The Mainstream World Is Not Free-Market
An excerpt from Chapter 1 of *Unbeatable*
Here’s another excerpt from my next big book.
[from Chapter 1: The Hyperbole of Laissez-Faire: What Economists Really Think About Markets and Government]
During my three decades as an economist, I’ve inhabited two distant ideological worlds of my profession. The first is mainstream economics; the second is free-market economics. I spent four years earning my bachelor’s degree at the University of California at Berkeley, and the next four years getting my Ph.D. at Princeton University. Yet the summer before entering UC Berkeley, I started informally meeting the professions’ scattered – and often closeted – economists who earnestly love the free market. The internet barely existed, so we mostly met at conferences sponsored by outfits like the Ludwig von Mises Institute, the Ayn Rand Institute, the Cato Institute, the Institute for Human Studies, and Liberty Fund. After finishing my Ph.D., I was hired by the economics department at George Mason University, the most pro-market Ph.D.-granting program in the world. I’ve been a professor there for a quarter century. During my career, I’ve continued to straddle both worlds. I’ve published heavily in both mainstream and free-market economics journals, and written four books – two with Princeton University Press. By mainstream standards, I’ve done well, but could never get a job at a top school. In the microcosm of free-market economics, in contrast, I’ve been a leading figure since 2007, when my The Myth of the Rational Voter released.
Mainstream economics and free-market economics: Since I’ve long lived in both of these intellectual worlds, I know their inhabitants well. I don’t just know what these two breeds of economists are like now. I know their life stories – or at least their intellectual biographies. Their “neoliberal” reputation notwithstanding, calling mainstream economists “free-market” – or outright “free-market fundamentalists” – is a joke. Few such economists have ever had free-market sympathies. And even though they’ve won a few Nobel prizes, calling free-market economists “mainstream” or even “dominant” in their profession is likewise absurd. Just because your peers cite you doesn’t mean they like you.
Let’s start with my tour of the world of mainstream economics. Despite Berkeley’s far-left reputation, UC Berkeley and Princeton econ were barely distinguishable. Both stood securely at the top of the academic pecking order and squarely in the intellectual center of the discipline. At each school, I studied under a future winner of the coveted John Bates Clark Medal: Matt Rabin taught me intermediate microeconomics at Berkeley, and David Card taught me Ph.D. microeconomics at Princeton. I performed well in both programs, but was no star.
At both Berkeley and Princeton, at least 80% of economics professors presented themselves as technocratic quants who coincidentally happened to be lifelong Democrats. They rarely suggested that their research turned them into Democrats, and would have been livid if you suggested that their Democratic identity even slightly swayed their research. Technocratic quant and lifelong Democrat: From all I’ve heard, these paired identities are now more prevalent than ever not just at Berkeley and Princeton, but every top-twenty econ department. That includes the University of Chicago, formerly a glaring free-market outlier. In mainstream economics, we’re all technocratic quants now – and we’re all lifelong Democrats now.
The biography of a typical mainstream economist starts with a conventional left-wing teenage intellectual from an upper-middle-class home. His parents and school are center-left, but their complacency disturbs him. They pay lip service, while he believes. In college, he discovers economics – and realizes that the world is more complex than he thought. Eventually, the budding economist concludes that a few conventional left-wing views are overstated or mistaken. Support for rent control is a classic example. If you know no economics, rent control sounds like a fine idea: Want the poor to have affordable housing?[i] Then pass a law requiring wealthy landlords to rent at affordable rates. Intro econ highlights rent control’s big negative side effects: shortages, low quality, and dwindling quantity. Politically, though, “a few conventional left-wing views are overstated or mistaken” is normally the end of the line. If you start out as a conventional teenage leftist intellectual, undergraduate economics turns you into a slightly-contrarian twenty-something leftist intellectual.
For most students who fit this profile, admittedly, intellectual curiosity is only a phase. They end up in non-intellectual jobs and turn into their center-left parents. They may even forget that a few conventional left-wing views are overstated or mistaken. The future mainstream economists, however, stay the course. Soon after earning their undergraduate degrees, they continue on to graduate school, where they acquire two new sets of skills.
First, they spend two years grappling with mathematical economic theory. This is demanding material, but too otherworldly to shift grad students’ economic policy views. High theory presents dozens of esoteric ways for markets to fail, but Ph.D. students normally learned all the standard market failures as undergrads. If you’re already deeply worried about imperfect competition, asymmetric information, and externalities, discovering more exotic market failures rarely makes you like markets less.
Second, unless they become pure theorists, grad students immerse themselves in one or two bodies of ultra-specific empirical research. This immersion occasionally shifts economists’ policy views in their areas of specialization. Yet the maximum effect is small because the volume of research is so massive that most economists end up with no more than a few narrow topics of expertise. In all other areas, mainstream Ph.D. students graduate with virtually the same policy views they held when they started grad school. Minor tweaks aside, that’s where they stay for the rest of their careers. They transition from conventional teenage leftist intellectuals to slightly contrarian twenty-something leftist intellectuals to slightly-contrarian mature leftist intellectuals. Possibly with truly contrarian economic policy views in a few ultra-specific areas they know best. Otherwise, mainstream economists barely connect their life’s work to economic policy. When policy comes up, most take off their researcher hat, and put on their slightly-contrarian left-wing intellectual hat.
P.S. A few readers asked for Unbeatable’s full Table of Contents. Here you go!
Table of Contents
Introduction: When Good Sounds Bad and Bad Sounds Good
Chapter 1: The Hyperbole of Laissez-Faire: What Economists Really Think About Markets and Government
Chapter 2: Tragically Underrated: Why Economists Are Wrong About Free Markets
Chapter 3: Absurdly Overrated: Why Economists Are Wrong About Government
Chapter 4: A World of Irrationality: The Best Case For and Against Government
Chapter 5: To Be Brutally Honest: What Ought to Be Done But Probably Won’t
Chapter 6: Four Candid Conversations
Conclusion: A Plea to the Free-Marketeers of the Future
References
[i] Prior to studying economics, I heard my parents complain that rent control would ruin their investment in a rental home. Otherwise, I spent seventeen years hearing nothing but praise for this policy that almost all economists revile.
Calling mainstream economists left wing or leftist feels a bit extreme. This is just quibbling over definitions but I think calling them center-left or liberal would be more appropriate.
But there is no intergenerational free market in land tenures. They are based on "first come, first grabbed". Later generations are excluded from competing. Hence wealth inequality.