What’s Wrong with the Economy—and with Economics?If Sandwichman was on that panel tomorrow afternoon, he would share with the audience two accounts of the education of economists, one by Larry Summers from a few weeks ago and one by John Kenneth Galbraith from 1975. All that appears to have changed from the 1930s to the 1960s was that rejection of the Luddite (etc.) fallacy was substituted for acceptance of Say's Law as the test of respectability and the 'crackpots' who didn't go along were replaced by 'a bunch of goofballs.'
VI. 2:30–4:00 pm: The Education of Economists
Professor Jefferson Cowie, Cornell University
Jeff Madrick, Century Foundation, New York, Editor of ‘Challenge’ Magazine
First, Galbraith:
Until Keynes, Say's Law had ruled in economics for more than a century. And the rule was no casual thing; to a remarkable degree acceptance of Say was the test by which reputable economists were distinguished from the crackpots. Until late in the '30s no candidate for a Ph.D. at a major American university who spoke seriously of a shortage of purchasing power as a cause of depression could be passed. He was a man who saw only the surface of things, was unworthy of the company of scholars. Say's Law stands as the most distinguished example of the stability of economic ideas, including when they are wrong.Summers:
...when I was an undergraduate at MIT in the 1960s there as a whole round of concern about this -- will automation displace all the employment? And what I was taught as an undergraduate was that basically the people who thought it would were a bunch of idiot Luddites and that obviously there would eventually be enough demand and it would all sort of work itself out, and if people got more productive they'd be richer and they'd spend and maybe we needed some transition assistance, but that it was all basically going to be okay. That was what I was taught. That's what Bob Solow thought; he was a hero and the other people were all a bunch of a goofballs was kind of what I learned. (Laughter)
I actually believed that for many years and actually repeated it often.Today it's much simpler. The dogma is so deeply embedded in the models and their microfoundations it doesn't have to be explicitly accepted or even acknowledged..The goofballs and crackpots are called "heterodox."
«The dogma is so deeply embedded in the models and their microfoundations it doesn't have to be explicitly accepted or even acknowledged..The goofballs and crackpots are called "heterodox."»
ReplyDeleteWith the usual sympathy for even slightly more realistic approaches to the study of the political economy, focusing on the so-called Say's Law, which is a slightly squishy subject as a mark of heterodoxy is a bit limiting, and then gets us the rather limiting approach of the neokeynesians, for both neoclassical approaches like RBC are entirely fine, except for occasional wobbles.
Which is an improvement, but not much.
The real dividing line between "aligned" Economists (usually working for the "sell side") and political economists is that the latter give a lot of importance to distributional issues, which are a forbidden topic ("class war") for "aligned" Economists.
The "dogma is so deeply embedded in the models and their microfoundations" is not the so-called Say's Law, but the Central Truthiness of Economics, that the distribution of income is uniquely determined by marginal productivities, and "aligned" Economists can only discuss models in which the Central Truthiness holds (by hook or by crook).
There is a link between distributional issues and the so-called Say's law, and it is that usually the make-believe needed to hold the Central Truthiness also results in some version of the so-called Say's Law, but that is just "lucky" happenstance :-).
Still the core of the discussion is about the distribution of income and how economic policy (macro and micro) changes it, as Sraffian arguments show, not the so-called Say's Law, which is a distraction. But perhaps our blogger likes to do incremental steps.
blissex,
ReplyDeleteI would be only too happy to lay off the lump of labor and Say's Law if the right-wingers and the Wall Street centrist Democrats would lay off. Wake me when that happens.