IN OCTOBER, the Swedish Academy announced that George Stigler was the winner of the Nobel Prize in Economics. In view of Stigler's well-known conservatism, it is not surprising that he was promptly invited to the White House and put before the media. What followed surprised the president's men. According to the news reports, Stigler referred to the current "depression," and using that word in the Reagan White House shortly before the mid-term elections was rather like speaking of rope in a hanged man's house. Before long Stigler's characteristic candor had apparently persuaded the president's press agents that the news conference should not continue.
We can learn a great deal about the relationship of economics and politics from this event. George Stigler did not achieve his great reputation as an economist or his Nobel award because of his conservatism; there are some economists of very different persuasions who have achieved similar scientific distinction, and many economists of the same conservative (or more precisely, classical liberal or laissez-faire) views who have no comparable honors. Scientific contributions such as Stigler's are, or course, obtained through careful observation, rigorous logic, or original ideas, rather than through fidelity to any political program.
Some may object that what is observed depends on what one expects to see, and thus on ideology. But whether he looks to the right or to the left, the careful observer will see a great deal, and some of it so surprising or puzzling that it will amend his conception of reality. As Stigler emphasizes in The Economist as Preacher, everyone must gain from having a better understanding of causes and effects. Any president, for example, is more likely to be reelected if there is a prosperous economy, so all presidents have an interest in valid information about what makes an economy work. This suggests that economists should have a substantial influence on public policy, but Stigler thinks that they have very little.
One reason, he argues, is that in the economic idea market, as in other markets, what is produced depends crucially on what the consumer demands; each interest or party gets some economists to state its case, but what is done is not changed appreciably. It is not, says Stigler, that there is a lot of intellectual prostitution, but rather that most economists inevitably absorb the predilections of one group or another through the culture. Most people naturally also develop those of their views which receive applause. Disinterested applause from learned colleagues would be welcome, but, as Stigler says, "Too often the educated hands seem to be sat upon by educated asses."
Stigler also believes that economists have little influence on public policy because the policies chosen usually reflect the true interests of those who suborn the political process. The many policies that most economists agree make the economy as a whole less productive are not chosen out of ignorance but rather because they are in fact good for the special interests that obtain them. One still has to explain why the larger public, whose goose is being plucked, allows this to happen, and Stigler admits the explanation could be that the relevant economic logic is not, because of its complexity, widely understood. Still, he inclines against this possibility on the ground that the physical and natural sciences are at least as complicated as economics, but nonetheless are able to influence policy-making. He accordingly concludes that more economists must devote their talents and intellectual tools to the study of political institutions, so that we may come to understand why inefficient policies harmful to most of us are so often chosen.
Though I agree wholeheartedly with this last recommendation, I still think Stigler passes too quickly over the wider public's lack of awareness of its losses to the special interests, and the possibility that economic education could eventually sensitize the public to them. It is true, as Stigler says, that some economists are even enlisted in the services of special interests, and that most are prisoners of the culture and ideas they have inherited.
Yet the culture and ideas we inherited did not spring out of thin air. Our intellectual inheritance is what it is partly because of the economists and other thinkers of the past. And the intellectual inheritance of our children will be at least marginally different because of the thinking of our own time. Even if almost everyone is a prisoner of his intellectual inheritance, there can still be changes in the conventional wisdom: progress will travel, if it must, in a hearse.
Thus the neglect of economic ideas that Stigler observes probably does not hold over the very long run. As Keynes said, people are often slaves to some defunct economist. Now, a generation after he died, a crudely Keynesian type of thinking has indeed become a part of the popular culture. (It is even to some degree evident, under a very different label, in the Reagan White House.)
The process by which new economic ideas are absorbed is probably much the same today as it was in Keynes' time. No matter how strong the faith in the existing culture may be, some of the young at least will be open to new ideas. As they age and rise in rank new cohorts of students will be educated in the new ideas, and in due course the deviant novelty will become the next orthodoxy. Then public policy too will change. We do not, I think, need to worry that society will never learn.
But, the way things have been going lately, we do, alas, need to worry about whether it will learn in time.