Was airline deregulation a good idea? If you fly occasionally, you surely have opinions. If so, do yourself a favor. Read Clifford Winston’s forthcoming column in the Milken Institute Review. The topic has been in the news recently, and Economists Are Still Right About Airline Deregulation! is the best thing I have read on the question by far. That it reads even better than Winston ordinarily writes owes to the skills of Milken editor-in-chief Peter Passell, who for many years was economics columnist for The New York Times.
If your doubts are not completely resolved by Winston’s apiece, keep reading. I’ve just finally finished reading Thinking Like an Economist: How Efficiency Replaced Equality in U.S. Public Policy, by Elizabeth Popp Berman (Princeton, 2022). Berman is a sociologist, an associate professor of organizational studies at the University of Michigan. Her book demonstrates one of the most effective tools that sociologists possess: identifying communities, describing their antecedents, elucidating their convictions, toting up their successes and failures, and asking important questions about what comes next.
She notes, following philosopher Ian Hacking, that what she calls “the economic style of reasoning,” has over the last fifty years become vastly more familiar, even dominant, in thinking about public policy in the United States. Many accounts ascribe this change to persuasion from the Right: the Mont Pelerin Society, the Chicago school, corporate power, a “neoliberal thought collective.”
Instead, she argues, “the most important advocates for the economic style in governance consistently came from the center-left.” The shift only began to take off in the 1960s, effected by two intellectual communities rooted in the economics profession, in particular its microeconomics wing.
One was the systems analysis group that came to Washington from the RAND Corp. at the beginning of the Kennedy administration. The other was a more diffuse network of university economists specializing in industrial organization, rooted first at Harvard University, commuting to Washington DC, for decades before being gradually displaced by counterparts from the University of Chicago, especially after Ronald Coase moved there from the University of Virginia. All this is thoroughly reported.
In the background, Berman says, were fading economic traditions. One was macroeconomics, which enjoyed a vogue in the 1960s, especially as an avatar of fiscal policy, but which lost its gloss in doctrinal disputes starting in the 1970s. The other was the instituional tradition in economics, dating back to Thorsten Veblen, John R. Commons, and Wesley Clair Mitchell. Criticized in the 1940s as advocates of “measurement without theory,” institutional economists lost their standing in university departments but found homes in leading business schools.
Berman gives short shrift to both traditions, I think. It is true that macro has been tangled up for decades in arguments about fiscal and monetary policy, but its concerns are too important to remain on the sidelines for long. Meanwhile, the institutional style of thinking has never really gone away, though its most successful entrepreneurs have been practical politicians instead of university theorists. Its crowning achievements include the Federal Reserve System, the Social Security System, and, quite unfinished, Medicare.
Otherwise I have little more to say about the book here except to assert that Thinking like an Economist is an important work, deeply founded if not yet fully built. It will influence discussion of these important matters for decades to come.