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Thursday, September 13, 2007
Econo-think
Martin Feldstein is resigning as the head of the National Bureau of Economic Research, which as I understand is the commanding heights of the economics profession. To get your head around how he and his peers think, take a look at this excerpt from an address he wrote a few months ago:
So economic policy changes occur as the ideas of the economics profession change
and as those ideas become more widely diffused. By the late 1970s, many
economists had abandoned their old Keynesian views as a result both of
experience — especially the poor economic performance of the late 1960s and the
1970s— and of new economic analysis and research. The result has been a return to
the traditional pre-Keynesian supply side policies that emphasize incentives,
capital accumulation, and price stability.
What of the future? The battle for good economic policies is never over. There are always those who want to turn back the intellectual clock and return to counterproductive policies. They are always willing to sacrifice economic efficiency and growth in order to redistribute income more equally. In the extreme, some dislike inequality so much that they favor policies that will hurt
those with higher incomes even when such policies would not help those who areless well off. Fortunately, such spiteful egalitarianism is rare in the United States.
Redistribution is a harmful trade-off or born of unvirtuous envy. Supply-side economics is good, everything else is bad. These are the fundamental assumptions of the dominant paradigm in economics. Whenever I read a mainstream economist's work, I try to keep in mind the fact that very few of them ever think critically about these assumptions. It is an unfortunate discredit to a profession that's supposed foster open inquiry, I think.
Have a happy retirement, Prof. Feldstein.
Posted by Matt Lewis
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