Thursday, February 11, 2010

The Dynamite Prize

Real World Economics is accepting ballots in its search for the winner--actually, three winners--of the Dynamite Prize "to the three economists who contributed most to blowing up the global economy." The finalists are:

I'll bet a hat that not many Underbelly readers can identify the entire list (I couldn't). Prescott and Kydland, for example? Oh, "dynamic macro," right. Portes? Oh, "clean bill of health to Icelandic banks," check. Lindbeck? Ah, the evil genius behind the Econ Nobel, checkeroo.

Butbutbutbut--Friedman? A highly creative thinker (also a pugnacious public intellectual) who did more than almost anyone to shake us out of the socialist doldrums. Black and Scholes? Architects of a really insightful analysis of options behavior that remains as true today as it did last year. Fama? Author of one deeply flawed but still irreducible first principle of market behavior--namely that you can't run with the big dogs if you pee like a puppy. Lucas? Too weird for words? Samuelson? Now, that's just silly....

But that does leave two candidates. One, Larry Summers who seems to have ridden a long way on (a) a rep for off-the-wall yet provocative flashes of clarity; and (b) the fact that he has two uncles with Nobel Prizes. Oh yes, and (c) his role as a great excuser for just about everything that went bollywackers in the market over the last decade.

Now, that is indeed good grounds for candidacy. And it brings is to (the envelope, please)--the one person on the list whose life work is almost entirely devoid of coherent theory, but rather dominated by fealty to dogma. And here is the great irony: Alan Greenspan probably does deserve most of the abuse being heaped on him--but he earns it not so much by advocating as by betraying the principles of market autonomy that he has so loudly espoused.

So for refusing to take markets seriously--for telling us to ignore everything we'd learned from Friedman, Black, Scholes, Fama, Samuelson and their ilk--for telling us to trust him and he'd make it come right in the end, I'd say the man who carries the can is Alan Greenspan.


The New York Crank said...

Nah! I'll blame Milton Friedman for infesting a couple of generations of gullible idiots with the notion that a totally unregulated economy regulates itself to the benefit of all and therefore is the way to go.

That puts him right up there with Ayn Rand as a founding philosopher of the George Bush School of Applied Cconomic Thought.

Froiedman once entertained a TV camera by walking through a peasant vegetable market somewhere out in the Third World and pointing out the intense competition that seemed to "regulate" prices.

All fair enough. But healthcare, the national debt, and tranched derivatives aren't a bunch of vegetables.

Friedman implied that what works for Rongo the Turnip merchant works everywhere, universally. The people who believed him got into power.

Now look at the mess of crap we have.

Yours crankily,
The New York Crank

New York Crank said...

I appear to have committed a pair of typos that my beautiful girlfriend, a psychiatrist who used to teach Freud at a leading medical school, is likely to have a field day with.

I meant to say, "Applied Economic Thought," not "Applied CConomic Thought," which sounds like a perilous subconscious flirtation with Caca-nomic thought, which it also is, although I truly didn't intend to say so.

And I meant to say Friedman, not Froidman, even though his cacanomic theories can have chilling results and are used by frauds, and probably have deep Freudian underpinnings.

"I'm sorry, Mr. Crank, that's all we have time for today."

Crankily yours,
The New York Crank