12 Nov 2010

Inside Job a Scathing Indictment of Professional Economics

Financial Economics 16 Comments

I don’t know what the deal is, but I can’t find the NPR story on the documentary Inside Job that I heard just this week. Instead, I can find this earlier interview with the film maker that aired in October:

Now I want to caution free-market economists against focusing on incidentals. Sure, the guy making this film (I’m guessing) wants much more stringent government regulation of the financial industry, and he wants people to go to jail for things that you and I might think were not crimes.

But please don’t dismiss the level of corruption he has uncovered in academia, and also the revolving door between academia, investment banks, and government regulatory positions (including Treasury Secretary and the New York Fed). The interview above shows Glenn Hubbard in the hot seat, but the one I heard earlier this week also featured the famous “gotcha” with Mishkin, and it discussed the Goldman Sachs connection.

What I really don’t want to to see happen, is what occurred in the wake of Naomi Klein’s book The Shock Doctrine. When I read that, I was stunned by the horrific things that the U.S. government had done to psychiatric patients, and the odious foreign regimes that were openly advised by Chicago-trained economists.

But most libertarians didn’t care about any of that; they merely bristled at Klein calling all of that “capitalism.”

16 Responses to “Inside Job a Scathing Indictment of Professional Economics”

  1. Daniel Kuehn says:

    I kinda wish there was more context to that Hubbard quote. I wasn’t especially convinced by your Mishkin point earlier (my comment is on this post – and you say “you might be right”).

    So what was going on with Hubbard? Was he just badgering him and making insinuations based on the fact that he served on some corporate boards, with absolutely no evidence of wrong doing? If that’s what went on then it would make sense that Hubbard would be upset! If he actually did identify an actual impropriety, then perhaps we would care. But it’s very hard to tell with what’s provided here (just like it was with Mishkin earlier).

    Libertarians have recently had to respond to these silly charges about the Koch brothers. The better responses to that accusation has been “the fact that I draw a salary is not proof of any lack of objectivity in my research”. I would have thought you would extend the same reasoning to Hubbard and Mishkin, without some reasonable evidence. I don’t know – I think a lot of this is just so hard to say for sure. I’d prefer to not go in assuming impropriety, at least on the part of professional researchers who I’d like to assume are motivated by their desire to do objective research.

    People who are motivated by other things are different story.

  2. Daniel Kuehn says:

    By the way – I’m not sure if you noticed/remembered, but Glenn Hubbard also appears at the end of that Mishkin video.

  3. Daniel Kuehn says:

    I had to stop listening after the first Glenn Hubbard clip, though, where no real details are given… I’m picking it up again – maybe there are more details later.

    • Daniel Kuehn says:

      Sorry for all the comments! Ya – so he testified for them. That appears to be all they said for the rest of the clip. OK, so? I’m a little unclear on what there is to be concerned about? Was he being unobjective? If I had any sense of that at all maybe it would be easier for me to get flustered. We don’t second guess experts for the defense who analyze DNA, simply by virtue of the fact that they are experts for the defense. I’m not sure why we should be treating economists any differently.

      I think you’re being taken in by a lot of the editing/production magic of the piece. Let’s say someone came up to a libertarian economist and challenged them on Koch funding, and that libertarian economist got ticked off that his objectivity was being questioned simply because he got Koch funding. Would you say that that libertarian economist “thought people should defer to him”. Of course not! He just thought the accusation was insulting! I don’t see what the difference is here.

      What precisely did Mishkin or Hubbard analyze differently because of their financial compensation? Can anyone actually furnish an answer? Come on – we’ve all got to put food on the table. Maybe it’s because I have a private research job and not an academic position, but none of this seems especially problematic to me.

      Which is not to say, of course, that some people don’t abandon their objectivity. Of course some people do that. But simply being paid is hardly evidence that that has been done.

  4. Desolation Jones says:

    In the Mishkin video, the thing in the end about disclosing being paid was really misleading. Glenn Hubbard was most likely referring to research published in academic journals when he said financial ties needed to be disclosed. The paper Mishkin wrote was specifically commissioned by the Icelandic Chamber of Commerce. There was no secret about it. I mean right on the top of the paper there’s a big logo that says Icelandic Chamber of Commerce. Why would anyone assume Mishkin wans’t being paid?

    • Desolation Jones says:

      It’s like accusing an economist who wrote a paper for the The Cato Institute of having a conflict of interest for not disclosing that they were paid by CATO.

      • bobmurphy says:

        I wasn’t focused so much on the money, as on:

        (A) The apparent addition of “in” to the title, and

        (B) Mishkin’s handling of the question about money.

        • Desolation Jones says:

          “(A) The apparent addition of “in” to the title, and”

          Yeah, that’s kind of funny I guess. But seeing how the film is called “Inside Job” with the theme of corruption, that’s hardly something note worthy. At best, it was actually a typo. At worst, it’s just a paper he’s embarrassed about so he added an “In” for job interviews. Who cares?

          “(B) Mishkin’s handling of the question about money.”

