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Business Ethics ­MGT610
VU
LESSON 41
John Kenneth Galbraith (October 15, 1908­April 29, 2006) was an influential Canadian-
American economist. He was a Keynesian and an institutionalist, a leading proponent of 20th-
century American liberalism and progressivism. His books on economic topics were bestsellers
in the 1950s and 1960s.
Galbraith was a prolific author who produced four dozen books and over a thousand articles on
various subjects. Among his most famous works was a popular trilogy on economics, American
Capitalism (1952), The Affluent Society (1958), and The New Industrial State (1967). He taught
at Harvard University for many years. Galbraith was active in politics, serving in the
administrations of Franklin D. Roosevelt, Harry S. Truman, John F. Kennedy and Lyndon B.
Johnson; and among other roles served as U.S. ambassador to India under Kennedy.
He was one of a few two-time recipients of the Presidential Medal of Freedom. He received
one from President Truman in 1946 and another from President Bill Clinton in 2000[1]. He was
also awarded the Padma Vibhushan, India's second highest civilian award, for his contributions
to strengthening ties between India and the United States. Some of Galbraith's Ideas
In The Affluent Society Galbraith asserts that classical economic theory was true for the eras
before the present, which were times of "poverty"; now, however, we have moved from a state
of poverty into an age of "affluence," and for such an age, a completely new economic theory is
needed.
Galbraith's main argument is that as society becomes relatively more affluent, so private
business must "create" consumer wants through advertising, and while it generates artificial
affluence through the production of commercial goods and services, the "public sector"
becomes neglected as a result. He pointed out that while many Americans were able to
purchase luxury items, their parks were polluted and their children attended poorly maintained
schools. He argues that markets alone will under provide (or fail to provide at all) for many
public goods, whereas private goods are typically 'overprovided' due to the process of
advertising creating artificial demand above individual's basic needs.
He proposed curbing the consumption of certain products through greater use of consumption
taxes, arguing this could be more efficient than other forms of taxes such as labor or land taxes.
Galbraith's major proposal was a program he called "investment in men" - a large-scale
publicly-funded education program aimed at empowering ordinary citizens. Galbraith wished
to entrust citizens with the future of the American republic.
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Business Ethics ­MGT610
VU
Criticism of Galbraith's Work
Galbraith's work and The Affluent Society in particular drew sharp criticism from free-market
supporters at the time of its publication.
Milton Friedman in "Friedman on Galbraith, and on curing the British disease" views Galbraith
as a 20th-century version of the early 19th-century Tory radical of Great Britain. He asserts that
Galbraith believes in the superiority of aristocracy and in its paternalistic authority, that
consumers should not be allowed choice and that all should be determined by those with
"higher minds":
"Many reformers -- Galbraith is not alone in this -- have as their basic objection to a free
market that it frustrates them in achieving their reforms, because it enables people to have
what they want, not what the reformers want. Hence every reformer has a strong tendency to be
averse to a free market."
Galbraith versus Hayek
Two of the great economists of the 20th century were John Kenneth Galbraith and Friedrich
Hayek. They held very different views about advertising, which to a large extent reflected their
views about the capitalist system more broadly.
John Kenneth Galbraith's most famous book was The Affluent Society, which was published in
1958. In it, he argued that corporations use advertising to create demand for products that
people otherwise do not want or need. The market system should not be applauded, he
believed, for satisfying desires that it has itself created. Galbraith was skeptical that economic
growth was leading to higher levels of well-being, because people's aspirations were being
made to keep pace with their increased material prosperity. He worried that as advertising and
salesmanship artificially enhanced the desire for private goods, public spending on such items
as better schools and better parks suffered. The end result, according to Galbraith, was "private
opulence and public squalor." Galbraith policy recommendation was clear: Increase the size of
government.
Friedrich Hayek's most famous book was The Road to Serfdom, published in 1944. It argued
that an extensive government role in the economy inevitably means a sacrifice of personal
freedoms. Hayek also wrote a well-known critique of Galbraith in 1961, addressing in
particular Galbraith's view of advertising. Hayek observed that advertising was merely one
example of a broader phenomenon: Many preferences are created by the social environment.
