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Sunday, March 26, 2017

The Need for a Reformation of Authority and Hierarchy Among Economists in the Public Sphere

Brad Delong:

The Need for a Reformation of Authority and Hierarchy Among Economists in the Public Sphere: I find that I have much more to say (or, rather, largely, republish) relevant to the current debate between Simon Wren-Lewis and Unlearning Economics.

Let me start by saying that I think Unlearning Economics is almost entirely wrong in his proposed solutions.

Indeed, he does not seem especially knowledgeable about his cases. For example:

  1. the trashing of the Grameen Bank is undeserved;

  2. the blanket denunciation of RCTs as having "benefited global and local elites at the expensive of the poorest" is just bonkers;

  3. Merton and Scholes's financial math was correct, and the crash of their hedge fund did not require any public-money bailout;

  4. Janine Wedel is not a reliable source on Russian privatization, which I saw and see as the only practical chance to try to head off the oligarchic plutocracy that has grown up in Russia under Yeltsin and Putin (and, no, my freshman roommate Andrei was not prosecuted for "fraud in Russia", but rather the Boston U.S. Attorney's office overreached and was unwilling to admit it);

  5. Unlearning Economics confuses the more-sinister Friedrich von Hayek (who welcomed Pinochet's political "excesses" as a necessary Lykurgan moment) with the truly-libertarian Milton Friedman, who throughout his whole life was dedicated to not telling people what to do, and who saw Pinochet as another oppressive authoritarian who might be induced to choose better rather than worse economic policies;

  6. and then there is Reinhart and Rogoff, where I think Unlearning Economics is right.

So Unlearning Economics is batting 0.170 in their examples of "mainstream economics considered harmful". But there is that one case. And I do not think that Simon Wren-Lewis handles that one case well. And he needs to--I need to. And, since neither he nor I have, this is a big problem.

Let me put it this way: Carmen Reinhart and Ken Rogoff are mainstream economists.

The fact is that Carmen Reinhart and Ken Rogoff were wrong in 2009-2013. Yet they had much more influence on economic policy in 2009-2013 than did Simon Wren-Lewis and me. They had influence. And their influence was aggressively pro-austerity. And their influence almost entirely destructive.

Simon needs to face that fact squarely, rather than to dodge it. The fact is that the "mainstream economists, and most mainstream economists" who were heard in the public sphere were not against austerity, but rather split, with, if anything, louder and larger voices on the pro-austerity side. (IMHO, Simon Wren-Lewis half admits this with his denunciations of "City economists".) When Unlearning Economics seeks the destruction of "mainstream economics", he seeks the end of an intellectual hegemony that gives Reinhart and Rogoff's very shaky arguments a much more powerful institutional intellectual voice by virtue of their authors' tenured posts at Harvard than the arguments in fact deserve. Simon Wren-Lewis, in response, wants to claim that strengthening the "mainstream" would somehow diminish the influence of future Reinharts and Rogoffs in analogous situations. But the arguments for austerity that turned out to be powerful and persuasive in the public sphere came from inside the house! ...[continue]...

    Posted by on Sunday, March 26, 2017 at 10:47 AM in Economics | Permalink  Comments (150)


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