Introduction: Robert Eisner's Common Sense Commitment to Full Employment and Activist Fiscal Policy
Forstater, Mathew, Journal of Economic Issues
When Robert Eisner was invited to participate in the AFEE Roundtable on Employment Policy, he not only accepted the invitation on the spot, but also immediately said that he would speak about "Employment Policy and the NAIRU." For years, he insisted that the NAIRU was a theoretically flawed and socially harmful concept justifying the politically enforced unemployment of millions of workers in the name of price stability. Eisner saw the recent drop in the official unemployment rate to well below 5 percent without any signs of inflation whatsoever as an opportunity to slay the NAIRU dragon once and for all. Activist fiscal policy should be utilized to push the official rate down further and promote full employment. Following his death on November 25, 1998, at age 76, the Roundtable participants, William A. Darity Jr., Mathew Forstater, James K. Galbraith, Philip Harvey, Robert Kuttner, and L. Randall Wray, with the support of AFEE conference organizer Ronnie J. Phillips and Journal of Economic Issues editor Anne Mayhew, decided to dedicate the Roundtable and this symposium to Robert Eisner's life and work.
While Eisner was a gifted technical economist, no doubt contributing to his recognition within the mainstream of the discipline (e.g., his election as president of the American Economics Association in 1987), his ideas were rooted in something missing from much of the discipline: common sense. Eisner believed that failure to understand the logical fallacy of composition was at the root of many of the theoretical errors and misguided policy views that plague us [Eisner 1994, xi]. For the economy as a whole, contrary to the popular saying, there may be a free lunch, "and failing to take advantage of it may leave some of us without dinner as well" [1994, xiii]:
The cost of anything is what has to be sacrificed to get it. What then would be the cost of providing lunch to the needy if we used surplus food that would otherwise be wasted? Would there be a cost to government's giving lunch to hungry children? Would the people, otherwise unemployed, who might be paid to prepare the lunches perhaps thus secure the wherewithal to purchase dinner? [Eisner 1994, xiii-xiv].
The logic of an economy with unemployed resources is very different than that of an economy running at full employment and full capacity. It is a grave error to apply the logic of full employment - the logic of scarce resources - to the society in which we actually live.
Eisner's common-sense approach led him to repeat often the truism that "for every buyer there is a seller and for every borrower there is a lender." If someone or some institution is in deficit, some other person or institution must be in surplus. Reducing the federal budget deficit must reduce the private sector surplus on the other side of the ledger, and this has economic implications. If the federal government runs a surplus, the private sector is going to have to go into deficit. If you want to reduce the deficit or to pay down the national debt, you are going to have to face the economic consequences. …