Tag Archives: Lorie Tarshis

Idlers and good-for-nothings

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I’m in the midst of a book on the coming of Keynesian economics into the world and the disappearance of classical theory. I have just now finished a section discussing the first Keynesian textbook ever written, Lorie Tarshis’s The Elements of Economics, which I thought I might share a bit of which with you.

Tarshis’s text made Samuelson and other economic writers more cautious in how they discussed Keynesian theory. A passage such as the following would never again enter a Keynesian text, as accurate a reflection of the theory though it may actually have been.

“To put it bluntly, employment and income, in money terms, can be expended to respond equally whether the government sponsors useful public works like highway construction, or completely useless ones like digging ditches and filling them up again. In either case, because the income of the newly employed would be higher than before, they would increase their spending, so that the output of consumers’ good would be expanded and the upward swing begun. Naturally we should prefer projects which directly add to our real wealth. Flood-control projects, highways, parks, school buildings, research projects, housing, and so on are better than leaf-raking and useless excavations. But the latter are better than nothing, for even though the projects are useless, carrying them out leads to an increased output of consumers’ goods. And even though the men responsible for the increased demand were idlers and good-for-nothings, their dollars, in our economy, are as powerful as any others in increasing consumption, income, and employment.” (Tarshis 1947: 518)

Possibly the most revealing passage in the entirety of Keynesian literature.

It was overrun the following year by the first edition of Samuelson’s Economics, in part because Samuelson’s was a much better book, but also because he was a bit more candid about what Keynesian theory meant in practice.

Samuelson v Tarshis – a battle of the books

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On the discussion on the HET website over introductory texts in economics, there is quite a bit on how the first Keynesian text in the US, Lorie Tarshis’s, The Elements of Economics, was killed off by an attack by William F. Buckley, which cleared the way for Samuelson to take the field in his own more cautiously written Keynesian tract. This story about Buckley and Tashis is an old established myth within the left of the economics community (which means most of it). This is the start of Buckley’s assessment, which has quite a bit to say for it, and is very prescient:

“Marx himself, in the course of his lifetime, envisaged two broad lines of action that could be adopted to destroy the bourgeoisie: one was violent revolution; the other, a slow increase of state power, through extended social services, taxation, and regulation, to a point where a smooth transition could be effected from an individualist to a collectivist society. The Communists have come to scorn the latter method, but it is nevertheless evident that the prescience of their most systematic and inspiring philosopher has not been thereby vitiated.

It is a revolution of the second type, one that advocates a slow but relentless transfer of power from the individual to the state, that has roots in the Department of Economics at Yale, and unquestionably in similar departments in many colleges throughout the country. The documentation that follows should paint a vivid picture.” — William F. Buckley, Jr. God and Man at Yale: The Superstitions of Academic Freedom, Henry Regery, 1951, p. 46-47.

And I might also mention Buckley’s attitude to Keynes, also from the same source:

The individualist insists that drastic depressions are the result of credit inflation; (not excessive savings, as the Keynesians would have it) which at all times in history has been caused by direct government action or by government influence. As for aggravated unemployment, the individualist insists that it is exclusively the result of government intervention through inflation, wage rigidities, burdensome taxes, and restrictions on trade and production such as price controls and tariffs. The inflation that comes inevitably with government pump-priming soon catches up with the laborer, wipes away any real increase in his wages, discourages private investment, and sets off a new deflationary spiral which can in turn only be counteracted by more coercive and paternalistic government policies. And so it is that the “long run” is very soon a-coming, and the harmful effects of government intervention are far more durable than those that are sustained by encouraging the unhampered free market to work out its own destiny.

The true reason that Samuelson won out is because it is a far better book, much more accessible. The macroeconomic side, with its C+I+G diagrams and others of a similar kind is a fantastic improvement in the underlying power of explanation. I have first editions of both Samuelson and Tarshis, and there is no comparison. Even the 1948 version is an order of magnitude better, both to teach and to learn from. There are virtually no diagrams in the macro half of Tarshis’s text while Samuelson has a number which bring out the underlying message in a way that the hundreds of pages of diagramless text in Tarshis does not.

I might add, but only just for fun, that in my Defending the History of Economic Thought (Elgar 2013) I discuss the ways in which diagrams have dumbed down economic thought, so that we now move lines in a two-dimensional space instead of trying to think through the actual economic adjustments that are supposedly going on. But that’s just by the way.