Nobel prize in Economics causes harm – Edesess

Michael Edesess has written a review of The Nobel Factor: The Prize in Economics, Social Democracy, and the Market TurnThe history of this Nobel prize is fantastic:

The originator of the idea was Per Åsbrink, Governor of the Riksbank, Sweden’s central bank. For a variety of reasons in the 1960s the bank had accumulated a substantial fund from its profits. It decided to use part of it to create a “special jubilee” to take place on May 15, 1968, to celebrate the bank’s tercentenary (300th anniversary). About 100 central bankers and other dignitaries would be invited.

As the date approached, Åsbrink, in 1967, reluctant to hand the bank’s profits back to the Treasury, came up with the idea of using them to establish a Nobel Prize in economics. He discussed it with his young special advisor Assar Lindbeck, who pursued it from there. There were some objections from scientists, who didn’t believe economics merited such an award, and from the Nobel family itself. However, since the money didn’t come from Nobel family funds but from the Swedish taxpayer, they had little say in the matter.

The only concession to the family was made when its oldest living member, an 87-year-old woman, insisted on setting the prize apart by naming it “The Prize in Economic Science in Memory of Alfred Nobel,” versus the other, more simply named awards, such as the Nobel Prize in Chemistry. As Offer and Söderberg say, “This showed a remarkable presence of mind, since the awkward title has continued to tarnish the award ever since.” Peter Nobel, Alfred’s great-great nephew, according to Offer and Söderberg, later wrote that “The Economics prize has nestled itself in and is awarded as if it were a Nobel Prize. But it is a PR coup by economists to improve their reputation.”

That’s funny!  Seeing the role that VaR had in the global financial crisis of 2008, I would agree with the book’s premise that the Nobel prize in economics results in a net loss to the global economy over time.

Not sure if the book follows the same path as the review, but Edesess goes on to detail how in the US, what he calls market liberalism has caused great harm, with the other choice being social democracy.  That is, social security is more efficient and offers better returns than privately managed IRAs, single payer is implied to be a better health care system, etc.

One point is overlooked here, and that is that what has increased is not free markets, but corporate cronyism.  Free markets vs. socialized services is not a dichotomy, and what we have is neither.  Free markets are likely to be an improvement, and socialism would probably not be much worse, or not much different, at least as far as the amount of goods reaching the most people.

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