View original document

The full text on this page is automatically extracted from the file linked above and may contain errors and inconsistencies.

Economic Insights

‘Growth Comes Through
Change and Causes Change’
The David McCord Wright Lecture
Presented by Bob McTeer
President, Federal Reserve Bank of Dallas
and Former Student of Professor Wright


’m both pleased and honored
to give the David McCord Wright
lecture. Pleased because it brings
me home to Georgia— to the scene
of the crime, so to speak. Lewis
Grizzard spoke for me when he
titled one of his books If I Ever Get
Back to Georgia, I’m Gonna Nail
My Feet to the Ground. I know the
I’m honored because the first
David McCord Wright lecture was
given by my friend and senator, Phil
Gramm. Phil and I were in graduate
school here together in the mid1960s, and he was the quarterback
of our touch football team. (I think
he owned the ball.)
I’m proud of Phil because I
know the brand of free enterprise
economics we learned here, and to
my knowledge he has never sacrificed his economic principles to
political expediency. Not even
while running for president. Which
may be why he lost.
But most of all, I’m honored
because of the man this lecture

David McCord Wright was the
most distinguished member of the
Georgia economics faculty in the
early and mid-’60s. That’s saying a
lot since Professor Timberlake was
also here then, but then he had
many more years to catch up.
Following Professor Wright’s death
in 1968, two of my classmates, John
Godfrey and Mark Jackson, wrote
a wonderful essay about him as
economist and teacher and compiled a bibliography of his publications, which would choke a horse.
I can’t improve on John and Mark’s
work, so I’ve just made copies for
I had Economic Growth— Econ
606 — under Professor Wright. I
know that because, more than 35
years later, I still have the notes. I
found some evidence of another
course, but it was inconclusive. I
was his teaching assistant for two
quarters, the limit allowed by my
fellowship. He lectured a day or
two a week to a large economic
principles class in the old C-J auditorium. The other days, another

assistant and I split the class to
interpret, elaborate and fill in the
blanks. It helped greatly that Professor Wright had written the textbook.
In retrospect, I’m not sure that
Professor Wright was eccentric, but
he seemed so at the time. He’d
had facial surgery, which caused
him to talk out of the side of his
mouth. And he wore a hearing aid,
which sometimes caused him to talk
too loud, augmenting his natural
exuberance. When he wanted privacy, he would close his office door
and turn off his hearing aid so he
couldn’t hear me knocking. I hope
I wasn’t the only one he did that to.
Professor Wright would give
startling— seemingly off-the-wall —
answers to questions, answers he
appeared to have saved up for
years, just waiting for the right
sucker to come along. (Sucker was
a word he used a lot.) His oddball
answers were oddly thoughtful and
appropriate. He was teaching us to
think about old things in new ways.
Today’s cliché calls it “thinking out-


side the box.” He left inside-the-box
thinking to others. In truth, I doubt
he could have found the box.
I was good at listening to lectures, taking notes, anticipating test
questions and giving the right
answers. (Spell that r-i-g-h-t.) But
the right answer wasn’t always the
Wright answer (spelled W-r-i-g-h-t).
Many of his questions didn’t seem
to have answers. It was more an exercise in thinking, and like country
singer David Ball, I had a “thinking
problem.” I needed a 12-step program for it, but what Professor
Wright gave me felt more like shock
Since our questions and answers
rarely jibed, I usually felt vulnerable
and off balance around him. The
few times I made a good impression, I wanted to disappear for a
while so it would last. I later felt the
same way about some of my bosses.
Professor Wright was a machine
when it came to publishing. The
thing about him, and Professor Timberlake, was that most of his insights seemed publishable, while I
could hardly imagine having a publishable thought. My great fear was
becoming an assistant professor
somewhere in a publish-or-perish
environment — which was everywhere, as far as I could tell— and
never publishing. The great economist Fats Domino pretty much
captured my fear in “Ain’t That a
Shame”: “What I’m gonna do, is
hard to tell. I’m not gonna kill
myself, but I might as well.” I
solved my publishing problem,
however. As president of the Dallas
Fed, I have my own print shop.

