The practice of economics is being "fundamentally corrupted" - US DOJ

Want to know why we don't teach political economy anymore? AT&T persuaded Harvard to focus on cultural and social history instead.

I’ll start by saying I want to credit Matt Stoller’s excellent Substack for the first two of these stories. He is one of the single most interesting reporters on the issue of real-world economics, monopolies, because he focuses on facts and tells it straight.

On September 15, Stoller wrote about a speech at Fordham University by U.S. Assistant Attorney General Jonathan Kanter, where Kantner was blunt that economics has been corrupted, partly because economists were promoting policies that were beneficial to their patron without disclosing it.

Apparently it drew gasps - the shock of recognition, no doubt, because it’s incredibly common.

“this week, Kanter decided it was time to tell some hard truths to fellow antitrust experts. With “gasps in the room,” he laid into academics, particularly economists, for taking money from large corporations and then offering their supposedly expert disinterested opinion. It’s a well-known problem, but one that goes unmentioned in polite circles. Until now.

Kanter noted a series of stories, like tricking an international enforcer into attending a training event he thought was associated with the U.S. government, but was in fact paid for by large corporations encouraging lax antitrust, or academics taking money from big tech and then advocating against action against big tech, all without disclosure. He cited, without naming names, a disgraced academic named Josh Wright authoring papers promoting Qualcomm’s posture on antitrust, papers later cited by a Court of Appeals ruling for the company. Wright was paid by Qualcomm, but hadn’t disclosed that.

Kanter then brought up how pervasive and routine this corruption has become, that it has infected major economics journals, and that it’s similar to how big tobacco operated in the 1950s and 1960s to hide the link between cancer and cigarettes. Universities, economics journals, and the practice of economics are being fundamentally corrupted.

The response was even an even more shocking revelation about the profession has been undermined since the 1960s. Harvard itself was lobbied to change the way people talked about history from political economy, to “social history with a cultural lens.”

But corruption is also in our academic centers, shaping our views in ways we have trouble imagining. Historian Richard John, for instance, responded to Kanter’s speech by publishing a piece showing how much more deeply rooted the problem truly is. He revealed how the very practice of history at Harvard in the 1960s onward was structured by pro-monopoly AT&T lobbyists, who wanted Harvard historians to move away from studying political economy and towards social history with a cultural lens. That’s in part why the anti-monopoly tradition died, the historians stopped writing about it, at the behest of AT&T.

The goal, John argues, was:

to persuade the public that AT&T and its associated companies… was a magnanimous public servant that had earned its market dominance through technological prowess and economic foresight rather than political contestation. In reality, politics created the markets in which Bell would thrive. Yet for decades Bell publicists doggedly labored to persuade the public that it was the other way around…

Big Tech moguls have long proclaimed themselves to be creatures not of politics and culture, but of technology and economics. It is a convenient dodge. Google’s “Don’t be evil,” like Bell’s “universal service,” is an ostensibly bland mission statement that conceals a formidable political agenda.

In other words, corruption has shaped the very way most of us learned to think about technology.

This is truly astounding, on multiple levels.

There’s actually an entire field of study for this, called Agnotology

“the study of deliberate, culturally induced ignorance or doubt, typically to sell a product, influence opinion, or win favour, particularly through the publication of inaccurate or misleading scientific data

It’s absolutely clear that for decades, wealthy companies paid people, including academics and doctors, with the goal of successfully creating a mass deception. Examples would be years of scientists who worked for Big Tobacco, who claimed that cigarettes were safe, when they knew for a fact they caused cancer.

The idea that A T & T - itself a company entirely dedicated to communication and information, would be able to warp our understanding of political economy.

This is actually a very significant ideological shift, and not just a change in subject because it focuses on collective cultural and social conflicts in terms of clashes of ideology or group identity.

However, the idea that economics has been influenced by undisclosed payments to its practitioners is nothing new.

Ricardo, who argued for free trade, was involved in banking. His brothers actually foreclosed on Greece in the 1800s and imposed a debt that country took decades to escape from.

