The Collected Works of Galbraith

Author: Galbraith
Publisher:
Publish Date: 2006-04-01
Features: Galbraith was a renowned American economist and the leader of the Institutional Economics school. Born in 1908 in an Ontario, Canada farm family of Scottish immigrants, he graduated from the Ontario Agricultural College in Canada in 1931 with a bachelor's degree. He then went to Berkeley, California, to further his studies in agricultural economics, earning a master's degree in 1933 and a doctorate the following year (his doctoral thesis was titled "County Expenditures in California"). During his time at Berkeley, Galbraith diligently studied Marshall's Principles of Economics and Thorstein Veblen's works. Keynes's ideas had a significant influence on Galbraith during his youth. In 1934, Galbraith joined Harvard University as a lecturer, teaching agricultural economics while also serving as a dormitory supervisor. While working at Harvard, he became acquainted with the brothers Joseph and John Kennedy, later developing close relationships with them. In 1961, John Kennedy was elected President of the United States, which had a profound impact on Galbraith's political activities in the 1960s. He held various positions, including Deputy Director of the U.S. Price Administration, Chairman of the U.S. Strategic Bombing Survey after World War II, and Director of the Economic Security Policy Office at the U.S. State Department. Galbraith also served as an associate professor at Princeton University and an editor for Fortune magazine. Since 1949, he has been a professor of economics at Harvard University and was appointed U.S. Ambassador to India from 1961 to 1963. In 1972, he was elected President of the American Economic Association. Currently, he is a distinguished professor emeritus of economics at Harvard University, the Paul M. Warburg Lectureship. Over the first 40 years of the second half of the 20th century, he tirelessly wrote more than 30 books, truly a man of immense literary achievement.
Although Galbraith was initially influenced by Veblen, he did not belong to the Institutional Economics school. At that time, he was more influenced by Keynesian thought and co-authored Modern Competition and the Theory of Industrial Policy. This book already reflected Galbraith's exceptional insights, as he argued that the behavior of modern industrial organizations should differ from that of individual capitalists and that large companies did not necessarily need to pursue maximizing profits as their primary goal. After the 1950s, Galbraith gradually developed his own economic theories. In The Affluent Society (published in 1958, see also the essays The Concept of Traditional Views, The Myth of Consumer Sovereignty, and The State of Social Equilibrium in this collection), he pointed out that while modern capitalist society was materially abundant, it still had flaws, primarily the dominance of producers over consumers and the equating of material enjoyment with happiness. He also proposed reevaluating the relationship between economic growth and social welfare. In The New Industrial State (see also the essays The Demands of Technology, Technological Organization or translated as The Technostructure, and General Theory of Incentives), Galbraith analyzed the power structure of modern capitalist society and proposed the idea that members of "technological organizations" or technocrats actually held the power of modern corporations.
The "Power Shift Theory," "Producer Sovereignty Theory," "Dual System Theory," and "New Socialism Theory" are considered the core of Galbraith's Institutional Economics school theory.
Power Shift Theory: As a representative of the Institutional Economics school, Galbraith inherited and developed the "Veblen Tradition" and proposed the theories of the "New Industrial State" and the "Dual System" from the perspective of power shifts. According to Galbraith's power shift theory, the importance of the "most important factors of production" in society changes over time. In different societies and at different periods within the same society, whoever controls the most important factors of production holds the power. Taking a capitalist society as an example, during the industrialization period, capital was the most important factor of production, so power was in the hands of capitalists. However, in the post-industrial era, capital is no longer the most important factor of production; its position has been replaced by technology (what Galbraith referred to as technology actually includes specialized knowledge such as technical expertise and management knowledge). Therefore, social power has shifted to the members of "technological organizations" or technocrats, including technicians and the management class.
In the post-industrial era, the interests and power structures within enterprises, especially large companies, have also changed accordingly. During the industrialization period, capitalists were the ones most concerned with the future of the enterprise (or company). In the post-industrial era, the separation of ownership and control in companies means that capitalists (shareholders) who do not possess specialized knowledge no longer have the right to interfere in the management of the company. Their concern for the company is no longer exclusive: they buy stocks in companies that they believe have a promising future. Meanwhile, technocrats have become the actual rulers of the company, their interests closely tied to the company, forming a community of fate with it. Galbraith refers to large companies managed by technocrats as "mature companies" and the new economy composed of these "mature companies" as the "New Industrial State."
