Academic Research Problems Dwarfed By Outside Vested Interests

Paul KrugmanPaul Krugman wrote a curious column today, How to Get It Wrong. He looked at the financial crisis and asked how it is the economics profession got the response so wrong. Of course, he noted that it isn’t “economics” itself that got it wrong. Anyone with a basic understand of economics could predict what happened. But there were certain notable economists who got things fatally wrong. And how exactly does that work?

I think I can explain a big part of it. It’s the money, stupid! Glenn Hubbard was paid $1,200 per hour by Countrywide Financial to sign off on their toxic mortgages. There is gobs of money to be had by working as an apologist for the wealthy. And in the economics and financial fields, people are well aware of the kind of money that is available. Some Latin scholar has no such temptations. There aren’t man walking around college campuses with buckets of money for the scholars who have the right marginal theory about Cicero’s oeuvre.

Glenn HubbardThis isn’t to say that Hubbard is a charlatan. I don’t think it works that way. What happens instead is that bankers and other promoters of “free” markets notice that the young Hubbard naturally has opinions that go along with what they are selling. So they give him money for his research. And they give him money to speak to groups of like minded plutocrats. And before long, without any intent to deceive, Glenn Hubbard dives into a collection of toxic assets and just doesn’t see anything wrong.

The problem, of course, is not Glenn Hubbard or Alberto Alesina or Reinhart and Rogoff. The problem is the politicians. Krugman discussed this. Let’s suppose these self-serving academics had not been around to provide intellectual cover for bad economic policy:

But would it have mattered if economists had behaved better? Or would people in power have done the same thing regardless?

The answer, of course, is that the politicians would have done exactly the same thing. Politicians don’t need economists to back them up. Remember Obama at the very beginning of his presidency, “All across America, families are tightening their belts and making hard choices. Now, Washington must show that same sense of responsibility.” That wasn’t based on any economic theory. When Alesina made that argument, it was circuitous. Obama was making it because it is the kind of “common sense” that just happens to be totally wrong. What he was saying was, “All across America, families are tightening their belts and making hard choices. Now, Washington must do the same thing so that American families have even less money and must tighten their belts even more and make even harder choices.”

So Krugman is right that the problem is not with the economics profession. It has a lot of good advice to offer to policy makers. But all that good advice was ignored. It didn’t tell politicians what they wanted to hear. It didn’t justify Obama’s slick rhetoric that we knew was wrong in the 1930s. And if there hadn’t been very smart cranks like Alberto Alesina around to justify what the politicians were going to do regardless, they would have gone it alone.

Think about evolutionary theory. There are no reputable scientists who question it. But there are tons of people who pretend it is bunk just because they want to believe something else. The same is true of global warming. It really doesn’t matter. If an issue becomes political, people will find a way to ignore it. And any problems within an academic discipline are dwarfed by the vested interests outside it who want to make a buck today and don’t care about the people, planet, or even the long-term health of the economy.

This entry was posted in Politics by Frank Moraes. Bookmark the permalink.

About Frank Moraes

Frank Moraes is a freelance writer and editor online and in print. He is educated as a scientist with a PhD in Atmospheric Physics. He has worked in climate science, remote sensing, throughout the computer industry, and as a college physics instructor. Find out more at About Frank Moraes.

Leave a Reply

Your email address will not be published. Required fields are marked *