LESTER THUROW
347
going to have an even higher rate of inflation in 1984 than the one
we have now. The new right will say that if you do what the old right
wants to do, you may have a lower rate of inflation, but incomes will
be falling and people will vote you out of office for that reason.
ROB£RT NOZICK: On your diagnosis, if Reagan succeeds, he fails.
LESTER THUROW: In the long run, I think that's true, but not in the
short run. Obviously, if President R eagan can restore economic
growth, he 's home free, at least for a while. On the other hand , I
think you are abso lutely right: if you have ten or fifteen years of
economic growth, I'm sure people will begin pushing for social
welfare programs again. When our real income is rising we can
afford to be charitable.
ROBERT NOZICK: But with rising unemployment, social expenditures
have been going up very rapidly.
LESTER THUROW: That's because of unemployment insurance.
ROBERT NOZICK: Reagan now wants to cut that unemployment insur–
ance.
LESTER THUROW: Well, the new right can also make that argument to
Reagan. They can say, "Look, if you follow the procedure of the old
right, in addition
to
having falling incomes, the government budget
will go through the roof, because you will have to allocate so much
more money
to
unemployment insurance that it will more than
overwhelm any cuts you make in the social programs. " And that
certainly happened to Mrs. Thatcher. Every dollar she cut out of the
budget caused the unemployment bill to go up $1.10.
WILLIAM PHILLIPS: You talked earlier about the falling rate of produc–
tivity. And then you seemed to shift to production, not productivity.
LESTER THUROW: I may have been a bit sloppy. Rate of productivity
and production are basically the same thing. The GNP and produc–
tivity are not the same thing, because when you increase productiv–
ity, you could choose to take your increased income in terms of
leisure, which would mean the GNP would not go up. That's why
economists tend to want
to
talk about productivity. To economists,
economic growth means productivity. But in the general language,
economic growth refers to GNP.
DANIEL BELL: This is a side point, but do you have any estimate of how
strong the so-called underground economy is?
LESTER THUROW: The underground economy is virtually impossible to
measure.
If
an activity is illegal, by definition people are not
cooperating in measuring it. Everybody agrees that the underground
economies are much bigger in Europe than they are in the United
States. The question in the United States is whether the underground
