Ideological Differences between Economists

Scott Sumner provides a valuable discussion of the shifting ideological biases of American economists in this piece.

6 replies on “Ideological Differences between Economists”

It’s certainly an interesting read, but it contains some quite bizarre remarks. For example:

Thomas Piketty wrote a popular book on wealth inequality that is notable for being almost entirely devoid of what I regard as the heart of economics: It denies the importance of supply-side effects in a wide range of areas.

Piketty has repeatedly pointed out that the problems he identifies can arise even in a thoroughly neoclassical model. (Of course that doesn’t mean that he believes such models are adequate.) Far from ignoring supply-side effects, Piketty largely ignores demand-side effects; since he is concerned with the evolution of societies over long periods, he can largely disregard business cycles.

In my own field of macroeconomics, the new Keynesian consensus of the 1990s has been almost completely abandoned. As recently as ten years ago, graduate students at the top schools were taught that monetary policy should be used to control inflation and stabilize the business cycle, and fiscal policy played almost no role in cutting-edge models of countercyclical policy.

If this was intended as a criticism of New Keynesians for having neglected fiscal policy, it would make a lot of sense. But clearly Scott Sumner would actually prefer them to continue like that, whereas people like Simon Wren-Lewis acknowledge that it was a serious mistake.

I don’t think Mr Sumner, with his “folksy” tale of how Denmark proves a free market methodology works is going to be the neoliberals answer to Mr. Piketty. Right wing economists always give “obvious” examples to prove their point such as the death sentence reduces murders by seven fold and never review their theory afterwards when somebody points out that Denmark has a much lower murder rate than the U.S. without a death penalty.

Recently we have an 8% fall in the price of copper in one day, evidence no doubt that markets are “working”. I agree with him in saying that people do actually respond strongly to economic incentives and the continuing increases in taxes and charges on the low and middle incomes in order to pay the gambling debts of the extremely wealthy is having a huge effect on demand. The deflationary spiral caused by taking cash from people who spend it, the low and middle income, and giving to those who don’t, billionaires, under the guise of austerity is about to cause the next great recession.

At least unlike the other neanderthals who pass themselves off as “economists” of the right he accepts that global warming is real. Can we please get together with Russia, China and India and start using some of the printed money to fuel research into a new low carbon economy generating thousands of jobs in the process (and yes some unsightly windmills!) rather than the central bank using it to buy dodgy assets off oligarchs.

Fair play to Sumner!

He appears to have found some ‘soft’ ideological differences in US Economic Academia.

That said, these ‘differences’ are not significant.

@Brendan Walsh

As a very experienced, and productive, academic economist, how have your own ideological views changed over time, if at all?

If politics is show-business for ugly people, is economics just politics for nerds?

Discuss: (25 marks)

@unfeasibly charming
I wish it was unfortunately there is seems no scientific basis at all to economics and based on Mr. Sumners article it all seems to be based on building up some sort of false narrative for the side you have picked like a defense barrister. Are the people of Denmark aware that with their exemplary social housing, welfare and education polices they are being lauded as being the most capitalist country in world because of their “lack of corruption” by an American Neoliberal intent on rewriting the history of the great depression. Nerds I wish, at least they are real!

How many times have we have to endure the folksy Roosevelt legend, rather than the unpleasant truth about the ‘lost decade’ in the US? A lot, it seems.

The US banking crisis was more or less fixed by mid 1932 (Hoover was still in office), the US domestic economy had just about stabilized and by December-January 1933 had started to recover – albeit slowly. Roosevelt was elected in November 1932 but delayed the inauguration of the new administration until March 1933. During this interregnum he quite literally sat in his wheel-chair and made one crackpot decision after another – or in the case of the about-to-be successful London Economic Conference, no decision at all. Roosevelt had one life-abiding ideology – his own self-importance. He is only deified because he was the leader of the western powers during WWII. Winners get to write history. His real economic legacy is dreadful.

Eisenhower was the winning general: take a look at his economic policies (1953 – 1960).

Its somewhat similar for Lord Keynes. He hit the high-spot with his brilliant 1919 demolition of the 1919 Paris Peace Conference outcomes. If you want to develop an in-debth and meaningful intellectual understanding of our current financial mess – just read the final two chapters of his ‘Economic Consequences of the Peace’: its grim reading indeed. His later idea of a fiscal stimulus to correct a consumer demand deficit was considered somewhat daft – but again, he got off the ideological hook because of his work on the Bretton Woods conference. It was others, who for their own ideological reasons pumped the stimulus balloon. And anyways, europe from 1945 – 1953 was hardly a ball of economic laughs.

There are a few interesting bits in the piece: such as empirical evidence – even if it refutes a current theory – will at best be ignored, at worst be buried in a lava flow of invective. Always been that way.

There are two obvious (theoretical and practical) problems with the paper – provided you’ve been to SpecSavers recently! – there is no mention of the FIRE economy. That’s a big miss. Secondly, the idea that a Left v Right political ideology is still with us: it most surely is not. Apart from those two its basically ho-hum stuff.

Political Economy is like a high-Tog continental quilt draped over the bed. It keeps those in the bed snug and cosy. And in that condition you’d believe anything! Well, almost anything!

@ BW: Thanks for posting. Any idea how Ireland ranks on that Civic Virtue v Statist Econ Policies continuum?

Comments are closed.