Saturday, February 15, 2014

The policy-advising hegemony of economics

Since I find Storify a rather mystifying app, I'm going to take a series of tweets I made yesterday and turn them into a brief blogpost instead. The motivation for this was some reading I've been doing lately about the origins of academic advising to policy-making and how economics came to assume the preeminent role in policymaking in the 20th century United States.

Among his many world-historical sins, Woodrow Wilson was the first US president to formally assemble a team of academic advisors. Known as "The Inquiry," this group of men (and I believe it was all men) advised the President in preparation for the peace settlement that would follow World War I, particularly with respect to how the territorial boundaries ought to be redrawn. Based out of the New York Public Library, the Inquiry included many of the nation's top geographers (Isaiah Bowman), journalists (Walter Lippmann, Walter Wyle), lawyers (Louis Brandeis, David Hunter Miller), historians (James Truslow Adams [coiner of the term "American Dream], James Shotwell, Paul Monroe, Frank Golder - of course, not Charles Beard).

From our current historical conjuncture, what's most striking about the Inquiry, however, is the category of scholars who were almost completely absent from the Inquiry, namely economists. The only one of note was Simon Patten, whose voice on the Inquiry was relatively faint and whose role remained peripheral. Such marginalization of economists from a major policy intervention would be unthinkable in today's policy climate, in which economists wield unchallenged hegemony. It also reflects President Wilson's ideological reading of the moral purpose of World War I, namely to make national self-determination possible. Assessing the geographic contours of "a nation" required understanding the history (or, more accurately, the mythicized memories) of the peoples in question, and how this history could be legally mapped onto particular territories: a set of questions that evidently "belonged" to the disciplines of history, geography, and law. Whether these entities were economically viable or sensible was sidelined—by implication, something for the nations themselves to address, once their historically appropriate boundaries had been established. (That sense of priorities in itself would be unlikely today.) Indeed, Patten's marginalization within the Inquiry stemmed from his proposal that the new Europe be divided up not according to the principle of national self-determination, but in terms of natural economic units—a grubbily material suggestion ill-suited to Wilson's messianic quest to remake Europe.

After World War I, the core members of the Inquiry would go on to found the Council of Foreign Relations (you can read a celebratory in-house history of that transition here). CFR's particular profile in the wonkish world today continues to reflect these origins: based in New York, it is one of the few think tanks that remains unbeholden to economics as a discipline, offering space in particular for social scientists and journalists to expound in non-technical language (for an idealized audience of engaged businessmen) on the appropriate bases of long-range strategy for American foreign policy.

What's perhaps even more surprising is that economists remained marginal to academic policy-advising even as late as the 1930s, when President Franklin Roosevelt assembled his "Brain Trust," which he modeled after the previous Democratic President's "Inquiry." Unlike the Inquiry, which was addressing a challenge for which economics might plausibly seem a secondary matter, the urgent task facing the Brain Trust in 1933 was the crisis of the Great Depression, now well into its fourth devastating year. And yet even in this circumstance, in which the policy question at hand appeared to be of an essentially economic nature, the community of expertise that FDR called together was dominated by lawyers and historians, more than economists. (The original brain trust consisted of three Columbia law professors, Raymond Moley, Rexford Tugwell, and Adolph Berle; and of the extended group of about 20 people, only 3 were economists.)

In fact, the rise to policy hegemony of economics would take place during World War II. Peter Galison has argued that economists ascended to the top position above all because of their decisive planning and assessment roles the strategic bombing survey, which culminated in the nuclear annihilation of Hiroshima and Nagasaki. (Though as one reply to the tweet noted, economists were also central to the War Production board, supplanting the predominance of that businessmen had taken in that task during the previous war.) Although academics from every discipline supported the War effort, the economists, along with the physicists, managed to get (or take) the lion's share of the political credit. What the physicists got in return for their effort was tens of billions of dollars worth of funding for the next 70 years, and what the economists got in return was a permanent seat at the policy-making table, institutionalized in 1946 with the establishment of the Counsel of Economic Advisors. As Angus Burgin has observed, "For better or for worse, we now live in an era in which economists have become our most influential philosophers, and when decisions made by economistic technocrats have broad and palpable influence on the practice of our everyday lives."

By contrast, historians' voice in policy-advising has been reduced to a somewhat hush-hush once-a-year dinner with the President. As to whether the economists' rise to policy-advising hegemony has been good for our governance, well, your mileage may vary...

Key readings on "The Inquiry":

  • Laurence Gelfand, The Inquiry: American Preparations for Peace, 1917-1919
  • Wesley Reisser, The Black Book: Woodrow Wilson's Secret Plan for Peace
  • Neil Smith, American Empire: Roosevelt's Geographer and the Prelude to Globalization, ch. 5.


Anonymous said...

I suggest it was the success of quantitative economic planning and military logistic operations in the second world war, and the success of the field of economics in selling itself as a variety of applied mathematics, that was responsible for the rising prominence of economics in US policy making.

Responding to the Great Depression, Treasury Secretary Andrew Mellon advocated allowing market forces to "purge the rottenness." He died in 1937, so one can only speculate how he might have responded to Japan's attack on Pearl Harbor.

What did happen after Pearl Harbor was comprehensive government intervention in domestic production and consumption and the creation of military logistics networks of enormous scale and scope. Rather than market forces, central authorities were collecting, organizing, analyzing and communicating vast quantities of numerical data.

I believe the rise of mathematics in postwar economics was linked to this wartime success (and would've happened anyway to some extent). It was certainly not the only factor -- I would highlight the USSR's "scientific socialism" branding and the gigantic threat the USSR was perceived to pose regarding economic competitiveness. Also, the role of the Fed in hiring economics PhDs and thus steering the academy must not be overlooked or minimized: it's difficult to imagine the weight of the US troika (Fed & World Bank & IMF) in the early to mid cold war era.

Why does this matter?

The triumph of economics rode in on the back of perhaps the greatest anathema to American exceptionalism: fiercely and broadly imposed central command and control which achieved goals that were widely supported by the US polity. I doubt it's coincidental that said command and control was implemented not by cowboys, doughboys or GIs but by cubicle dwellers who were most likely disproportionately female.

"Mathemitized and scientific" economics provided a necessary cover for cold war policies that effectively traded US manufacturing power for strong economies in South Korea (military dictatorship), Japan (single-party "democracy" led by imperial-era actors) and West Germany (democracy committed to attonement and preventing large-scale war in Europe). Consequently, the US bottom 90% declined and the 0.01% gained wealth and power.

Self-deception can be a tactical virtue but strategically it invites disaster. Examples: Alan Greenspan's tenure at the Fed, US trade with China v Mexico after China's WTO asscension, EU monetary union.

Cheers Gils, you're great at provoking thought via the twitter machine & I hope you keep it up! I think it was your mention of CFR origins that set me off -- seems to me a fount of short-term Wall Street conventional wisdom dressed as serious grappling with issues. I don't read CFR publications but I pay attention to who they invite to speak & what's said.

Anonymous said...

For "consequently" pls read "inevitably"