Paul Krugman won the Nobel Memorial Prize in Economics today. I was so happy to hear that--I have really enjoyed reading his illuminating columns for quite a while. Congratulations to Krugman on a well-deserved honor.
This is the first Economics prize given to someone of a prominent liberal bent that I can remember. Krugman wrote a year ago that "conservative ideology" had "blinded" regulators to the danger of the subprime lending crisis--and he pinned a lot of blame on Alan Greenspan and the like. Maybe the recent financial debacle has given the Nobel committee some cause for shame?
I will never forget when the professor of an economics class I took at Berkeley recommended that we all read "Capitalism and Freedom" by Nobel laureate Milton Friedman. She wanted us all to read the short book because it straightforward, well-written, and most of all because, "It is important to understand the enemy."
Monday, October 13, 2008
The Conscience of a Conservative Committee?
Posted by Dr. Strangelove at 7:03 AM
Subscribe to:
Post Comments (Atom)
12 comments:
It would be a mistake to assume that just because an economist does research on individual rationality and related issues that they are conservatives or Republicans.
I know a lot of economists who are Democrats. Granted, they tend to be moderate Democrats rather than the "Gee I'd love to vote Ralph Nader or Kucinich but I know he won't win" type of Democrats.
RbR: You are right. I was wrong to assume the committee that awards the Nobel prize is conservative. I think it is true, though, that they have not awarded the prize to a prominent liberal voice in a while. In these times of financial turmoil, it is satisfying that they nominated a critic of the policies that brought us here.
The renewed faith in the notion that the "free market" thrives best in the absence of government "interference" died a hard death a few weeks ago. Unfortunately, that Nineteenth Century religion has animated US economics departments for a quarter of a century or more, led by the flagship Chicago school. Under the guise of "law and economics" it even invaded law schools. The Supreme Court has also in a series of cases more or less endorsed the philosophy that securities and antitrust regulation are generally too complicated for courts to understand, and they will only mess it up, so such thing should be left to the free market to work through. This, too, will be up for serious reexamination.
I wonder if we will start to see economics departments retool their curriculum to put Keynes back in, and move Friedman and Hayek from the list of heroes to the list of naifs.
Keynes never left economics curricula. His influence is still great in discussions about the Breton Woods institutions (IMF, World Bank). From a policy perspective, most governments have behaved in a generally counter-cyclical way, that is to say a Keynesian way. Economists and Political Economists ignore Keynes at their peril. They also ignore von Hayek at their peril. Both men had tremendously profound insights into economics and political economy.
Back to the prize: there have been other political liberals (or at least moderates) who have won in the last ten years or so.
Thomas Schelling won in 2005 (shared with a right wing Israeli). He worked on the Marshall Plan (hardly a policy based on Hayekian principles) and served in the Truman White House for years.
Joseph Stiglitz won in 2001, and he ran the World Bank and is a prominent critic of the IMF's conditions for emergency loans on the grounds that they are harmful to poor countries and favor banks.
So between 2001 and 2008 they have awarded 8 prizes and 3 of those prizes have at least been shared by economists who would not fit the caricature of economics that LTG offers up. Given the small number of observations it would be pretty hard to say that the committee has a bias in favor of doctrinaire von Hayek followers. Indeed, Hayek himself was shunned by the committee until 1974 and then, perhaps to balance the tally, Leonid Kantorovich, a Soviet economic planning expert won 1975.
The demographics of the Nobel Laureates in the wikipedia article are interesting. All have been men. 60% have been Americans and 42% have been Jewish. Next to the USA, the next most common nationality for recipients is the UK (7 laureates) followed by Sweden, Norway and Israel (2 each). If the Nobel committee has an agenda it is clear misogyny more than conservatism.
I don't recall Schelling being particularly outspoken or well-known outside economist circles (actually, I don't recall him at all) but I had forgotten they gave the prize to Stiglitz! So you are right, RbR. The committee has been more evenhanded in recognizing political liberals than I had given them credit for.
It is still fitting, however, that they should give the prize to Krugman this year. I think Krugman has been more outspoken (blogs, NY Times columns) about his views. Next up, Jeffrey Sachs?
Keynes remains very prominent in economics. Even Milton Friedman famously acknowledged in 1965, "We are all Keynesians now."
Is there really any doubt that for the past 25 years Friedman and von Hayek have been all the rage, while economists have treated Keynes with the enthusiasm with which one picks through a phone book? I can't prove it, but I doubt that more than a few have received an appointment to a major university economics department in the past 20 years by espousing traditional Keynesianism or writing articles praising government regulation as a cure for natural deficiencies in the market.
I don't think it was as one-sided as you imagine, LTG.
The problem is that many of these Nobel Laureates are being given the prize for what to most people is obscure work. Schelling got it for game theoretic analyses of strategic interaction international relations. Similarly, people like Harsanyi are not known for any public political leanings one way or the other. And unless you think there is political bias inherent in the assumption that people are self-interested and more or less informed about the consequences of their actions, the content of such work is not a political issue in and of itself.
I do think that LTG is exaggerating the extent of the dominance by von Hayek devotees. Certainly there are some departments (like the U. of Chicago) that do exhibit this kind of orthodoxy. But I know several economists at well respected departments who think Chicago school scholars are a little ridiculous. I did a quick search on JSTOR for economics and finance journal articles that mention "Keynesian" in their abstracts and got 256 hits. About 50 of them in the years between 2000 and 2006 (keep in mind that JSTOR doesn't usually have work done in the last year or two). And that's ONLY work that specifically and self-consciously mentioned "Keynesian" in the abstract. This is probably a dramatic under representation of the extent to which Keynes' work is influencing current economics research.
"Unless you think there is political bias inherent in the assumption that people are self-interested and more or less informed about the consequences of their actions, the content of such work is not a political issue in and of itself."
Well, there is a political bias there, but maybe not one that matters. The political bias is that this attitude rejects the Marxist notion of "false consciousness." Since Keynesians and others don't adopt that Marxist view (fyi, neither do I) it doesn't matter much within the discipline.
The view described above also rejects a great deal of the disciplines of sociology and psychology that posit the causes of human behavior to lie outside of rationality or even idiosyncratic rationality. One does not have to endorse these views to understand the diverging disciplinary bent.
In addition, the deterministic quality of rational-based economic thought has political implications
(just as Marxist determinism points another direction). A model of self-interested and reasonably informed persons disfavors paternalistic regulation.
It also, of course, rejects the whole "natural law" theory of Clarence Thomas and others that posit human nature (hence human behavior) as something ordained by God.
Let's not kid ourselves. Economic theories are all political, even if they are well within the mainstream and are compatible with a spectrum of political views. There's no such thing as politically neutral economics.
And I haven't even begun to talk about such things as Western biases, white-male biases, and other things that are viewed by other academic disciplines as real and definitely political. The sociology of universities is, itself, an area of political contest.
I am reminded of one of my favorite quotes by George Orwell:
"All art is political. The attitude that art should have nothing to do with politics is, itself, a political attitude."
But yes, RBR, it is totally crude and inaccurate to say that rationality-based economics is conservative or liberal, Democratic or Republican.
FYI, the same arguments can be made about the scientific method and will send Dr.S into apoplexy.
Indeed, LTG, the mere allusion to such arguments causes apoplexy :-)
Post a Comment