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Volume 17, Number 8
Economists and the
by Llewellyn H. Rockwell, Jr.
When Janet Yellen, Clinton's chair of the Council of Economic Advisors, resigned her post,
she said it was for purely
personal reasons. But according to inside reports, the personal reasons included frustration at
having to lie day-in and
day-out. No matter what the economic data of the week, she was expected to give it a spin that
would boost the president
and smear his enemies.
She was made to tout the glories of Clinton's proposed Social Security reform in front of
Congressional committees. She
warned of the dangers of global warming. She sang the praises of Clinton's commitment to child
care and social services.
She might as well have been reading campaign literature aloud, which tends to undermine one's
No surprise here. To some degree, this is what the economists who held this post have
always done. What's surprising is
that any self-respecting economist would take the job in the first place. And to her credit, Yellen
always looked vaguely
uncomfortable spewing out politically-correct blather as her full-time job. And this was despite
the fact that reporters went
easy on her because she is a liberal woman working for an administration generally beloved by
Yellen was the third person to hold the post in the Clinton years. The first was Laura
D'Andrea Tyson, who made her
academic mark on the world by extolling the productive power of Romanian communism. The
next was Joseph E. Stiglitz,
a respectable economist who immediately reversed his opposition to the minimum wage when
Clinton decided to support
an increase. Yellen's previous job was at the Fed, where she surely got her first taste of the fine
art of spin.
When the post of head of the Council of Economic Advisors was created in 1946, it was seen
as the triumph of Keynesian
scientific management. The chairman was to "de-velop and recommend to the President national
economic policies to foster
and promote free competitive enterprise, to avoid economic fluctuations or to diminish the
effects thereof, and to maintain
employment, production, and purchasing power."
Take no comfort in the phrase "free competitive enterprise"; the competitive part was
intended as a license to antitrust
regulation. The view was that enterprise was not competitive on its own but rather had to be
hammered into a competitive
pattern by government regulators. Overall, the sentence was generally seen as institutionalizing
New Deal economics.
The theory was that dispassionate economists, armed with all the recent data and the best
economic models, would tell the
president how to conduct economic affairs: how much to raise government spending, how much
money to flood into the
economy, how high deficits should be. The theory presumed that "exceptionally qualified"
economists would effectively
become economic dictators, bypassing the judgment of markets and the will of legislators.
In the end, of course, the economists caused a fantastic amount of wreckage: economic
fluctuations and inflations became
ever worse. Why? Reality intervened. The theory behind the job was all wrong, and even if it
weren't, there is no such thing
as a non-political economic post in the White House. The presentation of the data and the policy
always been tainted by politics.
There is a built-in bias in the job description itself: anyone who would take the job believes
it is up to the government to
steer the economy. Most of the appointments over the years (Arthur Burns, Walter Heller,
Herbert Stein) reinforce that bias.
Among those who had a free-market orientation, they were glad to trim and sell out for the sake
of the office.
The result has been the systematic discrediting of the office itself. It is no longer a position
aspired to by the best in the
profession, which is truly something to celebrate. But we are far from having achieved what must
be the real long-run goal:
the separation of economic science from the state.
In our own time, government is a huge employer of economists, who specialize in helping
the State to concoct regulatory
schemes and generally tighten its grip on economic life.
We need economists, but they should devote themselves to the endlessly interesting
problems which the Austrian
economists study, and therefore to understanding how the world works. To the extent they
involve themselves in politics, it
should be to debunk a great myth of our time: that economists can run the economy better than
the market itself.