George Soros, a man who in the 1990s probably showered more money on free market economists throughout the countries of post-communist Europe than any living human being, is now launching "a $50 million effort to purge economics of its free-market zeal," according to Newsweek's GQesque Michael Hirsh. The skinny:
This week Soros is gathering some of the leading practitioners of the market-skeptic school, who were marginalized during the era of "free-market fundamentalism," among them Nobelists Joseph Stiglitz, George Akerlof, Michael Spence, and Sir James Mirrlees. He's also creating an "Institute for New Economic Thinking" to make research grants, convene symposiums, and establish a journal, all in an effort to take back the economics profession from the champions of free-market zealotry who have dominated it for decades, and to correct the failures of decades of market deregulation. Soros hopes matching funds will bring the total endowment up to $200 million. "Economics has failed not only to predict and explain what happened but has also failed to protect society," says Robert Johnson, a former managing director at Soros Fund Management, who will direct the new institute. "That's what the crisis revealed. The paradigm has failed. There is no guidance."
Why, Joe Stiglitz was so marginalized during those pre-crash wilderness years that he only managed to chair Bill Clinton's Council of Economic Advisers, work as chief economist of the World Bank, and then win the Nobel Prize for economics!
For those of us who have slogged through Soros' lifelong attempts to establish his bonafides as a philosopher, this woe-is-paradigm stuff is more than a bit rich. The Hungarian-born currency bettor has made his fortune pursuing the observation that financial markets are filled with human irrationality. In other words, that there is no one true, predictable paradigm, and that markets are prone to speculative bubbles chasing underlying hysteria. You may note that the same arguments can be heard from many of the so-called "market fundamentalists" Soros so despises, making his core beef more about the "guidance" of wise men than the comparative predictive failures of various economics schools.
But my quarrel here isn't with Soros; it's with Hirsh (and his many cohorts in the bloviosphere), for evidence-free pox-on-market-fundamentalism paragraphs like this:
It might be tempting to dismiss all this as a war of words among brainiacs. It's not. The critical issues being discussed in Washington about the future regulation and control of the financial industry—the very nature of Wall Street and the health of the economy—depend on this battle of ideas. What led to wholesale deregulation in the '90s and '00s wasn't just Wall Street lobbying money. It was also that key legislators and policymakers, among them Larry Summers, persuaded themselves that deregulation was sound economics and good policy, and that markets and Wall Street institutions could take care of themselves. Many of those views have been discredited by the crisis. But in the absence of a new paradigm of economics, confusion still reigns in Washington. With no new concept of the proper role of government and regulation in the economy, of the proper balance between the markets and their minders, the old school still dominates.
Needless to say, no deregulation was mentioned in the making of this article. Also, the old school dominates what, exactly? Ultimate frisbee games between the University of Chicago and George Mason? There are many, many financial proposals coming out of Washington and various mainstream opinion organs these days; I'm at a loss to think of a single one that involves the D-word, or in any sense reflects the insights of free-market economics, aside from Ben Bernanke claiming that he's following the (controversial-among-libertarians) Milton Friedman/Anna Schwartz recipe for averting a Great Depression. Which is a contention that Schwartz herself hotly disputes.
Look, I know (through tedious experience) that it's a tempting intellectual shortcut to say Ayn Rand=Alan Greenspan=deregulation=crash, and that therefore every one of us deluded souls who doesn't hi-five Wall Street bailouts is some kind of fundamentalist ogre, but A) we are, at least according to this Time poll, 55 percent of the country, and more importantly B) it's also tempting to eat an entire chocolate cake by yourself. IF YOU'RE SIX YEARS OLD. If you're not, and especially if you have a job writing publicly about economic policy, it might behoove you to at least attain a distant knowledge of whatever you think you're condemning.
Some suggested reading for that quest: Katherine Mangu-Ward, on whether deregulation was to blame for the financial crisis. Anthony Randazzo, on the myth of financial deregulation. Veronique de Rugy, on the biggest regulator since Richard Nixon (hint: wasn't Bill Clinton). Former Security and Exchange Commissioner Paul Atkins, on the regulations he tried (but failed) to slap on derivatives trading. And to really blow the minds of those who see free market enthusiasts as an undifferentiated blob, here's a Reason roundtable about Greenspan, Bernanke, and the Federal Reserve from 2006, featuring (among others) Milton Friedman and Rep. Ron Paul. Newsflash: They don't all agree.