The Real World Economics Review Blog–which is run by PAECON, the “Protest against Autistic ECONomics”–has just launched “The Ignoble Prize for Economics“.
The intent is to select by popular vote the “three economists who contributed most to enabling the Global Financial Collapse (GFC)”.
Nominations are now open, and anyone can nominate up to three individuals by visiting this page and leaving a comment.
As it is currently stated, the prize is open for posthumous award; this may change if there are simply too many dead economists who get a guernsey.
Nominations should include a reason, and if a nomination you’d like to make are already there, you can add a comment supporting the case for that person.
If you’d prefer to make an anonymous nomination, you can send an email to email@example.com.
After roughly a month, nominations will be closed, the top dozen nominees (based on both the number of votes and the evidence given) will be selected, and a vote will be conducted using PollDaddy to select the three winners (this will ensure that each IP address can vote only once).
So please get in there and add your nominations, or your evidence. We are more than two years(!) into the crisis, and the level of self-examination by the economics profession about its failure to anticipate it remains pitiful. It’s time to turn the torch of public opinion onto it.
The current list of nominees (and some of the evidence given in favour of them) is:
… for perpetuating a financial bubble that should have burst in 1987.
“Alan Greenspan promoted the view that free financial markets are efficient while he was the Chair of the Federal Reserve System from 1987 to 2006. In a “mea culpa” testimony before a Congressional Committee on October 23, 2008, Greenspan stated: “This crisis , however, has turned out to be much broader than anything I could have imagined…. [T]hose of us who looked to the self-interest of lending institutions to protect shareholders’s equity (myself especially) are in a state of shocked disbelief…In recent decades, a vast risk management and pricing system has evolved, combining the best insights of mathematicians and finance experts supported by major advances in computer and communications technology. A Nobel Prize was awarded for the discovery of the pricing model that underpins much of the advance in derivatives markets. This modern risk management paradigm has held sway for decades. The whole intellectual edifice, however, collapsed”. In response to questions from Congressmen, Greenspan stated “I still do not fully understand why it happened…”
… for believing the theories of Milton Friedman about what caused the Great Depression and thus leading us to the brink of the next one, and for supporting Greenspan’s delusional belief in the efficiency of financial markets.
… for his poor understanding of financial crisis, which not only, as Mr. Keen points out, was oversimplistic, but who’s been rewarded with a political influence and control of economic policies that is keeping the economy away from recovery and job creation.
… whose flawed methodological innovations on cycle theory or econometrics; along with a ultraliberal policy strategy (of which he remains a tenet during the GFC) are guilty of ruining both the economy and most of the university courses in macroeconomic issues for two generations (I am young enough to know).
Chief promoter of the “Efficient Markets Hypothesis”.
Paul Samuelson is the major economist responsible for aborting Keynes’s Revolutionary general theory argument that the cause of unemployment is nested in the operation of financial markets and the demand for liquidity on the part of savers.
Paul Davidson provides the empirical evidence using direct quotes from Samuelson to show “Why Keynes’s Ideas Were Never Taught in American Universities” , [ pp 162-178 of the book THE KEYNES SOLUTION: THE PATH TO GLOBAL ECONOMIC PROSPERITY (Palgrave/Macmillan, September 2009). Samuelson is quoted as stating that he found The General Theory “unpalatable” and not comprehensible. Samuelson then goes on to say “The way I finally convinced myself was to stop worrying about it [understanding Keynes’s analysis]. I asked myself why do I refuse a paradigm that enables me to understand the Roosevelt upturn from 1933 till 1937… I was content to assume that there was enough rigidity in relative prices and wages to make the Keynesian alternative to Walras operative”. In 1986, Samuelson still held to this line when he stated “We [Keynesians] alweays assumed that the Keynesian underemployment equilibrium floated on a substructure of administered prices and imperfect competition”.
In other words, Samuelson propagated the view that Keynes’s analysis relied on the rigidity of wages and prices , even though Keynes, on page 257 of THE GENERAL THEORY wrote that the classical theory assumed that “the self adjusting character of the economic system [rested] on an assumed fluidity of money-wages, and when there is rigidity to lay on the rigidity the blame for maladjustment…..My difference from this theory is primarily a difference of analysis”.
Thus Samuelson, who proclaimed himself as the chief Keynesian after the war, promolgated a false basis for Keynes’s theory– and in ascribing rigidity of prices and wages as the cause of unemployment made his brand of ‘Keynesianism’ an easy target for peole like Milton Friedman. The result was Keynes’s policies were killed by Friedman et al and politicians such as Reagan and Thatcher were able to paraded out Nobel Prize winning monetarists, etc as strong advocates for their free market philosophy.
(Nobel Prizes 1997) for developing the Black-Scholes formula that led to the explosive growth of financial derivatives.
Some Dead Nominees
Although Walras was not THE founding father of neoclassical theory (Menger and Jevons made it before him to the press), he is today, perhaps, the most remembered of the three so it is in order to nominate him in representation of the 3 people who did most damage to the discipline. True, others followed suit with their failed physics-turned-economics pursuits, but the original 3 (akin to the not-so-good, the bad and the ugly) were Menger, Jevons and Walras.
… for misleading the economics profession with a naive methodology and an equally naive theory of money.
… his insane and fundamentally flawed musings on monetary theory (especially the assumption that doubling money in a system would result in a simple doubling of prices) led his neoclassical acolytes to believe in a chimera that has been disastrous in the first place and that promises to be even more disastrous now following the GFC.
Nothing in the remit for this prize said it couldn’t be posthumous. Keyserling virtually invented military Keynesianism with his advice to NSC-68 author, Paul Nitze and, later, advice to AFL-CIO honchos, George Meany and Walter Reuther. It’s been a long (60 years), strange trip but the GFC is Keyserling’s Cold War guns and butter chickens coming back home to get fried.