Literature, art, and music are all acquired tastes. A person's demand for hearing a Mozart
concerto may have been created in a music appreciation class, but this fact does not make the
desire less legitimate or the music professor a sinister influence. Hayek concluded, "It is
because each individual producer thinks that the consumers can be persuaded to like his
products that he endeavors to influence them. But though this effort is part of the influences
which shape consumers' taste, no producer can in any real sense `determine' them."
Although these two economists disagreed about the roles of advertising, markets, and
government, they did have one thing in common: great acclaim. In 1974, Hayek won the Nobel
prize in economics. In 2000, President Clinton awarded Galbraith the National Medal of
Freedom. And even though their most famous works were written many decades ago, they are
still well worth reading today.
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Table of Contents:
  1. INTRODUCTION:Business Issues
  2. INTRODUCTION (CONTD.)
  3. THEORY OF ETHICAL RELATIVISM
  4. MORAL DEVELOPMENTS AND MORAL REASONING
  5. MORAL REASONING:Arguments For and Against Business Ethics
  6. MORAL RESPONSIBILITY AND BLAME
  7. UTILITARIANISM:Utilitarianism: Weighing Social Costs and Benefits
  8. UTILITARIANISM (CONTD.):rule utilitarianism, Rights and Duties
  9. UNIVERSALIZABILITY & REVERSIBILITY:Justice and Fairness
  10. EGALITARIANS’ VIEW
  11. JOHN RAWLS' THEORY OF JUSTICE:The Ethics of Care
  12. THE ETHICS OF CARE:Integrating Utility, Rights, Justice, and Caring
  13. THE ETHICS OF CARE (CONTD.):Morality in International Contexts
  14. MORALITY IN INTERNATIONAL CONTEXTS:Free Markets and Rights: John Locke
  15. FREE MARKET & PLANNED ECONOMY:FREE TRADE THEORIES
  16. LAW OF NATURE:Theory of Absolute Advantage, Comparative Advantage
  17. FREE MARKETS AND UTILITY: ADAM SMITH:Free Trade and Utility: David Ricardo
  18. RICARDO & GLOBALIZATION:Ricardo’s Assumptions, Conclusion
  19. FREE MARKET ECONOMY:Mixed Economy, Bottom Line for Business
  20. COMPETITION AND THE MARKET:Perfect Competition
  21. PERFECT COMPETITION
  22. MONOPOLY COMPETITION:Oligopolistic Competition
  23. OLIGOPOLISTIC COMPETITION:Crowded and Mature Market
  24. OLIGOPOLIES AND PUBLIC POLICY:Ethic & Environment, Ozone depletion
  25. WORLDWATCH FIGURES:Population Year, Agriculture, Food and Land Use
  26. FORESTS AND BIODIVERSITY:The Ethics of Pollution Control
  27. THE ETHICS OF POLLUTION CONTROL:Toxic Chemicals in Teflon
  28. THE ETHICS OF POLLUTION CONTROL
  29. THE ETHICS OF POLLUTION CONTROL:Recommendations to Managers
  30. COST AND BENEFITS:Basis of social audit, Objectives of social audit
  31. COST AND BENEFITS:The Ethics of Conserving Depletable Resources
  32. COST AND BENEFITS:The Club of Rome
  33. THE ETHICS OF CONSUMER PRODUCTION AND MARKETING:DSA Comments
  34. THE ETHICS OF CONSUMER PRODUCTION AND MARKETING:Should Consumers Bear More Responsibility?
  35. THE CONTRACT VIEW OF BUSINESS' DUTIES TO CONSUMERS
  36. THE CONTRACT VIEW OF BUSINESS' DUTIES TO CONSUMERS:The Due Care Theory
  37. THE SOCIAL COSTS VIEW OF THE MANUFACTURER’S DUTIES
  38. ADVERTISING ETHICS:The Benefits of Advertising, The harm done by advertising
  39. ADVERTISING ETHICS:Basic Principles, Evidence, Remedies, Puffery
  40. ADVERTISING IN TODAY’S SOCIETY:Psychological tricks
  41. ADVERTISING IN TODAY’S SOCIETY:Criticism of Galbraith's Work
  42. ADVERTISING IN TODAY’S SOCIETY:Medal of Freedom
  43. ADVERTISING IN TODAY’S SOCIETY:GENERAL RULES, Substantiation
  44. ADVERTISING IN TODAY’S SOCIETY:Consumer Privacy, Accuracy
  45. THE ETHICS OF JOB DISCRIMINATION:Job Discrimination: Its Nature