Bill Black: Krugman Now Sees the Perversity of Economics’ “Culture of Fraud”

Wow, is Black fast. I had just seen the Krugman post decrying how the three academic authors of Romney’s white paper on economics – Glenn Hubbard, Greg Mankiw, and John Taylor – repeatedly and aggressively misrepresented research they cited in support of their positions, and wanted to say something.

As much as it’s good to see Krugman call this sort of thing out, it nevertheless raises a basic question: where has he been? He was soft on his colleagues when the movie Inside Job came out, which discussed corruption in academic economics, focusing on Frederic Mishkin, Larry Summers, Laura Tyson, and….Glenn Hubbard::

OK, about the economist-bashing: I thought it was basically fair. There aren’t, I think, all that many cases when economists are literally paid to offer a specific opinion — although Greenspan’s defense of Keating qualifies. But the movie didn’t say there are. What it suggested, instead, was a kind of soft corruption: you get paid a lot of money by the financial industry, you get put on boards, but only if you don’t rock the boat too much. Besides, you hang out with these people, and get assimilated by the financial Borg. I think all of that is very true.

In other words, the problem is cognitive capture. Right. So how do you explain Glenn Hubbard, who co-authored a solid piece that raised serious questions about LBO firms “Taxation, Corporate Capital Structure, and Financial Distress,” in 1990. Even though he put a major stake in the ground then, a scan of his subsequent articles indicates he has not revisited this topic. Might it be because he’s since joined the boards of KKR and Ripplewood Holdings (which BTW you don’t find on his official CV)? Oh, and might they have asked him to shut him up? Don’t laugh, it was common practice in the go-go M&A days of the 1980s to sideline the number one hostile takeover banker, Bruce Wasserstein (“Bid ‘Em Up Bruce”) by retaining him.

A Bloomberg editorial at the beginning of the year also suggested that the problem was more deep-seated than mere cognitive capture, and that money did play a corrupting role:

Academics often depend on the business community for the data they need to do their research, for the consulting gigs and board appointments that pad their salaries and for the contributions that keep their departments running. Also, in order to publish the papers that make their careers, they commonly face the scrutiny of editors who themselves are positively disposed toward the interests of business.

As a small test, Zingales looked at the 150 most-downloaded papers that had been done on executive pay. He found that papers supporting high pay for top executives were 55 percent more likely to be published in prestigious economic journals. They were also much more likely to be cited in other papers.

The test will be whether Krugman continues in his new-found enthusiasm for calling out bad behavior among his peers.

By Bill Black, the author of The Best Way to Rob a Bank is to Own One and an associate professor of economics and law at the University of Missouri-Kansas City. Cross posted from New Economic Perspectives.

Paul Krugman has written an article entitled “Culture of Fraud” about the Romney economics team.

Still on vacation, but I have internet access for a bit, and have checked in on a few matters. The big story of the week among the dismal science set is the Romney campaign’s white paper on economic policy, which represents a concerted effort by three economists — Glenn Hubbard, Greg Mankiw, and John Taylor — to destroy their own reputations. (Yes, there was a fourth author, Kevin Hassett. But the co-author of “Dow 36,000″ doesn’t exactly have a reputation to destroy).

And when I talk about destroying reputations, I don’t just mean saying things I disagree with. I mean flat-out, undeniable professional malpractice. It’s one thing to make shaky or even demonstrably wrong arguments. It’s something else to cite the work of other economists, claiming that it supports your position, when it does no such thing….

Is it really surprising, then, that the economists who have decided to lend their names to the campaign have been caught up in this culture of fraud?

I have often written about economists’ tribal taboo on taking fraud seriously or even using the “f-word.” (For economists, it’s like saying “Voldemort” out loud.) It is one of the leading shapers of the intensely criminogenic environments that create the perverse incentives that drive our recurrent, intensifying financial crises. Krugman seems particularly surprised that Mankiw (Harvard) would join the fraudulent culture, but Mankiw has been notorious in this regard for nearly two decades. He was a discussant at Brookings in 1993 when George Akerlof and Paul Romer presented their paper (“Looting: the Economic Underworld of Bankruptcy for Profit”). Akerlof and Romer explained how accounting “control fraud” occurred, why it was a “sure thing,” and how it hyper-inflated bubbles and drove financial crises. Akerlof and Romer (working in conjunction with savings and loan regulators and white-collar criminologists), ended their article with this paragraph in order to emphasize their central message:

Neither the public nor economists foresaw that [S&L deregulation was] bound to produce looting. Nor, unaware of the concept, could they have known how serious it would be. Thus the regulators in the field who understood what was happening from the beginning found lukewarm support, at best, for their cause. Now we know better. If we learn from experience, history need not repeat itself” (George Akerlof & Paul Romer, 1993: 60)

Mankiw dismissed the article’s thesis and conclusion using the economists’ favorite term of disdain (“anecdote”). Mankiw’s dismissal was dishonest, the article he was reviewing was not anecdotal. Mankiw’s infamous conclusion was that “it would be irrational for savings and loans [CEOs] not to loot.” Indeed, he expanded on his fraud-friendly thesis:

Consider an owner of a savings and loan who is taking excessive risks, hoping that they pay off and make him rich. It is only prudent for him to loot as much as he can, because he knows that his gambles might not pay off.

