'What’s the Matter with Economics?': An Exchange

Arnold Packer and Jeff Madrick respond to Alan Blinder in the NYRB, and he replies:

‘What’s the Matter with Economics?’: An Exchange: In response to: What’s the Matter with Economics? from the December 18, 2014 issue ...

To the Editors:

Alan Blinder is one of the finest mainstream economists around. But to read his review of my book, you’d think that nothing was wrong with economics in recent decades except as it is practiced by a few right-wingers.

This is of course not the case. ...

Jeff Madrick
New York City

Alan S. Blinder replies:

According to both Jeff Madrick and Arnie Packer, I claim “that except for some right-wingers outside the ‘mainstream’…little is the matter” with economics. (These are Packer’s words; Madrick’s are similar.) But it’s not true. I think there is lots wrong with mainstream economics.

For starters, my review explicitly agreed with Madrick that (a) ideological predispositions infect economists’ conclusions far too much; (b) economics has drifted to the right (along with the American body politic); and (c) some economists got carried away by the allure of the efficient markets hypothesis. I also added a few indictments of my own: that we economists have failed to convey even the most basic economic principles to the public; and that some of our students turned Adam Smith’s invisible hand into Gordon Gekko’s “greed is good.” ...

Yet Madrick still insists that “economists rely on a fairly pure version of the invisible hand most of the time.” Not us mainstreamers. I’m a member of the tribe, I live among these people every day, and—trust me—we really don’t apply the “pure version” to the real world. For example, many of us see reasons for a minimum wage, mandatory Social Security, progressive taxation, carbon taxes, and a whole variety of financial regulations—to name just a few. ...

[Hard to summarize this one with a few excerpts -- I left a lot out...]