A Perilous Progress: Economists and Public Purpose in Twentieth-Century America

Published by EH.NET (April 2002)

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Michael A. Bernstein, A Perilous Progress: Economists and Public Purpose in Twentieth-Century America. Princeton, NJ: Princeton University Press, 2001. xi + 358 pp. $39.50 (hardback), ISBN: 0-691-04292-6.

Reviewed for EH.NET by William J. Barber, Department of Economics, Wesleyan University.

This volume is part chronicle and part sermon. Both parts are rewardingly excellent.

The chronicle traces the course of the American economics profession from its beginning in the late nineteenth century to the close of the twentieth century. The author (Professor of History and Associated Faculty Member in Economics at the University of California, San Diego) takes note of the fledgling profession’s early struggles to establish standing and credibility with regard to the expertise its members could bring to the shaping of economic policy. The door to the corridors of power was opened a crack — but only a crack — in the Washington of World War I. Greater opportunities beckoned in the 1920s when Secretary of Commerce Herbert Hoover — who rejected the notion of inevitability in the business cycle — recruited economists to mount studies sponsored by the President’s Conference on Unemployment. Hoover nonetheless turned a deaf ear when more than a third of the membership of the American Economic Association petitioned him to veto the Smoot-Hawley Tariff in 1930. For the profession, the decade of the 1930s was difficult altogether. Though its members were represented on an unprecedented scale in the ranks of the New Deal’s bureaucracy, the absence of policy remedies for Depression around which a consensus could be formed was damaging to their public image.

In Bernstein’s account, a recognition that the economics profession could usefully serve the public purpose dated from economic mobilization for World War II. This trend was sustained and extended in the “national security state” of the Cold War era. The creation of the Council of Economic Advisers in 1946 was a signal achievement that institutionalized a role for economists in government, conveying an authority far beyond that accorded to other social scientists. Bernstein makes valuable use of the archives in the various Presidential Libraries — as well as the records of the American Economic Association — in crafting his narrative.

The author inspects the CEA’s performance in the Kennedy-Johnson administration in some detail and for good reason. The demand-side tax cut of 1964 — engineered by a CEA composed of Walter Heller, James Tobin, and Kermit Gordon — was the high water mark of Keynesian-style economics. For a time, confidence in the ability of economists to “fine tune” macroeconomic policies to achieve full employment and to accelerate economic growth seemed to be well-placed. That faith was shaken in the later 1960s as military spending in Vietnam fueled inflationary pressures that the Johnson administration failed to contain. But worse was to come. The sense of Keynesian triumphalism that prevailed in the early 1960s was effectively shattered in the “stagflation” of the 1970s. The backlash brought monetarist and supply-side doctrines into prominence. The author adds a richness of detail to this oft-told story.

The sermon dimension of the volume appears in the concluding chapters in which the author surveys the “state of the art” at the close of the twentieth century. At this moment in time, economists appear to have lost a capacity to say anything useful to serve the public purpose. The profession’s preoccupation with models remote from reality and with a virtually unchallenged faith in the allocative superiority of free markets have meant, in effect, that its practitioners have turned to serving the acquisitive purposes of private interest and have lost touch with the public interest. Bernstein argues this point with some vigor in a useful discussion of unfortunate consequences that have flowed from exercises in de-regulation and in the privatizing of functions formerly performed in the public sector.

Altogether, this book is an impressive achievement.

William J. Barber is Andrews Professor of Economics, Emeritus, at Wesleyan University. His recent works include Designs within Disorder: Franklin D. Roosevelt, the Economists, and the Shaping of American Economic Policy, 1933-1945 (Cambridge University Press, 1996).