Economics Stars Swing Left
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Charles Brown
Jan 12, 2015, 11:33:16 PM1/12/15
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http://www.bloombergview.com/articles/2015-01-07/economics-stars-swing-left
THIS MAN BEARS NO RESEMBLANCE TO MILTON FRIEDMAN.
PHOTOGRAPHER: JEROME FAVRE/BLOOMBERG
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ECONOMICS
Economics Stars Swing Left
283 JAN 7, 2015 9:00 AM EST
By Noah Smith
A lot of people see economics as a “conservative science” that makes
up unrealistic theories in order to push a free-market agenda. I don’t
know if that was ever true -- maybe in the 1970s? -- but if so, those
days are long gone.
At the latest American Economic Association meeting -- the big annual
economist convention, which ended Monday -- some people turned out to
protest against what they claim is too much mathematical formalism in
economics. In an act of supreme irony, their main target was Carmen
Reinhart, a Harvard economist whose most famous work was a book about
the history of financial crises -- a famous example of modern econ
that isn’t mathematical.
Why did the protesters go after Reinhart? Because she’s in favor of
cutting government debt. What the protesters want has nothing to do
with methodology -- they want economics to lean more to the left.
But if the protesters bothered to look around, they would see that
their wish has been coming true for decades. Over the past
quarter-century, economics has been shifting from singing the praises
of free markets. Instead, it has moved toward a greater focus on
inequality, human welfare and the ways that markets break down.
In academia, the shift has come partly through the introduction of new
tools, and models that reveal the shortcomings of unfettered
capitalism. Game theory shows how competition can lead to waste, and
models of asymmetric information also show how markets can fail.
Decision theory, learning theory and behavioral economics have poked
holes in the old assumptions of perfect rationality. Even in
macroeconomics, all the focus is on incomplete and imperfectly
functioning markets, as Karthik Athreya explains in his recent book,
“Big Ideas in Macroeconomics.”
The move away from pure free-marketeerism has been helped by a flood
of new data. Economics has become much more empirical, and that has
made it much harder to wave away the possibility of market
inefficiencies.
But academic economists themselves aren’t very ideological in the
first place. Where the shift from right to left has really been more
pronounced isn't in the ivory tower, but in the public sphere.
Back in the 1970s, the public face of economics was Milton Friedman. A
consummate public intellectual, Friedman would travel around the
country giving lectures about the power of free markets and the
virtues of capitalism. Just search YouTube and you can easily
seehighlight reels of Friedman smacking down socialists and idealistic
leftist youths. He inspired a generation of bright young conservatives
to go into economics. And before Friedman, there was Friedrich Hayek,
whose tirade against Keynesian government intervention is still
revered by many on the right.
Look around now. Where is the Milton Friedman of the 2010s?According
to a recent post by George Mason University economist and blogger
Tyler Cowen, the modern Milton Friedman is…Paul Krugman. Friedman's
“Free to Choose” has been replaced by Krugman's “The Conscience of a
Liberal.”
Krugman isn't alone. Cowen’s list of the five most influential
economists also includes Thomas Piketty, Joseph Stiglitz, Jeffrey
Sachs and Amartya Sen. Piketty, of course, exploded on the national
scene last year with a book warning about inequality, and his ideas
were apparently all the rage at this year’s AEA meeting. Stiglitz, who
helped invent the theory of asymmetric information, travels the
country talking about how markets are flawed. Sachs campaigns in favor
of foreign aid to poor countries and Sen has spent his life trying to
inject a human element into the cold equations of econ.
On the right side of the spectrum, what popular economists can match
the appeal of Krugman, Piketty and the rest? The only candidate is
Greg Mankiw of Harvard, who has become known as America’s economics
teacher through his authorship of the most popular introductory
college textbook. Mankiw is a rock-ribbed conservative, arguing
tirelessly for lower taxes on the rich. But in terms of popular
influence, he can’t match the heavy hitters on the left. Other
right-leaning economists such as Robert Barro, John Cochrane, Martin
Feldstein and John Taylor pen occasional op-eds in the Wall Street
Journal, but none of them has written a book or blog whose popularity
or influence matches that of Krugman or Piketty.
It’s worth asking: Why has economics shifted to the left? Maybe it’s
because the country itself, and its problems, have shifted. In the
1970s, when conservatism and Friedman became the face of economics, we
faced high tax rates, heavy regulation, high inflation and powerful
unions. But in 2015, we confront rising inequality, economic
insecurity, and the aftermath of a financial crisis and a long, deep
recession.
Maybe a country simply gets the economics it needs.
In any case, if you think of economics as a bastion of conservatism
and free-market dogma, it’s time to take another look. The winds have
changed.
