Pages: 1 2
Take Hayek: Before he won the award, it looked like Hayek was washed up. His career as an economist was essentially over. He was considered a quack and fraud by contemporary economists, he had spent the 50s and 60s in academic obscurity, preaching the gospel of free markets and economic darwinism while on the payroll of ultra-rightwing American billionaires. Hayek had powerful backers, but was out on the fringes of academic credibility.
But that all changed as soon as he won the prize in 1974. All of a sudden his ideas were being talked about. Hayek was a celebrity. He appeared as a star guest on NBC’s Meet the Press, newspapers across the country printed his photographs and treated his economic mumblings about the need to have high unemployment in order to pay off past inflation sins as if they were divine revelations. His Road to Serfdom hit the best-seller list. Margret Thatcher was waving around his books in public, saying “this is what we believe.” He was back on top like never before, and it was all because of the fake Nobel Prize created by Sweden’s Central Bank.
Billionaire Charles Koch brought Hayek out for an extended victory tour of the United States, and had Hayek spend the summer as a resident scholar at his Institute for Humane Studies. Charles, a shrewd businessman, quickly put the old man to good use, tapping Hayek’s mainstream cred to set up and underwrite Cato Institute in 1974 (it was called the Charles Koch Foundation until 1977), a libertarian thinktank based on Hayek’s ideas. Even today, Cato Institute pays homage to the Swedish Central Bank Prize’s role in the mainstreaming of Hayek’s ideas and Hayek’s influence on the outfit:
The first libertarian to receive the Nobel Prize was F.A. Hayek in 1974. In the years leading up to the prize announcement, Hayek had reached a professional and personal nadir. Unable to maintain an appointment in the United States, Hayek had returned to Austria to take up a position at the University of Salzburg, Austria. With the announcement of the prize in 1974, however, Hayek’s work, and the fortune of Austrian economics, took a remarkable turn.
Hayek’s influence on Cato is profound. Two of Cato’s first books were by Hayek: A Tiger by the Tail: The Keynesian Legacy of Inflation & Unemployment and Monetary Policy: Government as Generator of the “Business Cycle.” Perhaps more than any other intellectual in the twentieth century, Hayek has inspired Cato and its researchers to develop policies that ensure a free society. When Cato moved into its current location in 1992, its auditorium was named in Hayek’s honor.
Friedman’s Nobel Prize had a similar impact. After getting the prize in 1976, Friedman wrote a best-seller, got his own 10-part PBS series Free to Choose and became President Ronald Reagan’s economic advisor, where he had a chance to put the society-crushing policies he developed in Chile under Pinochet.
Friedman would spend the rest of his time denying it, but he was deeply involved and invested in the Pinochet’s totalitarian-corporate economic experiment. Chilean economist Orlando Letelier published an article inThe Nation in 1976 outing Milton Friedman as the “intellectual architect and unofficial adviser for the team of economists now running the Chilean economy” on behalf of foreign corporations. A month later Letelier was assassinated in D.C. by Chilean secret police using a car bomb.
Friedman’s monetary theory was used by Federal Reserve Bank Chairman Paul Volcker to restrict the money supply, plunging American into a deep recession, doubling the unemployment rate and had the added bonus of getting Reagan elected President. . . . And Hayek and Friedman were just the beginning.
For instance, in 1997 two economists won an award for their derivative risk models that minimized risk, just before the derivatives would explode in the 2000s real estate bubble.
The award was shared by economists Robert Merton and Myron Scholes for their work in figuring out how to value derivatives so as to minimize risk. The two economists used their Nobel-worthy economic models to run “the world’s biggest hedge fund,” which was called Long Term Capital Management (LTCM). And the fund really lived up to its name.
Nine months after winning the Swedish Central Bank Prize in Economics, LTCM went belly-up, racking up over $1 billion in losses over a period of just two days. It was of course bailed out by then-Federal Reserve Chairman Alan Greenspan, who considered LTCM “too big to fail.”
Then there’s Vernon Smith. In 2002, Vernon Smith, adored and funded by Libertarians like Charles Koch, won the “Nobel” — his patron looked at the money he spent funding Smith’s academic career as a good investment, saying simply: “The Koch Foundation’s gift was an excellent investment.”
Smith’s research basically entailed setting up theoretical “wind tunnels” to test how, for example, the privatizations of markets would respond in various conditions all in a way that has nothing to do with reality.It will take a brave act to bring this sham to the attention of the public.
One year, one of the prize winners will have to speak out, and explain this ruse to the public as he wins the award.
Pages: 1 2