John Cassidy's illuminating visit to the Chicago School

The Curious Capitalist:

Cassidy talks to three sorts of Chicago scholars. There's my buddy Gene Fama and his son-in-law John Cochrane, who by defining all the accomplishments of post-World War II financial theory down to the commonplace observation that it's hard to outguess the market are able to argue that there's nothing wrong with this theory. They may be right, but they also don't have much of anything interesting or useful to say about the events of the past couple of years. They have defined themselves out of the discussion.

Then there are the old-school Chicago economists (a group that in Cassidy's telling includes Judge Richard Posner) who have adapted their thinking in various degrees to recent events. Posner has become a sort-of Keynesian, albeit a sort-of Keynesian who continues to drive real Keynesians bonkers. Posner's buddy and co-blogger Gary Becker hasn't gone quite that far, but does manage to sound pretty moderate and reasonable in Cassidy's article. Robert Lucas refused to talk to Cassidy, but has established a fence-straddling record of sounding moderate when e-mailing with the likes of me and unrepentant when talking with the likes of Amity Shlaes.

Finally, there's the majority of today's Chicago economics faculty, an assortment of behavioral economists, freakonomists, financial-plumbing specialists and others who, while perhaps a bit more free-market-oriented than their counterparts at Harvard or MIT, no longer really constitute an ideological bloc. Posner says at the end of Cassidy's piece that "probably the term 'Chicago School' should be retired," and probably he's right. Chicago has become just another top economics department, as it was before Milton Friedman, George Stigler & Co. turned it into a "School" in the 1950s. Which is sort of a mixed blessing. Chicago economics has become more reasonable. But its very reasonableness may render it less influential.

Posted via email from Jim Nichols