I’m revealing my early demons
because some of you students may
worry about the same sort of things.
The good news is, you get over it.
It may just be an age thing. My
problem was that I thought every
thought had to be a deep thought—
important, original and worldchanging —and I didn’t feel up to it.
All the good thoughts had already
been taken, I thought.
I no longer feel that way. I didn’t
start thinking deeper; I just lowered
my sights. (“Aim low boys; he’s riding a Shetland.”) My fear of deep
thoughts may have faded when I
first heard Jack Handey’s deep
thoughts on Saturday Night Live.
My favorite is this one: “The other
day I got out my can opener and
was opening a can of worms when
I thought, ‘What am I doing?’ ” (I also
like, “I’d rather be rich than stupid.”
A good one for students: “When
you go in for a job interview, I
think a good thing to ask is if they
ever press charges.”)

Find Your Own Truth
Back to originality and creativity.
I came to realize that our different
experiences give each of us a
unique prism for viewing the world.
Therefore, originality is built in if
you keep your own perspective.
The trick is to embrace and nurture
it and resist those well-meaning
people who try to fit you into
another mold.
For example, the Dallas Fed has
excellent economists, from the best
schools, who publish in good journals. They’re smarter and certainly
more scholarly than I am, but I’m

not afraid to pick their brains and
sort through all their “on the one
hand” and “on the other hand”
ruminations to find the truth. Not
their truth, but my truth — through
my prism. So students, don’t worry.
You’re dumb and unoriginal and
uncreative now because you’re
young. You’ll get over it in time.
Frankly, I wish all you students
were in medical research trying to
cure and prevent diseases, or in
electrical engineering learning to
make things better, faster and
cheaper in our new economy. But
I suspect some of you may be in
economics or business, and you
may have wondered if you’ll ever
do the world any good in your chosen profession. I used to wonder
that when I was in your place.
Especially after my mother got a
phone call shortly after I got my
Ph.D. Her friend asked if I was a
doctor now. She said, “Yes, but not
the kind that does anybody any
If you wonder if you’ll be doing
anybody any good while you’re
doing well in your career, remember this reassuring thought, courtesy of Adam Smith and company: if
your income is high in a market
economy, you must be selling
something people are willing to pay
for. If your income is really, really
high, they must value it a lot.
My worry about not getting
published, and thus perishing, was
tied to my fear of not being good
enough to work on the leading
edge or frontier of economics. But I
finally realized that we also serve
who work behind the lines to bring


others closer to the frontier. I think
of our economic education efforts
at the Dallas Fed as trying to make
the world safe for sound economic
policy, especially sound money.
As an example, take the issue of
free trade. I didn’t invent the concept of comparative advantage.
Adam Smith did the absolute part,
and David Ricardo made it relative,
or comparative. But although virtually every economist on the planet
believes in comparative advantage
and free trade, it’s always been a
hard sell with the public.
Not having the right stuff to be
a Smith or Ricardo, I identify more
with Frédéric Bastiat, the French
pamphleteer who defended free
trade with satire. He’s the guy,
you’ll recall, who wrote the petition
asking the French Parliament to
pass a law shutting out the sunlight
because it unfairly competed with
the candle makers. Protectionism
couldn’t stand up to that.
The next-best piece of free
trade rhetoric I’ve found comes
from Henry George, who pointed
out that protectionists want to do to
their country in peacetime what the
country’s enemies want to do to it
in wartime — close the border to
Economists can’t seem to find
the right rhetoric for convincing
non-economists that free trade is a
good thing. Everybody thinks it’s a
trick. Witness Seattle. What was all
that about, anyway?
Even Abraham Lincoln, who got
most things right, got trade wrong.
He’s alleged to have said something
like this: “I don’t know much about

