Markets are as unstable as during any point in American history -- and a select few have found a way to capitalize
A year after Lehman Brothers collapsed, Paul Krugman took his fellow economists to task over a host of professional and intellectual failures. With the New York Times as his pulpit, he began his omniscient narration: “The central cause of the profession’s failure was the desire for an all-encompassing, intellectually elegant approach that also gave economists a chance to show off their mathematical prowess. Unfortunately, this romanticized and sanitized vision of the economy led most economists to ignore all the things that can go wrong,” he wrote. “They turned a blind eye to the limitations of human rationality… to the problems of institutions that run amok; to the imperfections of markets… and to the dangers created when regulators don’t believe in regulation.”
Despite this indictment, economists have not only retained their prominence in the years since the global financial crisis; they have expanded it. Media-savvy economists have only grown in number, disseminating nuggets of user-friendly economic theory and technocratic liberalism in newspaper columns, blogs, and econo-centric podcasts. Krugman, along with Joseph Stiglitz, Nouriel Roubini, Nassim Taleb, and Jeffrey Sachs have become household names as swaggering political pundits.
As economists’ profile has risen, the media attention toward them has changed. A recent Times profile on economists Justin Wolfers and Betsey Stevenson, “Economics of Family Life, as Taught by a Power Couple,” illustrates the media’s growing tendency to treat select economists as celebrities. “Mr. Wolfers,” we learn, “looks like a nerdy surfer and tends to pull his chin-length blond hair into a ponytail,” while “Ms. Stevenson has an irresistible laugh and a stylish taste in clothes and shoes.” For this Business Section article, Rich gushes over the couple’s fondness for interior design in prose more reminiscent of Monocle than the New York Times, cooing over the couple’s “glass-top Noguchi coffee table” and “white Jonathan Adler casting couch covered in a sheepskin throw from Costco.”
At a time when much of the world is mired by recession, and unemployment is hitting record highs, it’s not surprising that we’d want a way to make sense of it all. How does one explain the global financial crisis? How do we comprehend the illegal, risk-taking behavior of banks like Barclays, HSBC, JP Morgan, or Standard Chartered? Economists are not afraid to promise answers to these questions.
But why are economists, once thought to be humorless practitioners of the “dismal science” suddenly becoming celebrities? Since when did they become gurus to whom ordinary people can turn to for everyday-life advice?
One of the virtues of pop economics is that it refuses the dismal tag. Fun and inclusiveness figure heavily. The reader gains access to an exclusive vernacular; one begins to scratch the surface of the U.S.’s current economic woes, or Europe’s. But the rudimentary grasp of economic theory it allows for is divorced from history, politics, and endemic institutional dysfunction.
With economists becoming mainstream personalities, their econospeak is worming its way deeper into everyday language. Our money is as easily invested as our time: remember to “calculate” your “opportunity cost.” Emotions are “inefficient”: try not to have any. Choosing a restaurant necessarily invokes a “cost-benefit analysis.” Steering the course of one’s life is necessarily about making the right decisions at the right time. And the time for this linguistic evolution is right. In an age of laissez-faire capitalism and precarious labor, what are individuals and corporations doing, if not constantly “re-establishing themselves” as “market players?”
These mantras have been the refrain of HR manuals for decades, but their crossover into pop culture has been a fairly recent phenomenon. Over the past 10 years, economics has overreached into other disciplines (markets, if you will) like no other. Freakonomics: A Rogue Economist Explores the Hidden Side of Everything was a fluent treatise on the utility-maximization doctrine and the power of incentives that, as Steven D. Levitt and Stephen J. Dubner argued, lay the foundations for a society organized around individual choice. The Undercover Economist, by British economist Tim Harford, was lauded for adopting a similar tack. The paperback’s cover depicts our undercover economist clad in a trench coat and shades, like a sort of hardboiled antihero, a detective unearthing uncomfortable truths about the motivations for our actions.
The incentives-driven approach to explaining everyday life has also spawned An Economist Gets Lunch, in which noted econoblogger and self-professed foodie Tyler Cowen, a professor at George Mason University, argues that economic principles can help diners improve their culinary experiences. Reviews have tended to focus on Cowen’s quirky pronouncements (clusters of attractive women are a marker of poor dining quality) rather than his disquisitions on agribusiness and defense of fast food. “It is nature that is cruel and harsh, not commercial engineers and gene splicers and Monsanto,” he writes.
Even NPR has hopped on the bandwagon with Planet Money, a show that slices and dices economic complexities into conclusive aphorisms. Episodes have a distinct pantomime quality as the team tries to demystify concepts like job creation or the European sovereign-debt crisis.
Underlying all these examples is the idea that a perfunctory understanding of economics, it seems, is society’s best attempt at a code of justice amid endemic institutional dysfunction in political and legislative frameworks. As such, the quotidian economist presents himself (most often, it is a “he”) to audiences as above and beyond the realm of trifling matters like ideology or politics. The everyday economist goes out of his way to portray economics as a social science untouched by politics and ignorant of historical context. But such an approach is at a deliberate remove from the complexity and the uncertainties of modern life. It suggests that because humans are rational thinkers, then our actions can always be predicted, or at least reduced into theoretical epigrams. And so mainstream economics affirms itself as the discipline with an answer to everything, even when financial crises repeatedly underscore the gap between theory and praxis.
Economics — whether popular or academic — remains a slave to metaphors. In The Undercover Economist, Harford uses a carton of eggs to explain mortgage-backed securities and their relation to the 2008 crisis; Levitt echoes economist Gary Becker when he described children as “durable goods” in Freakonomics. Much like linear solutions in statistical problems, simple metaphors that digest reams of data ultimately tell us very little. Such analogies are a neat rhetorical strategy to convince readers that the economic imperialism that underpins daily events is a natural (if not inevitable) conclusion.
Metaphors may make for a great pull-quote, but too often they perpetuate causal simplification. Everyone is assumed to act in a certain fashion under a specified set of conditions, holding all other variables constant. Oversimplifying economic phenomena ignores possible failures and contingencies: how does one account for empathy, altruism, irrationality? Surely, politics must play a part; surely there are objects — sentimental talismans, or the right to decent shelter — to which no market value can be ascribed. It’s beyond the remit of economics to care.
Rationality, self-interest, and incentives can reveal a single easy answer, especially if you’re a solid writer. The media is easily seduced by the economist who teases out the “hidden” side of life by doggedly sticking to maxims of calculative rationality and neoclassicism. Nothing deviates from the script, and none of it resembles a serious structural — rather than reactive — criticism of our institutions.
What are the consequences of this? In an interview with Wired, when asked how the internet has shaped economic and political punditry, Krugman was pessimistic: “We thought for a while that it was going to be very democratizing, and it turns out not to be. It turns out that because people have limited attention and have to make priorities, you end up with what is a very hierarchical system, in which a few people really do garner the great bulk of the attention.” In the online marketplace of ideas, the influence of a few celebrity economists creates an illusion of scarcity of new, heterodox voices. Yet now more than ever, to prevent costly and irreparable policy errors, economics needs its crowded-out Cassandras.