The blogger Yves Smith has wonderfully parodied this, by slightly amending the language of public-choice theory of the neoliberal Virginia School to address the code of the economist:
What would you identify as the central insights of Academic Choice theory?
The theory begins by identifying three principal ways in which economists try to maximize their utility. First, they receive salaries from universities, which can be increased if their course enrollment increases. Course enrollment is primarily driven by students with future careers in business and the financial sector, so an economist has an incentive to propound theories that CEOs and financial institutions find attractive. Even if adoption of these theories leads to substantial public costs, these costs will not be shouldered by the economist personally. Second, by developing such theories an economist can open the door to future wealth as a lobbyist or consultant. Third, the support of economists is critical to creating and maintaining special privileges for the financial services industry and for top corporate officers. By threatening to withdraw this support, economists can engage in rent-seeking. I call this last practice academic entrepreneurship.
Is it really plausible that economists threaten top banks that in the absence of some kind of payoff, they will change the theories they teach in a direction that is less favorable to the banks?
There are certainly cases in history of the following sequence:
a. Economist E espouses views that are less favorable to certain special interest groups S. Doing so threatens the ability of S to extract rent from the public.
b. Later, E changes his view, thereby withdrawing the prior threat.
c. Still later, E is paid large amounts of money by representatives of S in exchange for services that do not appear particularly onerous.
For example, let E = Larry Summers and let S = the financial services industry. In 1989 E was (a) a supporter of the Tobin tax, which threatened to reduce the rent extracted by S. This threat was apparently later withdrawn (b), and in 2008 E was paid $5.2 million (c) in exchange for working at the hedge fund D. E. Shaw (an element of S) for one day a week.
However, it is naturally more difficult to witness the negotiations in which specific threats were appeased with specific future payouts. This is a problem that also bedevils Public Choice theory, in which it is likewise difficult to show exactly how a particular politician is remunerated in exchange for threatening businesses with anti-business legislation. The theory assures us that such negotiations occur, although they are difficult to observe directly. Perhaps further theoretical advances will help us to close this gap.137
This was the very same Larry Summers who a decade before the crisis had been quoted as saying: “Financial markets don’t just oil the wheels of economic growth—they are the wheels.”138
It should now become apparent that the way in which these deep conceptual commitments get translated into public advocacy helps ward off brickbats hurled by those offended by the role of economists in the crisis. Economists, the prophets of incentives, quite logically respond to their own incentives to service their various constituencies, and as they never cease to insist, life is nothing but a sequence of trade-offs. Whenever they make reference to the “public good” or “general welfare” in the course of their endeavors, they frequently mean nothing more than the brute fact of caveat emptor. Thus, when some rude outsider—say, Charles Ferguson in Inside Job—gets all steamed up about “conflicts of interest” while uncovering their prognostications, they react in a way resembling the Harvard economist John Campbell in the film; insiders are nonplussed, really at a loss to see what all the fuss is about. (There is also the barely disguised sneer: stop your cheap rabble-rousing and riling up the groundlings. We are Harvard.) There will be no perfervid eleventh-hour conversions, no dark nights of repentance, no rending of garments and gnashing of teeth for the economics profession. And this, in turn, fortifies their inclinations to mount a united front to mollify the greater public already familiar with Freakonomic insouciance, no matter what their personal politics might be. There has materialized no better way to face up to the rebuke of the crash.
This dynamic explains why the push to get the American Economics Association (AEA) to adopt a professional code of ethics in response to the crisis was totally unavailing.139 The AEA set up a committee to respond to the embarrassment of Inside Job, but it was met with a great wall of indifference. Neoliberal economists immediately argued to their own satisfaction that, within their worldview, there was no point to the AEA issuing a professional code:
Until “Inside Job,” the most serious ethical debate that I know of within the profession was over advising Chile’s Pinochet regime. One view was that providing advice to any regime that abused human rights was wrong. Another view was that providing economic advice was ethical, because it would improve the lives of the people living under the regime.
If the A.E.A. took either view on this thorny topic, the organization would have weakened itself dramatically, by creating conflict and alienating a significant fraction of its members. Another danger, which seems more likely, is that it might craft an excessively mild code of conduct that angers no one but sets too low a bar. That might be worse than no code of conduct at all, providing shelter to people who engage in inappropriate behavior but assert they are abiding by the A.E.A. code. . . .
What about disclosure in other contexts, such as non-refereed publications, speeches or comments to reporters? In these cases, universities—not the American Economic Association—are the natural ethical authority. (Full disclosure: I am just starting to serve on Harvard’s university-wide Standing Committee on Individual Financial Conflict of Interest).
Universities have the resources to develop ethical guidelines and the power to enforce them. They are the employers of academic economists, and ethical lapses damage them, too. They are the natural institutional guardians of their employees’ professional behavior.140
And, conveniently, universities also have been the staunch natural defenders of the Divine Right of economists to do whatever they please.
