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Tuesday, July 07, 2009

"Economists on Trial"

This is part of an interview of heterodox economist Michael Perelman:

Michael Perelman, on Market Myths, Past and Present, by Seth Sandronsky: ...[Seth] Sandronsky The Depression of the 1930's changed the public policy views of some in the economics profession. In brief, what were the main changes, and how do they connect with the post-bubble economy of mid-2009?

Perelman The Great Depression severely tarnished economists' reputations. For example, The Economist published an article on 17 June 1933, entitled "Economists on Trial," which described a "mock-trial - not entirely mockery -" of "the economists." The trial was staged at the London School of Economics, with Robert Boothby, M.P., representing "the state of the popular mind." He accused the economists with "conspiring to spread mental fog," charging that they "were unintelligible; that they had in general proved wrong; and that in any case they all disagreed." The economists - Sir William Beveridge, Sir Arthur Salter, Professor T. E. Gregory, and Hubert Henderson - were all highly respected in the field. They answered Boothby's charges without wholly refuting them. The article concluded, "There was never a time when the advice of an expert was so often asked and so seldom followed as the present." According to the magazine, the problem was that the authorities did not listen to the economists.

At the same time, during the New Deal economists played a very prominent role. For the most part, they had not previously been among the doctrinaire defenders of laissez-faire. But keep in mind that, until the post-World War II era, the economics profession was much more diverse. A good number of progressive economists had been purged from academia, but some progressives remained. The more elite a university was, the less diversity it had. Yet, even in elite universities there was a modicum of diversity.

Although the discipline of economics became radically more conservative after World War II, during the 1970's economists who were active during the Depression tended to give me a much more sympathetic hearing, even if they had drifted considerably to the right.

Today, the makeup of the economics profession has changed dramatically. The economists who experienced the Great Depression are gone. On virtually any campus, the economics department will be among the most conservative. Dissenting views are rarely tolerated, except in liberal arts colleges. Catholic colleges also tend to be less fearful of unorthodox views.

However, the government's stimulus plans - under both Bush and Obama - have been so inept that a good number of very conservative economists have been highly critical in ways that do not entirely differ from my own.

Perhaps what is most surprising is how little influence economists have had in the policy realm. Virtually no Congressional hearings have called upon economists, whether they are conventional or radical. How much influence economists - other than Larry Summers - have had behind closed doors is an open question. ...

    Posted by on Tuesday, July 7, 2009 at 07:47 PM in Economics | Permalink  TrackBack (0)  Comments (40)


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