By Richard Vedder
My distinguished colleague and friend Lowell Gallaway, on reaching his 80th birthday, said his only regret about his career is that the profession that he worked in for over a half of century -- economics -- had become so ideological, non-scientific, wrong, pompous, irrelevant and, most fundamentally, corrupt. A strong indictment, but supported by the evidence. Another friend, Doug North (winner of the Nobel Prize in Economics) has successfully argued that a good university should NOT have a sociology department -- I ask, should they have an economics department? (I think the answer is still "yes" but the case for the opposing view is growing).
Almost no one in economics warned the President, Congress, the financial community, etc., of the forthcoming financial crisis of 2008, of the dangers of subprime lending, or of the separation of loan origination's from loan risk, or of the dangers of excessive Fed monetary creation, etc. Economists on average were pretty mediocre in their response to what happened. Their models don't deal with financial panics, for example. They were clueless what to do. Most of them had no historical perspective, a useful thing (since there were distinct parallels to the Great Depression). A year ago, the new incoming chair of the Council of Economic Advisers, Christina Romer, said passage of the Obama stimulus package would keep unemployment from rising above 8 percent --we have had 3 consecutive months of 10 percent joblessness. And so it goes.
But let's talk about the "corrupt" part of the Gallaway remark. Sen. Charles Grassley is upset, and rightly so in my judgement, about the behavior of Professor Jonathan Gruber of MIT. He has testified before the Senate Finance Committee about the great benefits of the Obama health care proposal --failing to point out he had been given at least $400,000 (one account says $700,000) to 'research" and "evaluate" the health care bill. And he told no one about his financial ties to the Obama Administration.
This is triply deplorable. First, Prof. Gruber is guilty of a huge ethical lapse, despite Paul Krugman's pleas to the contrary (Krugman is worth another blog, another day). Second, the government is engaging in the politicization of the academy, giving un-bid, presumably non-peer reviewed contracts in huge amounts to favored economists who will support political objectives. Third, all of this tarnishes higher education in general, and MIT in particular.
Prediction: Nothing negative whatsoever will happen to Prof. Gruber. He will get a salary increase for next year, and not even a reprimand from the MIT administration --the Law of No Consequences at work (not the first ethical lapse problem in Cambridge amongst economists in the past decade, I might add). No congressional hearings will be held on the prostituting of "science" (if one wants to call economics that) for political purposes. And the decline in the integrity, the nobility, the greatness, of American higher education will continue unabated.
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4 comments:
This is a great post in the blog today. As I started to read the post Krugman immediately came to mind - and I do hope you will follow up on that in the future.
Embarrassingly, Christina Romer is a fellow Buckeye. She graduated from the same HS as my spouse. (Glen Oak High School in Canton).
I wonder how many people that are called economists are economists?
"Back in the day" there were only 5 Engineering disciplines. They were: Mechanical, Electrical, Chemical, Civil, and Industrial.
Engineering is based principally on physics, chemistry, and mathematics and their extensions into materials science, solid and fluid mechanics, thermodynamics, transfer and rate processes, and systems analysis. Yet when I go to online job boards to see what industries are hiring (one of my small measures of what industries are in some measure of apparent growth or decline), there are more engineers than you can shake a stick at. There are "Cisco Engineers", "Software Engineers", "Project Engineers", "Antenna Engineers" (Huh?), "Controls Engineers", "Quality Engineers", "Linux Application Engineers", and more. Who can forget the "Sanitation Engineer"? It is just rediculous.
If you logon to Monster.com and enter "Economist" in the keyword box and do a search, 26 positions come up. Do the same for "Engineer" and over 5000 positions come up.
So I am comfortable saying that there are more people called economists than there are real economists.
Example: Jared Bernstein is an American economist currently serving as Chief Economist and Economic Policy Adviser to Vice President Joseph Biden in the Obama Administration. Bernstein is considered to represent a progressive, pro-labor perspective.
Jared Bernstein co-authored Obama's plan for economic recovery. Bernstein graduated from the Manhattan School of Music with Bachelors Degree in Fine Arts where he studied double bass with Orin O'Brien. He earned a Masters Degree in Social Work from the Hunter School of Social Work, and, from Columbia University, he received a Masters Degree in Philosophy and Ph.D. in Social Welfare. He does not have a degree or any formal training in economics. http://en.wikipedia.org/wiki/Jared_Bernstein)
Ideology is an ingredient of those economists, like Gruber, that advocate Obama's neo-socialist economic policy. And this just poisons the well.
