Must-Read: On the defects of a disciplinary--as opposed to a liberal--education for anybody hoping to be a good disciplinarian, let alone anything more significant: Robert Skidelsky, Daniel Johnson, and Brad DeLong on Bagehot and on Machivelli
Robert Skidelsky: Economists versus the Economy: "Why did [economists] miss the storm?... Queen Elizabeth... asked a group of economists...
...Most... wrung their hands. It was “a failure of the collective imagination of many bright people,” they explained But some... focused on the failure of economics education... not required to study psychology, philosophy, history, or politics.... spoon-fed models... based on unreal assumptions, and tested on their competence in solving mathematical equations... never given the mental tools to grasp the whole picture....
Good economists have always understood that this method has severe limitations.... What unites the great economists, and many other good ones, is a broad education and outlook. This gives them access to many different ways of understanding.... Keynes graduated in mathematics... was steeped in the classics.... Schumpeter got his PhD in law; Hayek’s were in law and political science, and he also studied philosophy, psychology, and brain anatomy. Today’s professional economists, by contrast, have studied almost nothing but economics.... The economists are the idiots savant of our time...
Daniel Johnson: Have Public Intellectuals Ever Gotten Anything Right?: "What [is] it... that gives gravitas to a public intellectual[?]...
...It is not the possession of a prestigious university position but rather a breadth and depth of learning, the presence of invisible masters whose apprentice one has been. In 1947, Susan Sontag visited Thomas Mann at his villa in Los Angeles. She was 14; he was over 70. What she recalled was “books, books, books.”... Do the economists who, as Bradford DeLong points out, now monopolize our op-ed pages still possess private libraries as the likes of John Maynard Keynes and Friedrich Hayek did? To serve the public, intellectuals must have a private hinterland...
Brad DeLong (2012): This Time It Is Not Different: Walter Bagehot and the Persistent Concerns of Financial Macroeconomics: When the Financial Times's Martin Wolf asked former U.S. Treasury Secretary Lawrence Summers what in economics had proved useful in understanding the financial crisis and the recession, Summers answered: “There is a lot about the recent financial crisis in Bagehot...”. “Bagehot” here is Walter Bagehot’s 1873 book, Lombard Street.
How is it that a book written 150 years ago is still close to state-of-the-art in economists’ analysis of episodes like the one that we hope is just about to end?
There are three reasons:
The first is that modern academic economics has long possessed drives toward analyzing empirical issues that can be successfully treated statistically and theoretical issues that can be successfully modeled on the foundation of individual rationality. But those drives are disabilities in analyzing episodes like major financial crises that come too rarely for statistical tools to have much bite, and for which a major ex post question asked of wealth holders and their portfolios is: “just what were they thinking?”.
The second is that even though the causes of financial collapses like the one we saw in 2007-9 are diverse, the transmission mechanism in the form of the flight to liquidity and/or safety in asset holdings and the consequences for the real economy in the freezing-up of the spending flow and its implications have always been very similar since at least the first proper industrial business cycle in 1825....
The third is that the proposed cures for current financial crises still bear a remarkable family resemblance to those proposed by Walter Bagehot. And so he is remarkably close to the best we can do, even today.
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