116
PARTISAN REVIEW
methodo logy and of its applicati on on a mass ive scale, sta rting with
the prewar work of Ragna r Frisch and J an T inbergen (for whi ch they
received the first award o f the Nobel Memori al p ri ze in Economi c
Science when it was instituted ) and continuin g with tha t o f Lawrence
Kl ein, current president of the Ameri can Economi c Associa tion , and
man y others.
A second development , more continu ous with pas t economi c
doctrines though no t with past economi c po licy, has been the use of
economic criteri a for J ecision-ma king, wha t a re usua ll y call ed "cost–
benefit " or "cost-effecti veness" criteri a. For exampl e, in deciding
whether or no t
to
proceed with an irri ga tion p roject, the benefits and
the cos ts should be computed and the project approved onl y if benefits
exceed costs.
It
shoul d be emp has ized tha t the benefits and cos ts are not
confined to those realizabl e on the ma rket but should encompass the
full social range: fo r exampl e, en vironmenta l concern s, effects on soil
eros ion and the wa ter table, or changes in the likelih ood of fl oods. T he
difficulties in understanding and measuring the full range of social
consequences a re indeed considerabl e, not to say overwhelmin g; whil e
p rogress has been made, no on e workin g in the fi eld will den y that
much remains
to
be unders tood and to be meas ured and indeed that
there will always rema in unmeasura bl e elements in the economi c
ca lculus of any signifi cant po li cy decision .
T hree more brief rema rks before I turn to th e books under revi ew:
( I ) Economi sts were by no means uniforml y confident tha t Keynes
and econometrics had togeth er solved the probl ems o f economic
stability. The monetari st school of Milton Friedman deni ed the va lid–
ity of the simp ler Keynes ian models and took a much more modes t
view of the poss ibiliti es of interventi on ; Marxists, such as Paul Baran
and Paul Sweezy, tho ugh accepting much of Keynes ian theory, held
tha t the poli cies needed to achi eve economi c stab ility were not politi–
call y possibl e in a capitali st sys tem; economi sts who studi ed the labor
market and the special p roblems of the very poor held th a t glo bal
stimul ative po licies would run up aga inst structura l o bstacles, and
even convinced Keynes ians were worri ed about the poss ible infl ati on–
ary dangers of ma inta ining full empl oyment by government spending.
(2) No one who has been involved in poli cy formati o n would
agree that actual po li cy has foll owed the advice of economi sts. T his is
parti cul arl y true with regard to resou rce a ll oca ti on poli cy; one would
be h ard put
to
find a signifi cant decision in whi ch a benef it-cost
analys is has pl ayed mo re th an a marg ina l ro le. Even with rega rd to
economi c stabiliza ti on poli cy, it is easy to po int to decisive cases where
