Opinion Editorial | |
| Wednesday, October 27, 1999 | |
Economics Prize Politics |
The award of this year's Nobel Memorial Prize in economics to Columbia University economist Robert Mundell has aroused more than the usual amount of controversy surrounding such awards. That is because, unlike the awards for the hard sciences such as chemistry and physics, there is an element of political judgment involved in the economics award, as with the awards for peace and literature.
In Mundell's case, the political issue is supply-side economics, of which he has been an exponent for many years. To many, supply-side economics remains a kooky theory about cutting taxes without losing any revenue, which caused the massive budget deficits of the 1980s. In commenting on Mundell's award, a Toronto Star columnist said the term "Nutbar" was a scientifically precise term to describe supply-side economics.
More serious critics of supply-side economics, such as Business Week and Massachusetts Institute of Technology economist Paul Krugman, have simply contented themselves with noting (correctly) that the Royal Swedish Academy of Sciences made no mention of Mundell's work in supply-side economics in its citation.
Of course the Swedish Academy was not going to mention Mundell's policy work in its citation because the award is for theoretical accomplishments only. Hence, the Academy's citation limited itself to those areas of Mundell's work, mainly in the area of international economics, and ignored the rest. The same practice has always been followed whether the award went to Gunnar Myrdal, who was an architect of Swedish socialism, or F.A. Hayek, who was a lifetime opponent of socialism everywhere. However, because their purely scientific work overlapped, the Swedish Academy gave them both the Nobel Prize in 1974.
This is not to say that the Academy was unaware of Myrdal's and Hayek's political views. Indeed, it is almost a certainty that they played an important role in its decision to have them share an award, rather than awarding them separately. So too, the Academy was well aware of the political implications of awarding the 1998 prize to Amartya Sen, a strong proponent of increased welfare spending for the poor, and the 1976 award to Milton Friedman, a strong critic of welfare.
The point is that while the Academy did not cite supply-side economics in its award to Mundell, there is no question that it was well aware of his work in this area and that it played a role in his award. This fact is confirmed in a review of the economics Nobel Prize by Ronald Wirtz of the Federal Reserve Bank of Minneapolis. He points out that the Swedish Academy spends an enormous amount of time investigating its potential award recipients, not limited to their academic work. For example, the Academy was very wary of awarding the 1994 economics prize to John Nash because he had spent time in a mental hospital.
It may well be that the Academy simply chose to ignore Mundell's supply-side affiliation, just as they ultimately ignored Nash's personal problems. But more than likely, they knew exactly what they were doing. For example, when the 1995 award went to Robert Lucas, the Academy knew perfectly well that it was also acknowledging the "rational expectations" school of economics to which he belongs. Similarly, the 1986 award to James Buchanan acknowledged the "public choice" school, which he founded.
Krugman and other critics may continue to deny that the Mundell award has any significance for supply-side economics. But even Business Week knows better. In 1995, it admitted that "the basic supply-side notion has become commonplace: Economic growth depends on how tax rates, regulations, and inflation affect investment, entrepreneurship, and work effort." In truth, supply-side economics has simply become part of the mainstream.
Source: Bruce Bartlett, senior fellow, National Center for Policy Analysis, October 27, 1999.
For Minneapolis Federal Reserve text http://woodrow.mpls.frb.fed.us/pubs/region/99-09/nobel.cfm
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