Democracy and Exchange

Democracy and Exchange

Schumpeter, Galbraith, T.H. Marshall, Titmuss and Adam Smith

David Reisman

Democracy is the rule of the people. Exchange is supply and demand. Individualism, agreement, tolerance and choice are the underlying values that make possible the productive collaboration of the market and the state. This book assesses the theories of democracy and exchange of five interdisciplinary thinkers who tried to unite political and economic reasoning into a single theory of moderation and pragmatic management.

Chapter 6: Galbraith: Ideas and Events

David Reisman

Subjects: economics and finance, economic psychology, history of economic thought, institutional economics, social policy and sociology, economics of social policy


John Kenneth Galbraith is an evolutionary economist. The principal themes in the influential works of this prolific author – and most of all in American Capitalism (1952), The Affluent Society (1958), The New Industrial State (1967) and Economics and the Public Purpose (1973) – are not marginal cost and marginal revenue, consumer’s surplus and diminishing returns. Instead they are intellectual development, institutional progress and the constructive role of the State. Neoclassical economists wrestle with scarce endowments, alternative employments, equilibrium positions and allocative efficiencies. Galbraith addresses the big issues of corporate capitalism, political intervention, residual poverty and social trends. Neoclassicists sometimes say that Galbraithian economics is really economic sociology and that evolutionary institutionalism trespasses into non-scientific prescriptiveness. The Galbraithian is likely to reply, however, that it is the textbook orthodoxy itself that is limited and non-scientific, precisely because it treats as inert and invariant a systemic framework that is in truth organic and dynamic. Organic, dynamic – and very, very constraining: ‘Given the decision to have modern industry, much of what happens is inevitable and the same’ (Galbraith, 1967: 388). Man’s freedom to shape events in accordance with ideas is, evidently, severely circumscribed by the motion inherent in matter: ‘The imperatives of technology and organization, not the images of ideology, are what determine the shape of economic society’ (ibid.: 26). Keynes had concluded the General Theory with the ringing declaration that men are ruled by philosophy and ‘by little else’: ‘Madmen in authority, who hear voices in the air, are distilling their frenzy from...

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