Page 84 - Global Political Economy_Understanding The International Economic Order

NEO CLASS ICAL C ONCEP T OF AN ECONO MY
The predilection among economists to ignore those social and po-
litical aspects of public affairs that cannot be modeled means that
economists generally analyze public problems or make policy pro-
nouncements as if the fundamental issues at stake were solely, or at
least primarily, economic. Of course, experts in many other fields
have similar predilections. The knowledge (expertise) of experts is
frequently more limitedthan they are willing to admit to themselves
or to anyone else. In this way economists andother experts exhibit a
42
“trained-incapacity.” Robert Keohane, in his incisive critique of the
McCracken Report, has demonstrated superbly the tendency of econ-
omists to disregard the opinions of experts in other fields, to be to-
tally unaware of the political/ideological biases inherent in their own
policy recommendations, and to go beyond their competence when
advising governments. 43
During the early decades following World War II, the world econ-
omy experienced rapideconomic growth andrelatively low rates of
inflation. In the early 1970s, this happy situation suddenly turned
sour. During the previous decade, particularly after escalation of the
Vietnam War, the rate of inflation hadaccelerated, and this began to
dampen the rate of growth. Other developments, including a slow-
down in the rate of growth in productivity in the United States and
in Europe, hadcontributed to growing problems in the worldecon-
omy. In 1973 the crisis caused by a sudden large increase in the price
of oil changedmatters dramatically andplungedthe worldeconomy
into stagflation (an unprecedented combination of low economic
growth, rising unemployment, andsevere inflation). Much to their
embarrassment, economists hadto admit that at this time they knew
neither how to “fine-tune” the economy nor how to avoidthe scourge
of the business cycle. Trying to findout what had gone wrong, the
Organization of Economic Cooperation andDevelopment (OECD)
in Paris appointeda commission of eight eminent economists from
advancedcapitalist economies, ledby chairman Paul McCracken, to
study the situation. The commission was asked to prepare a report
on the “main policy issues involvedin the pursuit by member coun-
tries, of non-inflationary economic growth andhigh employment lev-
els in the light of the structural changes which have taken place in the
recent past.” After eighteen months of work, the OECD Secretariat
42
This thesis is elaboratedin my book, American Scientists and Nuclear Weapons
Policy (Princeton: Princeton University Press, 1962).
43
Robert O. Keohane, “Economics, Inflation, andthe Role of the State: Political
Implications of the McCracken Report,” World Politics 31, no. 1 (October 1978):
108–28.
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