Agree with us or else! Fed herds Economists to group think

I've often wondered what it would be like to be a graduate student of some economists who clearly are not in statistical reality and often mathematical reality. Would you not be allowed to get your dissertation accepted unless you group speak the party line, regardless of what your own research tells you?

A Huffington Post article, Priceless: How The Federal Reserve Bought The Economics Profession, details a similar situation with Economics Academia and the Federal Reserve big brother club. It seems the Fed has a lock on getting published, a critical issue if one expects to receive their PhD. No publications, no graduate degree and assuredly no tenure in Academia.

The Fed's Intolerance For Dissent

When dissent has arisen, the Fed has dealt with it like any other institution that cherishes homogeneity.

Take the case of Alan Blinder. Though he's squarely within the mainstream and considered one of the great economic minds of his generation, he lasted a mere year and a half as vice chairman of the Fed, leaving in January 1996.

Rob Johnson, who watched the Blinder ordeal, says Blinder made the mistake of behaving as if the Fed was a place where competing ideas and assumptions were debated. "Sociologically, what was happening was the Fed staff was really afraid of Blinder. At some level, as an applied empirical economist, Alan Blinder is really brilliant," says Johnson.

In closed-door meetings, Blinder did what so few do: challenged assumptions. "The Fed staff would come out and their ritual is: Greenspan has kind of told them what to conclude and they produce studies in which they conclude this. And Blinder treated it more like an open academic debate when he first got there and he'd come out and say, 'Well, that's not true. If you change this assumption and change this assumption and use this kind of assumption you get a completely different result.' And it just created a stir inside--it was sort of like the whole pipeline of Greenspan-arriving-at-decisions was disrupted."

It didn't sit well with Greenspan or his staff. "A lot of senior staff...were pissed off about Blinder -- how should we say? -- not playing by the customs that they were accustomed to," Johnson says.

This might explain to me why Alan Blinder is so cautious, very careful (this is my own impression) to not make any waves among the status quo.

If one makes waves, one might get kicked out of the club.

Galbraith, a Fed critic, has seen the Fed's influence on academia first hand. He and co-authors Olivier Giovannoni and Ann Russo found that in the year before a presidential election, there is a significantly tighter monetary policy coming from the Fed if a Democrat is in office and a significantly looser policy if a Republican is in office. The effects are both statistically significant, allowing for controls, and economically important.

They submitted a paper with their findings to the Review of Economics and Statistics in 2008, but the paper was rejected. "The editor assigned to it turned out to be a fellow at the Fed and that was after I requested that it not be assigned to someone affiliated with the Fed," Galbraith says.

Publishing in top journals is, like in any discipline, the key to getting tenure. Indeed, pursuing tenure ironically requires a kind of fealty to the dominant economic ideology that is the precise opposite of the purpose of tenure, which is to protect academics who present oppositional perspectives.

But this article really could be written on a host of specialties, especially within Academia. Take globalization agendas of some schools. Obviously if one points out that is hurting the past and current U.S. citizen student body, one will assuredly be kicked out of the club.

A lot of research grants, funding, comes directly from corporations, so once again, no one dare criticize that very corporation and lord forbid, reach research conclusions which put a large corporate donor to a university in a bad light.

This might explain why we have so few economists focusing in on the U.S. middle class, manufacturing and labor. It plain doesn't pay and has an additional threat. One is going to get kicked out of the club for mentioning screwing the little people might have long term bad economic consequences.

This also might explain the church of free trade. Like zombies mumbling we need more red meat, many economists claim all trade agreements are good and labor arbitraging the America worker somehow isn't a problem. Literally I've seen mathematical equations inverted, basic economic laws denied in attempts to justify their religious zeal. Economic Creationism anyone?

I still like the Atlanta Fed blog though and in spite of this criticism from the Huffington Post, a lot of the research, tools, information, statistics pouring from the regional Feds is damn good juju. If only unemployment statistics got as much love.

So please Huffington Post, point to a subject area within Academia that some special interest doesn't have a lock on. Maybe landscaping architecture. Wait, isn't Monsanto giving a grant to study insect resistant plants? Oops!

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Economics has become a bad joke

It can hardly even be called a science anymore, at least on the macro level. Economists are so consistently wrong, and so consistently wrong in the same way (i.e. optimistic), that it leads one to believe that they are all drinking from the same punch bowl.

me likey the economists

Although I must say the ones who make the most sense are either in their 80's or....kicked out of the club in so many words.

When I see the ones who have in depth research, good intel, etc. I try to put them up on EP....obviously they aren't living in Martha's Vineyard by being honest/objective, but they deserve more public awareness, recognition.

What I see continually is beyond pathetic bad research, bad mathematics, really bad assumptions or say correct conclusions, but then policy recommendations which contradict what their own research results indicate.

But, I wouldn't lump them all together and say the field is bad, but it sure does seem like too many have an agenda and it's become political spin instead of hard core in depth research, analysis.

I just scanned over Krugman's article on why Economists got it so wrong...maybe we should overview that one.

Example One

Great blog, great article, great points.

A great example would be an economics prof, Marina von Neumann Whitman (von Neumann's daughter), at the University of Michigan. After years as an executive at General Motors (no doubt helping to nullify any future automotive industry in the USA), after her stint as head of the Council on Foreign Relations, she currently serves with the Group of Thirty (senior membership) along with the Bretton Woods Committee (the international lobbyist group for the ultra-rich, as well as the most anti-worker, anti-union bunch around). Also either a present, or past, member of the Brookings Institution.

But where does the reality-based economics come from? Prof. Michael Hudson, Dr. Paul Craig Roberts (recommend to everyone his interview in the latest issue of Hustler, brilliantly lucid and easily understandable by any non-econ types), Prof. James Galbraith and Prof. Ravi Batra.

When one comes across them (AIG) using a variation of the Binomial Expansion Technique claiming correlated assets as uncorrelated, or banksters using a bivariate Gaussian copula, when the applicability is highly questionable as well as nonapplicable variables, and then fallback on the Modigliani-Miller Theorem (although possibly semi-sensical) to justify leveraged buyouts to destroy jobs and companies (and the economy), junk economics and junk math most definitely merges.