Perspectives on Economic Growth
The tax rise passed last June by a reluctant Congress, five months before a presidential election, marked the end of a story that began four years ago when the previous Congress—with considerably less reluctance—voted a major tax cut in spite of an impending Federal deficit: The New Economics is now clearly having its way. Perspectives on Economic Growth is the product of the group that masterminded and guided these operations. Indeed, this collection of essays has been dedicated to President Kennedy “who initiated and inspired this volume”; they have been edited by Walter Heller, who served under Kennedy as Chairman of the Council of Economic Advisors; and one of the contributors, Arthur Okun, now occupies this post. Mr. Okun recapitulates the computations that demonstrate how the 1964 tax reduction fended off the impending recession, and he shows how fiscal policies which aim to close the gap between actual and potential capacity, employment, and consumption helped to sustain continuous economic growth. No word about the sharp price rise of 1964-1966, which is just as well, since the President’s exhortation against the wage-price spiral is the only new anti-inflationary weapon that has been unveiled in recent years. Moreover, James Tobin, the author of the central piece, “Economic Growth as an Objective of Government Policy,” served, at the time Heller was Chairman, as one of the three members of the Council. The Preface emphasizes that seven other contributors have also had “Washington experience.” Warren Smith, for example, who writes on Monetary Policies for Economic Growth,” was appointed a member of the Council after this book was published.
The collection aims to present what it calls “the latest thinking and findings among the main stream of professional economic thought.” All nine essays reflect much satisfaction with past accomplishments, as well as a readiness to face continuing responsibilities in guiding the United States toward a better, or at least a richer, future. There are solemn references to “the (economic) profession” as undertaking certain tasks. Indeed, the authors exalt “high growth” as a means to “improve the image of the US abroad whereby aiding those friendly, and confounding those hostile to America and to Western values.” The authors, then, speak authoritatively on the subject of economic growth not only as technical economists, but also as representatives of Washington thinking.
In practical terms the problem of economic growth, as Tobin says, is the question of the present versus the future. The size of the Gross National Product depends at any given time on the amounts of labor, capital, and natural resources employed, as well as on the state of the technology used in various branches of the economy to transform the so-called primary inputs into the final outputs. As time goes on, the amounts of labor and of capital (but not of natural resources) increase, and technology advances; the Gross National Product grows.
Most of the services and goods which make up the annual National Product are consumed; that is, they are used to …