Why governments' attempts to pick winners produce more losers than winners.
The Real World Economic Review is taking votes for its Ignoble Prize for Economics, "to be awarded to the three economists who contributed most to enabling the Global Financial Collapse (GFC)." The shortlist is outstanding, and indeed many of the nominees who didn't make the shortlist deserve greater recognition for their roles in the destruction of real economic understanding. The candidates are:
I hadn't heard of Richard Portes (his economic "achievements" being rather less significant than his political "achievements"), but once I read his resume (which you can find in brief on the same page as the poll), I had to demote Robert Lucas to fourth place so I could give Portes my vote. This has provided a key missing piece in the jigsaw of causes for the complete obliteration of real economics in the UK, to a greater extent than any other country.
One name is particularly conspicuous by its absence. Where is Shriti Vadera? Gordon Brown is more culpable for the global mess than people realise, and guess which "beneficiary" of an Oxford PPE education joined his team as economic adviser in 1999, roughly when he started his spending splurge? She is now economic adviser to the G20, because you just can't do enough damage within the British government.
A poll for a Noble Prize for Economics will follow, but get your votes in now for the biggest knaves or fools in the field.
"Government is the great fiction through which everybody endeavors to live at the expense of everybody else", Government (1848)
Friedman and Lucas don't deserve votes here. The Fed interest rate policy that fueled the housing boom wouldn't have been possible had Friedman's monetarism been followed. Lucas has no influence anywhere outside academia. No one ever designed a policy based on his work...it would be nearly impossible to do so. I voted for Samuelson, who did a great deal to popularize Keynesian aggregate demand management and discredit capital theory, Summers, who argued that the shadow banking system would regulate itself even though it had implicit govt protection, and Fama, whose EMH convinced people that market participants can't make errors on net. Unlike Lucas, Fama is an academic that nonacademics actually cited.
But John Law and John Maynard Keynes would get my vote were they available (along w. Samuelson): Law for inventing the modern financial crisis, and Keynes for developing the theory that the sort of irresponsible fiscal and monetary policies Law invented are actually the road to prosperity.
This earlier post explains why Lucas was a strong competitor, in my opinion.
I thought about suggesting Keynes too, but to be fair, the stupidity before the Crash was not mostly being done in his name, and it is arguable that he would have argued for counter-cyclical restraint. If it were a poll for which economist will do most to turn a correction into a disaster, then he'd have to be top. But Friedman would also be in there. The Bernanke "helicopter" solution is basically following his mis-interpretation of the Great Depression.
Interesting post on Lucas. He actually wrote and published at least one paper (long ago) in which he formally made the point that economic models really can only predict so long as nothing important changes. It's in his econometric policy critique, often cited favorably by Austrians.
I still assign him no blame. Except for the paper where he denies that macroeconomics has policy relevance, his economics has zero policy relevance.