As the dust begins to settle from the current global economic crisis, one of the issues we need to confront is the role of academic economists in promoting ideas that in retrospect were both wrong and dangerous. Economists pride themselves on being simultaneously the most sophisticated social science theorists as well as the most rigorously empirical of the bunch. Yet in the case of financial-sector liberalization economists provided intellectual backing for policies for which evidence of beneficial effects was lacking and, in many cases at least, for which their own theories suggested reasons for caution. In this way professional economists contributed to a massive global recession that, from peak to trough, wiped out $40 trillion in savings and will cause U.S. public debt as a percentage of GDP to increase from 42 percent to somewhere between 60 and 80 percent, according to estimates.

As Keynes noted long ago, the views of academic economists are far more influential than those of virtually any other group of professors. Policymakers see a direct application of their discipline to issues of immediate concern to them. At the same time, non-economists are reluctant to question economists’ judgment for reasons having to do with the highly technical nature of their theories and methods. Given economists’ clout, there are relatively few intellectual checks and balances to the ideas that spill out of the discipline. Presidents, Congressmen and government officials can rarely follow the game-theoretic models that win Nobel prizes in economics, nor can they evaluate complex data analysis. When the consensus in the profession asserts that something is true—for example, that opening up a country’s capital account will spur growth and development—few non-economists feel qualified to gainsay them. But the truth is that the mathematization of contemporary academic economics lends spurious precision to a field that is pervaded by questionable premises, over-simplified models and ideological bias.