Back in January 2012, Jeff Sachs wrote an op-ed for the Huffington Post entitled "Libertarian Illusions", where he rejected single-minded ideology. In December 2012, however, Sachs published another op-ed in The Financial Times arguing that "Today's Challenges Go Beyond Keynes" and in parts endorses Hayek over Keynes on the substantive analysis of the Great Recession.
Has Sachs been caught in a contradiction?
The answer to that question for anyone who studies Sachs's career and even these articles closely enough is a resounding NO. Sachs is firmly committed to a middle-of-the road position. In the late 1980s and early 1990s when he was known as the architect for 'shock therapy', what he argued was for the necessity of a market economy that was in fact embedded in a system of regulation and macro demand management. But at the core, it was still a market economy. Sachs is in favor of an activist and robust regime of government intervention. But he also believes at the core of that system should be a market economy. The market should be free to allocate resources whenever and wherever monopoly power is absent, externalities are non-existent, and public goods are not required. But when these things are present, then the judicious action of the government are necessary to achieve the good society. I think it is reasonable to say that Sachs would include in his list of market failures not just monopoly, externalities and public goods, but also macroeconomic instability and income inequality. In short, Jeff Sachs in the quintessential "establishment economist" from the 1950s-1980s era. Innocent of much of public choice analysis, and not that persuaded by the Chicago School "New Learning", though he does pay lip-service to some ideas from New Institutionalism (though not many) and he will nod to certain aspects of Hayek's argument about prices, knowledge and discovery.
Sachs is a very compeling person to read. He has a tremendous amout of real world experience to draw on, as well as a strong pedigree in the scientific discipline of economics as taught by the establishment sect (read Harvard-MIT) circa 1950-1980. To use Mankiw's language, Sachs is the economist as engineer.
So it is very useful to see his latest turn, as the engineer has determined that the current approach is not the right path to fix our problems.
Read both op-eds, and lets discuss what we can learn from the distinction between the economist as scientist and the economist as engineer. Can we, and what should we still be learning from Hutt's "Politically Impossible?" If we are too be relevant, can we still push for a politics by principle and not interests as Buchanan argued? And how do you think Sachs would respond to such a distinction, let alone such an insistence?