The New Economics One Decade Older

James Tobin
Princeton University Press, 1974

Preface

In the spring of 1972 I was privileged to deliver the inaugural series of Janeway Lectures at the Woodrow Wilson School of Princeton University. I am very grateful to Dean Lewis and the faculty of the School for the invitation. It gave me the occasion to organize some reflections on macro-economic policy in the United States over the past dozen years.

Mr. Eliot Janeway, who honored the first lecture with his presence, had evidently expressed to the School his interest in lecturers who in some measure were inspired by Joseph A. Schumpeter. I do not know how well I met this preference, but I fully share Mr. Janeway's enthusiastic admiration of Schumpeter, who was my teacher, my dissertation adviser, and, in spite of many theoretical and political disagreements, my friend. I am afraid he would have been scornful of the "New Economics," but at least he would have endorsed its faith that the pragmatic mixture commonly called American capitalism was capable of sustained growth bringing increasing well-being to the masses of the population. And he would have been even more impatient than "New Economists" with the inhibitions on prosperity and progress proposed by monetarists and New Leftists. The development of a bourgeois intellectual New Left movement, incidentally, was foreseen with almost uncanny accuracy in Schumpeter's 1940 classic Socialism, Capitalism and Democracy.

Thanks to the Princeton University Press, I am publishing the three lectures here, essentially as they were prepared for delivery. I have made some editorial changes, and a few substantive ones. I have added some concluding remarks.

When Dean Lewis first intimated that I might be invited to give the lectures, he suggested that I might reflect on "The Keynesians, the Monetarists, the Treasury, and the 'Fed'." I took his suggestion, if not his title. I have always been fascinated by the connections between professional economic science and the terms of public discussion of economic issues, and by the intersection of these two influences in the actual making of economic policy in government.

The rise and fall — the fall, I think, is only partial and temporary — of the so-called New Economics in the sixties is an instructive chapter in the interaction of economics, public opinion, and government policy. The first chapter is devoted to that history, viewed from an admittedly biased perspective. The theme is continued in the second chapter, where I consider some currently fashionable attacks on the New Economics and the policies of the sixties associated with it, attacks from both the New Left and the monetarist Right. In the third chapter I try to draw from the experience of the last decade some lessons for economic stabilization policy in the future.

James Pugash, my undergraduate research aide at Yale, helped me prepare the lectures. Walter Heller came to the rescue of my memory on some points of history — I have vastly larger debts to Walter not so specific to this volume. In revising the lectures for publication I have greatly benefited from Richard Lipsey's valuable and perceptive suggestions. It is a pleasure to acknowledge his help, since he was one of my hosts at the University of Essex in January 1966 when I delivered a Noel Buxton Lecture on "The Intellectual Revolution in U.S. Economic Policy-Making," covering some of the material reviewed here in Chapter 1. Finally, Sanford Thatcher of the Press has been a most helpful editor.

J.T.