MIT and Keynesianism in America, Fall 1947
One of the defenses made of Samuelson's book was that he was teaching up- to-date material that was widely taught in American universities. Within MIT, this was a strategy that made good sense.
However, at the same time as Samuelson was defending his book within MIT, Keynesian teaching was under attack elsewhere. In August 1947, an organization called the National Economic Council published a review of another textbook, Elements of Economics, by Lorie Tarshis, a professor at Stanford.38 This review, by Rose Wilder Lane, sought explicitly to undermine the trust Americans placed in the textbooks used to teach their children.39 She urged her readers to look at textbooks, so as to see the lies and propaganda they contained. She had chosen the book by Tarshis not because it was unusual but precisely because, she claimed, it was typical of what was then taught in universities:It teaches in every day words the Keynesian theory that has dominated economic teaching for years, and is now orthodox in universities and powerful in Washington.
This textbook contains many lies; I mean contradictions of fact, which a competent economist knows are lies, such as (p. 53) “a hundred years ago... great depressions, like those of recent years, were simply not known.”... It contains also many lies of omission and distortion, such as emphasizing business profits without mentioning a loss, though every economist knows that 50% of American corporations normally show losses and nearly a third of them are in the red at the top of the biggest booms. But I have not the space to discuss the text's lies and you may read them for yourself. The importance of The Elements of Economics is its effective propaganda for the Keynesian theory.
Not to go into the theory's ancient, pre-Christian theological origins, in modern economics it represents Karl Marx's theory of “the inherent contradictions of capitalism.”40
Though Lane acknowledged that Keynesians were “emphatically not communists,” but lay in the center seeking to save capitalism, they shared “the Marxian-Keynesian explanation of depressions” and denied “the fact that government's economic action caused every depression in this country's history.” The real problem with Tarshis's book was the “emotional effects” it produced through its slant, and innumerable repetitions.41 “I cannot,” Lane wrote, “do justice to this textbook's charm for the immature.
I cannot convey the impact of its grave passages upon their deepest and best emotions.” The book was not even an economics text.The Elements of Economics plays upon fear, shame, pity, greed, idealism, hope, to urge young Americans to act upon this theory, as citizens. This is not an economics text at all; it is a pagan-religious and political tract. It inspires an irrational faith and spurs it to political action. From cover to cover there is not a suggestion of any action that is not political—and Federal.42
It has been argued that Lane was motivated as much by Tarshis's conception of democratic politics and the role of the economist within society as with the details of his economic arguments, for she was also very critical of an anti-Keynesian, Ludwig von Mises.43 The review named fifteen colleges that used the book, and the publisher sent letters to the universities’ trustees.44,6
Among those sent a copy of the review were members of the MIT Corporation. On receipt of it, Lammot DuPont wrote to Beadle, saying that he assumed that it constituted “an aggravated example of what the M.I.T. Professor has done in a milder way.”45 He was relieved to see that MIT was not listed as one of the colleges that had adopted the book. He then bemoaned the hold that “leftists” had in some universities, citing “a professor at a well- known university in the east,” who had been advised to look for an appointment elsewhere. His friend’s problem was that the department comprised eleven professors, of whom seven were leftist and only four were “sound”; the democratic process meant that retiring sound people would be replaced with leftists. Beadle was sent a copy of the review by a colleague in the corporation and sent it, along with DuPont’s letter, to Compton, explaining that it pointed out the problems with economics teaching in the United States.46
Compton had seen the review while on a summer camp with his family, and thought it “an exceedingly effective statement”—a comment that might have worried Samuelson had he heard it.
He also made a connection with a comment made in Fortune about Klein’s The Keynesian Revolution.47,f This review identified Samuelson as “one of the most brilliant contemporary economists” and focused on Keynes’s conservatism: because Keynes provided a cure for unemployment, “conservatives should have been more grateful to Keynes (whom he correctly classes with them) than they were.” The anonymous reviewer did find Klein guilty of “an excess of enthusiasm” and criticized his poor sense of the social and political consequences of Keynesian ideas, but considered his account of the technicalities “sufficiently masterful”e. When controversy over his book erupted a second time, in 1950, Samuelson provided Killian with a detailed account of its circulation: “About three years ago the so-called National Economic Council launched an attack, under the name of Rose Wilder Lane, on The Elements of Economics by Prof. Lorie Tarshis of Stanford University. In bitter viciousness it makes the present piece look like a love pat. This was the first anyone had heard of that organization or of Miss Rose Wilder Lane as an economist. Copies of this attack were sent to 15,000 banks (with a request that each contribute $500 to the task of purifying the college textbooks.) And copies were sent to every trustee of every college using Tarshis’ book. The Tarshis book by the way, was a respectable job, favorably reviewed by the academic journals, and any criticisms that have ever been made of it had nothing in common with those of Miss Lane” (P. A. Samuelson, August 22, 1950, Letter to James R. Killian, PASP 87 [MIT Archives]).
f. See chapter 24 this volume.
to make up for this.8 Perhaps Compton hoped that the opinion of a business magazine would carry weight with Beadle.
In the fall, the administration continued to liaise with the Visiting Committee about the teaching of economics in the department. Beadle suggested that Killian might look at a statement by Harvard's President Conant on education for business responsibility at the Harvard Business School.
He drew his attention to the paragraph in which Conant argued that equality of opportunity could “have meaning only in a competitive society in which private ownership and the profit motive were accepted as basic principles.”48 There was a clear suggestion that MIT should consider enshrining such a commitment to free enterprise in its statement about economics teaching. Killian replied by reassuring him that different perspectives were discussed in the classroom and sent him one of Conant's speeches on academic freedom.49,11 There were discussions about the supplementary readings assigned for Ec. ¿¿ and, on Beadle's request, the companion course on industrial economics, Ec. I2.50Beadle discussed the situation with Yale's Fred Fairchild, known to be hostile to Hansen's internationalism, and at his suggestion tried to interest Compton in the procedures followed at the University of Pittsburgh by Vincent Lanfear, dean of Pittsburgh's business school.i In words Beadle quoted in a letter to Compton, Fairchild endorsed Lanfear as “about the only administrative officer who I know has taken a firm stand on the kind of teaching that is delivered by members of the Economics faculty, particularly with reference to false and reckless statements about business and propaganda about Communism, collectivism etc.”51 Beadle sought to arrange a meeting between Lanfear and the MIT administration, but Killian held back from inviting an outsider to make judgments about MIT's Economics Department. It would be much better for Beadle to review the matter with him.52 Dean Caldwell, too, reacted negatively to the idea of consulting Lanfear, on grounds that the University of Pittsburgh had been widely criticized for its policies.53 While they wanted to be as accommodating as they
g. The review is too brief to specify what Klein's failings were; he might have been alluding to his belief that the Soviet Union had solved the problem of ensuring full employment.
h. Another life member of the MIT Corporation, Redfield Proctor, of the Vermont Marble Company, thought Samuelson gave the impression, reinforced by some wages statistics about which he was skeptical, that everyone ought to be paid the same, and deduced that he could not be “a really sound teacher” (R. Proctor, October 21, 1947, Letter to Karl
T. Compton, PASP 87 [MIT Archives]).
i. On Fairchild, see chapter 19 this volume.
could to members of the MIT Corporation, they did not want to become embroiled in discussions with other universities.j