Galbreath from the Grave

By Lee Russ

Thursday, September 18, 2008 at 10:47 AM

Even after his death, J.K. Galbreath remains more prescient and his views more valuable than the current gaggle of lemming economists who have fastened their careers and futures to the coattails of Milton Friedman and the right wing think tanks that made use of him. And could there be a better time to review some of the wisdom Galbreath left behind?

Here's a brief excerpt from Galbreath's introduction to his book The Great Crash, 1929 (emphasis added):

But someday, no one can tell when, there will be another speculative climax and crash. There is no chance that, as the market moves to the brink, those involved will see the nature of their illusion and so protect themselves and the system. The mad can communicate their madness; they cannot perceive it and resolve to be sane. There is some protection so long as there are people who know. When they hear it said that history is being made in this market or that a new era has been opened, that the same history has been made and the same new eras have been opened many, many times before. This acts to arrest the spread of illusion. A better sense of history is what protects Europeans if not perfectly at least more adequately from speculative excrescence.

With time, the number who are restrained by memory must decline. The historian, in a volume such as this, can hope that he provides a substitute for memory that slightly stays that decline.

John Kenneth Galbraith, Introduction to The Great Crash 1929.

Galbreath's respect for the value of memory is not shared by the free marketeers. In fact, they view memory as an impediment: if too many people remember why the New Deal was implemented, if too many people remember why there is an SEC, an FDA, etc,, they will never be able to get enough public support to have their way.

I've personally witnessed the deliberate attack on institutional memory as a way of cheapening products and cutting cost corners. When an international conglomerate bought out the privately held publishing company where I used to work, one of their first actions was to shift editors away from publications on which they had worked for years, ensuring that few, if any, publications were overseen by people who knew the publication history.

Once they accomplished that, the conglomerate imposed mandatory percentage cuts in cost on each major publication, but "left it up to the editors" to decide exactly where the cuts should be made. With no sense of the publication's history, the new editors cut willy nilly, greatly reducing the quality without batting an eye. At the same time, the conglomerate shielded itself from criticism over quality because (a) the editors know the publication best; (b) the editors, not the owners, decided where the cuts could/should be made.

Galbreath understood the human psychology that is more important to economics than an understanding of the abstract theories and the math involved in the calculations flowing from the abstract. Freidman most assuredly did not.