Friday, October 10, 2008

Market for economic advice (market failure)

This morning Peter Cramton and Larry Ausubel were on NPR talking about their reverse auction proposal, and The Chronicle of Higher Education writes about how little advice Congress got from economists on the financial rescue plans (i.e. not only how but what to buy, etc):
In Dismal Times, Economists Try to Shape Financial Debates (a permanent link for subscribers here)

Some quotes:
"Legislation drafted in haste and negotiated with recalcitrant partners is going to be bad legislation"

"Despite his frustrations with Congress, Mr. Galbraith says that he learned from watching his father for many years that it is important never to condescend to policy makers. “These are serious people, and you need to speak to them in a candid and serious way,” he says. “The question is not so much what economists need to say to policy makers, but what kind of policy education economists need in order to be able to intelligently understand the constraints that policy makers operate under.”
But one of the professors who joined Mr. Zingales in writing the anti-bailout petition takes a dimmer view of economists' efforts to speak directly into lawmakers' ears.
“The business of advice remains what it was,” says John H. Cochrane, a professor of finance at the University of Chicago. “You have to be willing become a sort of media person. You have to tailor your advice to what people want to hear, and then shade it a bit in the direction of common sense.” "

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