Austan Goolsbee--be very VERY afraid

Austan Goolsbee, the guy tapped to become Obama's new chief economic advisor, is just 41 years old.  If you believe, as I do, that the BIG sea-change in economic thought came in 1973 when an OPEC boycott triggered a huge recession in the west (and especially USA) that blew up the Keynesian consensus while the Pinochet-led coup in Chile provided an opening for a Chicago-style right-wing economic experiment, then it is interesting to note that he was only four years old when these events took place.  In other words, his whole life has been spent in a world where economics is some small variation on the themes developed at the University of Chicago.

Goolsbee is obviously an extremely bright guy who has been a star at every level.  I mean, just look at his CV!  Goolsbee wound up as a professor at the University of Chicago because that's where the stars go. (At least that is what the University of Chicago would have us all believe.)  That's where he met Barack Obama.  I think it is safe to assume that young Goolsbee is quite proud of a career track that led to the economics school in Chicago.

And you would be too except for one small problem--the University of Chicago is probably the MOST hated institution on earth.  The economics prescribed within her walls has led to widespread misery.  The cry that the "Chicago Boys are coming" literally strikes terror in the hearts of anyone who has been subjected to their ideas.  And it should strike terror in the hearts of the folks in USA if they know what's coming.

What We Learn When We Learn Economics

Is a little economics a dangerous thing?

By CHRISTOPHER HAYES

There’s a case to be made that the single most intellectually and politically influential neighborhood in the United States is Chicago’s Hyde Park. Integrated, affluent and quiet, the 1.6 square-mile enclave on the city’s south side is like a tiny company town, where the company happens to be the august, gothic, eminently serious University of Chicago. Students at the U. of C. sell T-shirts that read “Where Fun Goes To Die,” and the same could be said of the neighborhood, which until very recently had a bookstore-to-bar ratio of 5:2.

But the university is probably best known for the school of economic thought it has produced. When the Chicago School first emerged in the ’50s, its zealous support of free markets and critique of government intervention were considered reactionary and extreme. Among elites in economics and politics the consensus was, as John Maynard Keynes had argued, that capitalism could only function with regular and robust government management. Indeed, so total was this consensus that in 1971 Richard Nixon announced a plan to impose wage and price caps in order to curb inflation, declaring, “We are all Keynesians now.” Just 25 years later, however, Bill Clinton, the first Democratic president to be re-elected since FDR, announced that the “era of big government is over.” He might as well have said, “We are all Chicagoans now.”

Neoclassical economics, as the Chicago School of thought is now called, has become an international elite consensus, one that provides the foundation for the entire global political economy. In the United States, young members of the middle and upper-middle class first learn its precepts in the academy. Polls routinely show that economists and the general public have widely divergent views on the economy, but among the well-educated that gap is far narrower. A 2001 study published in the U. of C.’s Journal of Law and Economics showed that those with college degrees are more likely to subscribe to the views of neoclassical economists than the general public. This isn’t surprising. At elite colleges, economics is consistently one of the most popular majors (nearly a quarter of undergrads at the U. of C.), and across all schools, introductory economics, often a required course, has been one of the 10 most popular classes for the last 30 years. Graduate schools—from business to public policy to political science to, most notably, law—are now suffused with economic paradigms for understanding not only financial interactions but all human behavior. more

Naomi Klein has been following the trail of disasters left by the Chicago Boys for quite a while now, she wrote the following in 2008 for the Guardian.

Beware the Chicago boys

Obama's vow of love for free markets gives reason to fear a replay of Bill Clinton's 1993 U-turn

Naomi Klein, The Guardian, Saturday 14 June 2008

Barack Obama waited just three days after Hillary Clinton pulled out of the race to declare, on CNBC: "Look. I am a pro-growth, free-market guy. I love the market." Demonstrating that this is no mere spring fling, he has appointed the 37-year-old Jason Furman, one of Wal-Mart's most prominent defenders, to head his economic team. On the campaign trail, Obama blasted Clinton for sitting on the Wal-Mart board and pledged: "I won't shop there." For Furman, however, Wal-Mart's critics are the real threat: the "efforts to get Wal-Mart to raise its wages and benefits" are creating "collateral damage" that is "way too enormous and damaging to working people and the economy ... for me to sit by idly and sing Kum Ba Ya in the interests of progressive harmony".

Obama's love of markets and his desire for "change" are not inherently incompatible. "The market has gotten out of balance," he says, and it most certainly has. Many trace this profound imbalance to the ideas of Milton Friedman, who launched a counter-revolution against the New Deal from his perch at the University of Chicago. And here there are more problems, because Obama - who taught law at Chicago for a decade - is embedded in the mindset known as the Chicago School.

