The Strange History of Economics

From The Strange History of Economics;

Following WWII, the United States increasingly came to determine (one might say dictate) the shape of economics worldwide, while within the United States the sources of influence became concentrated and circumscribed to an absurd degree. This state of affairs, which persists to the present day, was engineered in significant part by the US Department of Defense, especially its Navy and Air Force. Beginning in the 1950s it lavishly funded university research in mathematical economics. Military planners believed that game theory and linear programming had potential use for national defense. And although now it seems ridiculous, they held out the same hope for mathematical solutions of “general equilibrium”, the theoretical core of Neoclassical economics. In 1954 Kenneth Arrow and Gerard Debreu achieved for this mathematical puzzle a solution of sorts that has been the central show piece of academic economics ever since. Arrow’s early research had been partly, in his words, “carried on at the RAND Corporation, a project of the United States Air Force.” In the 1960s, official publications of the Department of Defense praised the Arrow-Debreu project for its “modeling of conflict and cooperation whether if be [for] combat or procurement contracts or exchange of information among dispersed decision nodes.” In 1965, RAND created a fellowship program for economics graduate students at the Universities of California, Harvard, Stanford, Yale, Chicago, Columbia and Princeton, and in addition provided postdoctoral funds for those who best fitted the mold. These seven economics departments along with MIT’s, an institution long regarded by many as a branch of the Pentagon, have come to dominate economics globally to an astonishing extent.

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