Producer Sovereignty Theory: Starting from the fact that modern companies prioritize "stability" as their primary goal, Galbraith proposed the "Producer Sovereignty Theory." "Producer Sovereignty" is a concept that stands in opposition to "Consumer Sovereignty." Consumer sovereignty refers to the situation where consumers dominate and control the market, with their purchasing and consumption decisions determining what producers produce. In contrast, producer sovereignty refers to the situation where producers decide what products to produce and control prices, and consumers must purchase and consume according to the will of the producers. Galbraith argued that in modern capitalist society, producers design and produce goods, control their selling prices, and then use vast advertising, communication networks, and sales organizations to "persuade" consumers. Modern large companies also lobby governments to influence government procurement decisions. This is the main content of the "Producer Sovereignty Theory."
Dual System Theory: After analyzing the changes in the power structure of enterprises (companies), Galbraith further examined the economic structure of modern capitalist society, using the United States as an example. He argued that a modern capitalist economy like the U.S. is a dual system composed of a planned system and a market system. The Dual System Theory is Galbraith's primary theory for analyzing modern capitalist society. He believed that this dual system is the root cause of the contradictions and social conflicts in a "wealthy society" like modern capitalism, such as poverty, misallocation of resources, and other issues. In Galbraith's view, a modern capitalist economy like the U.S. consists of a planned system made up of over a thousand large companies and a market system made up of tens of thousands of small businesses and individual entrepreneurs. The phenomena of "power shifts," "goal changes," and "producer sovereignty" all occur within the planned system. Within the market system, power still resides with business owners, companies still prioritize maximizing profits as their primary goal, consumer sovereignty remains significant, and producers still take orders from the market. Galbraith argued that the power within the dual system is unequal, leading to income inequality. The market system is forced to purchase inputs at prices set by the planned system and can only passively accept prices manipulated by that system. The market system is exploited by the planned system. Since the planned system is powerful and the market system is weak, the former holds a dominant position in the socio-economic sphere, while the latter is in a position. For this reason, Galbraith proposed weakening the power of the planned system and expanding the power of the market system. He advocated price controls on the planned system to limit large companies from harming the interests of small businesses and consumers by artificially inflating prices. He argued that modern capitalist society should aim for power equality and income equality. His concept of power equality means restricting the power of large companies and elevating the status of small businesses, and he believed that power equality is the prerequisite for income equality.
New Socialism Theory: Galbraith's New Socialism Theory essentially holds that capitalism and socialism will eventually converge, and "New Socialism" can be achieved through social reforms. In Galbraith's view, this convergence is an inevitable result of modern economic and technological development, with the planned system ultimately replacing the market system. This is manifested in the demand for management, price control; the eventual replacement of capitalists by the technological class in managing the planned system; and the state's role in regulating aggregate demand, prices, and wages, as well as investing in education and developing technology. Galbraith believed that by limiting the power of the planned system in capitalist societies and elevating the status of the market system, power and income equality could be achieved in both sectors, thus realizing "New Socialism."
Galbraith's New Socialism Theory recognized certain general trends in modern mass production, such as the conflicts and contradictions between the planned and market systems. However, the solutions he proposed to resolve these contradictions (such as the state regulating aggregate demand, prices, and wages) may only alleviate the tensions rather than cure the root causes.
Major works such as American Capitalism: The Concept of Countervailing Power (1952), The Great Crash, 1929 (1955), The Affluent Society (1958), The New Industrial State (1967), The Economics of Public Purpose (1973), The Age of Uncertainty (1976), and A Life at the Center of the Storm (1971) are considered Galbraith's key works. In addition to including important and excerpts from these works, this collection also features essays reflecting Galbraith's views on certain influential economic predecessors—Adam Smith's contributions to political economic terminology and the foundation of political economy, Karl Marx's profound impact (Galbraith acknowledged that Marx was not a significant figure in his economic career, but no scholar could ignore Marx's existence), Thorstein Veblen's arrogant and unique perspectives, as well as John Maynard Keynes and his General Theory of Employment, Interest and Money and their influence on Western economics and society. The Chinese translation also includes a newly published pamphlet in 2004 by Houghton Mifflin Company, An Economic Analysis of Innocent Fraud: The Truth of Our Time.