Herb Stein's Comfortable Purgatory

As a member of the Council of Economic Advisers, Herbert Stein, an advocate of free markets, argued long and hard against controls on wages and prices. But when he was summoned in mid-August to the weekend Camp David summit at which the pay-price freeze was slapped together, he recalls, "I felt a sense of exhilaration. I left all sorts of conventional notions behind." Working almost straight through from 7 p.m. Friday to noon Saturday, he drafted position papers on the options facing President Nixon; on Saturday night he wrote summaries so trenchant that, with only slight editing, they were handed out to the press as background material on Sunday. Last week Herb Stein's flexibility was rewarded. In a change not so much of policies as of personalities, Nixon named pragmatic Herb Stein, 55, to succeed professorial Paul Mc-Cracken as CEA chairman on Jan. 1.

The job is theoretically one of the most powerful in Washington, but its actual clout has varied widely with the man filling it. McCracken, on leave from the University of Michigan, was one of its less mighty occupants. Gracious and courtly, he once asserted: "I'm a professor, not a politician." No infighter, he was elbowed aside in policymaking by Budget Boss George Shultz. When Treasury Secretary John Connally replaced Shultz as top economic-policy man, McCracken rode Connally's coattails within the Government by arguing --well before Stein--for an incomes policy. Publicly, however, McCracken became known for doggedly insisting that the Administration's original "game plan" was working well. As early as last spring, he was asking Nixon to let him return to academe.

As McCracken's successor, Stein will have the task of watching carefully over Phase II policies, of telling the President whether they are succeeding and of suggesting alternatives if they are not. Logically, that should be a special purgatory for Stein, who still harbors deep theoretical doubts about the program. But, he says, "my skepticism is subordinated to making the program work. After all, I have a sort of parental love for it."

Stein has excellent credentials as a thinker who can not only adapt to but also lead changes in economic thinking. In the late 1940s, he helped develop the concept of the "full employment budget" --the idea that the Government should gear expenditures not to estimates of what tax revenues actually will be but to what they would be if the economy were operating at full employment. Nixon finally enunciated that idea as official Government policy last January.

Stein, who holds a Ph.D. from the University of Chicago, first gained attention in the economics profession at age 28 by winning a $25,000 prize from the Pabst Brewing Co. for the best essay on how the U.S. could achieve full employment after World War II (he recommended retraining defense workers and reducing taxes to stimulate the economy). The next year, 1945, he joined the business-supported Committee for Economic Development. Eventually he became its chief economist, and later a senior fellow at Washington's influential Brookings Institution, which is a sort of stud farm for top Government economic policymakers.

A jowly and owly man, Stein brings to his new eminence a refreshingly acerbic wit that should serve him well in making points to the President and the press. Just before his promotion, he suffered an unexplained blood clot that has left him almost completely blind in one eye. When Nixon called him in the hospital, Stein joked: "Half of what I see isn't worth reading anyway." He also possesses a feeling for the politics of the economy that Nixon should appreciate in a key adviser during election year. In a speech a year ago, as the 1970 elections were approaching, Stein observed: "The poet says that April is the crudest month, but the poet did not know about seasonal adjustment. Seasonally adjusted, September was the crudest month. The news wasn't as bad as in the spring, but it came at a worse time--just before the election."

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