How Did 17 Prize-winning Economists Get It So Wrong?
They had one job
As inflation remains stubbornly high, I was reminded that the prospect of inflation was raised and rejected by a plethora of Nobel prize-winning economists as early as September 2021.
While Congress was debating Biden’s $5 Trillion Build Back Better plan, 17 economists signed an open letter urging passage of that atrocious spending bill (coming on top of an extra $3 trillion in spending at the time, mind you).
The letter opened and closed with these two absurd statements: “The American economy appears set for a robust recovery in part due to active government interventions over the past year and a half” and “[the agenda] will ease longer-term inflationary pressures.” At the time of their writing, inflation was at (only) 6% and got as high as 9% in June 2022. How much more egregious would things be had Congress actually passed their spending behemoth? And even more critically, how is it that 17 prize-winning economists managed to get their economic forecast so wrong?
Readers would be wise to steer clear of the following economists:
George A. Akerlof, Professor, Georgetown University
Sir Angus Deaton, Professor, Princeton University
Peter Diamond, Professor, Massachusetts Institute of Technology
Robert Engle, Professor Emeritus and Co-Director of the Volatility and Risk Institute, New York University
Oliver Hart, Professor, Harvard University
Daniel Kahneman, Professor, Princeton University
Eric S. Maskin, Professor, Harvard University
Daniel McFadden, Professor, University of California, Berkley
Paul Milgrom, Professor, Stanford University
Roger Myerson, Professor, University of Chicago
Edmund S. Phelps, Professor and Director of the Center on Capitalism and Society, Columbia University
Paul Romer, Professor, New York University
William Sharpe, Professor Emeritus, Stanford University
Robert Shiller, Professor, Yale University
Christopher Sims, Professor, Princeton University
Robert Solow, Professor Emeritus, Massachusetts Institute of Technology
Joseph Stiglitz, Professor, Columbia University
It must also be noted that Paul Krugman, another Nobel winner, did not sign the letter but did actively discuss it in his NYTimes column.
These economists had exactly one job: to tell the truth about spending and inflationary policies — namely that increased government spending as a means of intervention will typically result in higher inflation. But they didn’t do that. Instead, they told Congress what it wanted to hear, instead of what it needed to hear, and they ought to be ashamed.