What was going on when I was born?

President Reagan sought to clarify American nuclear policy today by asserting that any suggestion that the United States was considering fighting a nuclear war with the Soviet Union at European expense was ''an outright deception.'' His statement, issued as he flew to Cancun, Mexico, for a conference of developing and industrialized nations, was specifically designed to counter a wave of speculation in Western Europe that the United States was insensitive to the possibility of a nuclear war erupting in Europe, State Department officials said today. They said European concerns and protests had intensified as the result of what an official said were ''inflated accounts'' of Mr. Reagan's own impromptu remarks last weekend on the possibility of limiting a nuclear war to Europe. NATO Plans to Counter Protests In Gleneagles, Scotland, the Secretary General of the North Atlantic Treaty Alliance said the alliance planned ''a very strong public relations effort'' to counter the protests. (Page A7.)

AT first glance, Jim McWilliams's small, lower Manhattan duplex with its bright palette and comfortably mismatched selection of chairs appears to be spontaneously designed: an almost haphazard combination of textures and patterns. But a closer look shows that the apartment is the result of a meticulously executed plan - one in which Mr. McWilliams wanted to illustrate the possibilities of using paper ''without,'' as he explained, ''being boring about it.'' Mr. McWilliams, a vice president and creative director for a Massachusetts-based paper manufacturing company, set out to prove his point with a vengeance; the end product is an interior that is both imaginative and provocative. Papyrus plants are displayed in a basket, huge strips of paper hang from the walls, rolls of paper in the corner masquerade as a palm tree, paper on a wood column doubles as a lamp shade, and sheets of paper stacked and topped with glass serve as a coffee table. And, in one of the most appealing applications, there are tiny square bits of paper strewn over the floor - scattered like confetti after a summer wedding.

A House banking subcommittee rejected today an Administration-supported bill that would abolish state interestrate ceilings on consumer loans, but backers of the measure are still pressing for its adoption by the Senate, where chances are rated more favorable. The panel's 8-to-1 vote against the bill marked the first substantive Congressional consideration of the fiercely controversial issue. It would pre-empt state usury ceilings on consumer loans. Similarly, the Federal Government removed limits last year on home mortgages.

The International Business Machines Corporation yesterday introduced its most powerful computer, a machine that will be up to 40 percent faster than its current top model. The new computer, along with pricing changes announced yesterday, was viewed by analysts as an attempt to shore up lagging earnings and to make I.B.M. more competitive against the Amdahl Corporation and other companies that make computers that are essentially interchangeable with those made by I.B.M. The new machine, the 3081 model group K, is the second version of the 3081 introduced last November. While able to process information at a speed 40 percent faster than the first model, the new one will cost only 16 percent more: $4.3 million compared with $3.7 million. 'Strengthens Competitiveness' ''It strengthens I.B.M.'s competitiveness at the high end,'' said Thomas J. Crotty, an analyst with the Gartner Group. Analysts also noted that the new 3081, along with pricing changes for other large computers, would encourage customers to buy the machines rather than rent them, which could result in better shortterm earnings for I.B.M. The company's income has suffered recently from unfavorable currency translations and other factors.

New York City's Department of Health, hard hit in recent years by budget cuts, is trying to regain its reputation as the finest municipal health department in the country, according to city officials. ''It's essentially a forgotten agency of the city,'' said Barry Ensminger, counsel to the City Council President, Carol Bellamy, reflecting the view of most observers. ''It's in real bad shape. The first-rate people are no longer there.'' According to Deputy Mayor Robert F. Wagner Jr., ''It's no longer in the pre-eminent position.'' He cited as reasons not only budget cuts, but also the growth of the city's Health and Hospitals Corporation, a shift of powers to the state and the difficulty of attracting first-rate people because salaries were not competitive with those in the private sector.