          What exactly did you find wrong with his response? Is it the fact that he didn’t say the specific amount? Since when do gentlemen talk about their personal finances in public in front of strangers? My answer would have been “none of you business”. This wasn’t a trial.

          Or was it that he that fumbled his words after he was asked about why he didn’t mention he was being paid in the study itself? It was a very odd question with sinister implications. I would have fumbled for a second too. How exactly do you answer that? The question doesn’t make any sense. He was commissioned to write the study. Why would he have to write on the paper that he was being paid? For all we know, he gave a full answer including what I said in my previous posts and it was all edited out.

          From what I imagine, Mishkin was probably asked to be interviewed under the impression he was there for his expertise, not to be one of the villains of some guy’s documentary. This might explain why he sounded a bit flabbergasted by some of these questions pertaining to himself personally.

          That last part was straight out character defamation. Pure sensationalism. Zero substance. Yes, it’s always nice to know with an economist gets it wrong, but I didn’t learn anything from that clip other than this Mishkin guy is evil incarnate. There was a heavy implication that Mishkin is some corrupt economist, but zero proof was offered other than the extremely misleading emphasis of the large sum of money he was paid.

          I’m all for exposing corruption, but the clip really left me with a sour taste. I could already imagine what the rest of the film is like and I can’t say I’m interested in it anymore. I completely agree with what Daniel has said so far.

          • bobmurphy says:

            Yeah, that’s kind of funny I guess. But seeing how the film is called “Inside Job” with the theme of corruption, that’s hardly something note worthy. At best, it was actually a typo. At worst, it’s just a paper he’s embarrassed about so he added an “In” for job interviews. Who cares?

            Note to self: Don’t ever interview Desolation Jones for a job.

    • Daniel Kuehn says:

      I agree completely – that was my response when Bob first posted this.

  5. Dan says:

    So Mishkin gets paid by the Icelandic government to write a report, it comes out favorable because of what he calls “faith” in the central bank, and then they have a convenient typo on the title of the report once it is shown to be way off. Nothing to see here, move on.

    I’m not for witch hunts but when a guy writes a favorable report for the same people who paid him to write it, and then he turns out to be 100% wrong, then he needs to be pressed on how he came to those conclusions. I mean the guy was paid with stolen tax money to make the government look good and it should be obvious to all the Austrians who could have written a book on all the problems in Iceland. The corruption is in the fact that these so called economists are used to provide intellectual cover for the State. They get paid with stolen money to lie through their teeth and sell their souls to the devil.

    • Desolation Jones says:

      The Iceland Chamber of Commerce is not part of the government. Just like the US Chamber of Commerce, the Iceland Chamber of Commerce is an organization of varies businesses with common interests. That was another thing that that bothered me about this clip. I also though they were part of the government before I looked it up. They should have explained what the Iceland Chamber of Commerce was to give the viewer some context. The documentary is called “Inside Job.” Mishkin was not an inside man. He was outside independent contractor. If it’s one thing if Mishkin was an official government regulator of Iceland and wrote that report, but honestly, how accurate of a study can a foreigner make with no real power to see what the banks are up to behind close doors?

      “a convenient typo on the title of the report once it is shown to be way off.”

      The typo is only on Mishkin’s personal CV. (resume)

      ” and then he turns out to be 100% wrong, then he needs to be pressed on how he came to those conclusions.”

      I completely agree with this. I would love to hear more about how Mishkin came to those wrong conclusions. But all this documentary did was show a highly edited excerpts of his responses with “gotcha” questions to make him look corrupt. It wasn’t informative in the slightest.

  6. Desolation Jones says:

    Does anyone know if there was more Mishkin in this film, or was that it?

  7. N. Joseph Potts says:

    All purveyors (at least, all successful ones) produce products appealing to their patrons. This goes for lawyers, doctors, economists, journalists, painters, carpenters, auto mechanics, and so on (yes, whores, too).

    In fact, the main objection to public education and public medicine is that they break this linkage of customer (consumer)-to-supplier.

    This linkage was broken long ago in the case of economists. The customer now is the government. Anyone who is not the government who listens to them is simply a fool. And the government, of course, is the foolER.

  8. Contemplationist says:

    No Bob the disgust at Klein was justified not simply because of the issue of NAMING. It was that even by her own utilitarian standards (purporting to show how things become worse when “capitalism” is implemented against “peoples wishes), that THINGS GOT BETTER in Chile, almost exactly following Milton Friedman’s own speculation that economic freedom tends to increase other kinds of freedom as well.
    If she’d agreed that Chile is now the wealthiest and most successful latin american country then it would not have been so dishonest. Repeat with Cuba and its truly socialist dictator. Any libertarian will easily denounce all the corporatism and warfarism that the US Fed Guv engages in, for example “War on Drugs.”
    Aren’t establishment libertarian economists against that sort of thing? Didn’t Milton Friedman EXACTLY CHASTISE THE FEDGUV for destroying Colombia’s Cocaine crop?
    No, THERE IS NOTHING OF VALUE in that worthless garbage can called Naomi Klein.