On “balance” in economics ...
There is a long-standing tension in economics between belief in the
advantages of the market mechanism and awareness of its
imperfections.... There is a large element of Rohrschach test in the way
each of us responds to this tension. Some of us see Smithian virtues as a
needle in a haystack, as an island of measure zero in a sea of
imperfections. Others see all the potential sources of market failure as so
many fleas on the thick hide of an ox, requiring only an occasional flick of
the tail to be brushed away. A hopeless eclectic without any strength of
character, like me, has a terrible time of it.... I need only listen to Milton
Friedman talk for a minute and my mind floods with thoughts of
increasing returns to scale, oligopolistic interdependence, consumer
ignorance, environmental pollution, intergenerational inequity, and on
and on. There is almost no cure for it, except to listen for a minute to John
Kenneth Galbraith, in which case all I can think of are the discipline of
competition, the large number of substitutes for any commodity, the
stupidities of regulation, the Pareto optimality of Walrasian competition,
the importance of decentralizing decision making to where the
knowledge is, and on and on. Sometimes I think it is only my weakness of
character that keeps me from making obvious errors.
Robert Solow , 1987 Nobel Laureate
“On Theories of Unemployment,” American Economic Review, March 1980