What was going on when I was born?

Stock prices dropped yesterday after Monday's sharp advance despite a cut in interest rates by a major bank. The main casualties were some of the blue chips and technology issues. At the final bell, the Dow Jones industrial average was down 11.68 points, to 1,058.87. In the previous session, the Dow climbed 25.48 points, to 1,070.55, a new closing high, buoyed by signs of an upturn in housing starts and automobile sales.

President Reagan today recommissioned the World War II-vintage battleship New Jersey and asserted that his Administration had dramatically improved American military readiness after what he called a period of unilateral disarmament from 1970 to 1979. In an appeal for continued growth in military expenditures, Mr. Reagan said critics of his Administration were ''dead wrong'' in suggesting that the Pentagon was ''inherently wasteful and unconcerned about cost-cutting.'' Speaking from the deck of the 887-foot ship in the shadow of one of her nine 16-inch guns, Mr. Reagan declared: ''As the recommissioning of this ship demonstrates, we are re-arming with prudence, using existing assets to the fullest.'' ''However, even with maximum efficiency and an eye toward making every dollar count, we must not fool ourselves,'' he added. ''Providing an adequate defense is not cheap. The price of peace is always high. But considering the alternative, it's worth it.''

Mexico's new Government moved to soften the impact of the nationalization of the country's private banks last September by announcing plans to sell off 34 percent of the nationalized banks. The move is expected to stir criticism from leftist and nationalist groups that have pledged to fight any efforts by the one-month-old Government of President Miguel de la Madrid Hurtado to reverse or weaken the state takeover of the banking system. But the proposal, contained in a bill sent to Congress Monday night, does not contemplate returning shares to the former bank owners. It would offer them for purchase by Federal, state and municipal agencies, bank workers and bank users. No single shareholder would be allowed to own more than 1 percent of the stock in the banks.

The President's top economic advisers, in preparing next year's budget, have significantly scaled back their forecast for economic growth in 1983, Administration officials said today. They now predict slow growth in the first half of the year and as a result little reduction in the 10.8 percent unemployment rate by the end of 1983. The economic forecast is the first critical decision that must be made in assembling the fiscal year 1984 budget because it is the basis for all the projections of tax revenue, spending and the budget deficit. The President will submit the budget for the 1984 fiscal year, which begins Oct. 1, 1983, to Congress at the end of January.

Drew Lewis resigned today as Secretary of Transportation to return to private business as the head of one of the nation's largest cable television operations. Mr. Lewis said he would assume the job of chairman and chief executive officer of Warner Amex Cable Communications Inc., which is owned by Warner Communications and American Express. The company, which has been losing money, operates more than 140 cable television systems in 27 states and is constructing additional systems, including one in New York City. Mr. Lewis, who for months has been reported to be in line either for a higher assignment in the Administration or a return to private industry, said he informed President Reagan on Dec. 13 that he was departing Feb. 1, but added that he did not accept the job at Warner Amex until Monday. He said that he had decided to leave ''after much thought and careful consideration,'' confident that he had met his major objectives for the transportation system.

The death in Lackawanna was a long time coming. But to a person who has known the death of an elderly parent or of a friend who had lain unconscious a long time, the death in Lackawanna, while almost sure to come, was no less shocking, meant no less pain. David Yetman demonstrates this. Mr. Yetman, 35 years old, is an American steelworker. That is, he used to be, and would still like to be. But the announcement Monday that the Bethlehem Steel Corporation plans to close its plant here all but means that he and 7,300 others won't. Mr. Yetman has worked at his trade - for decades a basic American trade - one week in the last 16 months. He earned $12.99 an hour, his basic wage, when he worked at the Lackawanna plant. But, laid off in September 1981, Mr. Yetman now earns $3.50 an hour on the 5 P.M.-to-2 A.M. shift as a custodian @for Mr. Janitor, an office and factory janitorial company.

