Dani Rodrik on Simon Johnson: Save us from the technocrats!

Simon Johnson’s new Atlantic article The Quiet Coup—about how the crony capitalists of the U.S. financial sector have corrupted our system—has been getting a lot of deserved attention.

But Dani Rodrik isn’t so sure about Johnson’s proposed remedy, and I think Rodrik has a point:

Simon’s account is based on a very simple, and I believe misguided, theory of politics and economics. It is an odd marriage of populist and technocratic visions. Countries fail because political elites always end up in bed with economic elites. The solution, apparently, is to let the technocrats (read the IMF) run your affairs.

Among the many lessons from the crisis we should have learned is that economists and policy advisors need greater humility. Too many of us thought we had the right model when it turned out that we didn’t. We pushed certain policies with much greater confidence than we should have. Over-confidence bred hubris (and the other way around).

Do we really want to exhibit the same self-confidence and assurance now, as we struggle to devise solutions to the crisis caused by our own hubris?

Stocks Rally Further in Run-up to EU Summit

MOSCOW — Global stocks enjoyed one of their best days in weeks on Tuesday ahead of a summit of European leaders that’s expected to be dominated by calls to boost economic growth.

Europe remains the focus of attention across all financial markets in the run-up to the June 17 Greek election that could go a long way to determining the country’s membership of the euro as well as the future of the single currency zone.

tc125231

I don’t think either of you have read Mr. Johnson’s web site carefully enough. Read “Frog, Toad, Cookies, and Financial Rehttp://baselinescenario.com/2009/03/26/frog-toad-cookies-and-financial-regulation/gulation”

I quote his conclusion (which I believe is allowed under “Fair Use” doctrine):

“Options 2 and 3 allow banks to become big and then use their power to weaken the regulations. …no regulatory scheme can serve its intended purpose forever. But the simpler it is, and the weaker the parties who want to undermine it, the stronger it will be.”

I remind you that the Founding Fathers believed in a balance of powers among competing viewpoints and entities. How does Mr. Johnson’s position differ from that?
plukasiak

tc is right — Rodrik grossly misrepresented Johnson’s thesis (that the problem was bankers) and his “solution”–at no point did Johnson say that the problem should be turned over to the IMF; Rodrik is flat out lying about that.
Justin Fox

Agreed, Johnson doesn’t really propose an IMF takeover (although he does keep referring throughout to what IMF economists would say). It may just be that Rodrik is congenitally suspicious of anything a former chief economist of the IMF says.
Brew

Read this the other day:
The IMF’s global fumble