A year later, the AEA predictably declined to produce a code of ethics for its membership. It did issue a new disclosure policy for conflict-of-interest-reports for papers submitted to the AEA-sponsored economics journals—which are only a small subset of the universe of ranked economics journals.141 Since the same body had earlier promulgated a code of provision of all econometric data sets for all submitted articles to AEA journals, which it then promptly proceeded to neglect and ignore, the prospects for any major changes of behavior are slim at best.
Agnotology Is the Economics Profession’s Best Friend
Here we return to the most important “double truth” broached at the end of chapter 2: The major ambition of the Neoliberal Thought Collective is to sow doubt and ignorance among the populace, because it helps foster the “spontaneous order” that is the object of all their endeavors. This is an extrapolation of the point stressed above: from this perspective, it is perfectly justifiable that paid experts should behave as apologists for the interests that hire them, insist the neoliberals, because that is how the marketplace of ideas works.
Although the neoliberal approach to knowledge bears profound consequences for nearly all aspects of human inquiry, it holds special salience for the contemporary economics profession. This is where the histories of neoliberalism and the economic orthodoxy collide in the most spectacular fashion. Yet, in the most unexpected fashion, the ensuing dynamic ended up providing still another layer of protection for economists.
My primary thesis here, and in the rest of this volume, is that the crisis has revealed a severe epistemological contradiction that festers at the heart of the modern economics profession; this has dovetailed with a new set of practices and institutions that have developed since 1980 to paper over the contradiction. It began when the economics profession tended to grow more neoliberal over the past few decades. We will take that proposition as given here, be
cause we aim to explore one of its most important implications: namely, that it sets up a treacherous dynamic interplay between the economics profession and the general public, awkwardly brought closer to the surface by the crisis. In a word, neoliberal theory in the context of economic crisis creates problems for economists’ self-image as public intellectuals.
In the neoliberal playbook, intellectuals are inherently shady characters precisely because they sell their pens-for-hire to private interests: that is their inescapable lot in life as participants in the marketplace of ideas. It is the market as superior information processor that ultimately sorts out what the masses should deem as truth, at least in the fullness of time. This constitutes the gist of the Robert Barro position that, as long as they keep paying us, we must be right. This stance creates a problem for the economics profession, because it drives a wedge between trusting economists to clarify issues of great public import, and trusting the market to arrive at time-tested knowledge. This epistemic tension becomes a full-blown contradiction when the issue becomes the possibility of the breakdown of the market itself. If one adopts the hard neoliberal horn of the dilemma, then the intricate operation of the market is truly inscrutable, unknowable by any individual person, and thus economists are despicable charlatans who keep pretending to know what they can never truly know. From this perspective, the market has never actually failed, even in the current crisis; all that has happened is that economists have befogged our understanding of the necessary accommodations that must occur in order for it to come to terms with current events. Clearly, in this special neoliberal frame, economists (with few exceptions) end up looking like part of the problem, not generally part of the solution. Yet, if one instead occupies the more “moderate” horn of the dilemma, then orthodox economics theory was never fundamentally falsified, because it was the markets themselves that bore inherent flaws, which only the economists can be trusted to rectify. However, this bumps up hard against the empirical phenomenon apparent for all the public to see: the orthodox profession was blindsided by the depth and pervasiveness of the crisis, and has been perplexed and befuddled as to any consensus diagnosis of the crisis, much less appropriate measures to rectify it. And worse, there is no limit to how “deep” the market failures go. Thus there is no reason not to think that “market failure” itself betokens failure of the orthodox economics profession as well.
Neither horn of this dilemma is very tolerable, so in the aftermath of economic collapse the economics profession has sought to have it both ways: the lesson they would want to draw from the crisis is that the public should trust both the market and the economics profession to rescue it from economic disaster.142 This happened on both the notional left and the notional right. Pace Robert Barro, this contradiction has proven a source of growing dissatisfaction with economists on the part of the public. The purpose of the next chapter is to document how some elements within the economics profession have sought to sustain this impossible straddle, mainly by cooperating with new arbiters of public discourse such as think tanks, banks, and corporations, in order to modulate between the two opposed horns of the dilemma. The fallout from trying to have it both ways is that it is no longer possible for the heroic public intellectual to personally embody a shining beacon of rationality amid the rough and tumble of political discourse, at least in economics. Instead, orthodox economists tend to waver between two incompatible positions, depending upon which appears more convenient for the entity that provides their institutional identity (as explored in this chapter); but the only way they can manage to accomplish this is by fostering greater ignorance among the public, their primary audience. Indeed, the think tanks and corporations that employ economists frequently explicitly seek to foster ignorance as part of their business plans: that is the postmodern phenomenon of agnotology. Economists, witting or no, have become the vanguard of the purveyors of ignorance in matters pecuniary, precisely because they cannot face up to their own epistemic dilemma. The crisis only highlights the divergence between “Trust us” and “Trust the neoliberal market.”
