Nobel prize in economics, for totally flawed understanding of economics.

The Nobel Committee already proved that the prize was a joke years ago by giving the Peace Prize to Yasser Arafat.

Now we have the prize awarded in Economics to Eugene Fama, a University of Chicago (bad choice right off the bat) professor who got the award for saying this?

In a "fiscal stimulus," the government borrows and spends the money on investment projects or gives it away as transfer payments to people or states. The hope is that government spending will put people to work, either directly on government investment projects or indirectly through the consumption and savings decisions of the recipients of government spending. The current stimulus plan adds up to about $750 billion. Will it work? Unfortunately, there is a fly in the ointment. Like the auto bailout, government infrastructure investments must be financed -- more government debt. The new government debt absorbs private and corporate savings, which means private investment goes down by the same amount.

Seriously?

A casual glance at any one of a number of charts showing the relationship between private savings and government deficit spending (borrowing) would show the exact opposite of what this guy is saying. I'm sure one of his freshman economics' students could teach him a lesson if he or she had the nerve.

Anyway, giving an economics prize to anyone from the University of Chicago (notoriously neoliberal school/monetarist) is a waste of time unless you are trying to establish the irrelevancy of the award.

Read the rest of his article here.

And read a takedown of it by Ramanan, here.

Kimball Corson — On Being Highly Resistive to Indoctrination

One of my basic observations, having been in the economics PhD program and in the law school there, is those at and from the University of Chicago usually have much too strong a tendency to implicitly assume that anything government does is bad and work their analysis up from there to favor free market results.

Probability alone should otherwise imply a greater spread to Chicagoans' research results and conclusions. The bias is clear and discernible, leaking through particularly in regard to assumptions made, matters taken as given and topics selected for study or comment.

The implicit or explicit view of much Chicagoan analysis is no matter what it does or how it does it, government always gets it wrong and markets -- even when they crash and burn right under our noses -- always get it right. All crashing and burning is also government's fault. Government is always slandered and markets apologetics are more pervasive and strained than those of Catholic theologians, at least with non-Chicagoans.

MIT, Harvard, Yale, Princeton and Columbia are more diversified and empirical in their views with fewer axes to be monolithically ground. The thing about the bias is it is quite predictable. Honest open ended research seldom is.

Wandering the Oceans
On Being Highly Resistive to Indoctrination
Kimball Corson