Never give in, never surrender -- that's the motto of the Chicago School of Economics, as portrayed in a new feature in the University of Chicago Magazine, "Chicago Schooled." (Found via a tweet from DrFausty.) The piece, by Michael Fitzgerald, offers a nuanced view of the rise in the influence of Chicago's market-oriented economists, and the subsequent hit in prestige the school has suffered in the wake of the financial crisis. (And I say that not just because Fitzgerald quotes my own attack on all things Chicago.)
But despite the plethora of Nobel prizes adorning faculty members, in their public statements, some of the Chicago economists don't sound a whole lot different from your typical South Carolina Republican. Here's Sam Peltzman, the Ralph and Dorothy Keller distinguished service professor emeritus of economics (italics mine):
"This experience is going to seal the tomb on socialism for all time," he says. "If this can't bring it back, it's hard to think about what could." A burst of Keynesianism should surprise no one, he argues. Of course we hope the government can step in and save the economy. In a crisis people "become infantilized and go back to what's comforting to you as a child."
The Keynesian burst, Peltzman insists, will wane. "It's clear already it's not working," he says. "There are two possible reactions to that: 'Well, it's not big enough,' from the left. The other, from people like me, is it'll make it still worse if you go down that road."
I'll leave it to Paul Krugman to respond as to whether the return to Keynes is infantilizing. In the meantime, I suggest Peltzman take a look at the 48-page report released by the White House's Council of Economic Advisers yesterday, which concluded that the stimulus funds already disbursed contributed about 2.3 percentage points of GDP growth to the economy in the second quarter of this year.
Christine Romer's CEA has a vested interest in touting the positive effects of the stimulus, to be sure, but there's plenty of data to crunch in the report, and the conclusion is not terribly controversia. At the very least, the question of what impact the stimulus might be having would have to be considered open. Only an economist completely wedded to his ideology could state that "It's clear already it's not working."
So who's acting like an infant?