Aftershock: Protect Yourself and Profit In The Next Global Financial Meltdown, Second Edition

Economists Have Become Academia’s Version of Financial Cheerleaders

Once professors are given tenure, it is almost impossible for them to be fired. Tenure amounts to total job security. Rewards in academia are not solely monetary. They also include quality (or ease) of life. Year-long sabbaticals are easier to get when the university has a lot of money. Well-funded retirements are also a great perk. Because of all of this, the status quo has been very good for most economists and most people naturally don’t want to threaten it. People in that position don’t want to see the status quo changed and have an inherent bias against ideas that would threaten the status quo. Hence, explanations of the economy tend to be biased in support of current ways of thinking and not to favor new ways of thinking that are vital for breakthroughs. The result is that economists became academic cheerleaders—the academic counterparts to financial cheerleaders. And, when you are a cheerleader, there is no hope of making a breakthrough.

In a sense, they are right to become economics cheerleaders. The alternative of having the bubbles pop is not good for them. A final popping of the bubbles would result in huge funding cuts for economists at universities and research centers, since both will be badly hit by government cutbacks in spending (due to the dollar and government debt bubble collapse) and huge drops in philanthropic giving (part of the discretionary spending bubble that will pop). In such an environment, ...