Setting The Record Straight, Ecomically, Chicago Style

THE WINNER of this year's Nobel Prize in economics is a seventy two year old researcher at the University of Chicago, Richard Thaler. The university of Chicago has produced trillions of Nobel winners in economics. After World War Two the school assembled a distinguished group of strict free market neo-liberal scholars, among them Milton Friedman, which became know as "the Chicago school" of economics. they stressed the importance of getting government out of the economic way, as a means to faster growth. The less regulation of corporations, the better. Trickle down, supply side economics, later implemented by the Reagan administration. Their philosophy was tried in Latin American countries in which the CIA first overthrew socialist governments, than installed capitalistic dictatorships, paving the way for Chicago style experimentation. In every case, the results were disastrous. Richard Thaler is more reasonable. He understands that the "free market" is only a concept, a grand illusion, that markets are not self correcting, and that human psychological factors, highly complicated, always play a part in determining outcomes. His Nobel prize was awarded based on his description of how emotional, psychological factors, extreme exuberance, optimism, pessimism, bad hair days, and numerous other factors influence human economic behavior and thus economic outcomes. His bottom line is that human beings rarely if ever behave rationally, in their own self interest. Thaler makes it seem obvious, so obvious that one wonders how on earth any intelligent and serious student of economics could ever subscribe to pure Adam Smith free market theory, as they do in Reagonomics. "Neo-liberalism", which is what everyone outside the United States calls trickle down supply side economics, holds that by reducing taxes on the wealthy corporate producers, they will have more capital to invest I further production, which will stimulate economic growth. they fail to explain how increased supply will increase demand, because it won't, it doesn't. the opposite is what is needed: trickle up, demand side economics, in which money is put in the hands of the bottom rung of the socio-economic ladder, and poor people are turned into consumers, with purchasing power, demanding more goods and services, which are then provided by producers in response to the larger market. This should be obvious to all, but it evidently isn't, evidently, at least to conservative economic adherents. By demonstrating that subjective, psychological factors play an important role in the market, Thaler liberates us from the simplistic paradigms of the old Chicago school, and ushers in the new Chicago school, which is far better educated.