The most important part of the history of the crisis that has been neglected by the mass of commentary cited herein is that there have surfaced in the crisis some relatively systematic attempts to pump doubt and confusion into public discourse; in other words, some “explanations” of manifestations of the crisis and its aftermath have been launched as trial balloons not expressly for purposes of further test, judicious development, and elaboration by sanctioned professional economists or other intellectuals, but rather as calculated interventions in public discourse in order to buy time and frustrate any shared impressions of a few sharply delineated positions on a contentious issue. Think global-warming denialism, but now extended to the question of the causes and meaning of the economic crisis. And it is not some fringe anomaly, but built into the very conceptual structure of the contemporary economics profession.
The orthodox economist cannot help but try to get his audience to simultaneously trust markets and trust economists. As we have seen, he is also inextricably woven into the financial sector. Older notions of the role of the “public intellectual” referred to someone who served to both personify and clarify positions of great import in public debate;143 but one of the signal contemporary postmodern developments has been the genesis and nurture of intellectuals poised and primed to muddy up the public mind and consequently foil and postpone most political action, and hence to preserve the status quo ante. This has been one of the objectives of the financial sector since the crisis, and economists are in the front lines of the disinformation project. John Dewey is most likely spinning in his grave, but the complex of neoliberal think tanks and corporations has sure control over what it is doing, and has sometimes even admitted its motives. The economists play along to maintain their untenable straddle between trusting the market and trusting the economists.
The literature that discusses this feature of public discourse travels under the rubric of agnotology.144 It is not the study of ignorance and doubt under all their manifestations, as sometimes mistakenly asserted, but rather the focused study of the intentional manufacture of doubt and uncertainty in the general populace for specific political motives. This literature is very different from an older “sociology of propaganda,” which was an artifact of Cold War theories of totalitarian societies. Agnotology instead studies a pronounced market-based set of procedures, as opposed to propaganda, which tends to emanate from a single source. It rather situates the practice of the manufacture of doubt as rooted in the professions of advertising and public relations, with close connections to the organization of think tanks and lobbying firms. Its essence is a series of techniques and technologies to both use and influence independently existing academic disciplines for the purposes of fostering impressions of implacable controversy where actual disputes are marginal, wreaking havoc with outsider perceptions of the configuration of orthodox doctrines, and creating a parallel set of spokespersons and outlets for ideas that are convenient for the behind-the-scenes funding interests, combined with the inflation of disputes in the name of “balance” in order to infuse the impression in outsiders that nothing has been settled within the core research community. The ultimate purpose in erecting this Potemkin controversy is to stymie action. The earliest instances of agnotology were focused upon instances deployed in the natural sciences, most specifically, on the political controversies over the cancer consequences of tobacco smoke, Star Wars antimissile systems, the theory of evolution, the efficacy of pharmaceuticals, and the causes and consequences of global warming.145
The advance of agnotology beyond propaganda is lodged in the fact that its hallmark techniques thrive off a hermeneutics of suspicion, with the result that the populace can maintain the comfortable fiction that it is not being manipulated by the obscure interests funding the initiatives. In this, it is similar to advertizing that makes use of the general conviction of the target populace that they are immune to the blandishments of advertising
.146 As the famous Frank Luntz memo to the Republican Party stated:
The scientific debate remains open. Voters believe that there is no consensus about global warming. Should the public come to believe that the scientific issues are settled, their views about global warming will change accordingly. Therefore, you need to continue to make the lack of scientific certainty a primary issue in the debates.147
For many, this may sound like a feckless procedure of elevating the marginal and the discredited in the interests of promoting spurious science and dubious intelligence; but more recent historical work has demonstrated that think tanks also have managed to recruit very prominent scientists, from Nobel winners to presidents of the National Academy, to lend their name to serial instances of agnotology.148 In many cases, these figures were willing to participate precisely because of their ideological commitments: namely, they regarded established science as helping foster illegitimate government intervention in the marketplace, or as perhaps providing support for political opponents, and that political considerations were sufficient to deem the existing consensus wanting. It is important to note that these recruits are not misrepresenting or lying about their deepest scientific beliefs; rather, they have come to embrace a different conception of “truth.” In other words, the think-tank thought collective has been able to recruit esteemed members of the scientific community in good standing to volunteer in various agnotological projects, to better cultivate the ignorance that lies at the foundations of the neoliberal conception of social order. At the risk of venturing into thorny questions concerning individual motives, we reprise a quote from Hayek’s Constitution of Liberty: “There is not much reason to believe that, if at any one time the best knowledge which some possess were made available to all, the result would be a much better society. Knowledge and ignorance are relative concepts” (my italics).149
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