Looting one’s shareholders and creditors was not only “rational,” it was the “only prudent” strategy under “Mankiw-morality”.

Mankiw rejected Akerlof and Romer’s explanation of how deregulation created the perverse incentives that drove the fraud and claimed that the problem was overregulation. Akerlof and Romer’s warning (a warning that we the regulators and white-collar criminologists made contemporaneously) could have prevented a repeat of the financial disaster. Unfortunately, the Clinton and Bush (II) administrations followed Mankiw’s policies and produced the criminogenic environments that drove the accounting control fraud epidemics that produced the Enron-era crisis and the ongoing crisis.

Reading Mankiw’s claims as discussant, where he missed everything important in Akerlof and Romer’s (and the S&L regulators’ and criminologists’) insights and pronounced his faith in the dogma of efficient markets preventing all fraud make particularly painful reading today. His statements as discussant foreshadow all the most destructive creeds that produced the Enron-era and ongoing fraud epidemics.

It is vital to understand that the claim that “accounting fraud” is impossible was not an isolated dogma shared by only a few acolytes. Under even the weakest variant of the efficient market hypothesis, accounting control fraud could not exist or markets would (particularly given the Gresham’s dynamic that Akerlof explained in his 1970 article on “lemons) not be efficient. Because the efficient market hypothesis is the foundation on which all of “modern finance” is built, the circular belief that fraud is impossible because we know markets are efficient was the dominant dogma among finance theorists.

The Frontline special (“The Warning”) explains that Alan Greenspan believed that fraud could not exist and therefore eagerly destroyed Brooksley Born’s (CFTC Chair) effort to protect us from credit default swaps (CDS). It was that same dogma that led Greenspan to an even more catastrophic refusal to act. The Federal Reserve had the unique authority under the Home Ownership and Equity Protection Act of 1994 (HOEPA) to ban endemically fraudulent liar’s loans. Greenspan refused to do so despite pleas from colleagues and housing advocates (including ACORN). Indeed, the refused pleas to even send the Fed’s examiners in to the holding company affiliates making the fraudulent liar’s loans to determine the facts. Greenspan and the Fed economists then, having refused to find the data, shamefully dismissed pleas to use HOEPA to ban liar’s loans by experts who explained how the frauds and predatory lending occurred on the grounds that the experts’ reports were “merely anecdotal.”

Similarly, a generation of American lawyers who have studied corporate law have been reading Frank Easterbrook and Daniel Fischel’s assertion that: “a rule against fraud is not an essential or … an important ingredient of securities markets” (Easterbrook & Fischel 1991). They do not inform the reader that Fischel, in his capacity as an expert economist for Charles Keating (who looted Lincoln Savings), tried applying this fraud-free dogma in the real world. He, and Greenspan (who served as both an economist and lobbyist for Keating – Keating used Greenspan to recruit the five senators who became known as the “Keating Five) opined that Lincoln Savings was a superb S&L with stellar management. Lincoln Savings proved to be the most expensive S&L failure and Keating the most infamous fraud.

To sum it up – the surprise is that Krugman is surprised. Neo-liberal economists, globally, have been the most valuable allies to control frauds. Mankiw is not a late convert, but among the earliest and most strident apologists for the elite frauds. Mankiw’s mendacity has been on open display for nearly two decades. Here’s the really bad news: the room full of prominent economists who listened to his praise for the looters expressed no disapproval of his “friending” of the frauds. Harvard, under Larry Summers, epitomized the economics taboo against taking fraud seriously. Andrei Shleifer remained the editor of the most prominent journal in the field, protected by Summers from any consequences. My recent column explained how a New York Times columnist (Eduardo Porter) cited Shleifer as his primary source on fraud and the Gresham’s dynamic it can produce without Shleifer informing the journalist of the fraud decision that had just dome down against Shleifer.

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  1. Ben Babom

    Why do the vast majority of economists dismiss corruption?

    For the same reason that the politicians do… Kickbacks! The loopholes are there for a reason.

    It’s the slippery slope and there is no stopping at this point. When the corrupt control the government, media and education, corruption will not be properly addressed.

    1. R Foreman

      The lines between government and business have blurred for many of them. Since the debt merchants have perverted the government over the past 150 years, more and more of the official policy has been about economic enslavement, keeping the chains around the workers and finding new slaves throughout the world. The lure of certain riches is a strong one.

      Of course this is not the purpose we set out for our government in 1782, but this is what we have now. Now if you ask one of the quasi-government employee economists to do what’s right, go against the establishment, it’s like asking him to chop off his own arm.. he just can’t do it.

      Even if they are able to stand up and say what’s right, being cast out of the system is a real danger if they don’t have the means or the will to fight. This is a dangerous time for all of us, because fighting the establishment can lead to very real conflict (just ask the Occupiers).

      1. wryzee

        Exemption from legal consequence is the inverse of cruel and unusual punishment. And both are forms of anarchy.

