The Economists’ Hour: False Prophets, Free Markets, and the Fracture of Society
Binyamin Appelbaum
Little, Brown & Co., $15.99 (cloth)

Binyamin Appelbaum’s new book has lived up to its controversial billing, particularly among its subjects. The book condemns the role the economics profession has played in breeding inequality, and holds economists to account for the resulting backlash of xenophobic white nationalism. When the New York Times published an excerpt, the reaction was sadly predictable: How dare he suggest that economists don’t care about inequality? It is only because of economists that we know that inequality has risen. How dare he point out that economists have occupied a privileged position in public life? These behind-the-scenes advisors very close to power should not be implicated in whatever unsatisfactory state of economic affairs exists today.

The hostile reaction to Appelbaum is revealing—and damning.

This is exactly the privileged carping I feared would arise from the so-called “empirical revolution” in economics. Empiricism has manifestly changed the content of economics scholarship in recent years. On the one hand, economists seem to say, better and more enlightened scholarship now excuses past wrongs, and on the other, economists aren’t really responsible for anything that may have been wrong to begin with. As a result, the rhetoric of empiricism has been weaponized to paper over the field’s culpability and to permit retrograde tendencies to remain in place even as what counts as scholarship has changed.

Two years ago, when Nancy MacLean published Democracy in Chains—a book about the long-running, regressive influence of one particular economist, James Buchanan—economists found it easy to dismiss. MacLean brought forward a disturbing history of the connections between white supremacy and academic economics, but it was often presented with over-the-top bombast that provided its critics with an out. Not so with Appelbaum. He works hard to credit the positive influence economists have had in public life, and, unlike MacLean, he has a strong understanding of the apparatus of economics scholarship—enough for him to recognize and elucidate its flaws.

The hostile reaction to Appelbaum is thus more revealing—and more damning.


Appelbaum, a New York Times editorialist and former economics beat reporter, writes lucidly about a number of connected subjects: the content of economics scholarship during the postwar era, the highly interpersonal and institution-specific story of how particular ideas and individuals came to have influence with those in power, and, most strikingly, how economists came to enter policymaking and insinuate themselves into the governing class—a distinction among academic disciplines.

The result is a convincing historical interpretation that shows both the origins and consequences of economists’ most self-serving myths. By purposefully obscuring the political decisions inherent in their scholarship, economists have convinced the rest of the world—or at least its governing elites—to see them as apolitical advice-givers. They thus enjoy an open invitation to the governing table, where their assumptions and values have become the lingua franca of international policy discussion.

What was once a political decision—one that weighed many different factors and consequences—was now reduced to an economic calculation.

This aspiration to appear bipartisan or above the dirt of politics afflicts the profession regardless of ideological affiliation. The real neoliberal achievement—which spanned both parties—was to re-purpose the content of positive economic scholarship (such as individual optimizing behavior) in the guise of normative advice for “optimal policy.” Through this artifice, economists were able to achieve an unprecedented degree of influence, as Appelbaum documents in great detail.

Take his lead example: Richard Nixon's move to end the military draft in 1973. This is a lesser-known case of economic influence on policy, but Appelbaum rustles it up for a reason: it happened early in what might be called the “neoliberal turn,” and there was, at the time, a progressive cast to the policy. In 1966, the University of Chicago economist Walter Oi calculated the economic cost to the nation of removing the labor of would-be workers from national output during their terms of service. A conservative Columbia University economist named Martin Anderson got wind of Oi’s work and presented it to Nixon’s advisors.

Starting here was a shrewd choice for Appelbaum. The decision to end the draft looks rosier in retrospect than most any other policy Appelbaum writes about. Indeed, Oi’s analysis appealed to Nixon in part because of the growing opposition to the draft, and Nixon and his advisors quickly put Oi’s work to use in their campaign to drive the change through both Congress and the Pentagon. What was once a political decision—one that weighed national security, military readiness, and democratic control of and participation in military decisions—was now reduced to an economic calculation. Putting the question in those terms did real political work for the policy’s backers, and the economists involved were more than happy to be put to use in that way.