Obama chose as his chief economic adviser Austan Goolsbee, a University of Chicago economist on the left side of a spectrum that stops at the centre-right. Goolsbee, unlike his Friedmanite colleagues, sees inequality as a problem. His primary solution, however, is more education - a line you can also get from Alan Greenspan. Goolsbee has been eager to link Obama to the Chicago School. "The guy's got a healthy respect for markets," he told Chicago magazine. "It's in the ethos of the [University of Chicago], which is something different from saying he is laissez faire." more

Unfortunately, Goolsbee is a star of a profession that has been completely discredited and disgraced.

How Did Economists Get It So Wrong?

By PAUL KRUGMAN, Published: September 2, 2009

It’s hard to believe now, but not long ago economists were congratulating themselves over the success of their field. Those successes — or so they believed — were both theoretical and practical, leading to a golden era for the profession. On the theoretical side, they thought that they had resolved their internal disputes. Thus, in a 2008 paper titled “The State of Macro” (that is, macroeconomics, the study of big-picture issues like recessions), Olivier Blanchard of M.I.T., now the chief economist at the International Monetary Fund, declared that “the state of macro is good.” The battles of yesteryear, he said, were over, and there had been a “broad convergence of vision.” And in the real world, economists believed they had things under control: the “central problem of depression-prevention has been solved,” declared Robert Lucas of the University of Chicago in his 2003 presidential address to the American Economic Association. In 2004, Ben Bernanke, a former Princeton professor who is now the chairman of the Federal Reserve Board, celebrated the Great Moderation in economic performance over the previous two decades, which he attributed in part to improved economic policy making.

Last year, everything came apart.

Few economists saw our current crisis coming, but this predictive failure was the least of the field’s problems. More important was the profession’s blindness to the very possibility of catastrophic failures in a market economy. During the golden years, financial economists came to believe that markets were inherently stable — indeed, thatstocks and other assets were always priced just right. There was nothing in the prevailing models suggesting the possibility of the kind of collapse that happened last year. Meanwhile, macroeconomists were divided in their views. But the main division was between those who insisted that free-market economies never go astray and those who believed that economies may stray now and then but that any major deviations from the path of prosperity could and would be corrected by the all-powerful Fed. Neither side was prepared to cope with an economy that went off the rails despite the Fed’s best efforts.

And in the wake of the crisis, the fault lines in the economics profession have yawned wider than ever. Lucas says the Obama administration’s stimulus plans are “schlock economics,” and his Chicago colleague John Cochrane says they’re based on discredited “fairy tales.” In response, Brad DeLong of the University of California, Berkeley, writes of the “intellectual collapse” of the Chicago School, and I myself have written that comments from Chicago economists are the product of a Dark Age of macroeconomics in which hard-won knowledge has been forgotten.

What happened to the economics profession? more

Ok! So Goolsbee is this star who learned a lot of wrong things very well and wound up in that epicenter of ignorance and evil, the University of Chicago, maybe he personally is the man of genius the times require.

Probably not.  Start with Ezra Klein at the Washington Post telling us the seven most important things we should know about Goolsbee.

4) Goolsbee has a reputation as one of the liberal economists on the team, but that's more a byproduct of his populist rhetorical style than actual populism. He's a serious free-market guy, and his much-reported showdown with Larry Summers came because he wanted to let Chrysler fail, while others in the administration wanted the administration to intervene and save it.

5) His academic work was mostly -- though not exclusively -- on tax policy. Look for him to play a major role if the administration decides to pursue serious tax reform. He also wrote a bunch of columns for Slate. more

So let's look at Goolsbee's writings themselves.  Try this example on the subject of medical reform.

Michael Moore and the Beige Bomber

He's got the indictment of health care right, but not the fix. 

By Austan Goolsbee, Posted Sunday, July 1, 2007

Michael Moore's shtick cracks me up. As entertainment, most of his movies are great fun. In Sicko, though, he goes beyond his usual ranting. After spending the first half of the movie railing against the American health-care system, he actually puts forward a policy prescription. Moore thinks the United States should adopt a free, single-payer, national health system like Canada, the United Kingdom, France, or Cuba—socialized medicine, in the words of his critics.

So, how does the movie stand up on policy grounds? Moore is right in his indictment of the American health-care system but overhasty in his readiness to blow it up. more

There Goolsbee is in all his glory.  The USA has by FAR the most expensive medicine of earth.  And those budget-busting costs yield outcomes that are rarely in the top 10.  ONLY the USA has unfettered for-profit medicine--a fact that produces this absurd outcome.

But Moore is a joke who cracks Goolsbee up when he suggests we might want to join the rest of the world when it comes to organizing medical delivery.

Sounds like Goolsbee is just another tragic waste of brainpower.  We have medicine so expensive it is literally bankrupting the country but rational solutions to the problem cannot even be entertained because the religion of the University of Chicago prevents it.

This guy is going to be the Obama's chief economist?  Be afraid.  Be very VERY afraid!