Political magazines and mainstream media outlets have recently unearthed a struggle for the very soul of economics. It's playing out in scholarly journals and in the back corridors of economics departments as lone, embattled researchers resist the stifling free-market doctrine that dominates their field.
That's the picture painted in recent months by the liberal magazines In These Times and The Nation and, more recently, The New York Times and The Atlantic in profiles about a circle of scholars who have been sending ripples through the power structure of the economics profession. The general assumption in the profiles is that economics is a field dominated by people who cling, sometimes beyond evidence, to free-market dogma, disadvantaging those whose findings might contradict the dominant view; the rebels, in turn, are presented as embattled exceptions to the rule. But a group of economists at George Mason University, and other prominent researchers, say this notion of a free-market mainstream is oversimplified at best and inaccurate at worst.
"There’s really not any data, and there’s a caricature, that economists are extremely free market," said Tyler Cowen, a professor of economics at George Mason who is popular in free-market and libertarian circles. "I think the differences are overdrawn."
The narrative tends to involve a familiar cast of characters: Alan Blinder and Alan Krueger of Princeton University; George A. Akerlof, David Card and Robert Reich of the University of California at Berkeley. They have, by their own accord or not, been associated with a movement that over a period of years has questioned neoclassical orthodoxy from within the mainstream of the discipline. Some have favored, for instance, a higher minimum wage (while more free-market-oriented economists would say that causes people on the margin to lose their jobs) or a more progressive tax system (instead of a flat tax), or written about the downsides of globalization and wealth inequality. (They are separate from the so-called "heterodox" camps, which are situated on the fringes of the left and right.)
Surely such views aren't out of touch with those of many Americans. But are they that heretical among other economists, as media profiles have suggested?
"The average view may be more towards free markets than the population as a whole, but economists are still about equally diverse in their views, reflecting I think the weight they put on distribution, fairness, relative to overall efficiency or economic growth, and that’s a judgment call in terms of what policies are desirable even if economists can agree on the facts in terms of what the implications of what the policies would be," said Roger H. Gordon, an economist at the University of California San Diego and editor of the Journal of Economic Literature.
To be sure, there have been numerous reports of hostility from colleagues at other departments when a study reaches a conclusion that would seem at odds with a free-market worldview. Card, who later won the prestigious John Bates Clark Medal, was the target of vicious attacks from other economists and the media after work he did with Krueger was used to support the Clinton administration's 1996 minimum wage hike bill, for example.
If Blinder, Krueger and others are insurgents from within, then Daniel B. Klein, a professor of economics at George Mason, has been at the center of the counterinsurgency with the journal he founded and edits, Econ Journal Watch. The so-called heretics are "sitting in the center of it," Klein insisted. "The Alan Blinders and Robert Reiches and Kruegers … these guys are like president of the AEA types," referring to the American Economics Association. (Krueger is on the executive committee and Akerlof is a former president. Blinder declined to comment.)
And Klein has numbers to back up his claims. Some of those numbers come in the form of party donations, similar to studies (some of which have also been done by Klein at George Mason) purporting to show political bias among professors in academe: For example, one Econ Journal Watch study found a 5.1 to 1 ratio between contributors to the Democratic versus Republican party among a sample of 2,000 members of the AEA. Klein found similar lopsidedness in the authors and editors of journals (including the Journal of Economic Literature) and even within the groups of people listed in authors' acknowledgments in journal articles.
But party affiliation doesn't necessarily say much about scholars' policy preferences: Consider the Clinton Democratic Party's general market orientation and commitment to deficit reduction, or the Bush administration's interventions into the market with steel tariffs and the Medicare prescription benefit.
Another study, by Klein, quantifies economists' views on policy questions (from a survey of AEA members to which 264 responded), and finds that for some questions, like the minimum wage, most economists lean toward a more liberal (or "interventionist") policy -- hardly what one would expect from wholesale believers of laissez-faire economics. But again, it's possible that subtleties are being obscured in the questions; answers might not distinguish between a preference for, say, a higher minimum wage as opposed to the current level, or any minimum wage at all.
"If you ask is mainstream economics free market, it’s relative," said Gary Becker, a former AEA president and an economist at the University of Chicago, traditionally considered a bastion of free-market economics. "I would say, however, the trend in economics in the last 30 years has been toward more support of free markets." After the 1960s, when Keynesian economics still influenced researchers and presidents alike, a massive paradigm shift began with the rise of the so-called "Chicago school," and with it Nobel laureate Milton Friedman, who became AEA president in 1967 and won the Nobel in 1976.
Compared with other social scientists, economists are certainly more supportive of markets, Becker clarified. "It’s long been true that economists are more conservative, more free market than other groups. ... But still it’s true that within economics, people like Blinder would not be very rare. There are quite a few people like Blinder who support government solutions to different problems."
That has especially been the case over the last several years, with the growing popularity within prestigious departments of behavioral economics, which questions the assumption that people are always rational. At the same time, prominent economists have responded to the effects of globalization and increasing wealth inequality in the United States with solutions that don't fit within strict neoclassical interpretations.
