By Dan Kervick
Paul Krugman made a remarkable assertion last week about the dwindling legacy of Milton Friedman:
… Friedman has vanished from the policy scene — so much so that I suspect that a few decades from now, historians of economic thought will regard him as little more than an extended footnote.
Krugman’s efforts to deliver a disparaging judgment on the Friedman legacy in macroeconomics may be appreciated, but I’m not sure his critique digs very deep. Friedman was not just a macroeconomist; he was also an important figure in the history of American political thought who left a deep conservative impact on the minds and attitudes of people whose intellectual development occurred during the Friedman heyday. Consequently, Friedman helped define the boundaries of the rigid neoliberalism that still seems to reign supreme among US politicians of both parties, and among elite opinion-makers in the ranks of the professional economists and technocrats. He was possibly more responsible than any other figure for converting a generation of policy makers and pundits to a more conservative, market oriented approach to political economy, an approach that goes beyond the specifics of Friedman’s own macroeconomic theorizing. So I think Krugman overestimates the damage that has been done to Friedman’s legacy. Aspects of Friedman’s macroeconomics might be in trouble; but Friedman’s broader paradigm for political economy is still, regrettably, too much with us. In fact, Krugman himself doesn’t seem to have moved much outside that paradigm, as I will try to show.
By Dan Kervick
Since the crisis of 2008, professional and academic economists have grown increasingly concerned that something is wrong with their profession. Sometimes that anxiety springs only from the recognition that most of their colleagues failed to predict the oncoming crisis. But sometimes a nearly opposite concern is voiced: We sometimes hear the complaint that economists are offering good advice, but none of the decision-makers are paying attention.
I am not a professional economist, so I can only speak to the way the profession looks to me from the outside. Now, if people are not paying attention to what an expert has to say, it could be that those people are too ignorant or inexperienced to grasp the important things that the expert is trying to get across. But it could instead be that the expert doing the saying is not offering anything relevant to the most urgent problems the listeners are attempting to grapple with in their own lives, or to the institutional and political constraints that decision-makers must grapple with in carrying out their jobs. And it could also be that they are just not saying anything very interesting.
By Dan Kervick
Brad DeLong says he often wondered why Milton Friedman was willing to accept the need for government regulation in the world of money and banking, but not elsewhere:
In my rare coffees and phone calls with Milton Friedman, I found I could distract him whenever I was losing an argument by saying: “Why is it that the government needs to intervene and keep the flow of liquidity services provided to the economy growing along a smooth path? Why must there be a quantitative target achieved by government for the path of the liquidity services industry–commercial banking–when there must not be a quantitative target for kilowatt hours or freight-car loadings?”
By William K. Black
(Cross posted at Benzinga.com)
I have done a series of articles about the efforts of honest appraisers (which began in 2000) and loan brokers to alert the lenders, the markets, and the government to the twin fraud epidemics (appraisals and “liar’s” loans) committed by lenders’ controlling officers that drove the financial crisis.
Honest appraisers could have profited greatly by becoming dishonest appraisers who would be given the lucrative assignments by fraudulent lenders’ controlling officers and their agents. Instead, honest appraisers suffered serious losses of income because they refused to succumb to the extortion efforts of the fraudulent lenders and their agents. A national survey of appraisers in early 2004 found that 75% of them reported that they were the subject of attempted coercion designed to inflate the appraisal during the past 12 months. A follow-up study in 2007 found that percentage rose to 90% and that 67% of appraisers reported losing a client and 45% did not get paid their fee because they refused to inflate the appraisal during the past 12 months. Many honest appraisers were driven out of the profession by the blacklists the fraudulent lenders’ controlling officers and their loan brokers used to deny business to honest appraisers.