1. There's a reform movement within economics, but one assumption remains unchallenged. Most economists - left, right, and center - believe policy should be what a bunch of economists sitting around a table decide. And that's core to the discipline.
2. Let’s start with a basic question. What is the point of economics? To understand the world accurately? No. Paul Pfleiderer notes economists launder political assumptions through complex models. And economists get big things wrong. mattstoller.substack.com/p/what-is-the-…
3. In 2004, Ben Bernanke lauded the 'great moderation' of successful policy, just before the crash. Larry Summers mocked Raghuram Rajan in 2005 when Rajan warned of hidden risk in finance, which non-economist housing advocates in Las Vegas noted years before.
4. Obama DOJ Antitrust economist and Google consultant Carl Shapiro said they wanted to bring monopolization cases when he was there, but there weren't any. He claimed no abusive monopolies in the entire U.S. economy! mattstoller.substack.com/p/what-is-the-…
5. In 2004, Greg Mankiw argued offshoring was largely a good thing and anyone who said otherwise was a quack. Millions of Americans losing jobs to China disagreed. A decade later economists published a paper called the 'China Shock' and economists finally saw the carnage.
6. If the goal of economics were to ascertain truthful views about the world, if economics were as its proponents offer, a science, these errors would matter. They do not.
So what is the goal? Simple. Winning bureaucratic turf fights.
So what is the goal? Simple. Winning bureaucratic turf fights.
7. Economists have arranged themselves in four places to have hidden veto power over what elected officials decided. First is the Congressional Budget Office. CBO makes determinations about what laws cause deficits, and they get it wrong in ways the help concentrated capital.
8. Here's how it works. Bills that raise or lower deficits as per CBO projections are be held to points of order, which is to say, members of Congress have to affirmatively vote to ignore what is portrayed as the scientific truth. mattstoller.substack.com/p/what-is-the-…
9. Here's the trick. CBO uses opaque economist models to appear that spending money on childhood poverty is more expensive than ends up being. But deregulating derivatives to banks gamble with public money? That scores as costing zero.
10. In other words, spending money through the regular budget gets subject to points of order, but spending money by shifting risk onto the public balance sheet by letting banks gamble with our money doesn’t. Guess which one Congress regularly enables?
That's economics.
That's economics.
11. Second is the Office of Information and Regulatory Affairs, where economists kill or weaken most regulations using opaque models under the guise of cost/benefit analysis. Health, safety, etc, even rules against prison rape.
That's economics. mattstoller.substack.com/p/did-economis…
That's economics. mattstoller.substack.com/p/did-economis…
13. Third is the Federal Trade Commission where economists spend their time justifying monopolies. And courts have accepted their expensive junk models, meaning bringing a case for robbery costs millions of dollars. That's a way of nullifying antitrust law.
14. Finally there's the Federal Reserve, in which economists make policy on bank regulation/money printing, under the guise they are 'apolitical' and should be left alone by elected officials.
That's the point of economics, to craft a governing language based on exclusion.
That's the point of economics, to craft a governing language based on exclusion.
15. There are wonderful economists, and bad ones. But the point of the discipline is to maintain bureaucratic positioning for people who speak in certain mystical tones.
The way to address this is to demote the economists bureaucratically. Here's how.
The way to address this is to demote the economists bureaucratically. Here's how.
16. First, make hidden political assumptions explicit. Split CBO into a Democratic CBO and a Republican CBO, and get rid of budget-related legislative points of order. Fight over assumptions, don't hide them.
17. Second, replace the Fed committee of economists and businessmen that sets interest rates (FOMC) with a Congressional committee. Congress should set interest rates and Fed policy, as the Constitution says.
18. Third, eliminate the bureau of economics at the FTC, the new Office of Economics and Analytics that @AjitPaiFCC set up at the FCC, and place economists under the lawyers. Four, eliminate the Office of Information of Regulatory Affairs and get rid of cost/benefit analysis.
@AjitPaiFCC 19. There's stuff to do at the IMF and BIS, though I know less about that. Regardless, reformers of the economics profession should recognize their goal needs to be to reorient the goal of the discipline so that it's about uncovering truth, not wielding power over the rubes.
@AjitPaiFCC 20. One of the more exciting critiques of economists was in early 2019 when @AOC and @RoKhanna through the progressive caucus rebelled against Pelosi's use of 'Pay-Go,' which lets economists veto Congressional choices on spending through deficit fear-mongering. That's democracy!
21. Economists have many useful things to offer, but it's critical that economist reformers focus on bringing more democracy into governance rather than replacing neoclassical aristocrats with left-leaning aristocrats.
Because aristocracy isn't the point, or shouldn't be. /Fin
Because aristocracy isn't the point, or shouldn't be. /Fin
