In an earlier post, I described the sociology of economic knowledge at the elite professional schools (as opposed to doctoral programs) where future meritocrats are trained. Due to a combination of significant time constraints, the varying mathematical abilities of professional school students and at times the ideological bent of the instructor, the majority among them who are not in training for economics are taught a version of the discipline that tends to just-so stories where every causal factor is clearly defined, and most problems have answers. Moreover, those answers just happen to align perfectly with the some of the most damaging political policy choices made about the economy over the past 30 years.
The initial post was about Geithner (who went to such a school, in addition to embodying regulatory capture), but now it seems I chose the wrong case study. Brad DeLong did the rest of us a great service yesterday by excerpting some choice selection’s from Suskind’s new book on the economic policy process in this White House. The swirl of accusations and counter-accusations about misogyny and accuracy is something I’ll leave to others to comment on. What I was struck by was this exchange:
In this telling, the President’s view is not only counter to that of his senior policy advisors but also to much of the economics profession. That is not to say he was alone in dismissing the demand argument – in fact, the strongest voices against have tended to come from Obama’s former colleagues at the University of Chicago, which is also Ground Zero for the creation and dissemination of the Law & Economics approach that is widely taught in law schools.
Regardless of the source, Obama’s conclusion that the driver of unemployment was productivity gains has had clear policy implications. Since productivity gains are good in the aggregate, goes the argument, it would be counterproductive to do anything that could hinder business. Hence the lack of meaningful regulation, or of spending on jobs that would be opposed by the Chamber of Commerce. It is also inherently a supply-side argument, and one that is not far off from the weekly columns of Casey Mulligan (also at Chicago), many of which boil down to “there is no unemployment, only unmotivated workers.”
It is of course impossible to know exactly what Obama believes in his heart of hearts, or what factors led him to any decision. What is becoming increasingly clear from the pattern of his policy choices and preferences is another matter. Education has consequences, and I believe we’re seeing the consequences of government officials learning just enough economics to be dangerous, but no more.