        Regulators need to find some orthodoxy for any teeth to grow, or justice to prevail. Co-mingling with the industry they regulate in ANY way should be prohibited.

  2. Z

    It’s pretty obvious why Krugman is all of a sudden outraged by economists’ lies: they are lying for Romney. He could give a flying fuck if they were lying for a democrat … in fact he often uses intellectually dishonest arguments himself in support of democrats and their policies.


    1. Robin Hood

      I like how Krugie tries to spin himself as an outsider, when convenient.

      The other day I got the urge – forgot why already – to google the “Group of 30”, and was quite surprised to see Krugman on the list. I didn’t even know he hung out in that lofty circle.

    2. Teejay

      Z, can you give an example of when Krugman didn’t care that an economists was lying for a democrat? Can you give an example of when Krugman(“in fact”)used intellectually
      dishonest arguments (“often”)in support of Democrats and their policies. Our opinions and assertions have more weight when they’re backed up with examples. Where are yours?

      1. Z


        Have you ever heard of Jonathan Gruber?

        Is requiring that people pay a tax that finances health coverage O.K., while requiring that they purchase insurance is unconstitutional? It’s hard to see why — and it’s not just those of us without legal training who find the distinction strange.

        Was it really that difficult to see why that was under question when you are requiring them to purchase something from a private entity … a for-profit private entity by the way … instead of the government administering the service like they do for medicare? You don’t think that’s a notable distinction (one that Krugman fails to note at all)?

        Anyway, I can care less whether you want to believe that Krugman is not intellectually dishonest. You want to believe different, then go ahead and do it … it’s not my responsibility to awake you from your delusions.


    3. Crazy Horse

      People shouldn’t be so hard on Poor Paul. After all, he is just lobbying for Geithner’s job, and everyone knows how hard it is to get a job in today’s economy.

  3. Z

    If you ever want to a ricidulous apologia for why the vast majority of these all so innocent economists missed the housing bubble read Krugman’s article from a few years ago called ‘How Did Economists Get It So Wrong?’. Krugman talks about beauty and numbers and models and all kinds of mealy mouthed bullshit while neglecting to ever mention the rampant corruption in his profession. It’ll make you want to just hold one of these innocent, well-meaning economists … that somehow couldn’t see what was painfully obvious to anyone with any sort of knowledge of the housing market who had taken a ECON 101 course … and tell them that everything is going to be all right, just like these corrupt bastards were telling the public as everything went to hell while they somehow managed to make money being completely wrong and never paid any professional costs for their “mistakes”.


  4. Joshua Konov

    By its fundamentals the Capitalism is a pro shady business trickle-down system of economics, which has brought prosperity in a pro-supply marketplace. However, under the new conditions of globalization and rising productivity, the China’s, the outsourcing and moving of industrial production for record short times, the system of shady business perform in conflict with the possibilities for economic/market development and growth, because under these new conditions the small and medium businesses and investors, which have been in great disadvantage to their big brothers as a result of the shady business, are becoming the major important players in this new economy/market to support employment and development overall. I dare to question the productivity as the main 1=f noise element under these new conditions, too.

  5. psychohistorian

    Thanks for the posting Yves.

    It will be interesting to follow the boarder economist Krugman to get some idea of which way the ship might turn….or be made to look like it is turning.

    Some cultures of fraud get prosecuted but not our financial one, I wonder why not? The global inherited rich wouldn’t want any of their financial henchmen to squeal on them and killing them would be messy so buying off the legal system is a more comprehensive solution.

    1. psychohistorian

      And yes, the legal system in my definition includes the bought congress critters that make laws to support the financial culture of fraud.

  6. brian t

    Does Krugman sound surprised? I’m not getting that from what he wrote. He hasn’t said that before, but that doesn’t mean he hasn’t thought that before. One possibility, not brought up by Yves, is that he’s been reading “Econned” 8)

  7. Robert Asher

    Remember what the New York Times did to Molly Ivins? Cut her column for one little swear word (And Krugman noted that in a column about 2 years ago.) He is not a radical economist, but he is a damned good progressive economist. If he was too strong in his attacks on the mainstream shills for corporate America he would lose his column in the NY Times. Think not: just remember the owner of the Times was in the same play group (as a kid) as the editor of the weekly Standard.

    1. mac

      So he lies by omission at times for the profit of keeping his column, not unlike all the economists and opinion writers.

  8. David Lentini

    The fundamental problem is that econmics has never been a true science; so there is no basis for defining “professional” behavior. Thus, the pronouncements of econcomists have little to no intellectual value. But the public has ignored, or has been rendered ignorant of, these facts and looks upon these men and women as some sort of class of technical experts who can manage human activity. Why then are we surprised to find economists selling their “voice” to the highest bidders, especially when those bidders also keep the sham going strong.

    The sad fact is that, as a group, economists are second-rate thinkers—why else would they continue their bickering over the various “schools” of economics that are nothing more than competing superstitions? If econmists were really serious about making economics as intellectually sound as the true sciences they try so hard to mimic and compare themselve to (as in Feynman’s famous “Cargo Cult Science” lecture), then they would spend their time building a solid intellectual foundation based on obvservable facts, rather than writing inflammatory books denouncing each other and then running off for their next interview on some insipid “news” program.

