the question is why starting in the 1970s much of academic macroeconomics was taken over by a school of thought that began by denying any useful role for policies to raise demand in a slump, and eventually coalesced around denial that the demand side of the economy has any role in causing slumps.
I was a grad student and then an assistant professor as this was happening, albeit doing international economics – and international macro went in a different direction, for reasons I’ll get to in a bit. So I have some sense of what was really going on. And while both Wren-Lewis and Waldmann hit on most of the main points, neither I think gets at the important role of personal self-interest. New classical macro was and still is many things – an ideological bludgeon against liberals, a showcase for fancy math, a haven for people who want some kind of intellectual purity in a messy world. But it’s also a self-promoting clique.--Paul Krugman "The New Classical Clique."
It is no surprise that an economist calls attention to the significance of self-interest in human behavior. It is more unusual for a professional economist to highlight the role of self-interest within the political economy of science and then apply this to his own discipline. The move is not unprecedented -- it can be traced back to Mandeville and Adam Smith --, and even in recent times it received a notable expression in the work of Gordon Tullock--not a main-streamer, but certainly a familiar name to many economists. Krugman's analysis is interesting because rather than only focusing on monetary incentives (jobs, consulting gigs, lucrative speaker fees, etc.) he also pays attention to the way "intellectual and ideological foundations" generate a cohesive baseline the promotion of which is both a substantive interest as well as one of the means to help distinguish in-crowd (who get the spoils, including -- this is significant in Krugman's piece -- journal space)/out-crowd (who are denied such spoil). The in-crowd is a "clique" or an "extremist" "movement" with "leaders," who "turned their backs on empirical evidence" when it went against their views.
Krugman's analysis relies on a distinction between those that act from "pure" -- strictly epistemic ("selfless seekers of truth") "motives" -- as opposed to the (ideological) self-interest of the "clique" Krugman is criticizing. That is to say, Krugman is not fully reflexive here--the folk that he studies (be they ordinary economic agents in the trade models he works with or the other economists described in the column I am quoting from) have one set of motives, while he stipulates that some, but only some, within the sciences have another set of motives. This is an appealing thought and appeals to the vanity of the scientist-economist-philosopher, especially if she can convince herself she remains pure.
Krugman is self-aware enough to recognize that he is part of a "counter clique" that has had tremendous success in landing "country consulting" gigs, but in addition to their self-interest (never named as such), they followed the "international evidence" and they are more "open-minded." One need not have an advanced degree to notice how self-serving his analysis is here. There is also no attempt to look at all the disastrous and sometimes immoral policy-advice emanating from the country consultants he lists; "Rogoff...Draghi...Summers" is not exactly a honor-call of scientific integrity and moral wisdom.
So, what to make of this? It's surprising that Krugman makes no effort to help us think about the institutions of economics that structure, say, access to journal space (I have remarked in passing on the tight-knit of gate-keepers in economics). Nor does Krugman offer the reader any guidance on how we might improve economics such that it becomes more amenable to right sort of empirical evidence. He does not really see the problem; it's just them, even though Alex Rosenberg and I (recall) have pointed out that he is confused on methodology. (I don't say that lightly.) Anybody that has studied the history of science in any depth will learn how hard it is --- and now I adopt a phrase from my undergraduate guru George Smith -- to turn data into high quality evidence absent the right sort of background theory (see this article for my more elaborate views) and luck. Krugman makes no effort to educate his audience about the complexities of empirical evidence and how hard it is to establish enduring, policy-relevant truths in economics. It is probably impolite to say that to do so would, perhaps, undermine his short-term self-interest as pontificating expert writing for a broad audience that needs to project self-assurance and convey mastery over esoteric expert knowledge (preserved by pure truth-seekers), but, if he would apply polity economy to economics he might start an important conversation some day in both the republic of letters as well as the polity he undoubtedly wishes to serve.