Refining Economic Theory at the K-School

Once each month some 20 professors gather at the Kennedy School of Government to debate the theory behind industrial policy, the strategy of government intervention in the economy which has attracted notable liberal support in the last two years.

Although academians still disagree over exactly what industrial policy is, one can trace the concept's origins in the United States to K-School Lecturer in Public Policy Robert B. Reich, author of The New American Frontier, the leading book on the subject.

Reich's concept of industrial policy centers on coordinating branches of the government toward focused economic objectives--in short, introducing greater planning and centralization into the country's manufacturing sector.

Reich says that all nations by definition have an industrial policy, and his work focuses on trying to identify and harness the forces of it. To this end, he and professor of Sociology Ezra F. Vogel began a faculty seminar on the topic in 1981.

"We felt that a lot of our businesses were in serious trouble, these issues were very complex, and there was an urgency in trying to understand them" is how Vogel explains their invitation to a wide range of professors from throughout the University two years ago.

The two founders of the seminar sent a prospectus "to anyone we could think of," says Reich and have since called a steady membership of about 20 scholars from the Law, Business, Kennedy and Arts and Sciences faculties, along with a few outsiders.

Reich and Vogel plan a detailed agenda for the seminar and have seen their concept imitated by a handful of unions, financiers, and liberal political groups.

After spending the entire 1981-82 academic year debating definitional issues of industrial policy, the group has sought to narrow its focus. Last year it concentrated on issues of markets and world trade, and the 1983-84 program encompasses feasibility studies of industrial policy.

"The first couple of years we explored a broader range of issues," explains Vogel. "Now we're trying to see what's possible."

The group meets once a month to discuss a pre-determined topic, often with a guest speaker, in an atmosphere Reich describes "bouncing ideas off each other."

"It's one of the rare opportunities people have to work across faculties for a long period of time," he adds.

Because of the controversy that often accompanies the topic, the group has an informal agreement to set aside definitional arguments and keep its discussions on as theoretical a plane as possible. To this end, Vogel says he and Reich try to keep the seminar depoliticized.

"We wanted people who are not rabble-rousers," he says. "People who carry on tangential discussions and insert their own agenda" are not invited back.

Although most national coverage of industrial policy has allied its proponents with the Democratic Party, both Reich and Vogel downplay this association. Instead, they say, the group should have as broad a membership as possible.

"It's strictly academic," says Reich. "We have very, very consciously tried to keep it nonpartisan. We're not trying to help or hinder any group."

Despite denials like this, observers cannot mistake the political inclinations of the seminar's guest speakers. The list includes Sen. Gary Hart (D-Colo.), the Presidential candidate whose espousal of industrial policy made the concept a political force: Democratic elder statesman John Kenneth Galbraith (scheduled for later this year), and officials of the United Auto Workers and the AFL-CIO.

Perhaps the most ardent advocate of industrial policy has been Democratic front-runner Walter Mondale, who has invited Reich to Washington to address his campaign staff.

While the left-wing espousal of industrial policy may soon bring credibility to the concept and possibly transform it into federal programs, it is ironic that Reich's program may replace Keynesian deficit spending as the main economic weapon of the Left.

Keynesian economics, first articulated in the late 1930s, also earned its intellectual stamp of approval in Harvard seminar rooms. Forty-five years ago, a clique of young intellectuals, somewhat to the chagrin of the economics department, became the first Americans to teach the radical new subject. Within a decade many of the same men found themselves in heavy demand, as Washington espoused a then-unheard of degree of government intervention in the economy.