The Ignoble Prize for Economics

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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

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:

Alan Greenspan

… 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…”

Ben Bernanke

… 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.

Larry Summers

Timothy Geithner

Edward Prescott

… 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).

Eugene Fama

Chief pro­mot­er of the “Effi­cient Mar­kets Hypoth­e­sis”.

Paul Samuelson

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.

Fischer Black [deceased] and Myron Scholes

(Nobel Prizes 1997) for devel­op­ing the Black-Scholes for­mu­la that led to the explo­sive growth of finan­cial deriv­a­tives.

Some Dead Nominees

Leon Walras

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.

Milton Friedman

… 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.

Leon Keyserling

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.

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