Abba P. Lerner (1903-1982) [1] — Facts and Likings

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Abba Lerner wrote his first book

in the context of a gathering debate on the effectiveness of capitalism as an economic and social system, especially by comparison with a hypothetical socialist alternative. (It is always hard to argue against utopia.) Lerner was on the socialist side, but his economic analyses gave little comfort to his spiritual and intellectual comrades. His heart may have been in the right place, but he never let his heart rule his head. As a result, he preferred efficiency to orthodoxy, competition and freedom to state monopoly and dictation. Not that he thought private enterprise intrinsically superior: that had to be tested in the marketplace, and both private and public sectors should be free to prove their worth. (Ironically, Lenin had had fewer doubts on the subject. He thought that to let even one village grocer subsist would be to invite the return of capitalism.

In anticipation of this contest between public and private, Lerner devoted a series of articles to those principles that should govern socialist planners and economic managers and enable them to duplicate the advantages of a free, competitive market. He then worked these into his first major book, The Economics of Control—Principles of Welfare Economics (1944). The book is written as a kind of owner's/ user's manual for a command economy, but it is much more than that, as the subtitle indicates. It is a study of the character and conditions of optimality, presented in clear,simple, nonmathematical prose. (That probably cost it with the experts, who were moving increasingly to mathematization of argument.) It begins with the exchange economy and moves on to production, with special reference to the problems posed by indivisibility of factors. From there it takes up such matters as efficient allocation in the short and long run, rent, economic surplus, taxation and fiscal policy, investment, international trade and finance, and—a gloss on Keynesian analysis—the thorny link between unemployment and inflation. Scitovsky's appreciation of this ambitious work will serve to situate it in the history of economic thought: ''By comparing Lerner's book to Pigou's Economics of Welfare (1920), one realizes how narrow and one-sided was Pigou's interpretation of that term, and what enormous progress was made in one generation. Had Lerner written his Economics of Control fully footnoted with a complete set of references, one would also realize the magnitude of his own contribution to that progress" (1984, p. 1553).

Continued here.

Source: here and here.