The Structure of a Modern Economy: The United States, 1929-1989.

Kenneth Boulding undertakes a relatively straightforward, yet by no means simple, task--to analyze the wealth of available data to provide a comprehensive, dynamic picture of the U. S. economy since the Great Depression. The Structure of a Modern Economy: The United States, 1929-1989, published in 1993 shortly after Professor Boulding's death, accomplishes this task in a refreshingly effective manner. The result is a primer on economics in general and the U. S. economy in particular that is informative to readers with all levels of economic expertise. The potentially tedious data analyses are continually spiced with useful analogies that serve as a reminder that economics is not isolated from the social, political, and ecological world. In fact, one strength of this work lies in the broad analytical brushstrokes that place many past, current, and potential policy issues into a relative context.

Yet this book is not without flaws. Perhaps the most troubling is theoretical perspective. Although Professor Boulding remains relatively objective in his treatment of many politically charged topics, including national defense expenditures, inflation, the federal deficit, and the size of the government, an underlying but unstated theory appears to drive his analysis. This is most problematic when correlations are characterized as cause and effect relationships. For example, he suggests that an increasing share of income from net interest causes a reduction in the share to profit. The theoretical underpinnings for this and similar relationships need to be explored more fully.

The book contains nine chapters, with the core analyses found in Chapters 2 through 7, and an appendix with 80 pages of tables. While these tables provide a wealth of data, most is obtained from the Economic Report of the President. The first chapter establishes an excellent contextual setting for this book, as well as the discipline of economics. It is a useful primer on economics for economists. In particular, Professor Boulding illustrates a knack for slicing through (often politicized) rhetoric to pinpoint the essence of an economic issue. Two of the more noteworthy points made in this chapter include the often erroneous use of the term consumption (we have ". . . an unfortunate tendency to think objects die as soon as they are purchased by a household") and that information is not conserved (". . . unlike materials and energy . . . information gained by the recipient is not lost by the sender"). We would be well-served to remember both.

Chapter 2, on human capital and labor, is the first of the six chapters that examine the structural aspects of the economy. Using labor data, it analyzes the trends and changes in the economy--agriculture's decline, manufacturing's rise and fall, women entering the labor force, the baby boom generation, "growth" of services and government. It provides an excellent entry into the subsequent chapters.

Chapter 3 analyzes the standard measures of production (GNP, NNP, etc.) and introduces the terms gross capacity product and net civilian product as alternatives to these standards. While Professor Boulding's logic for employing gross capacity product in this and subsequent chapters is well founded, a comparison with other alternatives, such as measure of economic welfare or full-employment GNP would have been useful. This chapter also analyzes the distribution of income to factors and income groups, where the trade-off between interest and profit is first broached. In this context, an excellent point is made between passive capitalists (interest) and active capitalist (profit). In a strangely refreshing way, it was nice to see Professor Boulding use the Schumpeterian term "depression" in reference to economic declines other than the 1930s, contrary to the politically motivated redefining of economic terminology.

Chapter 4 analyzes, perhaps too briefly, the relationship between money and prices. While some issues could have been discussed further, such as the relative rise in medical care prices, this chapter presents a nice overview of inflation.

Trends in business and household capital structure are presented in Chapter 5. Unlike information in other chapters this analysis is based on data that are not commonly available elsewhere. The increased mortgatization of households and their declining net worth are also clearly illustrated. Moreover, the contention that consumers are burdened by (non-mortgage) consumer credit is debunked.

Chapter 6 considers the government's role in the U. S. economy. A useful introductory exposition notes the two basic government functions: (1) quantitative (taxes and expenditures) and (2) qualitative (regulations), in a crisp, clear manner. This chapter also reinforces a point made earlier that state and local governments have a bigger (and expanding) influence on the economy compared to the relative stability of the federal government. The changing tax and expenditure structures are also clearly presented.

Chapter 7 contains a nice overview of the world economy showing relative trade in recent decades. A major problem, however, is that much of the data are limited to recent decades (after 1960).

An overview of what to do with the information garnered in the previous six chapters is presented in Chapter 8. It provides an excellent analogy between the health of the economy and that of the human body. Professor Boulding also makes a noteworthy point about the marginal productivity theory's inability to explain changes in the income distribution over the six-decade period of study.

Chapter 9 concludes this book with a thoughtful probe of the future. While this chapter provides many insightful considerations of how to learn from the past to avoid future problems, it seems to overlook a few potential problems. As a largely historical account, this book is often concerned more with past problems (e.g., depressions) and ways to avoid them, than with emerging current and future trends suggested by the same data. For example, the decline in education expenditures receives limited attention, and the overwhelmingly obvious trend in rising medical care prices, burgeoning social security and welfare expenditures, and related issues are overlooked entirely.

Orley M. Amos, Jr. Oklahoma State University