Must-Read: Marshall I. Steinbaum and Bernard A. Weisberger: Economics was Once Radical: Then It Decided Not to Be

Must-Read: Marshall I. Steinbaum and Bernard A. Weisberger: Economics was Once Radical: Then It Decided Not to Be: “When it was first formed in 1885, the AEA was a radical challenge to the orthodoxy of classical, free-market economics…

…A generation of young American economists trained at German research universities in the 1870s returned to find their field dominated by an establishment largely confined to Harvard and Yale…. Richard Ely, an avowedly Christian Heidelberg-trained professor at Johns Hopkins with a calling to make economics a friend of the working man…. As originally drafted, the opening platform of the AEA declared ‘We regard the state as an educational and ethical agency whose positive aid is an indispensable condition of human progress. While we recognize the necessity of individual initiative in industrial life, we hold that the doctrine of laissez-faire is unsafe in politics and unsound in morals,’ and it went on to excoriate ‘the conflict of labor and capital.’ The mission of the new organization was to promulgate empirical economics research, including the nascent concept of peer review, a powerful weapon in asserting the scientific superiority of the new school over the establishment’s dry, unshakable orthodoxy….

[But] university presidents seeking stature for their institutions appealed to rich donors among the period’s Robber Barons, and that appeal was unlikely to be successful when rabble-rousers in the economics department were questioning the foundations of American capitalism…. Economists realized there was much to be gained in terms of professional stature and influence from making themselves appealing to the establishment, so they banished those elements that tainted them by association…. Even Ely himself eventually came around after his own notorious trial before the Wisconsin Board of Regents in 1894…. The economic tracts of that era began to enshrine the perfectly competitive market at the center of the intellectual firmament in economics…. It’s hard to escape the conclusion that in choosing to sideline left-wing elements among their own, economists gave up important if inconvenient empirical insights in favor of intellectual self-promotion, and that left them blind to the realities of inequality…