International American pilots are flying for Libya, according to associates of Edwin P. Wilson, a former American intelligence agent. They said that dozens of American pilots and aircraft mechanics, including military veterans, were working for the Libyan Air Force in an operation organized by Mr. Wilson. The sources said that the recruits, along with pilots from Britain and Canada, were hired and paid by companies controlled by Mr. Wilson and have been flying and maintaining, at least since last year, a Libyan fleet of American-made cargo craft and helicopters. (Page A1, Column 6.) Opposition to the sale of Awacs planes to Saudi Arabia was expressed by Robert C. Byrd, the Senate minority leader, who said he would vote against President Reagan's proposal. The outcome of the Senate vote, set for next Wednesday, remained in doubt, but Senator Byrd's decision buoyed those opposing the sale of five radar planes and other equipment. (A1:4.)

In another piece of evidence that the nation's economy appears to be in a recession, the Commerce Department reported today that the gross national product declined at an annual rate of six-tenths of 1 percent in the third quarter and should continue falling in the present quarter. The third-quarter drop in the G.N.P., the broadest measure of American economic activity, follows a 1.6 percent decline in the second quarter. The President and his economic advisers already said earlier this week that the economy had entered a ''slight recession.'' Figures Subject to Revision The third-quarter figure for the G.N.P. - which measures the total output of goods and services, adjusted for inflation - is subject to revision as more information about the period becomes available.

Harding Park, a surprising little community of bungalows, dirt lanes and tomato patches in the East Bronx, has long seemed a contented place. In recent months, moreover, the longtime residents of its 237 houses have been negotiating a city offer to sell them the plots their houses sit on -20 acres of tree-shaded land, a poor man's paradise, with a spectacular view of the East River from the Throgs Neck Bridge to Manhattan. But the residents of Harding Park, in the Clasons Point section, have now been electrified by a warning from Mayor Koch. Unless they act faster to accept the city's offer and also end a rent strike started last June when the city raised each parcel's ground rent to $75 a month from $25, the Mayor said, the city will evict the strikers and sell their houses.

The magazine was called Fruit, Garden and Home when it was spawned in 1922, the same year that Reader's Digest sprang into being and a year before something called Time hit the racks. The first issue had a story about the Delicious apple, and another article went into what you could do with $50 in your backyard. In 1924, the name was rewritten to what it has been ever since - Better Homes and Gardens. What has changed since those embryonic days is the home, as well as the people who dwell in it. But while many big circulation magazines, notably those geared for the homemaker, have been hobbled by circulation woes and identity crises, Better Homes struts along. Feeding America's middle class a diet of insulation tips and Strawberry Banana Freeze recipes, it has never cut its circulation in its 59-year history, and, in fact, debates now whether to increase it.

In a game that saw Tommy John shut out his former teammates for seven innings, the Yankees defeated the Los Angeles Dodgers, 3-0, last night at Yankee Stadium and took a lead of two games to none in the World Series. The third game is tomorrow night in Los Angeles, with two of baseball's top rookies - Fernando Valenzuela of the Dodgers and Dave Righetti of the Yankees - pitching against each other.

An article Tuesday on the Reagan Administration's view of the Greek election incorrectly described terri- torial claims in the Aegean Sea. Tur- key has asserted that its continental shelf extends to areas around Greek is- lands. Greece rejects these claims.

American pilots and aircraft mechanics, including military veterans, are flying and maintaining Libyan Air Force planes in an operation organized by Edwin P. Wilson, a former American intelligence agent, according to associates of Mr. Wilson. The American flight personnel, as well as pilots from Canada and Britain, have been recruited and paid by companies controlled by Mr. Wilson and, at least since last year, have flown a Libyan fleet of American-made cargo and transport aircraft and helicopters, the associates said. One Western pilot recruited by Mr. Wilson said that American pilots flew helicopters in support of the Libyan invasion of Chad this year, but the extent to which Western recruits are involved directly in Libyan combat missions could not be determined. The pilot said he was paid about $3,000 a month. Coordination in London Some of the American pilots and mechanics have been recruited in the United States by other Americans. Most of the operation is coordinated through a London office that represents several African and European companies controlled by Mr. Wilson, according to his associates.