"They’re great economists, they’re really smart people, but they’re not at all heterodox," Cowen said.
That label is sometimes reserved for a coterie of economists who go further, rejecting even some of the basic founding principles of economics. Sequestered in departments at the University of Notre Dame, the New School and others, the heterodox economists often complain that they aren't respected in the field and are systematically kept out of mainstream debates. Most find it difficult to publish in mainstream journals or present at major conferences.
"It’s kind of like the third parties in politics," said James Devine, a professor at Loyola Marymount University who describes his approach as within the heterodox tradition.
But, as with any vaguely defined term, "heterodox" can be used to mean anything. It's "an ambiguous term," Gordon said . "What’s heterodox changes over time," said Avinash K. Dixit, at Princeton, who is the president-elect of the AEA. Sure enough, the Association for Heterodox Economics lists researchers who approach the discipline from an Austrian perspective -- like some at George Mason.
"Very conservative people can be heterodox," added Devine, whose areas of interest include labor economics and Marxian political economy. "We’re basically seen as consumers. That’s the dominant [view] and I don’t think that’s going away in the near future, but there is some change, an opening, towards heterodox views, and that comes mostly from experimental economics and behavioral economics," he said.
As Devine sees it, the neoclassical model that dominates economics has a subset -- laissez-faire market economics -- that he calls "more of a political commitment" than a scholarly consensus. So within the field, he said, economists like Blinder and Card (who subscribe to most of the mainstream tenets) are rebelling against that political orthodoxy, while the "experimentalists" working in behavioral economics or more fringe heterodox circles are chipping away at the neoclassical foundations themselves.
How Did Some Economists Become Mavericks?
Klein -- speaking from Sweden, which, although not known for adherence to capitalist ideals, is home to several well-known free-market think tanks -- described his project as a critique of the dominant mentalities of the economics profession. "I think that culture is not at all like the toothpaste market. I think that culture is very different than markets for washing machines and labor and so on. And we’re talking about culture, and it’s much more like a genteel society, a kind of circular, self-validating scholastic system," he said.
He described the work in Econ Journal Watch as a kind of "sociology of economics" that approaches the discipline from a classical liberal perspective. At George Mason's economics department, where professors routinely assign Adam Smith and stress the importance of foundational texts, that isn't necessarily an unusual approach. And while the journal operates from somewhat off the sidelines, Klein said the readership is increasing and it has recently been added to the major journal indexes. Six Nobel laureates sit on the journal's advisory council. Becker said he didn't follow the journal, while Gordon said he'd heard of it. "It’s being written for economists being involved in the government, in Washington or public outreach more broadly," Gordon suggested.
Klein describes his classical liberal approach as one that is strongly grounded in guiding texts and principles. He says his journal doesn't adhere blindly to laissez-faire economics or assume that there is necessarily a scientific basis for the view. "Our whole view is that there are these different character types of economists, and we kind of represent one and it’s kind of an old and venerable one," he said, seeing "economics as a liberal creed" in the original sense. "We kind of see liberalism ... as kind of the jewel of Western civilization, so naturally we go back to the original texts."
Like Adam Smith, he said, he believes "a presumption of liberty should be taken seriously," and that the burden of proof should be on those who wish to intervene in markets. Rather than math-heavy papers elaborating on complex models to describe various economic phenomena, a typical EJW article might look at whether Smith could be published in an economics journal today, or seek to illuminate the character differences of economists based on their university Web sites.
Against the narrative of a mainstream dominated by free-market ideologues, Klein offers several reasons why there is a common misperception about economists' views as a whole:
- A confusion between free markets and free trade. While most economists would probably support trade liberalization between nations in some form or another because of its worth as an engine of wealth creation, that is not the same as supporting relatively unregulated markets at home.
- Klein said he believes there is also a bias, perhaps unconscious, in the media: "Basically they’re social-democratic periodicals, and probably journalists, writing those articles talking almost exclusively … to people on the left."
- The persistence of straw-man arguments. In a recent book review, Columbia economist and Nobel laureate Joseph E. Stiglitz, the author of Globalization and Its Discontents, wrote of Milton Friedman and others' "belief in the perfection of market economies on models that assumed perfect information, perfect competition, perfect risk markets.... They were never based on solid empirical and theoretical foundations, and even as many of these policies were being pushed, academic economists were explaining the limitations of markets -- for instance, whenever information is imperfect, which is to say always." In an e-mail, Klein called this characterization "simply untrue": Friedman and other like-minded theorists simply believed that "in most instances, free markets are less bad than the alternative."
So who's being marginalized, and by whom? Both the editors behind EJW and many of the economists it sets in its sights have considered themselves embattled by the other. "So, everyone in a debate always wants to call the other side ideologues, essentially, and the critics of economics are doing that here," Cowen explained. "They like to think they’re on the outside, there’s something new, they’re warring against some powerful authority."
About theories that run counter to the neoclassical model, he said, "It’s a view that’s been with us for centuries."
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