Five Economic Challenges

142 Pages·1981·15.442 MB·English

by  Robert L. Heilbroner, Lester C. Thurow.

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PRENTICE-HAIL, INC. Englewood Cliffs, New Jersey
07632
Charts on pages 39 and 114, and tables on pages 68 and 71,
from 1he EconomicPr oblem6th, Ed ,Ro bert L. Heilbroner
and Lester C. Thurow. Prentice-Hall, Inc., © 1981.
Reprinted by permission.
FiveEco nomicC hallengbesy Robert L. Heilbroner and Lester C. Thurow
Copyright © 1981 by Robert L. Heilbroner and Lester C. Thurow
All rights reserved. No part of this book may be
reproduced in any form or by any means, except
for the inclusion of brief quotations in a review,
without permission in writing from the publisher.
Address inquiries to Prentice-Hall, Inc.
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Whitehall Books Limited, Wellington, New Zealand
10 9 8 7 6 5 4 3 2 1
Library of Congress Cataloging in Publication Data
Heilbroner, Robert L.
Five economic challenges.
Includes index.
1. Economics. 2. United States-Economic conditions
-1971- . I. Thurow, Lester C. II. Title.
HB171.H48 330.973'092 81-465
ISBN 0-13-321091-X MCR2
ISBDN- 13-321091-X
RJrT orbaenn Ethadn ,a nZeked anJdo nah
INTRODUCTION ix
TI-IE FIVEC HAUENGES
ONE
CopwiinIthgn flat1i on
1WO
OvercoRemciengs 3s1i on
TI-IREE
UndersGtanovdeirnmnegn t
SpenanddiT naxgi5 n3g
FOUR
DefethnedDo illnar7g 9
FIVE
LivwiinLthge E snse 1r0gy3
A !AST WORD 129
INDEX 135
IHTRIDUCTIOH
Like great threatening clouds, five economic challenges­
inflation, recession, big government, the falling dollar, the
energy crisis-loom over our lives. Who has not worried about
inflation? Who has not been made apprehensive about the
consequences of recession? Isn't the problem of taxing and
government spending a national obsession? Although we may
not understand very clearly what it means, do we not feel in
our bones that it is ominous when the dollar falls and gold
skyrockets? And is it not gradually dawning on us that the
energy crisis is not just a matter of higher gasoline prices, but
of an impending change in our way of life?
So we know the five economic challenges from their
impact on our lives. But the challenges loom up for another
reason. We do not really comprehend them. The challenges
wrack America not just because of the damage they inflict, but
because of the confusion they bring. We do not understand
where the great storm clouds come from or what gives them
their enormous power.
As a result, the challenges demoralize us. We listen to
experts-or to politicians who have been drilled in their parts
by experts-talk about the causes of rising prices and falling
output, of the intricacies of government spending and taxing,
about the outlook for the dollar and for oil, but we do not
understand what they are saying. Worse, we often have the
feeling that they do not understand it either. Thus the chal­
lenges are not only assaults on our economic well-being, but
on our psychological well-being. They undermine our self­
confidence, our feeling that we have the necessary grasp to set
things right, to distinguish good programs from bad ones.
This book is aimed above all at dispelling that feeling of
ix
X INTRODUCTION
insecurity, even inferiority, in the face of the five central
economic problems of our time. Our primary purpose is to
explain these problems in terms that are crystal clear, not only
to readers of the financial pages, but to those who never get
past the spons or fashion pages.
Just as a good mechanic can teach a lot about how a car
works without subjecting his listeners to a lecture on compres­
sion ratios, so a good teacher of economics should be able to
explain a lot about how the economy works without subjecting
his audience to long, technical explanations. But the engine of
an economy· is different from the engine of a car in one vital
way: Its pans are people. A mechanic may be able to fix a badly
working engine by disconnecting or reconnecting things or by
discarding worn-out pans for new ones. But when you fix an
economic engine, you are disconnecting or reconnecting
people-to work, money, opportunity. When you throw old
pans of the engine aside and put in new ones, you are
consigning industries, regions, cities, to hardship or good
fortune. Thus an economist can never fix an economy the way
a mechanic can fix a car. No matter whether he assures you that
the economy will run faster and farther and more smoothly
after his repairs than before, there are always human costs as
well as human benefits involved. Changes in the economic
machinery never lift everyone evenly, like boats on an incom­
ing tide. Usually economic remedies spread their effects
unevenly, making the rich richer and the poor poorer, or vice
versa; helping the Sun Belt grow faster than the Frost Belt or
the other way around; boosting one interest and leaning
against another.
And so the real challenge-the challenge below the
economics of inflation and unemployment, government
spending and taxing, international competition and the energy
crunch-is political. It is to find resolutions to difficulties that
will be acceptable to the people who are the economic
machinery. As we will see, it is not the economics of the five
challenges that is difficult. It is the politics.
INTRODUCTION xi
Bringing home that political meaning of our current
economic plight is the second major purpose of our book,
every bit as important as explaining the "economic" part of the
challenges. We want to show that political decisions are
inextricably mixed into these problems, and that every eco­
nomic "solution" to these challenges is political, insofar as it
will favor one group or region or constituency more than
another. Our message is that the economy is not a machine
and that economists are not engineers. The parts of the
economy, no matter what fancy names we give them, are always
people. The repairs, for all the economic jargon in which they
may be clothed, are always political. The decisions are never
just technical, but moral.
We have strong political views about many of the
economic challenges before us-views that will become clear
as we get into things. But our objective is not to try to impose
our own political judgments so much as to make our readers
aware of theirs. Our belief is that people want to have their
economic predicament explained to them, but do not want
their political minds made up for them.
Finally, a word as to how this book came to be written.
fur many years we have worked together on a college
textbook* After we finished the most recent edition, we felt
that it contained five "lessons" that ought to be beamed at a
broader audience than students. The gist of these lessons,
sharpened and pointed, is the basic text of our book. Five
Economic Challenges represents the economics that we feel
our country must know to master its economic destiny.
Robert L. Heilbroner
Lester C 1hurow
*Robert L. Heilbroner and Lester C. Thurow, 7heEco nomicPr obl6emth ,ed
(Englewood Cliffs, NJ: Prentice-Hall, 1981)
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