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2 of 4 people found the following review helpful
5.0 out of 5 stars hits the nail on the head in diagnosing the obsolescence of our economic thinking, March 20, 2012
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This review is from: The Affluent Society (Paperback)
I wish I'd discovered this guy's writing during his lifetime. What's striking is that economic and political thought still hasn't come close to acknowledging what was already obvious to JKG more than half a century ago - the need for a paradigm shift that comes to terms with an economy so productive it doesn't know what to do with itself, as our society is so used to poverty, it has yet to figure out how to handle and take full advantage of abundance.

I've always thought there was something off when, in an economy with rapidly expanding productivity and the theoretical capacity to produce at least all the material goods all of us could want many times over, people increasingly feel overworked and like they're having trouble making ends meet. In the continuing aftermath of the 2008 financial crisis and subsequent recession, something seemed fundamentally dissonant about all the talk - from across the political spectrum - about the need for "job creation" as the most important issue of the day, in a world of unprecedented production capacity. What seems lost in the anguish over unemployment and stagnation is that 1) the basic purpose of an economy, from a birds eye view, is to provide goods and services - stuff - for its people, and 2) that we have no shortage of capacity for production of a wide variety of stuff, enough to sustain our entire population at a very comfortable level. Why can't we focus on figuring out a sensible way to take advantage of our society's affluence? All the talk of "economic growth" seems divorced from any connection to actual improved standards of living for the average person; it seems to me nothing more than a very inefficient way of trying to reduce unemployment-driven poverty and individual economic insecurity, with many negative effects on the environment and on the lifestyles of people who ought to be able to relax a little and enjoy our wealth and ability to enjoy more leisure time.

From the first page of "The Affluent Society", Galbraith assures me I am in fact not the first person to have had these thoughts, and goes on to express these ideas eloquently and elaborate on them in very interesting ways. He substantiates my suspicion that the widespread concern with economic growth is almost entirely a proxy for concern about poverty and economic security and a very ineffective way of addressing it at that,. He also explains how economic policy is not only highly inefficient at alleviating the income insecurity people care about, it's also not effective at maximizing long-term growth in overall production capacity (which few people are actually concerned with in developed countries, for good reason) OR in facilitating the innovation and investment of resources in the kind of novel consumer products and services that would most genuinely raise peoples' private living standards (an iPhone counts; another new brand of deodorant doesn't). Investments in the kind of basic, patient R&D that yields truly novel consumer products is unaffordable by small and medium companies, and not very well incentivized even for the large, monopolistic companies that can afford it. [A lot of the breakthroughs in innovation that occurred in America in the mid-20th century were actually funded by research investments within the Department of Defense under the justification or guise of military necessity. The internet has unleashed a lot of valuable and exciting innovation in the late 20th and early 21st centuries, but much of it doesn't lend itself to the standard B2C retail model.] One can accept all of this and have differing views on what the best approaches are to the realities of an economy in which growth in the production of standard consumer goods is no longer urgently needed nor demanded by the market - but still necessary for "job creation" given that that's how we're used to distributing these goods. We should all, however, be able to acknowledge that the way we've been talking about the economy and about growth and jobs, is out of touch with our affluent economy.

Galbraith paints a humorous picture of Americans so wealthy in personal goods (albeit not as wealthy as we could be if companies had better incentives to invest in R&D that yields truly innovative and useful products) and yet relatively impoverished in public ones, especially those provided locally. As we're able to afford increasingly frivolous and abstract consumer products, we accept the need for painful cuts to our public budgets. Contrary to popular belief across the ideological spectrum, this contradiction is more applicable to the middle class than to the poor, but is most striking for the very wealthy, who've effectively maxed out any utility they can get from individual purchasing power and can be made more economically "wealthy" only through improvement in the "public goods" that affect them - or investments in R&D in the private or public sector that will yield truly innovative utility for consumers. Of course, not all public spending is created equal. But Galbraith makes an irrefutable case that - though he doesn't put it in exactly these terms - a wealthy voter solely driven by material self-interest should be an even more adamant advocate for higher taxes and more government spending across the board than a wealthy voter primarily concerned with raising the living standards of the poor. This point seems lost on everyone from Grover Norquist to Michael Moore, from Ron Paul to Ralph Nader, from Warren Buffet to David Koch, from Milton Friedman to Paul Krugman.

I'm inspired by this book to learn more about is how standard measures of things like productivity and utility are measured by economists in a primarily non-industrial economy - and then how they should be measured in terms meaningful to our well-being, even just in economic terms. I can conceive of cars and houses and TVs and even haircuts and restaurant meals having economic value for which growth can be meaningfully measured from one decade to the next. But what about a consultation with a financial adviser? That has value but it's a type of meta-value, or investment value not dissimilar to education and doesn't represent real end-user consumption, the way I see it. Facebook usage, on the other hand, does represent end-user consumption of a sort but is not paid for as such (the company's revenue comes from B2B sales of ad space and user data and it's operations are thus considered intermediate, not final, goods). "The Affluent Society" was originally written in the still largely manufacturing-dominated economy of the 1950's. Since then, the growth-driven, product-oriented economic framework developed by Smith and Ricardo amid pervasive poverty has no doubt become even more profoundly out of date in the post-industrial economy.

I wish Galbraith were still around to share his thoughts on all these developments. And I hope at some point society will realize the opportunity afforded to it by its affluence to readjust its thinking about work, growth and economic value and to direct its efforts to higher-order economic and societal goals.
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Initial post: Jan 26, 2013 9:16:05 AM PST
Excellent review. In 2013, a new paradigm is needed, but there is no political will for this. The US has never been more affluent, but the media trumps that the country is going broke and is passing down crushing debt to children and grandchildren. Nothing could be further from the truth,
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