Economists' Hour False Prophets, Free Markets, and the Fracture of Society

Binyamin Appelbaum produces a stunning overview of the changes in the role and prestige of economists from the 1960s to the present. I majored in economics and think myself fairly conversant, but I was not fully aware of the extent to which economic language and methods are relatively new to society; a shift amounting to nothing less than a revolution. Appelbaum describes how in the 1950s, there were no economists working in the Federal Reserve's leadership, instead being treated there and elsewhere as primarily data analysts. Over the course of the book, he looks at how in fields from taxation and currency valuation, to antitrust and corporate regulation, economists propounded a particular laissez-faire approach to policymaking with often devastating consequences.

What particularly struck me is the naked ideology described in the narrative. Milton Friedman shows up repeatedly, bringing a libertarian approach to topics from the draft to tax cuts but his motivation is not evidence, but belief in “freedom”. Alan Greenspan is the chief proponent of zero regulation in the financial sector, despite mounting abuses and failures. The narrative highlights the extent to which economists were declaring truths that they did not have evidence for; an unearned confidence that remains today. I don't think Appelbaum believes, nor do I, that the pre-economic ways of thinking were ideal. Tools such as cost-benefit analysis or principles of quantifying problems are clearly beneficial. But for all the economic discussion of positive vs. normative analysis, the ideology clearly shaped (and shapes) the kinds of analyses being proposed, and excludes factors that a society might wish to include. It's particularly shocking when confronted with the human costs of this thinking; in the gutted Rust Belt, in Pinochet's Chile. Even more so when you recognize how deep this neoliberal ideology rooted itself, since most of the relevant actors knew these costs and forged ahead anyway.

I strongly recommend this book; it's an invaluable reminder of the relative newness of certain “facts” that neoliberalism has tended to portray as such. For economists, lauded by society, it's a suggestion to preserve some humility. In an era of rising populism and criticisms of capitalism it remains to be seen whether we can build something better, but I hope this book will give us some of the context to get us there.