Friday, September 2, 2016

The Journalist Godfather of Keynesian Economics

Some important history from David Warsh:
Most people haven’t read Walter Lippmann,Public Economist, by Craufurd Goodwin (Harvard, 2015).  I have, and the book opened an important new window on an age for me....

Lippmann worked briefly as a leg-man for muckraker Lincoln Steffens, before joining the editorial board of the start-up New Republic. His first book, a paean to the infant academic enterprise of social psychology, was published in 1913 as A Preface to Politics.  Sigmund Freud arranged for it to be reviewed in Image. Theodore Roosevelt read it on vacation in Brazil and began a warm friendship with the author. Woodrow Wilson read it and in 1917 hired him as a war planner and two years later took him to the Paris peace talks as an aide. It was in the course of going to budget meetings together that Lippmann got to know Assistant Secretary of the Navy Franklin Delano Roosevelt....

 I learned from reading Goodwin’s book...the friendship Lippmann formed in 1919 with a counterpart junior negotiator at the treaty talks in Paris, John Maynard Keynes.  Both were critics of the ensuing treaty. Ten years later, the calamity of the Great Depression became paramount for both. Reasoning matters through on his own, then with dawning recognition of the English economist’s contribution, Lippmann in the 1930s became the principal interpreter to the literate public in the United States of what eventually came to be known as the “Keynesian revolution.”...

Lippmann gave the prestigious Godkin Lectures at Harvard in 1934, “The Method of Freedom.”  Keynes’ influence is evident throughout, according to Goodwin, in Lippmann’s ideas about “free collectivism,” a balance between the US government’s responsibility for managing the business cycle, on the one hand, and the liberty and competitive instincts of citizens, great and small, on the other. One chapter of the little book that eventuated is even titled “The End of Laissez Faire.” Keynes’ name doesn’t appear in the book, Goodwin writes, for one reason or another (a row developed soon when Harvard failed to recognize Keynes with an honorary degree at its gala Tercentenary celebrations in 1936), but by 1937, Lippmann wrote in his column,
The man who more than any other living person to develop a scientific basis for this policy, and to popularize it, is Mr. John Maynard Keynes. Few economists have ever exerted as wide an influence on practical affairs in their own time.
 Thus in Walter Lippmann: Public Economist, I had found the answer to a riddle that had puzzled me whenever I got to thinking about the years after World War II.  Every time I went looking for a Keynesian evangelist in the period, I found mainly critics, especially journalists who had attended the first Mont Pelerin meeting, Henry Hazlitt and John Davenport.  Economist John Kenneth Galbraith entered the lists as a popularizer of Keynes in 1953, with American Capitalism: The Concept of Countervailing Power, and especially after 1956, with The Affluent Society.  It turns out, though, that among journalists, Walter Lippmann had been the godfather of the Keynesian understanding of what we still call “the modern mixed economy.”  He had made the sale before the war.
Curiously, though, Lippmann was at times sympathetic to Austrian school economics, while simultaneously promoting Keynes. Go figure. Warsh writes:
Lippmann had become highly critical of the preoccupation with bureaucratic planning in the wake of Roosevelt’s landslide reelection. The New Deal now threatened civil liberties and free markets, he wrote in 1937.  American progressivism
…was in the hands of inexperienced and short-sighted zealots who, unless they were soon checked, were destined to discredit progressivism and to provoke a violently reactionary temper: and that in the ensuing conflict the ruthlessness of the Right would be much more than a match for the ruthlessness of the Left.
 That same year Lippmann published his most important book, The Good Society, a draft of which appeared first in The Atlantic Monthly.  Today, its exposition of the virtues of decentralized markets against the tendencies to inefficiency of central planning is perceived as one of the founding documents of what has come to be known as “neoliberalism.”  Lippmann acknowledged the influence of Austrian economists, including Ludwig von Mises and Friedrich Hayek; he advocated Keynesian macroeconomic policies as well. 


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