    Among the group, Krugman is certainly above the rest. But as others here have noted, does that really say much? For example, has Krugman ever commented on how many of the bankseters were students of his at Princeton? Has he ever opined on how economics education (and elite higher education more generally) has helped to create this social disaster? For every “right-on!” I give to Krugman’s comments, I also find a counter-balancing defense of Larry Summers (Brad DeLong is especially good at licking his bootss) or a ducking of a really telling crtisism like Steve Keen’s comments on credit and money creation.

    We need to accept that economics is not a science. We therefore cannot let our lives be run by people who think they can design the future the way engineers build bridges and aircraft, physists explain the tides, and chemists make molecules. That would be ugly for the 1%, becuase then they would have to share political power as just other citizens once the curtian has been pulled back from the Wizard of Oz.

    1. JTFaraday

      “The fundamental problem is that econmics has never been a true science; so there is no basis for defining “professional” behavior.”

      Another fundamental problem is that “professional” has been (re)defined as “doing whatever your network wants you to do.”

      It’s not just economics. The problem is endemic.

      Endemic, from the Greek: en- in or within + δῆμος demos people.

      1. David Lentini

        Points well taken, JT. I think however that it tends to be worse in fields that are build on intellectual dishonesty to begin with. But definitely, money has corroded the idea of professionalism generally.

        1. JTFaraday

          That’s because most economics departments today are service departments for the business schools, just as most freshman composition programs are service departments for the university at large. Whereof the former specialize in the construction of ideology, while the latter specialize in the construction of essays.

          But surely not all economists are ideologues, and nothing but ideologues. Just as some former composition instructors manage to get out of the kiddie pool.

    2. rob

      I whole-heartedly agree.Economics is a soft science.Having the discusssion in such a soft and fuzzy parameter as “economics”,as opposed to who is doing what.why and who makes money from egregious practices,some call frauds other call sophisticated innovative financial products and services;just means we can’t say anything definitively.and any con from the streets knows how to scam a buck.sell an idea to someone who wants to buy it.
      If this were a carney show, economists are the shills outside the tent.along with the journalists who tell everyone of the amazing show inside.
      I guess it is a good job for them. They get to “say” stuff. Never prove anything.never second guess themselves EVERYTIME they are proven wrong.Stiil recieve accolades from the uninformed masses,as to their stunning intellect,their sheer brilliance….but… too bad they can’t tell shit from shinola.

      1. They didn't leave me a choice

        I think you give it too much credit by calling it a science perioid, soft or not. Even extra-soft stuff like sociology and psychology /try/ to ground their results in hard science where possible, and in replicateable experiments where not.

        Economics on the other hand is one part worshipping holy texts by ancient economists, one part adherence to a set of dogma that can be best described as fairytales like the “efficient markets hypothesis”, one part a mixed bag of cults of personalities and one part deception, manipulation and obfuscation for example via draping a veil of mathematics over the fetid pile.

        It’s a religion. Plain and simple. A complex, multifaceted and obtuse religion with plenty of blind adherents, but still just a religion. The sooner this trash is excised from all of our organisations the better.

      2. The Pale Scot

        Economics: The Science of Explaining Tomorrow why the predictions you made yesterday didn’t come true today.

        Economics is what Richard Feynman called a “cargo cult science” – they’re going through the motions of being a science, but they achieve no actual results.

    3. ebear

      Best stuff I’ve read here in weeks. Personally, I put economists on the same level as 15th century court astrologers, although that may not be fair to the profession of astrology, which has progressed considerably since then.

  9. middle seaman

    The point of discussion should not be Krugman. Do we employ one additional person by attacking or defending Krugman? Krugman mentioned many times the wrongheadedness of economists such as Taylor and others. He was quite harsh about it.

    If anyone believes that there exists a system that eliminates fraud the person should be rushed to a mental institution for immediate care. The moral/religious tradition of the west is about human flaws fraud absolutely included.

    Academics are as corrupt as any other group. The money stolen from the poor and the middle class is enormous. Economists who help and support the robbery are rewarded handsomely. I don’t know who is rewarded and how. But academics argue techniically not by using four letters words or mentioning ones mother. That’s the job of reporters blotters and us silly commenters.

    1. Ray Phenicie

      “Academics are as corrupt as any other group. The money stolen from the poor and the middle class is enormous. Economists who help and support the robbery are rewarded handsomely.”
      I tend to agree and indeed in the scientific field one has to go a long way to get honest reporting on the real world. Look at any 1st year college chemistry text book and see what it says about industrial pollution caused by the processes so eloquently praised inside the book. Look up fluoride; see if the huge danger that element causes to human health is presented. Same goes for nuclear power. Or chemical fertilizers. Or. . . . .
      As numerous comments above elaborate on and as the article shows, so called intellectual leaders in academia are following their department’ heads and kindred spirits who hang around at after hour cocktail gatherings in the fundraising venue. Can’t displease the next group of donors who are about to fund another $15,000,000 department add on in the form of more brick and glass.

