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LYNN HAESSLY:

In the trade area, what are the issues that you had hoped to solve and haven't been solved yet?

JUANITA KREPS:

The basic problem is our inability to accept, understand, appreciate the internationalization of the world economy. And because we don't appreciate the different kinds of governments we are dealing with-many, many of which are not laissez-faire capitalistic economies, many which subsidize their industries in order to promote exports-because we fail to take these things into account, we are somewhat naive about how trade flows will occur. We remain completely addicted to free trade, on the basis of doctrines which presumed different competitive situations from the ones we actually have. And, therefore, we make mistakes in dealing with other nations, the communist nations as well as the other industrial countries, notably Japan. So I think our poor understanding of what is happening in the world economy and our willingness to act on the basis of an unrealistic appraisal of how other people do business is the heart of the problem. It was then, it is now, it has not changed much. Commerce Secretary Malcolm Baldrige is battling the same dragons that I battled and with not very much improvement. In fact, in some ways I think we have gone backward.

LYNN HAESSLY:

Those are essentially the disappointments that you see during the ongoing problems with trade.

JUANITA KREPS:

I wouldn't characterize it as a disappointment. I would characterize it as broadening of my understanding in how government works and does not work, and a greater appreciation on my part of the inability to solve those problems until the public generally, and even the specialists in the field, have a better appreciation of what the problem is. So, after a stint in government at this level, one is not so much disappointed as he or she is discouraged with the progress that can be made and the pace at which it can be made. There are no magic solutions, and many of the problems that we are dealing with in the trade area can only be mitigated; there is no mathematically perfect, easy, simple solution. One of the difficulties I have with the current Reagan administration is its tendency, particularly on the part of the President, to express problems and solutions in simplistic terms.

LYNN HAESSLY:

The way you have conceptualized this program you have talked about and, you had mentioned before about how you have ideas for policy often before people are ready to accept them.

JUANITA KREPS:

That makes me sound awfully vain and I don't mean it to be so.

LYNN HAESSLY:

But not just for yourself but for other policy leaders, and you had mentioned Social Security. Is that same conceptualization also something you would extend to what we've talked about-the problems of women in work-that policy leaders can see solutions before the public is ready to accept them?

JUANITA KREPS:

So your question has to do with whether we could extrapolate this to the case of women.

LYNN HAESSLY:

Well, from trade to just policy in general.

JUANITA KREPS:

I see. It's a generic proposition, I think, that holds. The academic or other students of a problem obviously understand its dimensions in a theoretical sense long before he or she can actually lay out any pragmatic way of solving it. And that explains the big gap between academia and government or academia and business. We perform different functions. But, if you study a problem carefully over a long period of time and if you observe what is going on in the society, you can often predict what's about to happen. You inevitably say if we would only do this, it would not solve the problem necessarily, but it would lessen its impact. It would help this group of people, the cost would be thus-and-so and you can afford those costs, and so on. And I think that does cut across different areas. The impracticality of some academicians' solutions-political impracticality-gives academicians rather a bad name. But they get a much worse name in their recommendations for what business should do, because there is an even bigger gap, as I see it, between academic economists' analyses and the business sector's studies than between academic analysts and the government because Business moves much faster; business can't study a problem in the depth that academicians expect; therefore, business solutions are never the perfect ones that the economists want. Problem-solving takes place at different levels. There is an idealized model-building solution technique which is what most academicians engage in. There is, at the other extreme, the seat-of-the-pants, the quick-and-dirty solution, which often is the only one that can be used because, if you are having a flood today you don't have time to worry about irrigation to prevent the next one. If you are caught in an immediate crisis, the solutions call for speed, not perfection. And then there is something in between when business tries to get the best information it can but has to make a decision in fairly short order, otherwise somebody else takes the market and RUNs away with it. I guess if I had to express my strongest drawback, as I analyzed my work in the Commerce Department, it is that I tended to be too academic. I wanted to know more about the subject than I had time to learn. And there were so many different problems all at once that I was frustrated in trying to understand them better than the time allowed.

LYNN HAESSLY:

Even working eighteen-hour days.

JUANITA KREPS:

Absolutely. That is not much of an exaggeration because, of course, one can't sleep if some pressing problem is there. You might as well stay up and read that huge stack of books and hope you find something that gives you a clue. But the learning curve is straight up. I never learned so much, so fast-not when I was in graduate school, not ever. I learned it in part with the help of some very bright young people who worked with me. There is a tendency to underestimate the quality of the bureaucracy. A lot of it is awfully, awfully good.