SYNOPSIS: Marvels how the continuing problem of Policy Entreprenaurs has played itself out. Most advisors are intelligent and respect Professors.
This weekend Boston played host to the annual meeting of the American Economic Association. It was a meeting of college professors; but it was also a conclave of some of the world's movers and shakers. Academic economists used to expect to affect policy only at third or fourth hand; but lately they have, in unprecedented numbers, moved into the corridors of power.
The most conspicuous example of the trend is Lawrence Summers, the academic whiz kid who became treasury secretary. But Harvard professors have attained high office before, and will again. What is different this time is that Mr. Summers is only the most prominent of a wave of professors-turned-policy makers. Even if a year from now Mr. Summers himself is forced to seek alternative employment (spokesman for Jenny Craig? Sorry, couldn't help myself), there will still be dozens of other former professors in key policy positions from the International Monetary Fund to the Bank of England.
What accounts for this growing academic influence over economic policy? One reason is that in the 1990's the professoriate effectively repelled the challenges, from both right and left, that had called its authority into question in the 80's.
The challenge from the right was more serious. Supply-siders -- who argued that high taxes were the root of all evil and ridiculed the concern of conventional economists with things like budget deficits -- were initially dismissed as cranks. But with ready access to the pages of The Wall Street Journal and Forbes, they had no trouble getting their message out. And they claimed that the economic growth of their disciple, Ronald Reagan, vindicated their doctrine.
But after eight years and counting of expansion under manifestly non-Reaganite policies that claim is, to put it mildly, unconvincing. (Yes, the faithful insist that our current prosperity is the result of their hero's 1982 tax cut; but I don't recall them giving Lyndon Johnson credit for the boom in 1983.) And 20 years on, the supply-siders themselves still sound like, well, cranks. They haven't gone away -- any doctrine that appeals to the prejudices of rich old men is assured of a certain basic level of financial support, and its adherents will always be able to find sinecures in the world of right-wing think tanks -- but they have gone into remission.
The challengers from the left were suaver, though less well financed. In the pages of intellectual magazines like The Atlantic Monthly, well-spoken men argued that the government-guided growth of Japan and other Asian economies contradicted the free-market implications of standard economic theory. Economists might shake their heads at mangled logic and garbled statistics; but in the early 90's, many thoughtful Americans, William Jefferson Clinton among them, found them convincing. Then Japan's economic engine started to sputter; a few years later Asia plunged into crisis; and those who had trumpeted the superiority of an "Asian system" became very quiet.
In recent years, in other words, conventional economics has been vindicated in at least a negative way: "Not as silly as our critics" isn't exactly a stirring slogan, but it more or less sums it up.
There is, however, another reason for the new policy prominence of economists: it is part of a broader social trend, the triumph of the nerds. Once upon a time important men weren't supposed to be too obviously clever; the technical brilliance of someone like Mr. Summers or the I.M.F.'s Stanley Fischer would in itself have marked them as unsound. In the business world of the 90's, however, the propeller heads consistently outperformed the suits, and that affected overall perceptions of what it takes to get the job done. A world in which Bill Gates is the ultimate businessman is a world in which Larry Summers can be treasury secretary.
Still, one suspects that the role of academic economists as policy makers is a transitory phenomenon -- perhaps even a Pyrrhic victory. New challenges to orthodoxy, like the growing backlash against globalization, are already brewing. These challenges may be ill-informed, but no matter. Economics is an inherently political subject, on which everyone has an opinion; it is hard to believe that the public will be willing to defer on a sustained basis to the expertise of professors, however brilliant.
Originally published in The New York Times, 1.8.00