Published by EH.Net (March 2015)

Craufurd D. Goodwin, Walter Lippmann: Public Economist. Cambridge, MA: Harvard University Press, 2014. ix + 414 pp. $35 (cloth), ISBN: 978-0-674-36813-2.

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

Few would quarrel with the judgment that Walter Lippmann (1889-1974) ranks as the dean of newspaper pundits.  Indeed he virtually invented the genre.  Over a prolific career that spanned more than six decades, he produced numerous books and articles that appeared in magazines.  He is primarily remembered for the syndicated column he produced — beginning in 1931 — that reached roughly eight million readers of some two hundred papers at its peak.  Craufurd Goodwin, James B. Duke Professor of Economics Emeritus at Duke University, has skillfully mined Lippmann’s voluminous papers, housed at Yale, with special attention to his thinking on economic matters.  By his reckoning, for example, a thousand of Lippmann’s 1,500 columns published between 1931 and 1946 dealt with economic issues.  The product of this research opens a fresh window on the state of economic discourse during turbulent times.

Lippmann’s career path was molded in the first instance by a visit to Harvard by Lincoln Steffens, the prominent muckraker, whose mission was to recruit the ablest young minds to the profession of journalism.  He was advised that Lippmann, a member of the class of 1910, was the most talented of his undergraduate generation.  Lippmann’s principal disciplinary interest at the time was in philosophy; his exposure to Harvard economics had been limited and had not been altogether happy.  Persuaded that journalism had a vital role to play in educating the electorate, he signed on to a post-graduate apprenticeship with Steffens which involved investigations of the banking industry.  Meanwhile he wrote books in which he criticized orthodox economists for “having taken their morals from the exploiter and of having translated them into the grandiloquent language of high public policy.” He characterized this as “intellectual fraud.”

These works attracted the attention of men in high places.  President Wilson appointed him as assistant to the Secretary of War during World War I, a position from which he served as a member of “The Inquiry,” a high-level think tank charged to prepare plans for dealing with post-war problems.  Lippmann called for the insights of an improved social science to be used in shaping public policies and recommended the creation of a body resembling what the Council of Economic Advisers became after World War II.  He also served as a member of the United States delegation to the Paris Peace Conference. There he met John Maynard Keynes, a member of the British Treasury delegation, and struck up a friendship that lasted a lifetime. He shared Keynes’s analysis of the unworkability of the Treaty of Versailles, as set out in his Economic Consequences of the Peace.

Lippmann’s career as a public economist took off in earnest in 1931 when he began his syndicated column.  By then, he had established contact with a wide range of economic thinkers by direct acquaintance or by correspondence.  There was no ambiguity about the overriding issue of the day:  the analysis of the causes of the Great Depression and of potential remedies.  He initially regarded the breakdown of the international economic system as the central problem, but soon realized that he needed to improve his understanding of monetary theory and policy.  From his reading and from consultations with monetary economists, he came to appreciate the value of aggressive monetary expansion as a depression-fighting tool.  By mid-1932, his thinking was still the captive of one component of conservative orthodoxy — the sanctity of balanced budgets and their alleged importance to sustaining business confidence.

Mid-1933 marked a turning point in Lippmann’s economic thinking.  He attended the World Economic Conference held in London which disintegrated in disarray.  The trip provided an opportunity to renew his conversations with Keynes. This shaped his grasp of a conception of compensatory spending which called for increased governmental outlays to offset deficiencies in private demand. This supplied a rationale for the deficit spending of the Roosevelt administration which he conveyed to his readers.  He resisted branding this doctrine as “Keynesian.” Nevertheless, a careful consumer of his columns would have been exposed to the central policy message of Keynes’s General Theory, even before its publication in 1936.  This was well in advance of what was then on offer in the bulk of American academia.  Recall here that Alvin Hansen — who came to be regarded as Keynes’s leading American disciple — wrote a hostile review of The General Theory when it first appeared.  In his capacity as a Visitor to the Harvard Economics Department in the mid-1930s, Lippmann tried — unsuccessfully — to persuade its senior members to broaden their horizons by appointing Lauchlin Currie, then on the staff of the Federal Reserve Board, who championed an activist fiscal policy led by deliberate deficits.

While Lippmann found justification for FDR’s unconventional fiscal practices, he was by no means an uncritical commentator on New Deal programmatic initiatives. He objected strongly to its National Recovery Administration, which awarded immunity from anti-trust prosecution to industries adopting so-called “codes of fair competition” (which were taken to mean agreements not to cut wages and prices).  This he saw as a legalized collusion.  Governments had a responsibility for the behavior of the general price level, but they had no business meddling in the setting of individual prices.  That was properly the function of competitive markets.  In his opinion, the NRA was ineffective, inefficient, and immoral.  He was pleased when the Supreme Court struck it down.

Along with official Washington, Lippmann was unprepared for the events of 1937.  As he read the economy in 1936, recovery was well underway and fiscal stimulants could start to be prudently withdrawn.  1937, however, brought a precipitous decline in economic activity, a phenomenon that was particularly puzzling because the economy was still operating at a level well below full employment.  Currie’s postmortem on the recession of 1937-38 revealed that the “net contribution of government to spending” shifted from sharply positive in 1936 to sharply negative in 1937.  This finding was influential in converting former skeptics about the explanatory power of the new macroeconomics into believers.

In the post-World War II years, the major preoccupation of Lippmann’s writing focused on foreign affairs.  He welcomed the creation of the Council of Economic Advisers, largely cut as it was to a design he had proposed in 1918.  He was enthusiastic about the work of the Keynesians on the Kennedy-Johnson Council in orchestrating the demand-side tax cut of 1964.  But he broke sharply with Johnson’s determination to fight a war on poverty and a war in Southeast Asia simultaneously without taxes to restrain aggregate demand, a decision he believed had “tragic consequences.”

This volume is a creative supplement to the considerable literature on “how the Keynesian revolution came to America.”

William J. Barber is the Andrews Professor of Economics Emeritus at Wesleyan University.  His works include From New Era to New Deal: Herbert Hoover, the Economists, and the Shaping of American Economic Policy, 1921-1933 and Designs within Disorder: Franklin D. Roosevelt, the Economists, and the Shaping of American Economic Policy, 1933-1945.

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