the tariff, but I know this. If I buy a
coat in England, I get the coat and
England gets the money. If I buy it
in America, I get the coat and
America gets the money.” What he
failed to consider was that England
would buy the cotton in Georgia to
make the coat, maybe cotton from
Billy Joe Hopper’s farm on Highway 411, between Ranger and
Oakman— close to the Red Bud
road. I picked a little cotton on Billy
Joe’s place when I was about 10
years old.
I’ve been looking for the right
free trade rhetoric for a long time.
During the debates before NAFTA
was passed, Merle Haggard recorded a song called “Rainbow Stew.”
I loved the title and thought “Rainbow Stew” was the answer to my
prayers. Listen to Merle’s version of
When they find out how to burn
water and the gasoline car is
When an airplane flies without any
fuel and the sunlight heats our
One of these days when the air
clears up and the sun comes
shining through,
We’ll all be drinkin’ that free bubble
up and eatin’ that rainbow stew.

I decided I’d turn free trade into
rainbow stew, using Bastiat’s brand
of satire. I penned several letters to
editors titled “Free Trade and Rainbow Stew.” I questioned whether
old Merle had thought the thing
through. If we didn’t want cheaper
goods from Mexico, surely we

wouldn’t want free goods like the
water and sunlight powering our
cars and heating our homes. Think
of all the jobs involved in producing that fine West Texas Intermediate crude that would be lost to
competition from sunlight and water!
Job counting is a major source
of bad economics. To put the jobcounting fallacy into perspective, I
like to point out that you can create
lots of jobs by substituting shovels
for bulldozers. If that’s not enough,
substitute spoons for shovels. Jobs
are precious things —too precious
to waste on unnecessary or inefficient work. Our goal should be to
eliminate all the jobs we can do
without so those people can produce something new. Yet how
many projects do you see justified
not on their merits but on their job
count? When job creation is the
main justification for a project, hold
on to your wallets.
The Wall Street Journal and
New York Times turned down one
of my “Rainbow Stew” pieces without comment. The Washington Post
passed on the grounds that its readers might not realize the piece was
meant as satire. Given their service
area, they were probably right.
I already had other versions
pending at the Dallas and Houston
newspapers, so I sent a shortened
version of “Free Trade and Rainbow
Stew” to the paper in Austin, Texas
— home of Austin City Limits —
where Merle Haggard might carry
more weight. It worked, sort of.
The Austin paper ran it but changed
the title. Don’t you just hate that?
I’d changed the article to save the


title, and they printed the article
and changed the title. So much for
my brief fling as a Southern-fried
French satirist. (“Fried French”—
Did I say that right?)
My point regarding operating
behind the front lines is this: if
you’re able to convince doubters of
free trade’s merits (or an equally
worthy cause), you will have made
the world a far better place. If you
can teach people some of what
economists so agree on that they
never talk about it anymore, you
may do more good than most of
those out on the frontier working
on the econometrics of minutiae.
Free trade, of course, isn’t the
only easy recipe for rainbow stew.
France recently shortened the legal
workweek as a make-work scheme
to increase employment. Lest we
feel smug, remember that we’re
about to raise once again the wage
below which employers are not
allowed to hire willing workers,
which means that people who can’t
contribute that much to the firm
won’t be hired.
We are just now getting rid of
another Depression-era law, one
that penalizes Social Security beneficiaries for working. I called for
repeal of the penalty in an op-ed
piece in the Wall Street Journal last
May, which obviously made the difference. This time the editors not
only changed my title, but they
added a cartoon of a broken-down
old man with no teeth and a cane —
not exactly the image of the mature
worker I had in mind.
Next on my common-sense
agenda is liberalization of immigra-