      1. red

        Actually, some recent chemistry textbooks address environmental concerns, and some departments (including Harvard’s, iirc) are moving to make all chemistry they teach as green as possible through the development and use of less polluting synthetic and other processes.

  10. Richard


    Excellent post. While I haven’t had a chance to blog on it myself, I thought your readers would be interested in a Wall Street Journal column “why the dismal science deserves federal funding”. [ ]

  11. Warren Celli

    Bill Black said; “To sum it up – the surprise is that Krugman is surprised.”

    To sum it up – the surprise is that Bill Black is surprised that Krugman is surprised.

    Good cop bad cop economists, globally, have been the most valuable allies to create frauds as they keep the Noble Lie Xtrevilist game alive by making everyone believe that they have a dog in the hunt. Nothing could be further from the truth.

    Bill Black’s good old fashioned Vanilla Greed for Profit (keep the host victim alive to exploit another day Evilism) has mutated into the newer more Pernicious Greed for Destruction (destroy the host victim Xtrevilism) and he and Krugman have led the marks to drink the Kool Aid. The sooner that you realize that they are both evil pigs, the sooner you will regain some control of your lives. Stop watching the movie and look around at all of the empty seats in the theater. The empty seats represent the people that they have both conned and can now no longer afford admission to the show as they spend what little money that they can scratch up on tents……0.0…1ac.yLslD9rpYfA

    More skepticism please, and hurry, you have very little time left.

    Deception is the strongest political force on the planet.

      1. Warren Celli

        LeonovaBalletRusse, you don’t go far enough.

        The garden is overrun with weeds. You don’t resolve the problem by helping the weeds now in shadow — the weeds who were your past problem and sucked your past life’s nutrients — topple those weeds who have overgrown them. You pull ALL the weeds, and then you lay down a mulch of integrity and transparency over the entire garden.

        When Bill Black admits to his own kleptocracy and renounces it forcefully I may heed his words. But to date his has always been nothing more than a poor me, self anointed elite, Vanilla Greed for Profit lament.

        Vanilla Greed for Profit (and all of their hopey dopey followers who cling to it) is the problem.

        Deception is the strongest political force on the planet.

  12. Paul Tioxon

    The crown jewel of the social sciences, economics, has been debunked for almost as long as its first appearance as a stand alone, rationally based academic discipline. But this is nothing new. If as many bridges collapsed as national economies and with the frequency of the boom and bust cycle that they regularly occur, no one would cross any bridge out of simple common sense. But the repeated failure of economics, not just in the academic sense to describe, predict and advise the best course of action, but to do anything useful or practical has not been a mystery to most of the people most of the time.

    Here at NC, you can not help but see the radical critique and the parallels to previous generations of clear thinking. There is a lot of sensible economic work done, but it is marginalized, politically purged and outright ignored and dismissed. This is nothing new. In another journal that lays capitalism bare, there is a near identical discussion going on.

    ” Monthly Review Volume 64, Number 3 (July-August 2012)

    As the economies of Europe, North America, and Japan continue to stagnate orthodox economics has revealed itself to be bankrupt, unable to explain what is happening much less what to do about it. It was not the failure to see the “Crisis of 2008” coming that represents the economics profession’s biggest failure, Paul Krugman declared in a recent talk, but what came after: “the profession’s descent into uninformed quarreling,” coupled with its reversion to Say’s Law (the notion that supply creates its own demand)—the disproof of which was the main achievement of the Keynesian revolution. As a result, many among the more orthodox members of the economics profession have “now regressed 75 years” (“Economics in the Crisis,” March 5, 2012, In another recent criticism of economic theory and policy, Michael Spence of New York University’s Stern School of Business suggests that the persistent failure to deal with growing inequality points to the possibility of “prolonged stagnation” (“Why Do Economies Stop Growing?,” Japan Times, May 28, 2012).

    Yet neither Krugman nor Spence, nor any other prominent orthodox analyst, has sought to engage in a genuine overhaul of received economics on the level of what Keynes accomplished in the 1930s. Indeed, no such scientific revolution appears possible within mainstream economics today, which is characterized not by its realism but its irrealism—serving now an entirely ideological function. Here one is reminded of Paul Sweezy’s observation nearly fifty years ago: “Bourgeois economics, I fear, has irrevocably committed itself to what Marx called ‘the bad conscience and evil intent of apologetic.’

    What is important to note, is that many people academically oriented or not, see Jon Stewart’s take down of Jim Cramer of Mad Money fame, can all see the end of the road for the existing system. That does not mean that there is a day and time for the end of the world, that there is some iron law of historical determinism, but that people can clearly see that for all practical purposes, the way we live in the world today cannot go on decades without some form of radical change. Terrible or wonderful, but something drastic will come about that is completely different from today.

    There does not seem to be anyway to justify or support a future based on the crumbling reality of today. There is no progressive construction of a better tomorrow, just a disintegration of the great institutions that were set in place generations ago. And nothing but sociopathic visions of individual survival that can not be anything but a pipe dream absent of legitimate social order. We will have individual freedom and social chaos. And it is no comfort to me, to watch mass murder that is called news, with the last moments of life spent in terror by the gunshot victims who go into their graves with their civil liberties intact.

