LOOKING AT THE ECONOMY DIFFERENTLY:|
A Maverick Wins the
Nobel Prize in Economics
BY JOHN MILLER
This October, William Vickery, an 82-year-old emeritus professor of economics at Columbia University, along with James Mirrlees, a British economist whom Vickery had never met, won the Nobel prize in economics.
Nothing unusual about that. The Royal Swedish Academy awarded Vickery its prize for work on what, in part because of Vickery's path clearing efforts, are now traditional microeconomic topics. Schemes for off-peak pricing to lessen congestion, auction bidding to reveal the true value of a commodity, and tax schedules likely to encourage the greatest work effort, were all Vickery ideas.
But Bill Vickery was also an unusual man-an eccentric famous for roller skating across Manhattan to work to save money during the 1930s and 1940s, long before roller blading became a craze. He was a social critic and a man with a political conscience. During World War II,Vickery did civilian public service as a conscientious objector, later became a Quaker, and throughout his life occupied what The Wall Street Journal called the "left end of the political spectrum."
Even if those left-leaning politics were not always evident in his economic writings Vickery did vote for Norman Thomas, the Socialist Party candidate for president during the 1930s and 1940s, and said he intended to vote for Ralph Nader for president in 1996. He also was a longtime member of the Union of Radical Political Economists. Vickery never had a chance to cast his vote for Nader. He died of a heart attack a few days after receiving the Nobel Prize.
The tragedy of Vickery's death extends well beyond the loss for those who knew him. "I don't need the money," Vickery told The New York Times upon winning the prize, "but I sure need the platform." He planned to use the "bully pulpit" of the Nobel to campaign against "the mania for budget balancing" that he argued was costing working people their jobs.
Vickery's voice will be sorely missed since there is little opposition to the financial orthodoxy of balanced budgets to be found either in the increasingly conservative economics profession or among today's mainstream politicians.
Despite his reputation as a maverick, in 1993 Vickery was elected president of the American Economic Association-the economics profession's governing body. He devoted his presidential address, "Today's Task for Economists," to outlining a plan to bring about genuine full employment in the U.S. economy-a 1% to 2% unemployment rate that would guarantee job openings for all those looking for work. That goes well beyond the 5% to 6% unemployment rate that economists typically deem full employment and label as the "natural" rate of unemployment (Vickery dismissed this term as "one of the most vicious euphemisms ever coined).
While his ingenious, literate, and seemingly odd-ball address threw the economics profession a curve-ball, it provided the kind of straight talk desperately needed to clear the way for a progressive economic policy that would combat stagnant wages, slow growth and address the gaping inequality that most traditional economists accept without protest. Despite containing a few clunkers, such as abolishing the corporate income tax, Vickery's plan still deserves our attention. Surely it is far more progressive than any proposal we heard from the pro-rich Clinton and Dole camps during this year's presidential campaign.
Vickery's key notion was that of recycling savings to take advantage of underutilized capital in the economy. For instance, to push economic growth rates up to the 10% a year necessary to guarantee full employment within two or three years, the government would have to put to work the savings the private sector currently fails to invest. Large budget deficits, more than four times as large as the current budget deficit, would convert idle private savings into government spending that would boost spending throughout the economy, dry up any excess capacity in the economy, and push the economy forward at a rapid paces.
The fastest way to recycle more savings through large deficits would be to cut taxes. Not Vickery's first choice, although he would endorse a massive cut in the payroll taxes workers pay. Vickery's preference was for recycling savings through "public capital formation"-the government investing in infrastructure, education, and research and development.
The prospect of an economy with a chronic budget deficit and an expanding national debt might scare off even those who would like to see genuine full employment. But Vickery argued that budget deficits used to finance public investment would be no more damning for our national future than the debt corporations used to finance their investments or the mortgages households assume to pay for their homes. In fact, without that borrowing we would surely be poorer-having fewer factories and machines with which to produce and fewer houses in which to live.
In addition, to keep the burden of servicing the national debt manageable, Vickery would insist on having the Fed keep interest rates low, "close to zero if need be." And finally, to counteract the likely inflationary effects of these policies, Vickery would place controls on corporations' gross margins-the amount that they mark up prices beyond costs.
Still, as Vickery saw it, none of these problems should be compared to the human tragedy of unemployment. And genuine full employment, Vickery argued, would go a long way toward making the U.S. a less troubled and more humane society. He listed among the likely salutary effects of his economic plan: "a major reduction in the illness of poverty, homelessness, sickness and crime."
Vickery, described as a "man of shining honesty" by one of his colleagues, called the work that helped him win the Nobel Prize "at best... of minor significance in terms of human welfare."
Surely even this modest man would have spoken differently about the campaign against the balanced budget and for genuine full employment that he was planning to undertake. Without Bill Vickery, and without the real hope of a full employment economy his plan offered, our lives will indeed be less full.
Reprinted with permission from Dollars and Sense magazine, Jan./Feb. 1997 issue. Published bimonthly by the Economic Affairs Bureau, Inc., One Summer Street, Somerville, MA 02143. Subscriptions $22.95/year ($18.95 for new subscribers). Phone 617/628-8411.
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This story was published on February 6, 1997.