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Bill Mitchell on Thomas Sargent and the Nobel Prize

Posted by WARREN MOSLER on October 14th, 2011

Rewarding those who are culpable

By Bill Mitchell

October 14 — I didn’t comment earlier this week on the recent decision to award the (not)Nobel Prize in Economics to Thomas Sargent. My thoughts were otherwise occupied but it is worth recording that Sargent has been at the centre of the mainstream macroeconomics literature which has been used to justify the claims that government fiscal interventions are ultimately futile and only generate accelerating inflation. His ideas helped my profession to claim authority in its campaign to pressure governments in deregulation, privatisation, inflation targetting and abandoning full employment as a primary policy target. The upshot has been three decades of policy development which really laid the foundations of the current crisis. If Sargent and his cohort had not been so influential the world economy might not have been in the mess that it finds itself in. And … millions might still have their life savings and be gainfully employed. The so-called Nobel Prize in Economics continues to reward those who are culpable.

I covered the event last year – Nobel prize – hardly noble – and noted that the award had nothing to do with Alfred Nobel’s will which wanted prestige to be bestowed on “shall have conferred the greatest benefit on mankind”. Instead, the economic prize was established in 1968 by the ultra-conservative Swedish central bank and the prize is awarded by the Royal Swedish Academy of Sciences.

There is a good critique of Sargent’s selection by John Cassidy in his New Yorker article (October 12, 2011) – A Nobel for Freshwater Economics. He said:

This week’s announcement of the Nobel Prize in Economics got me thinking about the state of the subject, and my thoughts weren’t very positive. Three years after the great financial crisis of 2008 discredited the ruling orthodoxy in macroeconomics and finance, the Royal Swedish Academy of Sciences has chosen to honor one of the leading creators of that orthodoxy: Tom Sargent, of New York University. And judging from the reactions to the Nobel announcement, most academic economists heartily approved of it.

4 Responses to “Bill Mitchell on Thomas Sargent and the Nobel Prize”

  1. ApeMan1976 Says:

    Excellent point.

    Fits with the basic narrative the investment banker/riverboat gamblers who run our economy push on us with every crisis:

    1) don’t worry, trust us, we know how to handle this, we know how to run the investment bank that is the federal finance system
    2) policy failure
    3) well, the problems we were trying to solve were insoluble, just be happy you had such smart people running things or it would have been a lot worse

    Never are we allowed to stop and ask “wait, does running the US Treasury as if it were a really big investment bank actually make sense?”

    Reply

  2. Ralph Musgrave Says:

    Here is another article casting doubt on whether Sargent and Sims should have got a Nobel Prize:

    http://stefanmikarlsson.blogspot.com/2011/10/nobel-price-for-useless-econometrics.html

    Reply

  3. GLH Says:

    I’m sure there is a convoluted math formula some where in the economic books that explains why Mr. Sargent won. That is how something that is inexplicable is explained, isn’t it?

    Reply

  4. Philip Crawford Says:

    You can read an interview with Sargent here. Pretty good interview, imo.
    http://www.minneapolisfed.org/publications_papers/pub_display.cfm?id=4526

    Sims too, but an older interview.
    http://www.minneapolisfed.org/publications_papers/pub_display.cfm?id=3168

    Reply

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