Tuesday, May 22, 2012

Economics Faculty For Sale At High Prices

This article,  (via Manan Shukla) by the producer of Inside Job, describes the relationship between two prominent economists and how they are funneled to very highly paid "consulting" relationships with major banks.  One is a conservative who is the Dean of the Business School at Columbia, and the other is Larry Summers who has held numerous key jobs in democratic administrations and in academia.  They have earned the great bulk of their wealth from non-academic "consulting" engagements.  They provide a high rate of return to their clients.  Each has access to influential politicians, and each has played a critical role in policy formation.  They are not typical academics, but they are not unique.  They are just among the most highly paid for their consulting.

I followed the Enron debacle very closely.  Enron had a list of opinion makers that received annual honorarium's that were established by top management.  Some were prominent economists who might be useful to Enron.  The deregulation of the energy industry was very important to Enron's strategy.  Enron was also involved in the use of "creative" accounting methods.  It made ample use of special purpose entities to make its balance sheet look less troublesome.  Enron even funded a chair in accounting at the University of Texas.

The changes that we have witnessed in business and in government policy over the last 40 years could not have happened without the support of well placed academics.  They provide the academic cover and respectability that is usually required to redirect the economy and gain support from government.

I have ordered a copy of the book that is just being published by the author of this article.  Not surprisingly, there is an ad for the book associated with the article.




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