NONFICTION - Jan. 21, 1996

ECONOMISTS CAN BE BAD FOR YOUR HEALTH: Second Thoughts on the Dismal Science by George P. Brockway (W. W. Norton: $22.50; 160 pp.). Whatever you think of Milton Friedman’s politics, George Brockway is on target when he censures the Nobel Prize-winning economist for supporting the idea of a “natural rate of unemployment.” Indeed--”natural” for whom? Brockway is an economic gadfly and he uses his columns in the New Leader, reprinted here, to undermine conventional economic wisdom. High interest rates cure inflation, right? Just the opposite, according to Brockway--they cause it, because inflation is built in to the rates through an unacknowledged, banker-specific cost of living adjustment (COLA). Economic valuation should be a function of productivity, no? Not according to Wall Street, says Brockway: “Favorable news of production is likely to cause the market to fall, because it is thought likely to frighten the Federal Reserve Board into raising the interest rate. . . .” Brockway’s not-so-hidden agenda is to encourage the dismal science to become more humanitarian--he points out that economics was once considered an “ethical science”--that recognizes the noneconomic (at first blush) costs of economic policy. An economic philosophy that presupposes unemployed millions may seem reasonable on paper, but only because difficult-to-quantify human factors have been left out of the equation.