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In law school many of my professors had erotic tones in their voices when uttering the name “Richard Posner“. But is Posner sleeping around while still living at home?
Posner was one of the biggest proponents of the Chicago School of economic thought. He was a neoclassical economic thinker who is credited with projecting economic theory into the realm of jurisprudence. However, since former Fed Chairman Alan Greenspan’s light bulb went off during the global economic meltdown, Posner has become a zealous inquisitor of extremist free market thought.
Although Posner still walks the intellectually gutted halls of the University of Chicago, he has no reservation helping tear the remaining walls down from within. In less than a year, Posner has dropped a new book, The Crisis of Capitalist Democracy,
“[T]he prolific federal judge and University of Chicago economist argues that competitive forces inspire financiers to take irrational gambles—especially when they’re betting other people’s money. We cannot trust them to put the common good ahead of profits, says Posner. As a result, government must step in to limit the risks bankers take and, occasionally, repair the damage they inflict.”
The Chicago School and all its powerful acolytes blundered, Posner writes, “by persuading themselves that markets were perfect, which is to say self-regulating, and that government intervention in them almost always made things worse.”
Posner’s change of tune is worth noting. He is a serious thinker whose career has been especially impacted by his passion for free market theories. His admission of error is no less forceful than high priest Alan Greenspan’s. Like Pink Floyd’s Judge, Posner appears to be screaming, “Tear down the wall!” of the Chicago School of economic thought.
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THANK God, common sense and reality returns to academe .. even to the hallowed halls of Chicago University School of Economics. Perhaps it is time for all those with a cultlike devotion to 'free market' ideology to balance that devotion on how the way theory is turned into policy..that is where the rubber meets the road. Given the fallible weakness of human nature, and the corruption of the political class, it would do well to remember that Adam Smith was a moral philosopher before he was a free market theorist. Should anyone ever READ his 1000 page tome they would be surprised at some of his conclusions about the business class ..they were not viewed as somehow sainted but rather as those who could screw up markets by selfish or unethical behavior. I would add, no 'free marketeer" I ever knew read the complete 'invisible hand' paragraph in Smith's work..it is much different than what they claim. Posner joins a list of people who understand the system is busted, and theory and devotion to it may have to be re-thought. Thanks for a GREAT site.
You make a great point: most people have never read The Wealth of Nations in its entirety. In fact, Smith points out that there are several exceptions to his thought that what's good for the self interest is good for the whole — one of those being AGENTS who gain from the transactions and not the consequences. In our case, iBankers and mortgage brokers fulfilled that AGENT role. And, since we ignored Smith's warning, we are now paying the price.
Thank you, Diane!
Posner is above all else a pragmatist. I don't see this recent intellectual course of his as 'tearing down the walls' of the Chicago school. If anything, he's actually reinforcing them: preparing the battlements for the 21st century and, in the process, shaking loose a few bricks here and there. Meaning, Posner has come to recognize the need for SOME degree of regulation, SOME degree of scrutiny of mainstream economics, etc., but only in the sense that those things are required to enable the full-flourishing of things he still very much believes in, such as the relative superiority of free markets over all other systems of aggregation and distribution, the benefits of quantitative analysis in modern macroeconomies, the merits of free flows of labor and capital, etc. Is this a denouement from the supposed 'arch-1980s Chicago School' views? Sure. Undoubtedly. But don't confuse an adjustment of methods for a loss of principles. Posner hasn't discarded the core beliefs of Chicago (nor should they be discarded); he's intelligently moderated them. Hayek and Friedman, in other words, still inhabit his heart–he's just made room for some Keynes too.
Well said. However, Given the Chicago School's extreme and passionate assertions that totally free markets MUST be placed above all other policy, I think this is a tearing down of the old orthodox walls to a more reformed view. In other words, if Posner wrote these things 10 years ago, he would have been branded a heretic for breaking from core orthodoxy. With that said, I completely agree with you that the move is an attempt to keep the Chicago School alive …
I will not suspend my disbelief that Richard poser isn't still a Chicago school neoclassical economist of the first order. Posner has succumbed to media pressure in revising his beliefs to conform to the current strain of thinking that is blaming the Chicago School for the conditions that make up the Great Recession
There are two strains of thought that have influenced much of the neo-classical school: 1) the pure; that is, that markets allocate resources best; and 2) the by product; that is, the snap, crackle, and pop of free-market economics that the US economy is currently experiencing despite all the wrong policy alternatives imposed by the federal government. It is the former trap Posner has fallen into, reluctantly. He is second guessing his second guesses.
To understand the future you must first study the past! Posner is too intelligent and experinced not to come to his dismal science senses.
Danny L. McDaniel
Lafayette, Indiana