UNR Students for Liberty

Legend.

Arthur F. Burns, now chairman of
the Council of Economic Advisers.
is one of the country’s outstanding
statisticians. Yet there is in his implied economic philosophy much to
cause misgivings.

He has, it is true, several times
criticized “Keynesian thinking” (see
The Frontiers of Economic
Knowledge.” Princeton University Press). Yet in this
very criticism he seems to
me to accept the four
principal assumptions, so
far as practical policy is
concemed, of Keynesian
doctrine: (1) That “full
employment” is the paramount economic goal; (2)
that a private competitive
economy, left to itself, tends to generate from mysterious inner forces a
perpetual cycle of boom and bust;
(3) that it is the “responsibility” of
govemment—tacitly assumed to be
wise, disinterested, and benevolent-
to pursue “contracyclical” policies to
eliminate or mitigate these otherwise
inherent booms and slumps; and (4)
that the basic contracyclical policy is
deficit spending. Let us look at these
assumptions more closely.

I—In “The Frontiers of Economic
Knowledge,” Dr. Burns declares:
“The principal practical problem of
our own generation is the maintenance of employment, and it has now
become—as it long should have been-
the principal problem of economic
theory. This transformation of economic theory is due in large part
to the writings of john Maynard
Keynes.” This surely sums up present
fashionable doctrine. But is it true?
The principal practical economic
problem of our own, as of preceding
generations, is the creation of the
maximum material welfare for the
great body of the people. This can be
mainly achieved through maximizing
the production and consumption of
the right things (including leisure).
Maintaining employment is, of course,
one of the necessary means to this
end. But to erect _it into the “principal”
end itself is a hopeless confusi And
as I wrote in “Economics in One Lesson” eight years ago: “Nothing is
easier to achieve than full mploy-
ment, once it is. . .taken as in
itself. Hitler provided full employment with a huge armament program.
The war provided full employment
for every nation involved.” The slave-
labor camps in Russia today provide
full employment.

2-Now in a speech in Detroit an
couple of weeks ago—on Oct. 18-
Dr. Burns made what seems to me
another disturbing statement. “Since our system of
free and competitive enterprise is on trial,” he said,
“the government cannot
stand aloof from the private
economy but must be ready
to take vigorous steps to
help maintain a stable prosperity.” In the last two centuries the system of free
and competitive enterprise
has shown itself to be the most productive ever known to man. In what
sense is it still “on trial”—except in
the sense in which every human institution and every human being may
be said to be on trial? Is it more on
trial than socialism? Or state planning?
Or Dr. Burns’ “beloved acyclical
policy”? The tacit assumptions in Dr.
Burns’ statement are not only that
a free and competitive private econ-
omy cannot be trusted to be reason-
ably stable, but that the government
—i.e., the politicians in power—can be
trusted to know and to do exactly
what is needed to keep it stable.
Both assumptions are debatable.

3—“Contracyclical policies” is a
fancy and flattering phrase, but I
cannot recall any example, historical
or contemporary, of their consistently
intelligent, disinterested, and successful application. On the contrary, the
record of nearly every govemrnent
in the world, in our time, is one of
recurrent or continuous monetary inflation. It is to this monetary inflation
that the apparent “successes” of fullemployment policies are due.

4—Dr. Burns seems at one with
the Keynesians, in spite of his reservations, in regarding deficit financ-
ing as one of the chief “weapons”
of “contracyclical p0licy.” But this
modern superstition, if persisted in,
must lead toward economic and political catastrophe. Largely as a re-
sult of its dominance, we have had
budget deficits for 22 out of
last 25 years; and the end of the
deficit orgy is not in sight.