Professor of Economics William L. Baldwin

"People are frightened about the future."

WTHEN ECONOMICS Professor William "Lee" Baldwin taught a course on the economics of market failure during Dartmouth's Foreign Study Program at Budapest University of Economics, his Hungarian students wanted to make sure he did not suffer from false optimism. "They wanted me to know how difficult the problems have really become in that country," says Baldwin, whose previous residence in Hungary seven years ago gave him his own basis for comparison.. "Living standards were higher and prices lower in 1985. There are street people now. People are frightened about the future. The increase in pollution is unbelievable."

If you detect a resemblance between the downward economic spiral of communism and our own current economic woes, you are not alone. Baldwin reports that his Hungarian students wondered if their country should be looking at Japan rather than at Western Europe and the United States for answers to ailing economies. But whether or not Japan offers the next economic model, common ground between socialism and capitalism is emerging in these post- Cold War times. As Baldwin points out, of all the world's major economic systems, only socialism and capitalism have taken social welfare as their prime objective. "The question is how efficiently these systems serve society."

Baldwin, who holds economics degrees from Duke and Princeton, explains, "We don't really have a free market economy; we have welfare capitalism." And, he adds, many features of our economic structure appeared in the Commu- nist Manifesto of 1848: heavily progressive taxes, inheritance taxes, central banking, social security, free education of children in public schools. "Pure socialism is bankrupt," he says, but "nineteenth-century laissez-faire capitalism hasn't swept the world."

But this isn't really his field, Baldwin makes clear. During a Dartmouth teaching career spanning 36 years, his research has centered on industrial organization and public policy toward business. His work, including six books, has won him visiting professorships and research fellowships in Thailand and Malaysia, at the Brookings Institution, and Princeton. In his softspoken way he sums up his time in Budapest—and his work on this month's Syllabus—as "an interesting departure."