When Good Economists Go Bad

It is weird to watch respected economists leap so far off the beam that you question their sanity.

The number who supported the federal bailout made me shake my head. I guess economists can panic, too, get all doe-eyed in the face of a power grab.

My confidence in sanity returned when I read Nobel Laureate Vernon Smith’s amazingly insightful article in the Wall Street Journal. He argued that the Treasury Department has now committed itself to a kind of auction with which it has no demonstrated competence. Smith’s practical take on the bailout folly reminds me of another Smith, Adam, way back in 1776, explaining why markets work better than governments to create the wealth of nations.

Then, a few days later, Paul Krugman received the Nobel Prize for Economics.

I had read Krugman years ago, and was impresssed with his good sense. But then he began writing op-eds for the New York Times, and, uh, I began questioning his sanity. On so many issues he seems to believe that the best government governs most. And he’s a very pro-Democratic Party partisan.

It is worth remembering, though, that Krugman is a left-winger who supports free trade, attributes Europe’s high unemployment to wage regulations, and regards anti-globalization activists as enemies of the world’s poor.

Maybe his new prize will remind him of his good sense. He might even rethink his allegiance to Party.

This is Common Sense. I’m Paul Jacob.