LOOK, I don't want to hear one more word about the sad fact that with the invention of the telephone we lost the art of writing letters. It is sad, it is a fact, but we've known it for quite a while now. It's more than a hundred years since Alexander Graham Bell made that first faint call on his wire: ''Please come here, Mr. Watson, I need you.'' Watson, I assume, was a repair man. Anyway, that's all past history except for a new, rather sinister development. It's not bad enough that we don't know how to write letters anymore. Any minute now we won't know how to talk on the telephone. It's true. With the invention of these new, lower-priced answering machines, all charm, all style, all grace is disappearing from phone conversations. I remember the golden, olden days (eight years ago) when, if you'd just heard a stunning piece of news, you'd automatically call a friend, right then

International Lebanon and Israel opened talks designed to bring about a withdrawal of Israeli, Syrian and Palestinian forces from Lebanese soil. Israel also hopes that the negotiations, being held outside Beirut amid tight security, will pave the way for an Israeli-Lebanese peace treaty. (Page A1, Column 1.) Ethnic tension among Israeli Jews has re-emerged over the fatal shooting of a man by a policeman in a housing dispute. The shooting occurred in a Tel Aviv slum dominated by Sephardic Jews from Middle Eastern countries. Officials have received threats, and swastikas and slogans against Ashkenazim, or Jews of European stock, have been spray-painted on cars and buildings in affluent sectors of Tel Aviv and Jerusalem. (A7:1.)

AS New Year's Eve approaches, thoughts automatically turn to Champagne. For some that evening is the only occasion during the year when they drink the world's most popular wine of celebration. But Champagne is expensive and this year, with the economy still in the doldrums, less costly alternatives will be chosen by many celebrants. The United States is now the largest market for Champagne, surpassing England, Italy, and France itself, and it is also the largest market for the imitations, the so-called ''almost-Champagnes'' that have risen sharply in popularity as well as quality in recent years. Some of them are appealing not only because they cost less but also because they actually taste just as good - or almost as good. The almost-Champagnes are produced in abundance in such countries as Spain, West Germany and Italy as well as France. Many retail for less than $5 a bottle and most for less than $10, whereas the average price of genuine Champagne is closer to $20 and virtually none sell for as little as $10.

A tentative agreement to end the nine-week strike by Legal Aid lawyers in New York City was reached last night between representatives of the lawyers and the Legal Aid Society, spokesmen for both sides announced. Details of the agreement were not made available by either side, but an official familiar with the progress of the negotiations said that both wages and working conditions were addressed by the tentative settlement. The official, who spoke only on the condition that he not be identified, said that the settlement did not include a no-strike clause. Such a clause was recommended by a mayoral advisory panel last week.

Criminal penalties against emergency room doctors and nurses who turn away critically ill patients were proposed yesterday by Mayor Koch and Assemblyman Alan G. Hevesi. Their proposal also included bringing all hospitals in the city into the municipal 911 emergency ambulance system. Despite what Mr. Koch described as ''dramatic improvements'' in the city's Emergency Medical Service, including reducing the average ambulance response time from 18.6 to 10.9 minutes in the last two years, he contended that there were ''serious, continuing problems in the provision of emergency services by hospitals.'' To resolve them, he proposed a series of measures ''to reform New York City's system of emergency medical care.''

The economy is dismal. But rather than wringing their hands over what they may have done wrong, many of the economists attending the three-day meeting of the American Economics Association were elated. Certain misguided policies, they said, were in the past. Now, the profession, and the country, could return to less flamboyant strategies that might meet with more success. ''The pat answers weren't so pat,'' said E. Cary Brown, professor of economics at the Massachusetts Institute of Technology. ''Monetarism and supply-side economics don't seem to hold quite the interest at this meeting as they have in recent years,'' added Richard Ruggles, a professor of economics at Yale University. ''I don't think it means the resurgence of Keynesianism, but everyone is looking around again. If anything,'' he said, ''there is more of an interest again in institutions, things like segmented labor markets, urban economics, health care economics.''