From there, Appelbaum highlights some of the policy’s most disastrous downstream effects—systematically deconstructing what Oi’s analysis had obscured. Ending the draft, for example, has arguably led to a more adventurous foreign policy thanks, in part, to the ability to project deadly and destabilizing force abroad without much political blowback at home. The erosion of civil–military relations had not entered Oi’s calculus.

This is a strategy Appelbaum sticks to throughout the book: narrate an intellectual history that leads from economic scholarship to a change in federal policy, then summarize each chapter with a discussion of how the economists’ ideology led policy astray, as we can now see from this or that contemporary economic or social pathology. He treats a series of policy areas in turn—international macroeconomics, fiscal policy, taxation, consumer and financial regulation, antitrust, and “cost-benefit analysis”—thus providing a cohesive picture of how the economists’ “hour” came to be.

Appelbaum, for example, marches through the Chicago School’s influence in loosening antitrust enforcement and the industrial consolidation that followed. He quotes Milton Friedman who advocated that antitrust laws be repealed entirely because they do more harm than good by punishing natural economic winners. He also quotes the scholar and federal jurist Richard Posner claiming, in 2001, that, other than the economic approach, there was no longer any other perspective—political or legal—taken seriously in antitrust policy. Appelbaum then quotes Posner again, in 2017, as asking “antitrust is dead, isn’t it?” That economists committed the murder barely even needs to be said.

One would think that economists might defer, or at least listen, to these histories, but so far they have not.

In addition to MacLean, other scholars—such as Elizabeth Popp Berman, Daniel Hirschman, Beatrice Cherrier, Quinn Slobodian, Robert Van Horn, Philip Mirowski, and Edward Nik-Khah—have delved into the specific histories of particular strands of economics scholarship and, in many cases, their influence on policy. It should not be surprising that informed outsiders have a better grasp of the intellectual history of the discipline and its influence on public life than do those closer to the action, who have a vested interest in the manner in which that history is told. One would think that economists might defer, or at least listen, to these histories, but so far they have not.

Appelbaum’s effort might be different. No one has told this whole story, operating over multiple economic subfields, as well as Appelbaum. In fact, Appelbaum’s assiduousness with the sources and the thoroughness of his footnotes means that the book will be of some use even to the scholarly community, since very few have such facility spanning all the domains that Appelbaum covers. But it is exactly because Appelbaum’s book is so good and so convincing that I fear his subjects will find reason to denounce it rather than take seriously what it has to say.


There are, however, some lacunae in Appelbaum’s narrative. First, he presents the economics profession as having sprung fully formed, complete with its more-or-less monolithic faith in markets and hostility to interventionist policies, in the postwar era. He is right (although he doesn’t put it in these terms) that a defining characteristic of the postwar economics profession is its hostility to the New Deal order, but the New Deal order was also put in place, in large part, by economists.

The so-called “institutionalists” grew out of economics’ foundation as a social science in the late nineteenth century and dominated its training and scholarly output in the interwar period. Their approach eschewed the one-size-fits-all epistemology of rational behavior, constrained optimization, and market-clearing that is characteristic of what we now think of as economics methodology. Instead, the institutionalists led with empirics and reasoned from there to policy prescription, usually prescriptions that were highly contingent.

The story of the institutionalists illustrates how the discipline has re-constructed its boundaries over time in order to ensure the economists’ influence on power.

The omission of the institutionalist legacy from Appelbaum’s account is unfortunate because institutionalists and postwar economists both believed that economists are uniquely qualified to hold and influence power. For example, institutionalists such as Edwin Witte, a University of Wisconsin professor, was executive director of the committee Franklin Delano Roosevelt formed to draft the Social Security Act; Walton Hamilton and Gardiner Means each held research positions with a number of New Deal agencies directed at corporate regulation and, eventually, antitrust. Another Wisconsin economist, Selig Perlman, was highly influential in the eventual passage of the National Labor Relations Act.

Indeed, the story of the institutionalists illustrates how the discipline has re-constructed its boundaries over time in order to ensure the profession’s influence on power. Take the example of David Saposs, the National Labor Relations Board’s first, and only, chief economist. Prodded along by McCarthyism, which made academic life difficult for anyone intimately associated with the New Deal in the postwar era, Congress persecuted Saposs as a Communist with a “strangely exaggerated social consciousness” and forbade the NLRB from hiring economists ever again, on the grounds their influence was likely to be excessively radical. (The agency was thus crippled in the contemporary era when economic “expertise” served as the stock-in-trade of inter-agency jockeying for influence.)