    It is not just apologia for economics, which is bad enough in its devastating scale of human misery, but for more and more of what should be common sense to oppose. Like the widespread distribution of guns and ammo to any and all. Like the drilling for gas to fuel our economy that destroys the water we need to drink and farm with. Instance after instance of reputed bona fide experts who will maintain their status and their paycheck to lie and try to fool all of the people, all of time. Despite the condescension of the intelligentsia so common on this site, the average American is still above average when it comes to bullshit detection. No body is fooled. Distracted with real lives lived, anxiety ridden, tired, flat broke, yes, but not fooled.

    Tens of thousands stand up for labor

    By Alfred Lubrano

    Inquirer Staff Writer
    Police estimated the rally crowd at 30,000, while organizers put the total closer to 40,000.
    RON TARVER / Staff Photographer
    Police estimated the rally crowd at 30,000, while organizers put the total closer to 40,000.

    Tens of thousands of sprinkler fitters, splicers, teachers, and other union workers convened in the steam heat of an August Saturday to rally for labor – espousing the dignity of work and lamenting the erosion of the middle class.

    Eakins Oval and surrounding streets were jammed with a muscular sea of 30,000 to 40,000 workers, mostly white men in various colored T-shirts representing their unions and trades from at least 10 states.

    “Work defines us,” intoned national AFL-CIO president Richard Trumka to the enthusiastic throng. “Work is who we are. But hard work alone never led to decent wages and retirement. It takes hard work – and activism.”

  13. Hugh

    This looks like Krugman is simply indulging in Democratic tribalism. Krugman has been almost getting it for years. That is people read this or that column of his and think that this time Krugman shows signs of really getting what is going in the economy and politics of the country. But he never does. For me, this is the very definition of an Establishment liberal: make some criticisms of aspects of the system but never question the system itself or anything fundamental about it. So no, Krugman hasn’t got it this time. Krugman has made a career out of this kind of tease.

    And it is important to remember that the system we are talking about and which Krugman supports is kleptocracy, you know the k-word that even Bill Black avoids. So no, Krugman is not a progressive and we really should stop expecting him to turn into one.

    As for economics, it is mostly kleptocratic propaganda with a veneer of scientificality. This is true whether it comes from a Republican like Mankiw or a Democrat like Krugman. The takehome here is that both are on the side of the elites and it is the elites who are looting us, for their benefit and that of the rich.

  14. Warren Celli

    Hugh said; “And it is important to remember that the system we are talking about and which Krugman supports is kleptocracy, you know the k-word that even Bill Black avoids. So no, Krugman is not a progressive and we really should stop expecting him to turn into one.”

    Worth repeating; “you know the k-word that even Bill Black avoids.”

    Deception is the strongest political force on the planet.

  15. RepubAnon

    So, some economists are fraudulently claiming that their research proves there is no accounting fraud?

  16. liberal

    These corrupt economists—well, really, the corruption of most of the profession—ironically shows that an important claim of economics is correct.

    Namely, “incentives matter”.

    Clearly in our political economy, an economist who whores himself out to the rich and powerful is going to be much better paid than one who doesn’t.

    1. LeonovaBalletRusse

      Many are captive to the System. To advance, they must tell the Economic Fairy Tale invented at Rockefeller’s University of Chicago, the Mother Ship of the British Empire, and all Universities connected with Rhodes Scholarships and the Anglo-American Establishment’s Party Line, which includes the Gospel of the City of London, direct from the City and Tel Aviv.

      “THE SECRET WAR AGAINST THE JEWS” (Loftus and Aarons) — aided and abetted by the treacherous Agency of “Court Jews” catering to Crown ENEMIES of “the Jews” for personal gain–is the ugliest story in history, especially when Harvard, among others, made a hard Right turn against Liberal Jews, to court “Conservative” (Arabic) Oil money for Chairs, Research, and the “Elite Endowment”. Another book, “RUNNING COMMENTARY: The Contentious Magazine that Transformed the Jewish Left into the Neoconservative Right” by Benjamin Balint (New York, Public Affairs, 2010), tells the tragic tale of the magazine’s U-Turn to the Hard Neoconservative Right, in a Faustian bargain to be sure.

      Was Ayn Rand a White Russian CIA tool of the .01%? “Conservative Anti-Communist” Nobility Reich? Is her acolyte Greenspan the greatest fool on earth, or the most egregiously corrupt? He definitely is NOT “good for the Jews.” But since when did “Court Jews” care about what’s “good for the Jews?” It’s a dirty little secret, revealed in part in “A NERVOUS SPLENDOR: Vienna 1888-1889” by Frederick Morton (grandson of Bernard Mandelbaum of that era). We begin with Theodore Herzl, the PR whiz of Vienna C.19:

      “Herzl felt socially stifled. In 1888 most of his fellow Semites seemed odious. Good Jewish society was to him the slum of fashion. ‘Yesterday a grand soiree at Treitel’s’ he wrote his parents during a stay in Berlin. ‘Some thirty or forty ugly Jews. Hardly a consoling sight. . . .’ And from Ostend beach: ‘Although there are many Budapest and Viennese Jews here, the rest of the vacationing population is pleasant.’

