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An undergraduate’s question about economic policy

from Thomas Palley

I received an e-mail from an undergraduate economics student who was curious about economic policy in Washington, DC. His question says a lot about the current state of affairs. Here it is with my reply.

From: Xxxxxxx Xxxxxxx [mailto:xxxxxxxxxxxxxx@xxxx.com]
Sent: Saturday, October 1, 2016 10:56 AM
To: mail
Subject: Question from an undergraduate
Dear Dr. Palley,
I am a first-year undergraduate in economics and political theory, and a longtime admirer of your work.
What are your thoughts on how Keynesian/Post-Keynesian ideas are treated in current political discourse?

I was in Washington D.C. recently and I had conversation with a Brookings fellow who told me that he thought Joseph Stiglitz was an “extremist who isn’t taken seriously by anyone who knows their way around the Beltway.”

Does it worry you that ideas which used to be considered “mainstream” (like social democracy) are now increasingly considered “extreme”?
Deeply grateful for your time and attention
Xxxxxxx Xxxxxxx


From: Thomas Palley [mailto:mail@thomaspalley.com]
Sent: Saturday, October 1, 2016 3:59 PM
To: ‘Xxxxxxx Xxxxxxx’
Subject: RE: Question from an undergraduate

Dear Xxxxxxx,  

Thanks for your e-mail.

I am saddened (but not surprised) to hear Joe Stiglitz described in that way. And yes, I worry that ideas which used to be “mainstream” are now considered “extreme”.

Economics, like all social thought, is a contested space. Neoliberals have an interest in controlling economics since control helps them advance their political and economic project by helping them sell their policy ideas.

Brookings is a core neoliberal institution in Washington DC, so it does not surprise me that a Brookings fellow would describe Stiglitz as an extremist. That is how neoliberals perceive him, and it is also a way they try to discredit him.

In my view they are profoundly wrong. Our challenge is to open space (in the academy and public discourse) for all ideas (including neoliberal ideas) that make passable sense of the economy. After that comes political debate about which ideas we will believe and be guided by. That is the function of politics, and different political parties will be guided by different economic ideas.

Neoliberals try to close down the space of political debate and social possibility by excluding all except neoliberal ideas. The tragedy of the past forty years is they have been succeeding. In the academy there is a neoclassical monopoly, and in politics Labor and Social Democratic parties have been captured by the Trojan horse of the Third Way, creating a neoliberal political monopoly.

Reversing this state of affairs is a massive challenge. The academy is a club that will refuse to include those who disagree, and politics has been significantly captured by the one percent owing to the importance of money in politics. That is a toxic combination: the academy delegitimizes ideas opposed to neoliberalism, while the neoliberal political monopoly blocks alternative ideas getting on to the political table.

This noose has been tightening for years, but the inequality and stagnation that neoliberalism has produced is generating a political backlash from below. That is a hopeful opportunity, but it is also dangerous because backlashes are unpredictable and can go horribly wrong.

Lastly, I am a great fan of the student movement for change in economics. Their case is right. However, I fear the club of academic economists will either belittle the students, ignore them, or deceptively disarm them by appointing milquetoast critical economists who produce “gattopardo” change (i.e. change that keeps things the same).

Best wishes with your studies,
Tom Palley

  1. avneroffer
    October 5, 2016 at 2:36 pm

    It might be noted that Joseph Stiglitz is the very top academically cited Nobel-prize-winning economist on a per-year basis for the period 1996-2005, which is the one covered in my new book with Gabriel Soderberg, *The Nobel Factor* (Princeton UP).

  2. October 5, 2016 at 2:58 pm

    Please, join the heterodox economics community. One important way to do that is joining the Association for Heterodox Economics . We had a research paper at our last Conf. showin that mainstream economists only rarely cite feminist research. There are good useful web pages and we’re currently looking for people to lead Streams at our upcoming July 2017 Conference. If you are interested, please scan this web site, and be sure to join around Janu. 2017 to get cheaper access to the Conference: http://www.hetecon.net Thank you so much for your conversation, – Wendy Olsen, joint Coordinator of AHE.

  3. October 5, 2016 at 5:57 pm

    Hello all: this is succinct and illuminating Tom. And thanks to avneroffer and Wendy Olsen for the follow-ups. Wendy, especially, but also to Tom and avneroffer: what do you make out of the Hillary Clinton appointment of Heather Boushey as the economic point person on Clinton’s transition team; I searched for her name on the long list of the World Economics Association “Founding members” but didn’t see her listed. Thanks…for “clarity,” I’ve consistently placed Sec. Clinton in the moderate Neoliberal camp…if that’s not a contradiction in terms in itself.

  4. October 7, 2016 at 10:22 am

    I know this is primarily a blog for academic economists who are fighting the “guys in charge” in economics and whom they fear have too much control over the policy discussions in DC. My concerns are much different. I’m concerned that economists of all sorts have too much influence over how actions and actors are said to be economic. And as a result have distorted both academia and large parts of everyday discussions. Economists are not needed to create actions dealing with resources, jobs, and buying/selling. These were going on long before economics as an academic discipline existed. And certainly long before any neoliberal economist drew breath. Yet economists regularly theorize the creators of economic activities out and theorize themselves in. Tom, I like your call to open up the academy for discussion of all proposals and theories. But you don’t go far enough. Open it up all the way. All the way to the actions, thoughts, and proposals of all the builders of economies. For example, I work with credit unions, cooperatives, employee owned businesses, and a host of what’s called these days “non-traditional” economic actors. None of these drank the neoliberal cool-aid and they do all in their power to blunt neoliberal arrangements when they can. In fact, when I attend board meetings and public access meetings of these organizations I find damn few who understand neoliberalism, even fewer who want to understand it, and almost no one who agrees with neoliberalism when it is explained to them. The strength of neoliberalism thus comes not from public support or agreement but from economists and other activists who as one coop board member put it “never let anyone else talk.” This is academics doing what no academic should ever do — replacing their subject matter with their own opinions of what that subject matter is and what it means. Allow the subject matter to express itself as it will, work like hell to describe those expressions, and then publish those description for all to review.

  5. robert locke
    October 9, 2016 at 9:55 am

    “Yet economists regularly theorize the creators of economic activities out and theorize themselves in”

    Ken, this is the main point of my monograph, Appreciating Mental Capital, and the discussion presented therein.

  6. October 10, 2016 at 6:14 am

    Robert, like the book. I’m not an academic. All my writing goes into reports and presentations for clients (government officials and advocacy groups now, before that just government regulators). Your book reflects the kind of information and policy advice I’ve given for over 30 years. Most government officials and regulators don’t agree with and don’t like neoliberal policy formulas. Their objections are not theoretical. Rather they are pragmatic. Neoliberal policy formulas just don’t work. But this is an uphill battle for them. At every turn they are confronted with neoliberal-oriented economists and policy experts who are backed with big money and even bigger political connections. In this sense neoliberalism works. It also works as barricade against anyone and everyone who is not an “expert” (per neoliberal criteria) being given any credence in public policy hearings. Lots of personal experience opposing neoliberal experts and opening up hearings.

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