The economists' hour: how the false prophets of free markets fractured our society

In the early 1950s, a young economist named Paul Volcker worked as a human calculator in an office deep inside the Federal Reserve Bank of New York. He crunched numbers for the people who made decisions, and he told his wife that he saw little chance of ever moving up. The central bank’s leadership included bankers, lawyers, and an Iowa hog farmer, but not a single economist.The Fed’s chairman, William McChesney Martin, was a stockbroker with a low opinion of the species. “We have fifty econometricians working for us at the Fed,” he told a visitor. “They are all located in the basement of this building, and there is a reason why they are there.” They were in the building, he said, because they asked good questions. They were in the basement, he continued, because “they don’t know their own limitations, and they have a far greater sense of confidence in their analyses than I have found to be warranted.”

Martin’s distaste for economists was widely shared among the midcentury American elite. President Franklin Delano Roosevelt privately dismissed John Maynard Keynes, the most important economist of his generation, as an impractical “mathematician.” President Dwight D. Eisenhower, in his farewell address, urged Americans to keep technocrats from power, warning that “public policy could itself become the captive of a scientific-technological elite.” Congress took testimony from economists but, as a rule, it did not take that testimony very seriously. “Economics was viewed generally among top policymakers, especially on Capitol Hill, as an esoteric field which could not bridge the gap to meet specific problems of concern,” an aide to Wisconsin senator William Proxmire, a leading Democrat on domestic policy, wrote in the early 1960s.

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