      “No, he did not have the companionship he deserved, and his career (no matter how awesome to Schnitzler) had failed him bitterly so far. His by-line in the papers he saw as a mere stepping-stone from which he should have long since leaped. His metier was to dazzle his audience on stage; to light up the world from a new, unexpected angle with the greatness of his wit. … Only two weeks earlier he had finally received a positive letter from the Court Theater. It accepted his one-act comedy, *The Refugee*; in fact, it planned to star Frau Schratt as his heroine. But the Court Theater also warned that production might be far off. … Would Herr Dr. Herzl therefore content himself in patience. Dr. Herzl tried. Meanwhile he worked the journalistic treadmill. [p. 26]

      “In 1888 he lived and wrote on an esthetic elevation far above politics and at a rather careful distance from all matters Jewish or anti-Jewish. But in the third week of August he had been jarred by something unexpected. … Passing through Germany on his way home [from a celebration at Hotel Hirsch in Bad Gastein], he had acquired something else. A shock, a pallor in his cheecks. Written rudely on his face was the discovery that he was nothing but a Jew pig to some people.” [p. 62]

      In “RUNNING COMMENTARY…” (op cit.), Balint observes:

      “Neoconservatism, a movement without an electoral base, was not an ‘ism’ at all; it was less a set of doctrines than a constellation of political instincts, a mentality. [p. 134]

      “In domestic affairs, Norman Podhoretz and the *Commentary* Family became preoccupied with the country’s cultural malaise, which naturally they blamed on the 1960s. The discredited ideas of that decade, as they saw it, were enjoying a pernicious afterlife. [p. 134]

      “Podhoretz’s newfound respect for the great collective wisdom inherent in inherited traditions extended, naturally enough, to religion. This time around, however, the magazine’s interest in religion–and the virtues religion cultivates–was less in its theological dimension, as in the 1950’s, than in its social utility. [p. 142]

      With rare exception, the new Commentary remained mute on abortion. But on other matters, it hewed to the agenda of the religious Right. The magazine argued that separation of church and state need not entail the elimination of religion from society. … And later, *Commentary* would come out in favor of giving public dollars to ‘faith-based initiatives.’ [p. 142]

      “At a time when such sentiments were almost unheard of among American Jews,, the Family suspected that secular humanism … posed a greater danger than Christian fundamentalism. … In the December 1953 *Commentary*, Jacob Taubes, a scholar of ‘political theology,’ had stressed the traditional rejection of Christianity as another in a long series of Jewish heresies. Despite a supicion of interfaith dialogue, Podhoretz’s magazine now extended a hand to the Christian Right–to Jerry Falwell’s Moral Majority, Pat Robertson’s Christian Coalition, and the ‘theocons’–as allies in the culture wars. [pp. 142-143]

      “Contrary to most American Jews, who harbored a deep distrust of Christian Zionists and their Evangelical eschatology, the Family assigned high value to Evangelical support for Israel, which had been galvanized by the Six-Day War and had grown stronger ever since. ‘The fact that the Moral Majority is pro-Israel for theological reasons that flow from Christian belief is hardly a reason for Jews to distance themselves from it,’ Irving Kristol wrote in the October 1984 *Commentary*. ‘It is their theology, but our Israel.’ Decades later, his son William Kristol would urge the magazine’s readers to ‘acknowledge that Christians United for Israel may be more important for the Jewish future than the Jewish Community Relations Councils.’ [p. 143]

      “Battle lines sharpened when Pat Robertson provoked charges of anti-Semitism with descriptions in his book *The New World Order* (1991) of a secret society of Jewish bankers and others who conspired to rule the world. Soon after, Podhoretz took to *Commentary* to defend the founder of the Christian Coalition.” [p. 143]

      “The Family’s hegira to the Right involved a recalibration of its views of the Vietnam War, which Podhoretz now understood to have been an altruistic effort to free the Vietnamese from Communism. … Podhoretz scoffed at the faint of heart who held the United States primarily responsible for the cold war. [p. 157]

      “Podhoretz urged greater support for Central America anti-Communists because he preferred right-wing dictatorships to left-wing ones: They were less pervasively repressive, he felt, less permanent, and more susceptible to American influence. [p. 160]

      “The stars over Reagan’s skies favored the magazine, which now enjoyed an audience in Washington as never before. Its neoconservative persuasion now firmly in place, *Commentary* wielded a political influence out of all proportion to its size. It had gained the ear of many who moved in the upper echelon’s Reagan’s administration. More members of the Family began to enjoy the perquisites of power. They were honored and consulted; tehy were makers and shakers. Podhoretz was invited to lunch in the cabinet room with Reagan and his aides. He had made it.” [p. 161]

      You know the rest.

  17. Mind You

    For those interested in reading the way right-wing Law academia has been financing itself for some time, here’s an interesting and well-documented book:

    I wouldn’t call it a hit-piece on the legal right or a demonstration of fraud, but it does show how academic discourse is affected by money, sometimes from people that don’t even know all that well the cause the ideas they are funding, content with just knowing that it favors free-markets.

