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economy's volume of invesunent by the way it divides its income
between spending and saving. Investment occurs, holds Thurow, only
when it is profitable for capitalists to invest. No rosy business horizons,
no invesunent, period-and no jobs or government tax revenues either.
Besides, "most of our savings are not personal savings but consist of the
internal savings of businesses in the form of retained earnings and
depreciation allowances. " These " basic characteristics of U.S. capital–
ism" denote an economy dependent on the whims of private accumula–
tion , and they create continuous economic instability and disequilib–
rium rates of return
to
capital-a "random walk" process that yields
instantaneous wealth for a handful and a "highly skewed " distribution
of wealth and income for society at large. Since World War
II,
a
precarious, three-pronged social stabilizing mechanism has been
worked out to mitigate the harshest effects of this economic free-for-all.
It
consists, writes Thurow, of " income transfers for the poor, direct or
indirect government jobs for the middle class, and little or no taxation
for wealthy capitalists. "
Does this constitute a society best understood in zero-sum terms?
One response to this rhetorical question comes from economic theory
itself: the total level of rewards is not fixed but depends upon the
specific strategies chosen and the particular coalitions which are
established. There is, in other words, a gulf between Thurow 's general
observations about the structure of U .S. society and his analysis of its
economic problems. The reason , I think, is to be found in the tendency
of neoclassical economics
to
deal with problems one in isolation from
another-the hallmark of
ceteris paribus
methodology. The core of
zero-sum analysis-the Pareto-efficiency attributes which Thurow
presents in a last chapter note-is based upon a number of "constants,"
such as the array of known technologies, supplies.of capital and labor
and the skill composition of the workforce, and the prevailing distribu–
tion of income and wealth. This is why, as Thurow simultaneously
instructs his readers, "we cannot avoid making equity decisions in
public policies, even though we can eliminate them in economic
theory." Thurow, a dedicated social scientist whose moral commit–
ment places him sky-high above most of his professional colleagues,
cannot himself close the gap . He seems compelled
to
apply received
economic theory to a set of problems which he senses are embedded in
the larger social system. The upshot is a book which lacks an integrat–
ing social thesis, one which may confuse many readers by its uneasy
mixture of detailed analysis of several "problems " and apparent social
agnosticism.
