Two books for the price of one. “The time of economists. False prophets, free market and the disintegration of society “(Hoepli), written by the American economic journalist Binyamin Appelbaum, bears the caption” Italian edition edited by “on the cover, well justified by the fact that Federico Rampini with the preface did not limit himself to present the topic, but he also wrote an essay that has its own merit for its content and incisiveness. If you are really in a hurry, you can also read only this, between the “two” books; but we recommend them both.
Under the blows of reality, the “single thought” in economics is crumbling, which since the time of Margaret Thatcher has monopolized the scene in the West: a mix of financial deregulation, cuts in social and health spending and squeezing income and rights of workers, in the United States and the United Kingdom, to which a paranoid fight against inflation (on German impulse) has been associated in the Eurozone. Mind you, each of these trends had its share of justification, to varying degrees, for reacting to the problems and sclerosis of the economic and social systems of the West in the 1970s; but it has gone too far, and far, and the pragmatic recipes have degenerated into ideology that is blind and deaf to reality.
Due to? It is the fault of the politicians (right and left) who held power and from time to time have taken responsibility for fatal decisions; but also the fault of the economists who inspired them. To quote Rampini, “almost none of them could foresee the systemic crash of 2008/2009. Worse: the most influential economists of the time had inspired decisions – by central banks, by market supervisory authorities, by governments – that caused that financial disaster. There is no trace of mass self-criticism for the responsibility for those events. Nor of a repentance. Since then, the majority of economists have still systematically wronged their predictions on the consequences of major world events such as Brexit, the economic policy of the Trump administration, the US-China trade war ”.
Politically, Appelbaum’s book blames the right but also the left of Clinton, Obama, Blair and even French socialists like Delors and Camdessus; and as for the economists, Appelbaum condemns them en bloc, arguing that the academic distinction between the “bad guys” of the Chicago school and the alleged “good guys” of the left or Keynesians is much less clear-cut than the journalistic vulgate tends to make us believe; Among the many examples cited in the book, we point out Samuelson and Tobin’s aversion to trade unions as “cartels”, and the hostility of these leftist economists to any hypothesis of a minimum wage as a market distortion.
One of the book’s central theses is that economists have historically played a marginal role in the history of economic development: the classical ones, says Appelbaum, from Adam Smith onwards, have been observers rather than inspirers of the changes taking place; and even Keynes is overrated as inspirer of the New Deal, because Roosevelt kept him in the hall and disqualified him as a theorist of little use in practice. Economists, again according to Appelbaum, have collectively risen to the role of advisors to the prince only in recent times, since the 1960s, and unfortunately (in his opinion) they have done damage.
Of course, many objections can be raised. For example: if economists gave (on average) such bad advice, and then were able to get politicians to accept it, it must have been because of the strength of their arguments, or because politicians were simply looking for certain slogans, to justify economic policies that they had already decided to implement? Indeed, when you see Kennedy, Nixon, Clinton, etc. in action in Appelbaum’s book, you get the impression that they are taking what they want from the à la carte economists, rather than letting them dictate the line. It seems that political economy, outside the university classrooms, is not very economic and very political.
We are allowed two personal notes. In the debate that Keynes and Friedman initiated in the 1940s about the origins of inflation, Keynes attributed the general increase in prices to a number of possible causes, from an increase in public spending to a temporary shortage of oil supply or union pressure. for higher wages. Friedman, on the other hand, pointed to a single cause: the government prints too much money, expanding the amount of money in circulation faster than the economy grows. Now, the surprising fact is that seventy years later the supporters of one or the other thesis are still not able to prove to the other side that they are wrong: they can try to convince the interlocutor to change his mind, with the Socratic method, such as if today’s economists were ancient Greek philosophers, but they cannot confront the adversary with the evidence of right and wrong and tell him: “here it is, it is proven”, as is done for example in the science called physics. Of course, even in physics there are frontier issues on which we debate, perhaps for a long time, but in the end the wrong or the right are proven. For example: on the origins of the Universe, the Big Bang theory has long been opposed to that of the “steady state”, but in the end one of the two was verified, and the other falsified. Does this happen in economics? No. Two economists, followers of Keynes and Friedman, who argue eternally over the causes of inflation and never manage to get to a full stop, are not like two physicists who cannot agree on a question at the frontiers of science. , but they are like two physicists who disagree on whether gravity is an attractive or repulsive force, that is, that Newton’s apple falls down or flies up. In these conditions, economics does not seem to be considered a science, no matter how many mathematical formulas fill its manuals.
Second personal notation. Over the years I have interviewed five or six of Appelbaum’s economists, including Nobel Laureates Amartya Sen and Paul Krugman. There was another one, of which I do not mention, and which Appelbaum cites among the worst, from his point of view, that is an exemplary representative of the “single thought” in treasurer, to which I asked, shortly before the crash of the 2008, what prospects he saw for the global economy in the following months, and he replied: all right. I interviewed him again a few months after the crash, objecting to him: “Professor, it is okay that economists can be wrong about the ways and times of a recession or recovery, but how is it possible that you have not been able to collectively grasp the symptoms of a system crisis? Shouldn’t that be exactly your job? ”. He replied: “The fault was not the economists, but the regulators who slept.” Such a response, at the very least, is inadequate. Appelbaum would object (and I do too, in my small way): the regulators, that is the bad central banks that created the conditions for the crisis and then self-incensed for having corrected their own mistakes, bring (all and all ) the imprinting of the single thought mentioned above.
We close by quoting Rampini for the second time: “The most authoritative economists of the time had inspired decisions – of central banks, market supervisory authorities, governments – that caused that financial disaster. There is no trace of mass self-criticism for the responsibility for those events. Nor of repentance ”.