Perceived as too overtly political and methodologically inconsistent and unscientific, institutionalism was exiled from the received intellectual history of the discipline, and its legacy is often mischaracterized as a result. Where postwar economists even acknowledge that institutionalism existed, it is to denigrate it and rationalize its extinction as justified by its retrograde methodology. Ronald Coase, the founder of the self-styled “New Institutional Economics,” denounced the output of the “old” institutionalism. Even contemporary economic liberals such as Paul Krugman have cast institutionalism as anachronistic and unscientific, because, as Krugman sees it, it was model-oriented economists (such as John Maynard Keynes) who proved the most useful to policymakers in the aftermath of the Great Depression.

Indeed, institutionalism’s disdain for the theoretical apparatus of economizing behavior made it possible for an alliance of hostile scholars to push it to the margins. Friedman, Coase, and George Stigler characterized it as uneconomic, marginalizing their predecessors so completely that to a current ear it sounds as if they were advocating for economics over “pre-economics,” or naïve do-gooderism. Save for the influence of a few luminaries such as Adam Smith, David Ricardo, and Alfred Marshall dotting the eighteenth and nineteenth centuries, economists today mostly conceptualize the field’s contributions to policy as springing forth from virtually nowhere in the postwar period, on the strength of its inherently rigorous methodological superiority.

This same tendency to police the relevance of the discipline is going on right now: as economists come to disavow the policy mistakes of a previous generation, they have changed the justification for why their unique influence ought to continue. Now, they assure us, they have a greater understanding of how to detect empirical causality, which renders them able to pass judgment on the work of social scientists from other disciplines and to apply such a methodology to virtually any context and policy question.

Appelbaum doesn’t speak at all about desegregation, welfare “reform,” or education policy, so readers do not get any window into economists’ influence in those spheres—and it was considerable

I have written about this empiricism-as-savior gloss before, and the tendency also appears in Appelbaum’s book. By relying on recent empirical scholarship to show how the prescriptions of a past generation turned out to be wrong, we risk validating the scholarship at both stages by creating a narrative of ascent from mistaken theory to valid empirics. This, in turn, serves the ongoing imperative that economists’ access to power must be preserved at all times, under all circumstances. Contemporaries can take credit for correcting past mistakes, and the practitioners whose work is so discredited can instead be portrayed as forerunners of their own eventual discrediting, which gives their story a Panglossian patina.

By remembering institutionalism as a school of economic thought as well as its role within the discipline, we can begin to dismantle such a narrative of inevitable intellectual triumph and question the imperative that economists must operate in service to power at all times.


Another missed opportunity for Appelbaum is the relative lack of attention he pays to race. Since the beginning of the civil rights movement, the backlash to black liberation has been a submerged theme in economic scholarship.

For example, Appelbaum presents the Federal Reserve’s turn toward monetarism in the late 1970s as a means of stamping out inflation at the cost of unemployment, but he doesn’t mention one of its motivations: that the ostensibly over-loose monetary policy of the prior decade—including the departure from the gold standard in 1973 and the consequent end of the Bretton Woods system for international monetary exchange—was brought about by politicians’ need to prevent urban unrest. As economists perceived it, sound monetary management had been wrested away from the unbiased technocrats who ought to have been conducting it and was instead being operated in service to placating self-interested social movements—namely, collective action by black Americans to claim their status as a constituency which public policy ought to serve.

Beyond that, Appelbaum doesn’t speak at all about desegregation, welfare “reform,” or education policy, so readers do not get any window into economists’ influence in those spheres—and it was considerable. For example, Gary Becker’s 1957 theory of discrimination held that discrimination would be punished by the free market and hence would organically diminish, without the need for government intervention. If workplaces remain segregated, he maintained, it is either temporary, or it is the manifestation of some other latent difference in “productivity” that bosses and colleagues can observe but courts and policymakers cannot. Therefore, court-orders to desegregate or not to discriminate are, at best, pointless, and at worst, counter-productive, since they impede the market’s natural tendency to racial egalitarianism and may be used opportunistically to label justified dismissal (or non-admission) as motivated by racial animus.