  18. Susan the other

    Exposing all the propaganda is no easy task because everything is up for grabs. It takes an equal expert to call it. If we let it go until it is obvious (i.e. now) it’s pretty much too late. So blogs like NC serve us well by exposing all the contradictions and nuances of theft like the news of the day. Here’s one problem with financial transactions and propaganda: money talks in an entirely different language. We need a delay mechanism. Give us time to translate. It is so frightening to learn that Romney, a man so fluent in money but nothing else, is going full steam ahead with his nutcase sense of capitalist economics and has a panel of economic “experts” to verify all his outsourcing plans; all his pump and dump vision. What a fine commander in chief, no?

  19. Phichibe

    Yves, as always thanks for posting Bill Black’s writings. Bill, thanks for your efforts. I’m continually appalled that people with your expertise are confined to the fringes today, when back in the late 80s under a Republican president you were leading a thorough housecleaning of financial corruption in the Savings & Loan scandal.

    Yesterday Goldman Sachs got a pass from the SEC on the whole mortgage disaster, and this from a Democratic administration. It’s time for us all to re-read the account of Cicero prosecuting Catalline for his conspiracy to undermine the state. 2000 years and we’ve managed to lose ground to the 1%.


    1. William C

      One complaint of mine is the pretence that economics is a profession. In any self-respecting profession you get struck off for malpractice. With the economists, where would you start?

  20. Glenn Condell

    Krugman’s 11th hour conversion smells like Sandy Weill’s. Mebbe both can smell the cordite in the air in this pre-storm calm and have decided now is the time to move, to step into the shade of the 99% and out of the elite glare, so that they might be spared come lamppost time.

    ‘Alan Greenspan believed that fraud could not exist and therefore eagerly destroyed Brooksley Born’s (CFTC Chair) effort to protect us from credit default swaps (CDS). It was that same dogma that led Greenspan to an even more catastrophic refusal to act.’

    Dogma schmogma. He knew what he was doing and who he was doing it for. He didn’t wail and gnash his teeth when his paradigm of greed was exposed. Ditto with Keating. The Maestro Shrugged, and played dumb, though not with much conviction. Then he went out and worked for John Paulson.

    1. Ms G

      This point is KEY. Krugman, like the rest of the handsomely remunerated neo-liberal media-academia apologists for crony capitalism and kleptocracy (under the guise of foo-foo “economic discourse”), resorts to stripping AGENCY from any account or “critique” of the systemic malfeasance by the chief agents of kleptocracy. Totally analogous to that Russian crook at Harvard with his “I don’t believe in the saints and crooks” theory of criminality by people in corporations because all they are doing is flowing with the “greed” and “animal spirits” — the “real moving force” behind everything, bla bla bla.

      1. Ms G

        To sum up. Yes, Greenspan was as clueless as a blooming FOX. He pulled that Vinnie Gigante trick of looking tired, old and doddering when he appeared before Congress to say “yeah, well guess free markets didn’t work out so well” and then quickly, as pointed out here, moved on to work for Paulson. The same Paulson, who fixed with Goldman Sachs to build a CDO of crap mortgages to sell to muppets so he could short it. A real paradigm of Greenspan’s “agent of the invisible hand.”

        Greenspan did what he did fully conscious — he had AGENCY and INTENT and KNEW EXACTLY WHAT HE WAS DOING. A true Maestro of Sleaze.

        1. Z

          No doubt, mate. Greenspan would rather have us believe that he just sort of accidentally wandered into the head fed chair as a doddering fool … like Peter Sellers in “The Party” … and that everyone took him too seriously. He knew what the fuck he was doing and who he was serving and why: for his own self-interests as well as his tribes’.


  21. rob

    The basic problem is we are all powerless. This site and any other where any group of rational people have a fairly decent grasp of being exploited,can’t do a dammned thing about it…. Anybody here got a billion bucks?SO ,we are all in the same boat,(to a greater or lesser extent).Ours is to do or die, and not to wonder why.WE watch the ship rocking and going down… we all spy something to float out on…if and when it does go down. No gaurentees.Life on the edge.we’re the rats on the titanic. Who knows what our kids are going to have to deal with.
    So for now,Why not try to fix the problems, or at leat leave possible fixes for others to try…

    I Don’t have a problem with the chaos of millions of people vying for money in a capitalist system…It has its good points.It does harness an incredible creativity…WE can do something now..ish.

    try to get the money system in our court.”the NEED act”HR2990,the kucinch bill that was modeled on the “chicago plan” of the late thirties is a shot…It is something that aims to put the benefit of creating money,to the use of the masses.for real improvements. actual paychecks and stop binding us to the debts of borrowing the money we use as a society,that is inherently worthless,excet for “full faith and credit” WE give it.When we change our money system(which all these orthodox economists say can’t be done and would be a disaster for a myriad of reasons),we would take away the original sin of creating money as a debt we owe to them who make it up out of nothing for us to use.We could eliminate many of the perverse incentives that these financial industry parasites depend on.To eliminate perverse incentives is better than creating regulations that are a mere semantic hurdle to get over,around,under,etc.

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