However, I disagree with you as to whether or not there will be consequences for Gruber to pay. His day will come. To state it as a cliche: What goes around comes around. And in your experience, I expect you have witnessed the truth in this.
Sociologists are on campus for comic relief. My view is, you come out of a sociology class shaking your head in laughable disbelief or you become a conspiracy theorist.
Anyway, I enjoyed your commentary today.
Gruber did make an ethical lapse but if you look at his position it's not like the funding changed his mind about anything. I don't think the funding gave him an incentive to be for it--he got the money regardless.
It's not like your analysis isn't heavily biased by your ideology. You have heavy pro-market leanings even when you recognize the behavioral quirks of students and market power of universities make market-based higher education reform a problem. You write about the student-as-"consumer" as if it's a problem when what you advocate your market mechanisms in education! You write with a far more polemical style than Krugman (you often call Obama a socialist as if he has any socialist leanings).
Do you think maybe you're holding people you don't like to higher ethical standards?
Steve, I appreciate your comments, but disagree with you on at least three matters.
My first disagreement is that money didn't provide incentive "to be for it" since he (Gruber) was going to get the money anyway. I'm wondering why he would get the money to do "research" and "evaluate" the health care bill if he did not do the research and evaluation. I'm guessing here, but I suppose what you are saying is that he (Gruber) already advocated health care legislation. But in that case, I'm not sure if the money or the research would have been necessary. So I'll conclude that I don't understand what you are driving at.
Also, I think there is a good debate to be had on what effect money has on research when it comes from a lobby or interest group - and it is an argument that isn't unique to one ideology or another. But I do not think I am the person to participate in such a debate.
However as a businessman, money is the incentive that keeps me in business. And without getting in to a long list of how money creates incentives, I will just leave it at this: I definitely believe money provides motivation and incentives. Lobbying and PAC's are evidence of this in the context of politics and public policy.
My second disagreement is with your contention that Dr. Vedder "often calls Obama a socialist." I have missed that and wonder if you would care to substantiate your statement?
Without a doubt I refer to Obama with a small dose of hyperbole as a "neo-socialist" - a person who subscribes to socialism. For example, the nationalization of banks and finacial institutions, nationalization of GM and Chrysler, and the nationalization of health care. And to a less visible degree his policies. On that we may have a complete disagreement or impasse, but that is solely my view and I do not presume to speak for CCAP. But there are things about Obama that I like. For example, being very deliberative in making a decision to send, or not to send more men and women into battle when surely some will never see home again.
Finally, labeling Dr. Vedder as a polemicist is subjective opinion and somewhat of a drive-by pot shot in my opinion. Have you assigned such a label based on this blog or the sum of his work?
I don't tend to label writers as polemicists because I believe it might lead to hesitation in presenting how passionate they feel about a subject and the dilution of their passion if they believe self expression is going to be labeled polemical or if the word polemic is used excessively.
I believe I would much rather read a passionately written (but not a destructive or attack) piece rather than a piece that is dryly written in a textbook context.
Thank you in advance for indulging me.
This is an example of a topic-relevant comment that we will consider responding to:
"Gruber did make an ethical lapse but if you look at his position it's not like the funding changed his mind about anything. I don't think the funding gave him an incentive to be for it--he got the money regardless."
My Response: The fact that he was a paid advisor is a conflict of interest that should at the very least have been disclosed during his testimony so that the senate committee could consider it as part of the evidence. In the court of law, this would be rendered contempt. Now, you are likely correct that Gruber was already supportive of the bill, but nonetheless he was paid a very lucrative amount which provided him with an incentive to see the bill the way that his employer (Obama Administration) wanted him to see it. This is the same sort of ethical dilemma that surrounds university medical research that is sponsored by drug companies.
Now, this is comment that is an attack on character intended to distract the reader from the topic at hand:
"It's not like your analysis isn't heavily biased by your ideology. You have heavy pro-market leanings even when you recognize the behavioral quirks of students and market power of universities make market-based higher education reform a problem. You write about the student-as-"consumer" as if it's a problem when what you advocate your market mechanisms in education! You write with a far more polemical style than Krugman (you often call Obama a socialist as if he has any socialist leanings).Do you think maybe you're holding people you don't like to higher ethical standards?"
My Response: none, we will not be responding to personal attacks. Please keep your comments on topic. We want to maintain an interactive blog that promotes the free exchange of ideas. Thank you!
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