Joe Stiglitz writes a monthly column for Project Syndicate in which he describes himself as a dissenter from the conventional wisdom --- somewhere in-between the failed models of laissez-faire capitalism and state-socialism. Do you believe him?
It is often fashionably chic to play the dissenter. But can you say that a man who has achieved every honor that the establishment can confer on an individual --- both inside and outside of academia (from the positions at Princeton, Stanford, etc., to the Nobel Prize to the Chairmanship of the CEA in DC to the top economist at the World Bank). Stiglitz perhaps more than any other economists was in the pivotal positions throughout his career to shape the economic discourse in this country and throughout the world --- and HE DID. How can he claim to be a dissenter from the orthodoxy when he in fact defined the orthodoxy throughout most of his career?
Keep in mind that in surveys of AEA membership only 3% would describe themselves as free market. So how can you possibly define the "conventional wisdom" in economics as --- 'let the market decide'? Most economists are in fact some form or another of a social democrat and believe whole-heartedly in the necessity of government intervention and the desirability of government programs to correct for market imperfections and protect citizens from the vagaries of unbridled capitalism. I
CP readers might be interested in two posts I have up at other blogs this morning (don't worry, I still love you guys):
1. I'm guest-blogging this week at Bleeding Heart Libertarians, where I have a post up recapping some of the data on income mobility and the household consumption of the US poor that I have discussed hereonCP previously.
Simon Johnson argues that the Bassel III negotiations from last year resulted in lower capital requirements which was folly, and now exposes the European banks to great risk. What do you think?
Along these lines, at the recent HES meetings I had the occasion to speak with Perry Mehrling, the author of The New Lombard Street (among many other works, e.g., his excellent biography on Fischer Black). Perry argues that free market types like myself ask the wrong question when we focus on letting the banks fail and thinking about decoupling the links that cause counter-party contagion. At a fundamental level, he argues the international credit system is not characterized by counter-parties, but by an intricate interwoven web of interlocked balance sheets. You cannot decouple, and thus a bank failure here results in a crash over there. My response, for sake of argument, was that this resulted in an extremely fragile international financial system, and thus I asked the question back to him --- how do we make the system more robust? And especially given the system and the politics involved, how would we ever overcome the permanent moral hazard the system as he describes it creates? I didn't get a concrete answer.
Though at some level this is what Nassim Taleb is asking as well, also see him discuss this idea:
If you were to teach such a course to PhD students, what would you emphasize?
(a) possibility of modern tools to represent older theoretical ideas associated with market process analysis
(b) possibility of a multiplicity of empirical approaches to illustrate theoretical ideas associated with market process analysis
(c) current research in the market process tradition -- both theory and application
(d) developments in the philosophy of science that are consistent with, but yet provide a novel defense of, the market process approach to economic science
(e) criticisms of the market process approach and possible defenses against the critics
(f) some combination
I fear that the (f) response will result in a course that lacks serious depth on any of the (a)-(e). I do think (e) can be incorporated into (a) - (d). But I think (a) - (d) represent radically different approaches to teaching a PhD course within the confines of a 15 week semester.
Clarification: The pre-requisites for this class would The Austrian Theory of the Market Process I and The Austrian Theory of the Market Process II. So the background in the Austrian tradition would already have been covered. Moreover, students at GMU that would take such a course would also have had the opportunity to take Larry White's monetary course, Pete Leeson's development course, Richard Wagner's public finance course, etc., etc. So my thinking is that I would try to explore some mix between (a) and (b) and with a focus on the task of intellectual arbitrage between the Austrians and the cutting edge of mainstream economics.
Written, produced and performed by Roy Cordato. Roy also rose to fame during the 1980s as one of the leading wrestling commentators on the East Coast. I don't think we have any pictures from his TV Show, which I think was called "Inside the Square Circle."
Paul Samuelson remarked once that as economics evolved it lost the wonderful characters who did economics in his youth -- personalities that were bigger than life. For all the students at GMU currently (or in the recent past), listen to the lyrics in Cordato's song. The intellectual commitment he expresses and the uniqueness of the opportunity at GMU to study Austrian ideas was what all of us at CSMP thought -- even prior to Buchanan winning the Nobel in 1986.
Do you all still have that sense of purpose? If so, express it; if not, explain why?
As Richard Ebeling has pointed out on numerous occasions, there has always been fierce competition among different members of the Austrian School of Economics --- scientific ambition, personal intrigue, and bitter rivalry has been common since the days in Vienna.
I want to point out another competition --- even among those who were trained at GMU; though a generation apart. We now have a potential rumble brewing over musical talents of two great teachers of economics -- David Prychitko and Dan Smith. Given that Dan is now working alongside of Dave's greatest student --- Scott Beaulier --- I am sure they can have a guitar dual down in Alabama shortly. In the meantime, please rate their performances. I am biased and vote for the older wiser generation --- the Austro-punk has grown up to be the Ottlakerambler.
Of course the greatest musical accomplishment of GMU Austrians would have to go to the duo of Roy Cordato and Karen Palasek, who were both classically trained and professional musicians prior to becoming PhD economist and Roy is the author of the finest rap song ever --- The Market Process Shuffle. If anyone has a recording of Cordato's brilliant performance from the 1980s, then please do share.
Horwitz is disqualified from judging given his taste in music, and D'Amico is highly suspect as well -- plus all the time they spend on the Judge means they don't have time to judge anything anymore.