17 January 2010

Annals of Ideology? The Chicago Interviews

"Q: What about skepticism toward the government: Isn’t that also a key part of the Chicago tradition?

A: Sure. You have to ask why would the government get it right. You can’t just say, here’s a market failure and the government needs to step in and address it. You have to look in detail at what the government might do, and compare the relative effectiveness of the two."*

Over at The New Yorker John Cassidy has posted a series of relatively brief interviews he's done with various key figures in the "Chicago" school of economics. They mostly deal with the response of conservative economic thinking to the financial melt-down. I have commented on this a couple of times here [1] [2] [3].

The first interview in the series, with Richard Posner (who is a lawyer, not an economist) is perhaps the most revealing. It is striking that he focuses on the political aspects of current arguments - conservatives against liberals. He also is blunt that the economists in Hyde Park have engaged in little self-reflection in light of recent events. (That is born out by the subsequent interviews.) This, I think, underscores an ideological dimension that economists generally seek to downplay. But a second striking point is that Posner thinks that, given their faith in markets, economists generally and the Chicago crowd in particular " have lost interest in or feel for institutional detail that might be very important." I think that is pretty much right on target.

It seems to me that the entire debate is dominated by a distinction that has been inflated into a dichotomy - 'free' markets versus government. The problem is that markets do not work absent an (internal and external) institutional scaffolding and government cannot do the distributive work of decentralized institutions. So what we need - as I have argued here several times before [4] - is a more experimental approach to political-economy. Neither the Chicago faithful nor their adversaries seem not to get that at all.
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* From the interview with Kevin Murphy.

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1 Comments:

Blogger Ryan Anderson said...

thanks for this link, jim.

17 January, 2010 17:44  

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