CLASSIC READINGS IN ECONOMICS
John Kenneth Galbraith (1908- ) In the 1960s, two economists with contrasting views were best known to the general public. One was Milton Friedman, known for his conservative or libertarian views; the other was John Kenneth Galbraith, known for his liberal views. Galbraith followed in the steps of earlier liberal economists who favored a larger government role in the economy, but his writing ability quickly led him away from technical economics into writing for the general public. This had two effects: it made him extremely well known, and it meant that his provocative ideas had little influence on the actual movement of the profession. The profession discussed his ideas, but somehow few of them became incorporated into economic thinking. He is a prolific author, and three of his most famous books are American Capitalism, The Affluent Society, and The New Industrial State. This selection, taken from The Affluent Society, discusses the “dependence effect,” an idea that parallels and further develops Veblen’s notion of “conspicuous consumption.” Specifically, Galbraith argues that the process of production creates wants and then satisfies them. Thus, it is an open question whether the production has made humankind better off, because if it had not created wants, humankind would not know what it was missing. Note that in the selection he mentions “Messrs. Batten, Barton, Durstine & Osborn.” “Messrs.” is an old-fashioned abbreviation used in front of a series of names to mean more than one Mr.— that is, a number of people all of whom individually could be called “Mr.” Galbraith’s point in mentioning these people is that Batten, Barton, Durstine & Osborn was, and still is, a prominent New York advertising agency. John Kenneth Galbraith. 1952. The Affluent Society. Boston: Houghton Mifflin, pp. 126-131.
The Dependence Effect The notion that wants do not become less urgent the more amply the individual is supplied is broadly repugnant to common sense. It is something to be believed only by those who wish to believe. Yet the conventional wisdom must be tackled on its own terrain. Intertemporal comparisons of an individual’s state of mind do rest on doubtful grounds. Who can say for sure that the deprivation which afflicts him with hunger is more painful than the deprivation which afflicts him with envy of his neighbor’s new car? In the time that has passed since he was poor his soul may have become subject to a new and deeper searing. And where a society is concerned, comparisons between marginal satisfactions when it is poor and those when it is affluent will involve not only the same individual at different times but different individuals at different times. The scholar who wishes to believe that with increasing affluence there is no reduction in the urgency of desires and goods is not without points for debate. However plausible the case against him, it cannot be proven. In the defense of the conventional wisdom this amounts almost to invulnerability. However, there is a flaw in the case. If the individual’s wants are to be urgent they must be original with himself. They cannot be urgent if they must be contrived for him. And above all they must not be contrived by the process of production by which they are satisfied. For this means that the whole case for the urgency of production, based on the urgency of wants, falls to the ground. One cannot defend production as satisfying wants if that production creates the wants. Were it so that a man on arising each morning was assailed by demons which instilled in him a passion sometimes for silk shirts, sometimes for kitchenware, sometimes for chamber pots, and sometimes for orange squash, there would be every reason to applaud the effort to find the goods, however odd, that quenched this flame. But should it be that his passion was the result of his first having cultivated the demons, and should it also be that his effort to allay it stirred the demons
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