tion laws to relieve our tight labor
markets, especially an increase or
removal of the quotas on the skilled
workers needed to fill vacant hightech jobs. Opponents of this measure apparently would rather force
U.S. companies to move abroad to
access foreign workers or reach them
through cyberspace. We ought to
be out shanghaiing these people to
bring them here. Instead, we shut
them out. Other countries worry
about their brain drain out —to the
United States. We— the beneficiary
— worry about the brain drain in.
I’m not making this up.
So, what about the battle in
Seattle? I have trouble understanding how barring voluntary trade
with citizens of other countries will
improve their environment and
raise their living standards enough
to eliminate child labor. For that
matter, I’m not real sure where the
harm is in genetically engineering
tomatoes and other veggies to be
bigger, better and pesticide-free.
Should we apologize for the fabulous productivity growth that enables less than 3 percent of our
population to grow more food than
90 percent used to grow? Was that
also a bad thing? Is now the time to
stop progress? No, Martha Stewart
and I think it’s a good thing. But I

him repeat it a thousand times and
probably rolled my eyes the last few
hundred. I regret those eye-rolls.
I’ve been on the receiving end of
eye-rolls myself and know how they
feel. Another deep thought for the
students soon to enter the world of
work: eye-rolling the boss is not a
smart career move.
Back to “Growth comes through
change and causes change.” It’s
important that you know my appreciation of this phrase was not conveniently conjured up for this lecture. Listen to what I wrote about
the job churn in the Dallas Fed’s
1992 annual report:
One of my college professors,
David McCord Wright, used to say
“Growth comes through change and
causes change” so often that I quickly
learned to tune him out. Only recently have I come to appreciate
the wisdom of his mantra. Joseph
Schumpeter also captured the
essence of this message long ago in
his classic description of “creative
destruction.” It is natural during
recession and sluggish recovery to
worry about job losses. We read
almost daily of layoffs and downsizings at familiar Fortune 500 companies. We rarely read of sizable
numbers of new jobs being created.
Yet, in recent months, we’ve had net
job growth. While the net growth

Wright Was Right

may be small, the underlying re-

It’s time now to start my speech.
I only have two hours. Its title is
“Growth Comes Through Change
and Causes Change.” If that phrase
isn’t on Professor Wright’s tombstone, it should be. I probably heard

structuring and revitalization are
anything but. The churn is revitalizing our economy.

Wright was right about growth
and change. I never doubted it, but


I did think it could go without saying. Now I’m not so sure. Growth
and change are much in the news
these days. As you know, we are
now in the longest economic expansion in our history. After a slow
start, it gained momentum at a time
when expansions usually slow
down. After about two decades of
thinking that 2 to 2.5 percent was as
fast as our economy could grow
without inflation accelerating, we’ve
now averaged over 4 percent growth
for more than four years while inflation has decelerated. The inflation
rate has been below 2 percent by
most measures for a couple of years
now. The unemployment rate has
also declined to 4 percent —its lowest level since the 1960s, when the
composition of the labor force was
very different.
It’s nice to have more output because of more workers or workers
working more hours. But productivity, or output per hour worked, is
what really boosts per capita incomes and living standards. Productivity growth declined in the
early ’70s, and for two decades it
averaged barely above 1 percent
per year. But that changed in the
’90s, especially the second half of
the decade. Productivity growth has
doubled or tripled since 1995,
depending on the measure. By the
most conservative measure, productivity increased 3.2 percent in
1999 and increased at a 6 percent
rate in the second half of the year—
actually pulling down unit labor
costs. How’s that for a new economic paradigm?
What happened? Well, technol-

ogy is the main thing that happened
— mainly information technology
and the Internet and, increasingly in
the future, biotechnology. Globalization, in its many aspects, is another.
So is the collapse of communism
and hard-core socialism, the collapse
of the Soviet Union and the Eastern
bloc, freer trade and investment,
deregulation, privatization and so on.
Some people, on the other
hand, think nothing much fundamental has changed, that we’ve just
been lucky. Economists, as you
know, call good luck “positive supply shocks.” Whatever the causes,
and whether they’re temporary or
lasting, a really big change is occurring. Really big growth. And growth
that seems— at least for a while —
less inflationary. As we’ve all heard
somewhere, growth and change go
together: “Growth comes through
change and causes change.”
A debate is under way over
whether we now have a “new paradigm” economy. I say we do. I
wrote an op-ed piece for the Wall
Street Journal last August spelling
out my views. I titled my piece
“Out on a New-Paradigm Limb.”
Naturally, they changed my title—
to “Believe Your Eyes; The New
Economy Is Real.” The “believe
your eyes” part came from my having quoted two of my favorite economists: Yogi Berra and Richard
Pryor. Yogi is alleged to have said,
“You can observe a lot just by
watching.” And Richard once asked,
“Who are you going to believe? Me
or your own lying eyes?”
“Believe your eyes” is my
answer to those who ask, “Can this

