What are economists for? | Washington Examiner


What is the social role of the economist?

Over the course of the last century, two distinct viewpoints developed. The first sees economists primarily as students of society. The second moves beyond study into the realm of social engineering. One of my graduate school mentors referred to this distinction as “economists-as-scholars” versus “economists-as-saviors.” Especially when it comes to politics, there’s a world of difference. Before the late 19th century, there weren’t many professional economists with university positions. The few that held such positions were often within faculties of law or philosophy. In fact, economics, or political economy as it was more commonly called, was seen not as a separate discipline, but an extension of humane studies. More commonly, economics was the domain of gentlemen-amateurs who wrote about the foundations of commerce in between their professional pursuits.

All this was changing rapidly by the dawn of the 20th century. Economics became more self-consciously “scientific,” in that economists began to adopt the methods and language of the natural sciences. In addition, the presence of economists on university faculties grew. This was most notable in the new “research universities,” built in America on explicitly Prussian templates. Lastly, the rise of the Progressive movement resulted in economists redrawing the boundaries between social inquiry and social control.

The professionalization of economics significantly changed the incentives that economists face. And as any economist worth his salt will tell you, when you change the incentives, you change the outcomes.

Once economists pushed to make their discipline more “professional” and “scientific,” they adapted their models and techniques to new goals. Old questions about how markets work took a back seat to new questions about how markets could be controlled. The social and political landscape seemed tailor-made for economists to save the day. Capitalist economies were besieged by unpredictable booms and busts. Also, the conspicuous fortunes of some capitalists made the prevalence of poverty alongside plenty rather morally odious. If economists adapted their toolkit to solve these problems, the thinking went, they could unleash enormous social prosperity.

Economists started making their way to Washington during the New Deal era, but their heyday was the aftermath of World War II. The budding consensus among the best and brightest was that capitalism was only sustainable if it were carefully managed. At the micro-level, economists had to shore up all the inefficiencies that existed in various markets. At the macro-level, economists pushed for ever-increasing government spending, which they believed was the only way to maintain full employment. Politicians and bureaucrats, always eager to grow their power, were happy to take this advice.

It didn’t work.

With economists in prominent policy making and advisory roles, the U.S. economy began to flounder. There were years of strong performance after World War II, but by the mid-1960s, there was growing unease about impending economic sclerosis. When inflation and unemployment both skyrocketed in the 1970s, the truth could no longer be denied: Economists had made a dreadful mess. Power had gone to their heads. In their hubris, they assumed they were the masterminds of material plenty. They were wrong.

The post-war years through 1980 are a cautionary tale. When economists fall prey to the pretense of knowledge, they make fools of themselves, but they do not bear most of the costs. Instead, it’s the millions of households across America who suffer.

Thankfully, a new cohort of economists revived old-school economics, with its appreciation for the spontaneous organizing forces of markets. Harvard economist Andrei Shleifer refers to this era as the Age of Milton Friedman. Economists became more frank about the myriad of forces beyond their control. Their humility was rewarded by the taming of inflation, a long-term drop in unemployment, and a generation of prosperity.

Unfortunately, we're losing this hard-won wisdom. The economists called up to the majors by the Biden administration are anything but humble and restrained. In some ways, their ambition extends even beyond that of the New Deal and Great Society economists.

The social role of economists matters for the wealth and poverty of nations — and the public should exercise great care in the kinds of economic “experts” they allow near the levers of power.

Alexander William Salter is an associate professor of economics in the Rawls College of Business at Texas Tech University, the comparative economics research fellow at TTU’s Free Market Institute, and a Young Voices senior contributor. Follow him on Twitter: @alexwsalter.

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