It’s actually surprising how little media attention has been given to the dominance of M.I.T.trained economists in policy positions and policy discourse. But it’s quite remarkable.
M.I.T.trained economists, especially Ph.D.s from the 1970s, play an outsized role at policy institutions and in policy discussion across the Western world. And yes, I’m part of the same gang.
The truth, although nobody will believe it, is that the economic analysis some of us learned at M.I.T. way back when has worked very, very well for the past seven years.
Heh. Krugman gives the impression that MIT dominance is a recent occurrence. But no. We here at the Cat pointed to the long-run dominance of MIT as long ago as 2010.
That graph is taken from John B Taylor who explained it as follows:
The blue line shows the percentage of presidential appointees to the CEA who have a PhD from Chicago. The red line shows the same for MIT or Harvard (Cambridge), one possible definition of an alternative to the Chicago school. The years from the creation of the CEA in 1946 until 1980 are shown along with each presidential term thereafter. Observe that the peak of the Chicago school influence was in the Reagan administration; it then dropped off markedly. In contrast Cambridge reached a low point of zero appointees to the CEA during the Reagan administration and then rose slightly to 20 percent in Bush 41, to 82 percent in Clinton, and to 100 percent in both Bush 43 and in Obama.
Blaming the financial crisis on the free-market influence of the Chicago school is certainly not consistent with these data. There were no Chicago PhDs on the President’s CEA leading up to or during the financial crisis. In contrast there was a great influx and then dominance of PhDs from Cambridge. And also notice that there were plenty of Chicago PhDs on the CEA at the time of the start of the Great Moderation—20 plus years of excellent economic performance. These data are more consistent with the view that the waning of the free-market Chicago school and the rise of interventionist alternatives was largely responsible for the crisis. But the main point is that there is no evidence here for blaming the influence of Chicago.
So yes – it’s all very well for Krugnman to claim that MIT dominates macroeconomic policy making; but then he – as part of the “same gang” – needs to take some responsibility for the macroeconomic mismanagement that lead up to the GFC and the sluggish economic growth we’ve seen since.