Becker was also the pioneering theorist behind human capital: he posited that individuals “invest” in their human capital the same way firms invest in their physical capital, and he therefore conceptualized unequal returns as being caused by unequal productivity of that “capital.” This theory provided an expansive explanation (and justification) for social disparities and has proven long-lasting and malleable over the years. It even formed some of the basis for economists’ public rejection of Appelbaum’s contention that economists have discounted or ignored economic inequality. For example, Matthew Kahn wrote “. . . skill is produced throughout the life cycle as you choose how much to invest (and society, peers, and parents also invest in you). Wages rise with skill. Early under-investment in children is the core cause of poverty. . . .The policy solution to reducing poverty is investment in early life skill formation, strengthening the family, and encouraging the geographic mobility of the poor.”

Appelbaum (rightly) does not pull any punches in delineating the many ways that economists have benefitted personally from the ongoing imperative to service power.

Kahn’s formulation reveals how powerful such an individualistic, victim-blaming methodology has been, since it by turns buries the true causes of social disadvantage (such as persistent racial or gender discrimination) and provides a language by which economists can paint themselves as egalitarian even as they perpetuate such anachronistic theories. Human capital theory, for example, shifted higher education policy away from a focus on public goods (i.e., the creation of an educated citizenry) to one of individual investment portfolios. Instead of financing institutions, human capital theorists such as Becker and Buchanan advocated for financing individual students, who would then “invest” in their acquisition of human capital and spend their working lives paying down that debt with their higher earnings. The threat to social order exemplified by the campus unrest of the late ’60s was, again, operating at all times in the background of such scholarship, but obscured by its neutral-sounding policy influence.

Given the degree of attention paid now to the field’s lack of diversity in terms of identity and also ideology, it would have benefited and strengthened Appelbaum’s book to investigate how that homogeneity came to be. Although addressing the lack of diversity is at the top of the agenda now, most economists still don’t understand or appreciate the historical processes that brought the field to where it is. Having seen the hostile reaction to Appelbaum’s book, however, it may be overly-optimistic to imagine economists finally acknowledging that history.


Appelbaum (rightly) does not pull any punches in delineating the many ways that economists have benefitted personally from the ongoing imperative to service power. His narrative is full of examples of people such as Alan Greenspan and Lawrence Summers passing through the revolving door of government service, and of academics such as Milton Friedman receiving behind-the-scenes financial support and fat consultancies from those interested in the adoption of their research by government agencies, politicians, and courts.

A large part of the hostile reaction to Appelbaum consists of asserting that whatever bad thing is being denounced would have happened with or without economists’ involvement. But ideas do not spring from nowhere.

While these channels of influence are obvious once pointed out—and, indeed, affect other industries, such as scientific research—they raise questions that Appelbaum does not address about the influence of ideas and ideologies on policies that are meant to be the result of democratic deliberation. Go back, for example, to the question of the military draft: Appelbaum’s narrative makes it clear that Nixon wanted it ended, and that Oi’s calculations became a rhetorically and politically convenient tool with which to make that happen. If all that economists do is serve up pre-baked policy conclusions to provide justifications for what politicians already want to do, are they at fault when politicians do them? A large part of the hostile reaction to Appelbaum and to similar authors consists of asserting that whatever bad thing is being denounced would have happened with or without economists’ involvement.

But ideas do not spring from nowhere, and it is not correct to say that economistic ideology exerts no independent effect on political outcomes. Kim Phillips-Fein’s book Invisible Hands (2009) and Angus Burgin’s The Great Persuasion (2015), among others, make quite clear how a constructed ideological-political machine set about rolling back the New Deal and how crucial economists such as Friedman, Stigler, and Buchanan were to the construction and operation of that machine. That there were eager benefactors greasing the skids for those involved does not negate the historical significance of the intellectuals doing the organizational and epistemological work of destroying the mid-twentieth-century liberal order and replacing it with neoliberalism. For that reason, Appelbaum’s project survives fundamental doubts about the importance of the channels of influence he narrates so successfully. His book will be a useful account for both the general public as well as for scholars seeking to explain how we got to be where we are.