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HETECON  February 2010

HETECON February 2010

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Subject:

Short List of Nominees for the Ignoble Prize for Economics

From:

"Wells, Julian" <[log in to unmask]>

Reply-To:

Wells, Julian

Date:

Tue, 2 Feb 2010 12:07:46 +0000

Content-Type:

text/plain

Parts/Attachments:

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Details of this initiative are available here:

     http://rwer.wordpress.com/2010/01/11/announcing-the-ignoble-and-noble-prizes-for-economics-2/

A sidebar at the right of the page (and other related pages) provides access to the voting mechanism and to the evidence pages for the nominees.

Discussion of the nominations is here:

    http://rwer.wordpress.com/nominations-for-the-ignoble-prize-for-economics/


Now here is the shortlist (from http://rwer.wordpress.com/short-list-dossiers/):


Fischer Black and Myron Scholes

They jointly developed the Black-Scholes model which led to the explosive growth of financial derivatives.  The importance given to their hypothetical calculation of derivative prices was baneful not just because it was bogus, but also because it meant that relevant and often urgent real-world economic research was widely neglected by the profession.


Eugene Fama

His “efficient market theory” provided the moral umbrella for all sorts of greed, predatory behaviour and incompetent corporate management.  It also provided the rationale for deregulation.  And his theory’s widespread acceptance meant that “discussion of investor irrationality, of bubbles, of destructive speculation had virtually disappeared from academic discourse.”  In these three ways Fama’s work created the environment which made possible the GFC.


Milton Friedman

He propagated the delusion, through his misunderstanding of the scientific method, that an economy can be accurately modeled using counterfactual propositions about its nature.  This, together with his simplistic model of money, encouraged the development of the financial theories with unrealistic assumptions that facilitated the GFC.  In short, he opened the door for everyone subsequently to theorize without fear of having to be attached to reality.


Alan Greenspan

As Chairman of the Federal Reserve System from 1987 to 2006, he both led the over expansion of money and credit that created the bubble that burst and aggressively promoted the view that financial markets are naturally efficient and in no need of regulation.  Before a Congressional committee on 28 October 2008 Greenspan confessed that his theoretical beliefs of 40 years were now proven to be without foundation, hence his total confusion and failure at his job.


Assar Lindbeck

By working to make the Riksbank Prize in Economic Sciences (“Nobel Prize in Economics”) almost exclusively a prize for neoclassical economists, this Swedish economist has contributed significantly to the conversion of the economics profession and of world public opinion to market fundamentalism.          


Robert Lucas

His development of the rational expectations hypothesis, which defined rationality as the capacity to accurately predict the future, both served to maintain Friedman’s proposition that monetary factors do not affect the real economy and, in the name of “rigor”, distanced economics even further from reality than Friedman had thought possible.


Richard Portes

As Secretary-General of the Royal Economic Society from 1992-2008, he helped suppress worries expressed by non-mainstream economists about developments in the financial sector.  In 2007 he wrote a Report for the Icelandic Chamber of Commerce giving a clean bill of health to Icelandic banks only a few months before they collapsed.  When investigators called attention to the real state of Icelandic banking, he wrote a series of letters to the Financial Times defending the soundness of Icelandic banks and imputing professional incompetence to those who doubted it.


Edward Prescott and Finn Kydland

For jointly developing and popularizing “Real Business Cycle” theory, which by omitting the role of credit greatly diminished the economics profession’s understanding of dynamic macroeconomic processes.


Paul Samuelson

Through his textbook Economics: An Introductory Analysis (19 English language editions and translated into 40 languages), he popularized neoclassical economics, contributing more than any other economist to its diffusion and thereby to the deregulation of financial markets which made possible the GFC.


Larry Summers

As US Secretary of the Treasury (formerly an economist at Harvard and the World Bank), he worked successfully for the repeal of the Glass-Steagall Act, which since the Great Crash of 1929 had kept deposit banking separate from casino banking.  He also worked with Greenspan and Wall Street interests to torpedo efforts to regulate derivatives.

++++++++++++++


Dr Julian Wells
 
staff web-page: http://fass.kingston.ac.uk/staff/cv.php?staffnum=287
personal web-site: http://staffnet.kingston.ac.uk/~ku32530
 
Senior lecturer in economics
School of Economics
Faculty of Arts and Social Sciences
Kingston University
Penrhyn Road
Kingston-upon-Thames
KT1 2EE
United Kingdom
 
+44 (0)20 8417 2124

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