous post as a professor of economics at the University of Minnesota.  Here is an excerpt from his 1966 book New Dimensions of Political Economy, Harvard University Press:

...A professional resolve to maintain our basic reliance on the market process does not require us to admire or to tolerate the resulting income distribution, or the existing division of resources between the public and private sectors, or the forces of monopoly and consumer deceit that tend to thwart the market process.  There are substantial differences among economists on how far the government should go in protecting consumers or setting guideposts for wages and prices.  But there is little difference-at least among the vast majority of economists-in supporting strong measures to protect the free play of market forces against monopoly and price-fixing, and in strongly opposing direct wage and price controls as inefficient and inequitable substitutes for market forces, to be considered as a last resort in a war economy.

    The study of macroeconomics, in turn, moves us in the other direction.  The basic structure of the Keynesian theory of income and employment-and even the basic strategies of Hansenian policy for stable full employment-are now the village common of the economics community.  When Milton Friedman, the chief guardian of the laissez-faire tradition in American economics, said not long ago, "We are all Keynesians now," the profession said "Amen".

     True, we still differ over the tactics and timing of fiscal and monetary moves for stabilization.  We do not, for example, agree on precisely when we should tighten the monetary and fiscal tourniquets in an overheating economy or loosen them in a slack one.  But we do agree that economy cannot regulate itself.  We now take for granted that the government must step in to provide the essential stability at high levels of employment and growth that the market mechanism, left alone, cannot deliver.


There you have it folks.  The country, and by extension the world in its entirety, can't properly  function without the guiding hands of economists like the late Dr. Heller.  Monopolies would abound, customers would be exposed to insurmountable deceit and the curse of unemployment would doom our growth and prosperity.  Thank goodness the apparatus to remedy these ills was implemented with the help of Dr. Heller.

Heller Hall, headquarters of undergrad economic indoctrination at the University of Minnesota.

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