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Source link: http://archive.mises.org/11644/economists-have-no-brains/

Economists Have No Brains

February 10, 2010 by

Nobel Laureate James M. Buchanan on why [almost all] “Economists Have No Clothes.”

Why have economists had so [few] meaningful [things] to say about the 2008 crises? Where and when did the ‘science’ get off the track? Can anything be done to restore respectability to Economics as a useful area of inquiry?

Ideal worlds. Constitutional Revolution? Toward Monetary Neutrality.The Constitutionalization of Money.

{ 13 comments }

geoih February 10, 2010 at 7:34 am

He starts out with some great observations, but then ends up preaching what sounds like the same old centralized planning ‘solutions’ that have been shown to not work. How will any of his suggestions not result in the same politicized picking of winners and losers, and ultimately the same types of failed ‘solutions’ we have now?

He also apparently fails to recognise that Keynsianism was/is so prevelent because of its political, not economic, utility. It is virtually impossible to implement any of his suggestions outside of politics or Keysianism.

To me, he sounds like the biologist who just can’t let go of his desire to breed a better organism, rather than study and explain the ones that already exist.

Ryan February 10, 2010 at 8:30 am

The Rothbardians will obviously hate this article, but in my opinion it’s the best, most important economic article I’ve read in a decade or more. Absolutely amazing. When I mentioned yesterday a lack of non-anarchist libertarian thinking on this blog, this is exactly the kind of thing I was hoping to see more of. THANK YOU for posting this! I’m reeling… That article is incredible.

mpolzkill February 10, 2010 at 8:51 am

Ryan, I don’t know exactly what a “Rothbardian” is, but if you mean those who know the Constitution was an abject failure (at best); I don’t hate Constitutionalists’ delusions as long as they know that all are free to secede (as Mises did, btw, down to the level of individual communities).

Seattle February 10, 2010 at 9:40 am

“The events of 2008 demonstrated that markets will not work with money anarchy.”

Dot dot dot.

fundamentalist February 10, 2010 at 9:43 am

Full of insights! Thanks!

I especially like these:

“The relevant question is not that of asking how this or that end-state or outcome may be put in place through possible collective or political action.”

Of course, what Buchanan is asking of mainstream economics is to abandon its entire reason for existing as understood by mainstream economists. Hayek made a similar appeal in 1974 in his Nobel address.

“Why have political economists, in particular, been apparently so willing to accept as sacrosanct the monetary framework in being? Why has not more attention been paid to alternative structures, to differing rules and institutions?”

Mises answered that when he wrote that mainstream economists abandoned a monetary theory of business cycles because keeping it would damage socialist theories too much. Mainstream economists may consider themselves free marketeers, but their economics has socialist foundations to it.

“Radical rethinking is required here—a rethinking that has not occurred since the Great Depression.”

How true! Austrians and others called for a rethinking of mainstream econ after the disaster of the 1970′s, but all the mainstream did was shuffle the furniture. They will never give up their core, the obsession with equilibrium analysis, from which all other error proceeds.

“Some modern equivalent of one hundred percent, or full, reserve banking
must finally be installed and enforced.”

Exactly, but it was a little disappointing that Buchanan didn’t recognize that this solution would solve the other problems he mentions later.

“The events of 2008 demonstrated that markets will not work with money anarchy.”

I don’t understand that statement. There was no money anarchy. The Feds controlled it as much as they could.

“As in other aspects of modernity, return to classical understandings and their implications could be transformative.”

O’Driscoll wrote in the early 1980′s that mainstream econ must return to the discussions of the 1930′s in order to make any further progress. That never happened. I’m afraid Buchanan’s expectations are a little naïve. As Mankiw once wrote, mainstream economists won’t even consider anything written more than 20 years ago.

Kray February 10, 2010 at 10:20 am

When James Buchanan talks about anarchy he mostly means hobbesian anarchy,which is essentially chaos.So his money anarchy has nothing whatsoever to do with Free market money.Something that was obviously not the case for the current recession.

Seattle February 10, 2010 at 10:27 am

And he intends to solve this “monetary chaos” by… implementing a central bank? Didn’t we already try that? I’m really confused here.

Sag February 10, 2010 at 12:54 pm

Buchanan wisely acknowledges the failure of mainstream economics. But he fails to mention the neglected Austrian research (with which he’s familiar) into the very issues he raises. For political reasons? Maybe he’s preparing the groundwork for changing the conversation among economists.

I doubt it…he dismisses “money anarchism” without grappling with the Mises-Hayek-Rothbard-Austrian view of the need for a free market in money and the abolition of central banking.

Ryan, the anti-Austrian, is happy about these evasions. But no one remotely familiar with Austrian research into central banking (Rothbardians or Hayekians or even free bankers) can be satisfied with the article.

The names von Mises, Hayek, Rothbard were conspicuously absent in the article. Buchanan is familiar with them. Genuine interest in his questions leads to engagement with the works of these and other Austrian economists. As usual, despite everything, we can safely conclude that “money anarchism” won’t work. On to the next “reform”…

DixieFlatline February 10, 2010 at 2:58 pm

All of these reformists have achieved what? Even Ron Paul hasn’t achieved any reform victories with millions of dollars and thousands of volunteers.

Pragmatic reform is code for “don’t rock the boat”.

Real boats rock.

And thus with Buchanan and other state recognized economists, there is no there there.

Rafe February 10, 2010 at 4:39 pm

When Buchanan criticizes the notion of monetary anarchy might he be referring to financial products as money ?

If so is this an issue of Gresham’s law where bad money forces out good money making a free market in money impossible? Might he mean that there is an adverse selection here where good money/commodities are held while bad money is relied on as a source of liquidity?

Ryan February 11, 2010 at 9:43 am

I think a lot of you guys really misunderstood Buchanan’s conclusions, but what do I know. I’m just an anti-Austrian. (Non-anarchist, really, but is there a difference around here? I guess we can only be “Randians” or “Rothbardians” around here anyway.)

There’s no hope of achieving anything with this kind of attitude. You guys are getting nowhere. You crticize even the people who agree with you, because they don’t accept absolutely every premise you hold dear. Good luck with that.

mpolzkill February 11, 2010 at 10:07 am

Back at ya, Ryan, you’re doing the same thing in reverse. And good luck to you getting your interpretation of the Constitution to fly with the Pentagon, Wall Street & those nine politically appointed for life, black-costumed jokers. Sincerely, I just won’t hold my breath.

Julien Couvreur February 11, 2010 at 2:24 pm

Maybe the paper read it wrong, but I didn’t see anything libertarian about it.
Nowhere does Buchanan suggest that reducing government control over the economy is a positive thing. He says more but _smarter_ control.

@Rafe, Gresham’s law is commonly stated: “Bad money drives out good”, but more accurately stated: “Bad money drives out good under legal tender laws”. That last part is very important.

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