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Jon Talton

Analysis and commentary on economic news, trends and issues, with an emphasis on Seattle and the Northwest.

October 12, 2009 at 10:15 AM

Prized idea: A modest proposal regarding economists

“The ideas of economists and political philosophers, both when they are right and when they are wrong, are more powerful than is commonly understood. Indeed the world is ruled by little else. Practical men, who believe themselves to be quite exempt from any intellectual influence, are usually the slaves of some defunct economist.”

–John Maynard Keynes

After we congratulate the two Americans who won the Nobel in economics, let’s proclaim this independence day from a slavish devotion to economists.

For one thing, the economics Nobel is given for highly technical work — even if some Nobel laureates are also highly political creatures who propagate opinions that might not be backed by science. Second, human action in the marketplace is very hard to pin down with the precision of, say, chemistry. “There are idiots. Look around” as Larry Summers wrote to knock down the holy efficient markets hypothesis.

And some things don’t pass the smell test that doesn’t require a Ph.D. If new laureate Elinor Ostrom really believes common resources can be managed by the people using them, rather than by government or companies, she’s never been to a National Park hit by funding cuts. (I know, true believers, the trash, etc. is there because of government, not the funding cuts).

Not to beat up unfairly on Dr. Ostrom, but we’ve just been through the near-death experience of a financial panic that was built upon the work of a generation of venerated economists and the elegant theories and computer models that made all the numbers seem to “work.”

They worked until they didn’t, and suddenly it was obvious that the markets couldn’t police themselves, companies wouldn’t look after the interests of their shareholders or even their survival, and now the commons, in the form of American taxpayers, must pony up to fix the mess. Alan Greenspan was shocked, shocked! But the economic future of the nation has been mortgaged to a set of highly suspect ideas, many of which were pulled from Nobel laureates. Lives and livelihoods have been ruined. We are a poorer nation because the theories didn’t work.

Another pernicious consequence of the rise of economic authority over the past 30 years is the notion that every human good can be valued in dollars and cents, in formulas of markets and self-interest, of “paying for itself.” No civilization could be built that way, no democracy perpetuated, no complex society maintained. Not for nothing did Alexander Hamilton, the envisioner of our commercial republic, say, “I hate money-making men.”

Economists are wonderful, but economics is never without values attached — that’s why in the early days it was called “political economy.” Detached from history and common sense, yoked to the service of greed and highly concentrated moneyed interests without any checks and balances — it can be just another racket.

Today’s Econ Haiku:

T-Mobile’s Sidekick

Kicked by a Microsoft glitch?

Talk about reboot

Comments | More in Macro/Big picture, Politics and the economy


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