The Latest from the Prospect ??????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????????
??
View this email in your browser [link removed]
**OCTOBER 18, 2024**
On the Prospect website
Playing Hardball [link removed]
Rebalancing conflicts over state policy will require that blue states wield power differently. BY ARKADI GERNEY & SARAH KNIGHT
Cutting Through the Granite [link removed]
Democrat Maggie Goodlander, a former Biden antitrust official, is bringing a message of fighting corporate power to New Hampshire's notoriously prickly voters. BY LUKE GOLDSTEIN
The SEC Whistleblower Program Is Dominating Regulatory Enforcement [link removed]
As the program, which cuts in whistleblowers on enforcements awards, grows exponentially, conflicts of interest are emerging. AI could make it worse. BY BRUCE SCHNEIER & NATHAN SANDERS
Housing Blues [link removed]
Blue states are the hot spots for the country's housing affordability crisis. BY RACHAEL DZIABA
Kuttner on TAP
****
****
****
****
****
****
****
**** Redeeming the Nobel in Economics
This year's prize went to three institutionalist critics of neoliberalism. The award is overdue.
The Nobel Memorial Prize in Economic Sciences [link removed] was awarded on Monday to Daron Acemoglu and Simon Johnson, both of MIT, and to James Robinson of the University of Chicago. The award cited their research into how institutions shape which countries prosper.
Their case in point was colonalism [link removed], which cast a long shadow once former colonies became independent. In some colonies, the European colonial power was mainly extractive. In others, they built political institutions that allowed a local economy eventually to thrive.
This research is informed by history as well as data, and is far from the sterile and abstract economics of equation manipulation built on the assumption of market efficiency, which has long dominated the mainstream profession. There is another related subtext-a rebuke of neoliberalism, with its calls for derergulation, privatization, and fiscal austerity.
Simon Johnson, whose credentials include having been the chief economist of the International Monetary Fund, is about as mainstream as it gets. Yet his 2010 book written with James Kwak,
**13 Bankers: The Wall Street Takeover and the Next Financial Meltdown**, is the definitive account of how insider influence and excessive deregulation of finance led to the 2008 financial collapse and the deep recession that followed.
Among the things that markets are supposed to price accurately are financial securities. So says standard theory. But as Johnson demonstrated, thanks to political corruption, insider influence, and self-dealing, rigged markets priced derivatives catastrophically wrong, enriching traders, crashing the economy, and devastating homeowners. Institutions indeed matter.
Writing in
**The American Prospect** in 2019 [link removed], Johnson was scathing about how Barack Obama's neoliberal team handled the collapse. "The financial sector was saved, largely intact, by unprecedented government support," he wrote. "If homeowners had received the same level of support in 2008-2009-for example, in the form of cheap refinanced mortgages-what would have happened? The American economy would have recovered, house prices would have risen, and everyone involved would have looked like a genius."
[link removed]
He was also spot-on when it came to the aftermath. "The result, in rough chronological order, was: mass unemployment, greater inequality, collapsed opportunity, confused anger, and President Trump. The efforts put into financial reform-making sure this could not happen again-by Messrs. Bernanke, Geithner, and Paulson were weak."
Those insights, surely, are worthy of a Nobel. For a couple of decades, the Nobel committee has been working its way through noteworthy economists whose work has challenged the conceits of free-market theory.
Claudia Goldin was awarded the Nobel in 2023 for her pioneering work on gender inequality. David Card was given the prize in 2021 for labor economics; his most famous empirical work, a book co-authored with the late Alan Krueger titled
**Myth and Measurement**, refuted the claim that higher minimum wages necessarily lead to increased unemployment.
Yale's William Nordhaus won in 2018 for incorporating the costs of environmental degradation into macro models. Richard Thaler of Cornell was the laureate in 2017 recognizing his work challenging the behavioral assumptions of the orthodox model.
In 2015, the prize went to Princeton's Angus Deaton, who has written about poverty and the increase in "deaths of despair."
And in 2001, Joseph George Akerlof, Michael Spence, and Joseph Stiglitz were lauded for their contributions pointing out that in the real world, contrary to standard models, there are major disparities of information and bargaining power between buyer and seller, manager and worker.
I could go on, but you get the idea. What all of these awards had in common were that they were recognitions of economics as political economy, and not as isolated individual transactions in a social or historical vacuum.
The Nobel committee has come a long way since they bestowed the prize on Milton Friedman in 1976. So has the profession.
~ ROBERT KUTTNER
Follow Robert Kuttner on Twitter [link removed]
[link removed]
To receive this newsletter directly in your inbox, click here to subscribe.?? [link removed]
Click to Share this Newsletter
[link removed]
??
[link removed]
??
[link removed]
??
[link removed]
??
[link removed]
YOUR TAX DEDUCTIBLE DONATION SUPPORTS INDEPENDENT JOURNALISM [link removed]
The American Prospect, Inc., 1225 I Street NW, Suite 600, Washington, DC xxxxxx, United States
Copyright (c) 2024 The American Prospect. All rights reserved.
To opt out of American Prospect membership messaging, click here [link removed].
To manage your newsletter preferences, click here [link removed].
To unsubscribe from all American Prospect emails, including newsletters, click here [link removed].
