The Nobel Laureates Strike Out | City Journal
Sixteen Nobel Prize-winning economists have signed a public letter in advance of Thursday s presidential debate endorsing President Biden s economic policies and criticizing Donald Trump s. They write:
While each of us has different views on the particulars of various economic policies, we all agree that Joe Biden s economic agenda is vastly superior to Donald Trump s. In his first four years as President, Joe Biden signed into law major investments in the U.S. economy, including in infrastructure, domestic manufacturing, and climate. Together, these investments are likely to increase productivity and economic growth while lowering long-term inflationary pressures and facilitating the clean energy transition.
The economists support Biden s reelection campaign and warn that Trump s tax-cutting proposals will reignite inflation and destabilize the nation s economic standing in the world. The message was drafted and circulated by Joseph Stiglitz and signed by other luminaries, including Edmund Phelps (Columbia University), Robert Shiller (Yale), Paul Romer (Boston College), Angus Deaton (Princeton), Oliver Hart (Harvard), and others. All are known as liberal or left-leaning economists with attachments to the Democratic Party.
In 2021, 15 of these same economists, including Stiglitz, Phelps, Shiller, Hart, Romer, and Deaton, signed a similar public letter endorsing Biden s Build Back Better agenda, which contained spending proposals for climate initiatives, health-care subsidies, schools, housing, and other causes. That bill eventually passed Congress with a $1.9 trillion price tag. Several pieces of a pared-back plan were eventually incorporated into the so-called Inflation Reduction Act of 2022, with an estimated cost of around $800 billion. The prize-winning economists had this to say about Biden s economic proposals: Because this agenda invests in long-term economic capacity and will enhance the ability of more Americans to participate productively in the economy, it will ease longer-term inflationary pressures.
The economists also claimed that Biden s agenda includes a broader conception of infrastructure that went beyond spending on roads, bridges, and the like to include investments in human capital, research, public education, and health care. This is a familiar Democratic Party talking point: expenditures on various social causes are really investments.
How did it all work out? The expert economists were badly mistaken on inflation. They said that Biden s spending packages would ease inflationary pressures, but everyone understands today that those same policies stoked inflation. When they signed their 2021 letter, the consumer price index stood at 273; since then, it has surged by at least 15 percent, to its recent level of 313. This is called being wrong.
Interest rates have also surged since then, much to the detriment of prospective homebuyers and those planning large expenditures for autos, home appliances, and school and college tuitions. The interest rate on 30-year mortgages has more than doubled since the 2021 letter, from 2.8 percent to above 7 percent today. The prime lending rate, used by banks for most loans, swelled from 3.2 percent in 2021 to 8.5 percent today. The economists would do well to ponder their performance as forecasters.
I remember a Law & Econ conference years ago where Prof. Stiglitz was the keynote speaker. After an unremarkable talk, Richard Posner asked him a tough question. I don’t quite remember it, but I remember thinking it cut right to the heart of what Stiglitz was trying and failing to say, and revealed it as baloney. Stiglitz didn’t even try to answer it. He just walked off the stage. And we all went back to our dessert. I also saw Posner reduce Charles Fried to similar state, but Fried nevertheless went on a bit. That’s another story.