When Milton Friedman Was Investigated by Congress

According to Mark Ames, the “libertarian economics” that emerged in the U.S. immediately after WWII was developed by a U.S. corporate lobby group called the Foundation for Economic Education (FEE). The FEE “focused on promoting a new pro-business ideology—which it called “libertarianism”— to supplement other business lobbying groups which focused on specific policies and legislation.” The FEE was considered the first libertarian think tank.

“A partial list of FEE’s original donors in its first four years includes: The Big Three auto makers GM, Chrysler and Ford; top oil majors including Gulf Oil, Standard Oil, and Sun Oil; major steel producers US Steel, National Steel, Republic Steel; major retailers including Montgomery Ward, Marshall Field and Sears; chemicals majors Monsanto and DuPont; and other Fortune 500 corporations including General Electric, Merrill Lynch, Eli Lilly, BF Goodrich, ConEd, and more. The FEE was set up by a longtime US Chamber of Commerce executive named Leonard Read, together with Donaldson Brown, a director in the National Association of Manufacturers lobby group and board member at DuPont and General Motors.”

In 1946, the Truman administration had decided to maintain rent control laws which were opposed by the National Association of Real Estate Boards. The Association’s chief lobbyist, Herbert Nelson, hired FEE, which then hired Milton Friedman and George Stigler to write propaganda in exchange for a “hefty payout, the terms of which were never meant to be released to the public.”

FEE’s deal with Friedman was the subject of a congressional investigation, the Buchanan Commission, for illegal lobbying.

According to Ames:

“Nelson and his real estate lobby led what investigators discovered was the most formidable and best-funded opposition to President Truman in the post-war years, amassing some $5,000,000 [in 1946 dollars] for their lobby efforts— or roughly $60 million in 2012 dollars. So Herbert Nelson contracted out the PR services of the Foundation for Economic Education to concoct propaganda designed to shore up the National Real Estate lobby’s legislative drive — and the propagandists who took on the job were Milton Friedman and his U Chicago cohort, George Stigler.

To understand the sort of person Herbert Nelson was, here is a letter he wrote in 1949 that Congressional investigators discovered and recorded:

“I do not believe in democracy. I think it stinks. I don’t think anybody except direct taxpayers should be allowed to vote. I don’t believe women should be allowed to vote at all. Ever since they started, our public affairs have been in a worse mess than ever."

The pamphlet that Friedman and Stigler produced on Rent Control is famous, and is referred to as a “classic.” The fact that it was written for propaganda purposes and paid for by the landlords is ignored or not known

It’s mentioned on a Freakonomics podcast as “the first major paper” on rent control.

There are decades’ worth of economic research describing the downsides of rent control. The first major paper was written in 1946 by Milton Friedman and George Stigler; here’s Friedman:

Milton FRIEDMAN: Rent control is a law that supposedly is passed to help the people who are in housing. And it does help those who are in current housing. But the effect of rent control is to create scarcity, and to make it difficult for other people to get housing.

Again - it didn’t stay secret. The campaign to persuade people that rent-controls were bad was investigated very publicly by the U.S. congress, because it was corporate propaganda masquerading as research.

We shouldn’t be suprised by this either - after all, even the so-called “Nobel Prize for Economics” isn’t a real Nobel Prize.

Alfred Nobel and his family set up five prizes in 1895 - Chemistry, Physics, Literature, Peace and Medicine. Economics was not among them. The Swedish Central Bank created an Economics Prize in honour of Nobel - over the continued objections of the family, and then proceeded to award the prize especially to economists who were hostile to social democracy. It is an absolute triumph of propaganda over science, especially when you consider the dismal failures and questionable applications of some of economists’ theories, and the catastrophic system failures they failed to predict - and which they helped build.

As Carl Sagan wrote,

“One of the saddest lessons of history is this: If we’ve been bamboozled long enough, we tend to reject any evidence of the bamboozle. We’re no longer interested in finding out the truth. The bamboozle has captured us. It’s simply too painful to acknowledge, even to ourselves, that we’ve been taken. Once you give a charlatan power over you, you almost never get it back.”

This Zeit needs a New Geist.

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