Economists are not the problem

I am not an economist, and will never be an economist, so I have no vested interest in pointing out that all of the bashing of economists in certain quarters runs the risk of missing the much bigger point. With some exceptions at the Fed and more recently in Italy, it is not economists who are making the final decisions on austerity and other delights. If anything, it seems to me that their discipline puts them in an odd position of being universally sought out but only very selectively listened to.

I’ve been meaning to write for the past couple of weeks about an event at my soon-to-be Alma Mater just before the holiday break that focused on the European debt crisis. The panelists included two of Alma Mater’s most prominent economists, one from the economics department and one from the business school, as well as two guys from Morgan Stanley. What was most remarkable about the presentations was the repeated proof statements that the ECB and Germany were going down a path that was supported by neither basic economics nor common sense. One student asked the obvious question in the Q&A session afterward: given the clear policy error, why was this happening? The economists had some thoughts on this but were ultimately too polite to say the truth, which was essentially that the policy was being driven by ideology, junk economics and the sociology of the elite class of Europe. That is not an answer that fits neatly in economics, nor is it one that we should look to economists to explain. These are questions for sociologists and political scientists. Why they are not being consulted is another matter entirely.

I was reminded of this earlier today when I saw this video of a former Thatcher advisor (so the youtube link says – I have no idea who he is, or whether that is accurate) who describes the mismatch between his intent as a policy analyst and the use of that analysis for political ends (h/t David Atkins):

Who knows whether the guy is the real thing, but the larger point obtains – focusing solely on the economic aspects of what are ultimately political choices made by those with actual power is likely to give only a partial understanding of the power dynamics behind the insane policy choices of the past few decades. This is not to say there aren’t ridiculous economists, but rather that the story of how we got here, and where we are going, should not begin and end with that profession.

And on a completely unrelated note, I’m heading here tomorrow so posting will continue to be light through Friday. After that, it’s open season.

Best wishes for a very happy and healthy New Year. It will be an interesting one, if nothing else.

Update of 1/1/12: I now realize I left out the glaring exceptions of the IMF and ECB. Fair enough, though political leaders still have agency. Iceland is the obvious example here.

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