Copyright: 2001

Publisher: Houghton Mifflin

This is a collection of Galbraith's works that, according to the author in the preface, were chosen by his associates, his publisher and the reading public.  This books serves as a quick primer on the economics of this renowned economist as well as a fascinating overview of his literary life.  Most of the chapters of this book have appeared as chapters in other of his books but each of these in turn grew out of other published essays or lectures that he had previously prepared.  Having been so finely tuned for the first publishing and then aged so well over his lifetime, the selection here contains the quintessential Galbraith. 

[Notes]

Countervailing Power

• In this excellent piece from American Capitalism, Galbraith introduces the concept he named the chapter after.  The concept of power in the market is a recurring theme in much of Galbraith's writing and it is studied here as it relates to counter-balancing power in the market-place.  Classical economic theory removes power from the market by asserting that competition will neutralize any position of power that might be gained on either side of the transaction.  Competition keeps both buyers and sellers "in line".  Since Galbraith argues that true competition among producers has disappeared, there are other forces which keep the market in check... forces which Galbraith calls "Countervailing Power".  Any time one side or the other gains an edge in the power market, a countervailing force will arise on the other side.  Thus when Producers collude to lower the cost of labor, unions arise in response to the power vacuum on the laborer side of the table and the power equation is stabilized once again.

The Concept of the Conventional Wisdom

• Galbraith coined the term "Conventional Wisdom" in this essay from The Affluent Society.  He deftly explains why academic and political leaders are so quick to repeat what they have been told and scoff at the new.  His piercing look at the tendency of academics in particular to make "vigorous advocacy of originality a substitute for originality itself."  is quite compelling.  His observations are intriguing given the recent advancement of "Global Warming" as the next crisis which everyone who is smart believes is right around the corner and those who don't believe it is a crisis are scoffed by the learned men among us. 

The Case for Social Balance

• Here Galbraith makes his strongest case for utilizing economic policy to engender social good. His vignette describing the American suburban family going on a trip to the country is a classic description of the juxtaposition of what American's THINK is important and what we LIVE as important.

The Imperatives of Technology

• Even though this essay was written and published before the computer revolution, the insight into the impact of technology on the modern corporation is stunning.  While most economists look at how technology impacts production directly (think Solow), Galbraith goes a step beyond and looks at how technology changes the PROCESS of production.   His analysis of the impact of the specialization of knowledge in lengthening the production process through planning is very insightful, especially given some of the schools of thought surrounding software development today.  Agile Development grew out of the Lean school of production management, a Deming ideology, but looking at Galbraith's work here, we can learn some vital lessons. 
• The diffusion of power via the specialization of knowledge is an important concept in any organization.  Software development methodologies often stumble over themselves because developers tend to think they are "cutting edge" in every aspect of their work.  In reality, while the particular clay we are modeling with is fresh and clean, the tools of the art haven't really changed all that much since the first earthen pots were thrown centuries ago.  For instance, Research and Development for most Agile Developers is a nice bucket for "pet projects" that we would like to work on but can't get the management to agree to.  Galbraith reminds us in this chapter that the R & D bucket grew out of the need for more information as technology became crucial to business needs.  The assumption is that for any given problem, a solution does exist whether or not the knowledge yet exists to develop that solution.  Since we know that the solution exists, but we don't have the knowledge yet, we must expend time and energy gaining the knowledge that will allow us to develop the solution.  It is this uncertain period of "gaining new knowledge" that appears under the catchet of "Research and Development" in economic terms.  Solow figured out how to account for the gains of technology and R & D is the tool we used to account for the cost of technology.  It seems that in the Agile world, we would be better off using our R & D allocation for developing knowledge to apply to business problems for which there is no known solution and for which the knowledge does not yet exist than we would in using that allocation for solving known problem with known solutions.
  

The Technostructure

• Galbraith here unveils his most unwieldy terms which refers to the modern day planning and organizational structure in firms.  He chose this term to reflect the need for firms to "structure" the information and knowledge necessary to modern success due to technological innovation.  There is an interesting discussion of the effectiveness of group decision making and the process whereby this takes place.  The need for information to flow freely within an organization is very evident since it is only by assimilating all of this information that a group can make accurate and wise decisions. 
  

The General Theory of Motivation

• In keeping with the tradition of Adam Smith's Theory of Moral Sentiments, Galbraith explores what motivates a person to take a particular course of action.  Using the framework of goals there are 4 ways to being an individual into acceptance of another's goals:

1. Compulsion - Negative reward
   
2. Pecuniary motivation - Payment, either monetary remuneration or in kind
3. Identification - You identify with the group and make their goals your own
4. Adaptation - Believing that the goals are close enough to your own that you can influence the group in your favor (think politicians and political parties)

• Compulsion cannot co-exist with identification or adaptation, however the corporate world is rife with examples of compulsion and pecuniary motivation living side-by-side in perfect harmony. Above a certain level of income, identification and adaptation become more important than pecuniary motivation.
  

Economics and The Quality of Life
&
The Proper Purpose of Economic Development

• These chapters are primarily a discourse in the direction of economic study with regard to its purpose.  Many economists believe that focusing on the growth of aggregate output is analogous to focusing on improving the human condition.  Here is an effective argument that beyond subsistence levels, the quality of human life may not be improved by over-all increases in output but rather by balancing the areas of output between private and public consumption.
  

The Valid Image of the Modern Economy

• If you ever want a succinct outline of Galbraithian economics, read this chapter.  In as tight of a nutshell as you can fit his general theories, he clearly outlines and defines his positions on various aspects of economic thought. 
  

Power and the Useful Economist

• I expected this chapter to reflect more of Galbraith's thoughts from his book The Anatomy of Power, however he chooses here instead to focus on the role of power in the economy.  He explains in detail how power is wielded in the economy, by whom it is wielded and for whose purpose it is wielded.  He argues quite effectively that for an economist to ignore power in the economy is to ignore a basic formative feature of any economy.  The traditional view that economies passively settle to equilibrium states, guided by the invisible hand is dangerous in Galbraith's mind because it ignores the power of the corporate to manipulate markets.  If markets can be manipulated than then free market is a myth and can no longer serve as a foundational pillar of economic thought. 

The "Biographical" Chapters

• Galbraith was somewhat of a historian, particularly a student of economic history.  He gives excellent biographical sketches of Adam Smith, Karl Marx, Thorstein Veblen and of course Sir Keynes.  These men are interesting characters in their own right and Galbraith gives succinct and interesting views of the men and their influence. 
  

The "Crash" Chapters.

• Galbraith wrote "The Great Crash of 1929" which is considered by many to be not only an authoritative account of the history of this era but also an excellent economic dissection of the causes and effects of the Crash and the Depression.  These chapters are great primers for anyone interested in the Crash and have certainly sparked an interest in me that will probably result in me reading the full book soon!

The Unfinished Business of the Century

• An incredibly prescient foretelling of the Bubble Burst, this lecture was given in June of 1999, at the height of the Bubble itself.  In addition this is a very eloquent dissertation on the liberal view of the world.  If more liberals were this capable in expressing their views and opinions, there would be more people willing to listen to them.  Unfortunately the sheer dryness of this lecture would assuredly keep it from getting on "Air America" and I suppose even if it did, the average listener of that network would not understand the portent of the message.  Of course Limbaugh's and O'Reilly's listeners wouldn't recognize Smith or Ricardo either so no slight intended.