The Good Society: The Humane Agenda.

• Author: Krugman, Paul

To be both a liberal and a good economist you must have a certain sense of the tragic--that is, you must understand that not all goals can be attained, that life is a matter of painful tradeoffs. You must want to help the poor, but understand that welfare can encourage dependency. You must want to protect those who lose their jobs, but admit that generous unemployment benefits can raise the long-term rate of unemployment. You must be willing to tax the affluent to help those in need, but accept that too high a rate of taxation can discourage investment and innovation. To the free-market conservative, these are all arguments for government to do nothing, to accept whatever level of poverty and insecurity the market happens to produce. A serious liberal does not reply to such conservatives by denying that there are any trade-offs at all; he insists, rather, that some trade-offs are worth making, that helping the poor and protecting the unlucky may have costs but will ultimately make for a better society.

The revelation one gets from reading John Kenneth Galbraith's The Good Society is that Galbraith--who is one of the world's most celebrated intellectuals, and whom one would expect to have a deeper appreciation of the complexity of the human condition than a mere technical economist would--lacks this tragic sense. Galbraith's vision of the economy is one without shadows, in which what is good for social justice always turns out to have no unfavorable side effects. If this vision is typical of liberal intellectuals, the ineffectuality of the tribe is not an accident: It stems from a deep-seated unwillingness to face up to uncomfortable reality.

Admittedly, Galbraith did at one time have a distinctive economic theory that might perhaps have justified his disbelief in painful choices. A generation ago, in The New Industrial State, he offered an image of an economy that was becoming increasingly dominated by General Motors-type corporations--giant firms, freed by their size and power from the rigors of competition, run by technocrats who pursued bureaucratic imperatives rather than serving the interests of the stockholders. In effect, he argued that capitalism would soon cease to be a market system in any meaningful sense, and that the trade-offs inherent in such a system would therefore soon be irrelevant.

But time has not been kind to that theory. We have not become an economy of GM-sized corporations; in fact, large corporations play a...