On TV Obama assures us that he gets the best economic advice from the finest minds trained at America's top universities. Two problems. One is that students who study economics at Harvard, Yale or another of the prestige schools — which are bastions of Keynesianism — are told endlessly that they are the nation's intellectual elite. They graduate thinking they know economics.
Certainty stops inquiry. If you are sure you are right, why investigate further?
Graduates of these "Ivy League" schools seldom know about Austrianism, but they are sought by the federal government to make the big decisions. The alma mater of Federal Reserve Chairman Bernanke is Harvard. Treasury Secretary Geithner's is Dartmouth, and that of the chief of Obama's Council of Economic Advisors, Alan Kruege, is Cornell.
By contrast, the vast majority of college graduates in the US study economics at Ivyless U. They graduate fully aware that they do not know much about economics. Some go exploring on their own and discover forbidden fruits no one at Ivyless U ever mentioned. One of these is Austrianism.
The second problem is that the department of economics at Prestige U suffers from intellectual inbreeding reminiscent of the intermarriage of European royalty of past centuries. Prestige U hires its own graduates, and these "top minds" all hang around the faculty lounge swimming in the same Keynesian and socialist paradigms. These paradigms say, among other things, that no matter what goes wrong, the cure is more government. (Obama's alma mater is Harvard.)
For at least a half-century these Keynesian/socialist schools have been teaching future politicians and bureaucrats that it is possible to express human behavior as a mathematical formula, and steer it like a car, as if humans are without free wills.
Friend JS summarizes like this: if you graduated from Ivyless U, then you know you don't know. If you graduated from Prestige U, you believe you do know, so why question your Keynesianism?
Let me pause here to say there are non-socialists and non-Keynesians among the students and faculties of the prestige universities. One is Austrian economist Jeff Miron of Harvard. But I'm generalizing; these Austrian rebels are rare exceptions.
For almost a century, the Federal Reserve, which is Keynesian, has been pouring dollars into the economy, creating malinvestment. These cones of malinvestment must be allowed to collapse before genuine economic recovery can occur. (See "The Unknown Shakeout" in the 8/09 EWR.) Until then, we must continue with our strategy for investing in a forest of cones. For more about cones and malinvestment, see my January 2010 EWR article, The Fed Caused Disaster or my books Whatever Happened To Penny Candy and The Clipper Ship Strategy. For its credibility, the econ department at Prestige U rides on the coat tails of the departments of physics, engineering, medicine, etc., which do have paradigms that work. If you are a doctor at Yale's medical school, for instance, your considerable achievements and reputation are helping prop up the credibility of the econ department's Keynesian hallucinations.
Recently, after White House spokesman Jay Carney (Yale) gave a typically Keynesian answer to a question, Stephen Moore of the Wall Street Journal replied that this was "economic bimboism" that could be believed "only by someone with a PhD in economics from an elite university."8
Poster Comment:
I operate on the assumption that any economist out of Harvard, Yale and Princeton is an idiot and has no idea what he is talking about.
I've yet to be wrong.