Morning Must-Read: David Warsh: Back to Cranks at AEI

He quit his professorship at the University of Washington to join the conservative think-tank in Washington, DC, in 1984…. Makin’s hiring in 1984 was widely taken as a sign of AEI’s determination to buttress its reputation as a source of serious opinion-making…. WSJ editorial writer Jude Wanniski had used a year in residence at AEI as a platform from which to launch… works by various authors that later  would be deemed ‘neo-conservative.’ With its twin contentions, that personal tax cuts would pay for themselves by boosting growth, and that the Smoot-Hawley Tariff Act of 1930 had caused the Great Depression… [he] caused no end of embarrassment among the traditionally conservative economists at AEI….

Today the most peripatetic figure among the AEI’s roster of experts is probably attorney Peter Wallison…. The basic cause of the 2008 financial crisis, he argued, was simple. It was government housing policy, particularly the two giant government- sponsored enterprises… government policies were solely to blame, and that none of the other factors commonly cited–the flow of funds from abroad, financial deregulation, rapid innovation, shifting boundaries among firms, investors’ increased appetite for risk, lax credit-agency monitoring, the panic that followed the Lehman default–were significant contributors…. Wallison… is… a lawyer, with no sense of what constitutes a satisfying economic explanation. What makes him a crank is the affable certainty with which he asserts that a partial truth explains the whole…. Probably not since Wanniski’s The Way the World Works has the gap been so great between a non-economist writing for a think-tank and the relevant community of professionals…. AEI has gone back to cranks…. It will be interesting to watch what happens…