Marshall Steinbaum
NAIDU, RODRIK, AND ZUCMAN are on the cutting edge of a new era in economics research, one that casts serious doubt on the received wisdom that the “free market” should not be jeopardized through government “intervention.” You would be hard-pressed to find an academic economist in good standing now who doubts the essential contingency of economic outcomes. The discipline has largely rejected the simplistic “economics says” pattern of policy prescription—the idea that theory implies we must enact this or that (usually elitefavoring) policy.
But the dead weight of decades of bad economics—and of bad interventions by professional economists in the public debate— remains. In the late 1990s, leading economists advocated for financial deregulation. In the early 2000s, Federal Reserve chairman Alan Greenspan put his great, and unmerited, prestige to work advocating in Congress for regressive tax policy. More recently, in the financial crisis and the global recession that followed, leading members of theeconomics profession placed their prestige behind the idea that the main threat to the economy was spiraling government debt and a resulting spike in interest rates that would lead to the crowding out of private investment and a stagflation crisis of the type experienced in the 1970s. The fact that these dire warnings repeatedly failed to come true has not stopped a march of bad policies, such as misguided fiscal austerity, from being enacted by politicians who think they are doing what “economics demands” (or so they say).