The Emperor has no Clothes

For years I argued in vain with those who absorbed the economic fads of the 1980s and 1990s. It good to see that with this Great Recession the scales have fallen off people's eyes and the great paragons of economics in this era, the Chicago School of economics, has been shown to have feet of clay. Here is Barry Ritholtz taking them to task. His experience echoes mine:

I first encountered the Chicago theory in law school. The Chicagoists somehow read into law a market efficiency component that was never there. I recoiled against it — not because of the libertarianism, which I embraced. Rather, it seemed a backdoor way to circumvent democracy, and force into the legal system rules that were never debated, voted on, or agreed to by a representative government. I found the extremist legal theories of Judges like Richard Posner and Frank Easterbrook intellectually repulsive. They were undemocratic, anti-representative government. When I told a professor that the law and economics movement was an attempt at a political coup, he laughed and said, try to stop it.

I disliked the neoclassical price theory. It was authoritarian, a worship of a form of mob rule outside of the usual legal channels. The view that regulation and other government intervention is always inefficient compared to a free market has now been made laughable. Its always the extremists that seem to control a discipline or school of thought. If I have any dogma, its extremism in all forms is undesirable (I know, radical, huh)

Ritholtz's whole blog entry called "RIP Chicago School of Economics: 1976-2008" is well worth reading.