SYNOPSIS: Krugman makes a fool of Lester Thurow
Lester Thurow is one of the world's most famous economists. A vigorous writer and a spellbinding speaker, he captivates audiences with startling statistics and compelling theories. But other economists worry that some of those statistics are not quite accurate and that many of those theories don't stand up to examination.
In The Future of Capitalism, Thurow surveys a huge territory, commenting on everything from the building of the Pyramids to the rise of religious fundamentalism. He doesn't like what he sees. In the face of rapid change, above all the rise of a global economy driven by knowledge-based industries, Thurow fears that we will be unable to cope. He warns that we risk entering a new Dark Age.
Of course, doomsayers are a dime a dozen. People will buy this book because they believe that Thurow knows what he is talking about, that even if he turns out to be wrong, his book will be packed with valuable information. But Thurow is not as well-informed as he sounds. Consider Thurow's claim that we are living in a "period of punctuated equilibrium." Punctuated equilibrium is a term biologists use to describe a hypothetical pattern in which species emerge through occasional bursts of rapid change rather than through steady evolution. But Thurow uses the term incorrectly: Punctuated equilibrium refers to the whole pattern of stability and change, not just the periods of rapid transitions. Thurow's misuse of the term is like describing an economic slump as a "period of business cycle," not realizing that business cycle refers to the whole pattern of recessions and recoveries, not just the bad stretches.
This tells us something about the author. While Thurow likes the words biologists use, he could not be bothered to find out what his catch phrase actually means. This kind of sloppy pretentiousness is common in Thurow's writing.
Admittedly, The Future of Capitalism is better on this score than some of his previous work. He is more cautious here than he was in his last book, Head to Head. Sweeping declarations about struggles for global supremacy are gone; the rhetoric is less purple (although I wouldn't have called California's anti-immigrant Proposition 187 - which I strongly opposed - "America's version of ethnic cleansing").
Thurow has filled this book with statistical tables and long discussions of issues such as the impact of foreign competition on wages. But the statistics in this book are often misused. For example, Thurow makes much of the fact that over the past 20 years, wages have lagged inflation not only for less-skilled workers but even for many well-educated Americans. But he nowhere notes that these data are inconsistent with other economic data - an inconsistency many economists believe can be resolved by acknowledging that the official consumer price index has been overstating inflation, which means the real wages of the highly educated have been rising after all. In fact, Thurow himself claims elsewhere that inflation fears are based on exaggerated statistics; it never occurs to him that this invalidates what he said earlier about wages.
Thurow may be a flawed messenger, but what about the message? Is a new Dark Age looming?
Well, maybe. It is easy to think of ways everything could go wrong, from nuclear war to the emergence of antibiotic-proof microbes. On this list, the anger of a middle class whose living standards have been stagnating would probably not rank near the top. Still, it's a possibility.
But you read books like this not so much for their conclusions as for their analysis, to learn about the world. So it's a shame that so much of what you learn from The Future of Capitalism turns out to be not exactly true.
Originally published in USA Today, 3.13.96