good performance continue? Is 4
percent growth without accelerating
inflation sustainable?” We’ve been
growing “above potential” and sustaining the unsustainable for over
four years now. When does the bell
ring? The following is usually said
as a joke, but it’s almost as if skeptical economists are saying that it
may work in practice but questioning whether it will work in theory.
As a footnote, let me say that I
retrieved my lost title, “Out on a
New-Paradigm Limb,” and made it
the title of the president’s letter in
the Dallas Fed’s 1999 annual report.
The annual report also has a great
essay by our chief economist about
the technology and economics of
the new economy. I have a few
copies here. You can find both on
our web site:

An Old-Fashioned Economist
I won’t say any more about the
substance of the current debate. As
I said, I have only two hours. It
might be interesting to speculate
whether my maverick views—the
views that put me out on a newparadigm limb —have any connection to David McCord Wright’s
teachings. Of course, he died in
1968 and never got to see the awful
’70s or the recovering ’80s, much
less the Goldilocks ’90s, otherwise
known as the Greenspan–McTeer
era. ☺ I found a short quote from
him in my old class notes that may
give a clue. He said, “The longer a
forecaster is successful, the less reason there is for following him. Time
marches on and his model becomes


Of course, Professor Wright was
an old-fashioned economist who
never had formal mathematical or
econometric models of the economy. He never had to program in a
Phillips curve or a NAIRU (nonaccelerating inflation rate of unemployment) that implied fixed relationships. He never saw the
economy in a mechanistic way,
where you could pull Lever A and
have one thing happen and pull
Lever B and have another thing
happen. His economic world was
populated by people —people who
change in response to their changing environment. He was comfortable with ambiguity. Regarding
ambiguity, I found the following
quote from the end of the eightpage, single-spaced, legal-sized syllabus for his principles course:
If this outline seems to open up
more problems than it solves and to
be irritatingly vague, that is because
the problem itself is full of imponderables. At least, you are now conscious of that fact.

I decided a long time ago that
the smartest person doesn’t always
have the best answers. God made a
more level playing field than that. I
now wonder if the best economists
always have the advantage in interpreting the economy. Is it possible
to be too good an economist? So
good that you are lulled into sticking with the old right answers and
missing the changing paradigm? I
may be kidding myself and trying to
rationalize my own shortcomings,
but I believe most of you will agree
that you wouldn’t want to have
only economists on an important
policy-making board.
Many people agree with my newparadigm views, but not many economists. I think most of the people at
Wired and other technology publications agree, along with the technology community in general. Many
businesspeople agree. My views on
pricing power in the new economy
were influenced by the businesspeople on my own board of directors. Even a few maverick economists agree with me, but not many

Economic Insights
is a publication of the Federal Reserve Bank of Dallas.
The views expressed are those of the authors and
should not be attributed to the Federal Reserve System.

mainstream, establishment economists — certainly not those from
large Northeastern universities that
don’t have good football teams.
Time will tell who’s right and
who’s wrong. And whether those
who were wrong were wrong because they knew too little or because they knew too much for too
long. Either way, I treasure the
memory of David McCord Wright
and others at the University of
Georgia who tried to teach me to
think for myself and whose personal
examples helped give me the courage to go out on limbs and endure
the rolling of eyes. Go Dawgs! ■
This is dedicated to Anna, who
will — as Hank Williams, Jr. puts
it — carry on the family tradition at
the University of Georgia.


