James Fallows from The Atlantic has been quite vocal in his dismay of the revolving revolving door of government positions to high paying jobs in the financial sector. In particular he has been lamenting the decision of Peter Orszag, who was previously Obama’s Director of the Office of Management and Budget, to take a multi-million-dollar per year job at Citi Bank, which was only 2 years ago bailed out by the government with 45 billion dollars and the kind of structural corruption of the entire system that this case highlights.
In James Fallow’s second post regarding this topic, he posts several reader responses, including one impassioned defense of Orszag. I don’t agree with his entire argument. First pointing to individual cases to justify the system as a whole its too microanalytic and loses sight of the bigger picture. Of course you can’t really blame someone for accepting a million-dollar-a-year job if companies are basically throwing the cash at you. But the fact that this is happening on such a regular basis that it has become the norm is indicative of structural corruption. And his second point about why presidents get higher compensation for speaking arrangements than ‘the average person’ seems to be missing the fact that this whole public speaking bonanza in the US is just a game. Its not about the content, its just about prestige. Who can pay the most sought after lackey wins. When some fortune 500 company wants to throw a dinner for some high ranking clients, they are happy to pay $50,000 or $100,000 for some top media figure or some ex high ranking government official. They might as well take a $100,000 dolar stash of dollar bills and burn them on stage. Just because they can.
This is indicative of a deeper problem though. Content doesn’t matter any more. The whole field of economics and finance has seemingly only become a prestige game where all that matters is how well you can work the system. The entire academic field of economics has just become a reality distortion that seems to be working on an increasingly bigger framework of assumptions that have just about nothing left to do with reality. For a good illustration of the point, watch this video from the Freakonomics blog. To me, is says just about everything there is to say about neoclassical economics as a profession.
Just as another example, see what the Nobel Prize in Economics was awarded for this year. I have absolutely nothing against Peter Arthur Diamond, Dale T. Mortensen and Christopher A. Pissarides. I believe every one of them is trying to make this world a beter place. But getting a Nobel prize for a theory that can be summed up in one sentence? Their whole theory sais nothing more than that people are not commodities and can not be substituted for one another like commodities, which is the reason why there is people looking for jobs while at the same time there are vacant positions available. Sounds like common sense to me. But when they introduced this theory in the early 80s, no one else had actually bothered to write about this in language of academic economics jargon.
Somehow the field of economics has emerged as the institution which has won the right to claim truth. But in reality, the entire field is more like a cult than a scientific institution. It almost feels like the entire field of economics has become a game of ‘who is the best at pretending we live in some sort of alternate reality?’ I suppose it has been changing now with the field of behavioral economics taking a much more reality centered approach, but with neoclassical economics theory it used to be that those who are most willing to throw reality out the window and subscribe to the bogus utopian reality of ‘rational humans’, would quickly rise in the ranks of the field and soon earn the right to proclaim their jargon, based on the framework of neoclassical economics, as ‘truth’.
