christina romer

Speaking Truth to Power Rarely Works

by Ryan Young on September 6, 2010 · 1 comment

in Economy, Politics as Usual, Stimulus to Nowhere

Telling the truth to one’s superiors is hard. Especially when the stakes are high. Christina Romer comes to mind. Brilliant economist. She’s done excellent work on the role of monetary policy during the Great Depression.

A partisan Democrat, she was summoned to Washington soon after President Obama’s election to advise him. All of a sudden she endorsed the Bush-Obama views on stimulus. This is a 180 degree turn from her previous views. Romer’s own academic research shows that fiscal stimulus’ effects are too small to do measurable good.

Romer the economist believes that most business cycles have monetary causes. Not fiscal. Monetary. Romer the economist had been very consistent in expressing that view. But that view changed as soon as she arrived in Washington and Romer the economist transformed into Romer the political advisor. Suspicious.

This is not a new phenomenon. Politicians from both parties have been using economists for as long as economists have let themselves be so used. Politicians love the air of legitimacy that pointy-headed academics can give to their proposals. And economists love the sudden rush of attention and name recognition — and the professional prestige that will long outlast the current administration. They are happy to sell out. Or is it buying in?

That thought was sparked by reading about F.A. Hayek mourning the death of some of his colleagues’ integrity back during the Reagan years:

“You can either be an economist or a policy advisor.

I have seen in some of my closest friends… how a few years in government corrupted them intellectually and made them unable to think straight.”

-Cato Policy Report, Vol. 5, No. 2, February 1983.

131,000 Jobs Lost in July; Obama Aide Abandons Ship; Economists Criticize Obama; More Bailouts

by Hans Bader on August 6, 2010

in Bailout Watch, Deregulate to Stimulate, Economy, Employment, Labor, Politics as Usual, Regulation, Sanctimony, Stimulus to Nowhere, Trade, Zeitgeist

“Non-farm job losses hit 131,000 in July,” on top of a loss of 97,000 jobs in May and June.  Another Obama economic advisor is abandoning ship.

Nobel Prize-winning economists Gary Becker and Vernon Smith criticized the Obama administration’s economic policies, such as its massive deficit spending and politicization of the economy.  Last year, Obama advisor (and economist) Martin Feldstein warned that Obama’s policies would lead to “serious inflation and higher taxes down the road.”  Administration economists botched deficit projections by at least $2 trillion.

The House is expected to pass a $26.1 billion bailout of state and local government sought by public employee unions, which will aid bloated and mismanaged school districts.  There is talk that the Obama Administration will give away billions of dollars in new mortgage bailouts at taxpayer expense, as a way to buy votes.

The stimulus package is costing $75 billion more than predicted.  It also inadvertently wiped out thousands of jobs in America’s export sector.

Obama’s polices would add $9.7 trillion to the national debt, according to the Congressional Budget Office.

Hoover and the Great Depression

by Ryan Young on August 31, 2009 · 1 comment

in Economy, Regulation

One of the oddities of U.S. history is that Herbert Hoover is regarded as a free-market president. He grew federal spending by 52% in just four years. Engaged in massive deficit spending. Created the Federal Home Loan Bank. And the Reconstruction Finance Corporation. Signed the Smoot-Hawley tariffs into law. And the Agricultural Marketing Act. And so on. Free-market, he was not.

The Hoover myth is showing some cracks, fortunately. Where most civics textbooks would blame Hoover’s laissez-faire policies for the Great Depression, a new paper by UCLA’s Lee Ohanian fingers Hoover’s labor market interventions.

I’m personally convinced the Depression was more of a monetary phenomenon than a fiscal one. But Ohanian is surely right that Hoover’s dictating to companies what wages shall pay their workers was a net negative for the economy.

It’s certainly possible to blame Hoover’s policies for the Great Depression. Just not on the grounds that those policies were free-market. People shouldn’t have to read obscure academic journals to find that out.