To contact the author on this story:
Noah Smith at nsmi...@bloomberg.net
To contact the editor on this story:
James Greiff at jgr...@bloomberg.net
THIS MAN BEARS NO RESEMBLANCE TO MILTON FRIEDMAN.
PHOTOGRAPHER: JEROME FAVRE/BLOOMBERG
Google+
ECONOMICS
Economics Stars Swing Left
283 JAN 7, 2015 9:00 AM EST
By Noah Smith
A lot of people see economics as a “conservative science” that makes
up unrealistic theories in order to push a free-market agenda. I don’t
know if that was ever true -- maybe in the 1970s? -- but if so, those
days are long gone.
At the latest American Economic Association meeting -- the big annual
economist convention, which ended Monday -- some people turned out to
protest against what they claim is too much mathematical formalism in
economics. In an act of supreme irony, their main target was Carmen
Reinhart, a Harvard economist whose most famous work was a book about
the history of financial crises -- a famous example of modern econ
that isn’t mathematical.
Why did the protesters go after Reinhart? Because she’s in favor of
cutting government debt. What the protesters want has nothing to do
with methodology -- they want economics to lean more to the left.
But if the protesters bothered to look around, they would see that
their wish has been coming true for decades. Over the past
quarter-century, economics has been shifting from singing the praises
of free markets. Instead, it has moved toward a greater focus on
inequality, human welfare and the ways that markets break down.
In academia, the shift has come partly through the introduction of new
tools, and models that reveal the shortcomings of unfettered
capitalism. Game theory shows how competition can lead to waste, and
models of asymmetric information also show how markets can fail.
Decision theory, learning theory and behavioral economics have poked
holes in the old assumptions of perfect rationality. Even in
macroeconomics, all the focus is on incomplete and imperfectly
functioning markets, as Karthik Athreya explains in his recent book,
“Big Ideas in Macroeconomics.”
The move away from pure free-marketeerism has been helped by a flood
of new data. Economics has become much more empirical, and that has
made it much harder to wave away the possibility of market
inefficiencies.
But academic economists themselves aren’t very ideological in the
first place. Where the shift from right to left has really been more
pronounced isn't in the ivory tower, but in the public sphere.
Back in the 1970s, the public face of economics was Milton Friedman. A
consummate public intellectual, Friedman would travel around the
country giving lectures about the power of free markets and the
virtues of capitalism. Just search YouTube and you can easily
seehighlight reels of Friedman smacking down socialists and idealistic
leftist youths. He inspired a generation of bright young conservatives
to go into economics. And before Friedman, there was Friedrich Hayek,
whose tirade against Keynesian government intervention is still
revered by many on the right.
Look around now. Where is the Milton Friedman of the 2010s?According
to a recent post by George Mason University economist and blogger
Tyler Cowen, the modern Milton Friedman is…Paul Krugman. Friedman's
“Free to Choose” has been replaced by Krugman's “The Conscience of a
Liberal.”
Krugman isn't alone. Cowen’s list of the five most influential
economists also includes Thomas Piketty, Joseph Stiglitz, Jeffrey
Sachs and Amartya Sen. Piketty, of course, exploded on the national
scene last year with a book warning about inequality, and his ideas
were apparently all the rage at this year’s AEA meeting. Stiglitz, who
helped invent the theory of asymmetric information, travels the
country talking about how markets are flawed. Sachs campaigns in favor
of foreign aid to poor countries and Sen has spent his life trying to
inject a human element into the cold equations of econ.
On the right side of the spectrum, what popular economists can match
the appeal of Krugman, Piketty and the rest? The only candidate is
Greg Mankiw of Harvard, who has become known as America’s economics
teacher through his authorship of the most popular introductory
college textbook. Mankiw is a rock-ribbed conservative, arguing
tirelessly for lower taxes on the rich. But in terms of popular
influence, he can’t match the heavy hitters on the left. Other
right-leaning economists such as Robert Barro, John Cochrane, Martin
Feldstein and John Taylor pen occasional op-eds in the Wall Street
Journal, but none of them has written a book or blog whose popularity
or influence matches that of Krugman or Piketty.
It’s worth asking: Why has economics shifted to the left? Maybe it’s
because the country itself, and its problems, have shifted. In the
1970s, when conservatism and Friedman became the face of economics, we
faced high tax rates, heavy regulation, high inflation and powerful
unions. But in 2015, we confront rising inequality, economic
insecurity, and the aftermath of a financial crisis and a long, deep
recession.
Maybe a country simply gets the economics it needs.
In any case, if you think of economics as a bastion of conservatism
and free-market dogma, it’s time to take another look. The winds have
changed.
To contact the author on this story:
Noah Smith at nsmi...@bloomberg.net
To contact the editor on this story:
James Greiff at jgr...@bloomberg.net
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