David McCord Wright
(1909 – 1968)
The following biography is taken from
“David McCord Wright: Economist and
Teacher,” by John M. Godfrey and Mark
Jackson, published in the May 1968 issue
of Georgia Business, Bureau of Business
and Economic Research, Graduate School
of Business Administration. Godfrey and
Jackson include a bibliography of Wright’s
publications: 9 books, 5 monographs, 69
articles, 18 papers and discussions, 14
notes and comments, and 27 reviews.
On January 7, 1968, the economics profession lost one of its leading members, the
University of Georgia one of its eminent professors, and the State of Georgia one of her
prominent native sons.
David McCord Wright was born in
Savannah, Georgia, on August 1, 1909. He
was the son of a University of Georgia graduate (class of 1891) and former president of
the Savannah Bank and Trust Company,
Anton Pope Wright, and Hannah McCord
(Smythe) Wright. Professor Wright was a
graduate of Savannah High School. He
attended The Citadel, the Military College of
South Carolina, in 1926–27. In 1927 he
transferred to the University of Pennsylvania
where he studied architecture for three years.
In 1935 he obtained his LL.B from the
University of Virginia and was admitted to
the Georgia Bar Association. He became an
attorney with the Reconstruction Finance
Corporation in Atlanta.
Professor Wright continued his education at Harvard University, receiving his
M.A. in Economics in 1939 and Ph.D. in
Economics in 1940. His dissertation, The
Creation of Purchasing Power: A Study in
the Problem of Economic Stabilization,
received the David A. Wells Prize for the year
1940–41 and was published by the De-

partment of Economics of Harvard University.
Professor Wright began his distinguished
teaching career at the University of Virginia in
1939. He was Assistant Professor of Commerce
and Business Administration from 1939–42 and
Lecturer in Law in the University of Virginia Law
School in 1940 and 1947–55. He served at
Virginia as Associate Professor of Economics
from 1943–46 and Professor of Economics from
During 1953–54, Professor Wright was at
Oxford University, Christ Church College, as a
Fulbright Lecturer. From 1954 to 1955 he was a
Rockefeller and an Earhart Fellow in Europe.
He served as William Dow Professor of Economics and Political Science at McGill University from 1955 until he was appointed
Professor of Economics at the University of
Georgia in July of 1962. During the summers
Professor Wright frequently lectured at Columbia
University (1946, 1950, 1952, 1953, and 1955),
the University of California (1947), and Harvard
University (1948, 1951, and 1965).
Among his other duties, Professor Wright
acted as an economic advisor to the United States
Government National Resources Planning Board
and lectured in 1943 at the United States Army
School of Military Government. In addition he
lectured at the Freedom Institutes of Claremont
Men’s College, California (1955), and Wabash
College, Indiana (1957). The United States
Department of State appointed Professor Wright
as Lecturer with duties in France and Germany
during the summer of 1956 and in France in the
summer of 1959. In June, 1963, he attended the
National Strategy Seminar of the U.S. Army War
College. The Federal Reserve Bank of Atlanta
appointed him to its staff in September, 1963,
where he served for two years as a consultant on
a part-time basis to the Bank.
Professor Wright was a member of the
American Economic Association, serving on

its Executive Committee from 1952–55; the
Southern Economic Association, being
elected president in 1950; the Royal Economic Society; the Canadian Institute of
International Affairs; and the Canadian
Institute of Public Administration. He was an
active member of the Mont Pelerin Society.
In addition, he was a member of the English
Speaking Union and a life member of the
Huguenot Society of South Carolina.
His other memberships included Phi
Delta Phi, Alpha Kappa Psi, Beta Gamma
Sigma, and Delta Psi. He was also made
an honorary member of Omicron Delta
Epsilon. He is listed in Who’s Who in
America and the International Who’s Who.
Professor Wright is survived by his
wife, the former Caroline Noble Jones of
Savannah, and three children: Anna
Habersham Wright, Anthony Pope Wright,
and Peter Meldrim Wright. In addition to
their home in Athens, the Wrights maintained residences in Cotuit, Massachusetts,
and Savannah, Georgia. ■