According to the American Economic Association, there are about 1,000 newly minted Ph.D. economists each year. The primary professional options for them once they complete their degree include working in an academic environment, in government, at an international agency, or in the private sector with banks and investment houses. The most high-profile of them toil in the field of public policy. Whether they hold current positions in government or are former government economists now in the private sector or in academia, they can be viewed in the media each day weighing in on a variety of contemporary subjects.

In The Economists’ Hour, New York Times writer Binyamin Appelbaum scrutinizes the changes wrought over the last 50 years in the public policy role of economists. He starts his book by explaining the attitude policymakers held, before the golden age of economists, at one of the major employers of Ph.D. economists, the Federal Reserve: “In the early 1950s … the central bank’s leadership included bankers, lawyers, and an Iowa hog farmer, but not a single economist.” At that time, there were staff economists at the Federal Reserve, but in the words of the Fed’s chairman at the time, William McChesney Martin, “They are all located in the basement of this building, and there is a reason why they are there…. They don’t know their own limitations, and they have a far greater sense of confidence in their analyses than I have found to be warranted.”

Appelbaum traces how the world of public policy has evolved in its views of economists since that time, at the Federal Reserve and elsewhere. The term “Economists’ hour,” embedded in his book’s title, is his description of the four decades between 1969 and 2008. He demarcates those years as the time frame that economists began to play a leading role in curbing taxation and public spending, deregulating large sectors of the economy, and clearing the way for globalization. He claims that the Economists’ hour ended in 2008 during the Great Recession when “trust-the-market economists” saw their theories disproven.

Appelbaum does not have a Ph.D. in economics. (He holds a bachelor’s in history from the University of Pennsylvania.) He has spent much of the time since the early stages of the financial crisis writing about it and its aftermath. Prior to joining the Times, he wrote for the Charlotte Observer where he developed a series on subprime lending that nearly won him a Pulitzer Prize. The Economists’ Hour is his first book.

Appelbaum clearly does not see all the developments during the Economists’ hour as having good results:

The embrace of markets lifted billions of people around the world from abject poverty…. But the market revolution went too far. In the United States and in other developed nations, it has come at the expense of economic equality, of the health of liberal democracy, and of future generations.

He compares the U.S. economic growth rate of just over 3% during the 1960s to the just under 1% growth during the 2000s and blames the market revolution:

Political and social constraints on the role of markets were set aside. Governments pulled back from efforts to regulate the marketplace, to invest in future prosperity, or to limit inequality.

Greatest economist of the 20th century? / Without a doubt, the book’s lead character is Milton Friedman. The references to him occupy over half a page in the index; no other individual or topic comes close.

This prominence is because Friedman’s rise in importance largely corresponded with the timing of Appelbaum’s Economists’ hour. Harvard’s Andre Shleifer calls the period from 1980 to 2005 “the Age of Milton Friedman.” This age began just after the breakdown in confidence in Keynesian economic principles during the 1970s.

Appelbaum at times shows admiration for Friedman and at other times he is clearly disdainful. Glowing quotes about Friedman are front-loaded in the book’s early chapters: “The most creative social political thinker of our age” (Sen. Daniel Patrick Moynihan); “Around any academic lunch table on any given day, the talk is more likely to be about Milton Friedman than about any other economist” (economist Robert Solow); “He has had more influence on economic policy as it is practiced around the world today than any other modern figure” (economist Larry Summers). In describing some of Friedman’s early work, Appelbaum seems to approve of his influence on Richard Nixon in eliminating the compulsory draft and replacing it with an all-volunteer military force paid market wages. Appelbaum nicely summarizes Friedman’s philosophy on the historical evidence of government action: “Ambitious interventions … tended to make matters worse.”

Living through the Economists’ hour / After the initial chapters primarily devoted to Friedman, the subsequent ones fall into a regular cadence. They are narrowly focused on a discrete issue over a 50- or 60-year period of public policy discourse: the turbulent monetary policy environment; the ever-evolving parameters of taxation; corporate antitrust litigation; industry-wide deregulation; benefit–cost analysis; exchange rates; case studies of the Chilean and Taiwanese economies; and the financial industry up to and including the 2007–2009 financial crisis. In most of these chapters, Appelbaum discusses Friedman’s influence on the topics and generally inserts a criticism of his public policy stance or those of other like-minded economists.

There are some not-so-endearing qualities to Appelbaum’s historical compilation. Many of his statements need to be fact-checked. Case in point (in a chapter entitled “Representation Without Taxation”), he describes the aftermath of the Reagan years: “It took most of the next two decades to repair the damage to the government’s finances.” This is what he has to say, notwithstanding the fact that the deficit as a percentage of gross domestic product blew up during the early 1980s because of a recession that Appelbaum admits Reagan inherited, peaking at 6% of GDP. After the deficit peaked, it drifted downward for the remainder of the 1980s to a level of under 3% of GDP.

Appelbaum also sneaks in some sarcastic comments, such as this zinger about the link between the Rockefellers and what he calls the “anti-antitrust” philosophy of the University of Chicago: “The University of Chicago, endowed with Rockefeller money, had found a way to return the favor.” He also uses euphemisms to describe countries that, in the name of fairer trade, put up barriers to competition from foreign products: “Sheltering these nascent industries from foreign competition jumpstarted Taiwan’s industrialization: output nearly doubled between 1951 and 1954.”

Economists’ hour, meet the Great Recession / Appelbaum pulls together the winding history of the rise and fall of economists in a concluding chapter. He starts off with a rather extraordinary statement about the Great Recession: “Friedman had as large a hand in causing the crisis as any man.” There are no citations to support this statement in his meticulously compiled endnotes that go on for a full 89 pages. I assume that he feels this conclusion is obvious based on the prior 10 chapters he has set forth before the reader, but it is not obvious. The financial bubble that began in the 1990s was brought on by heavy-handed intervention in the housing market, intervention that Friedman was dead-set against. As part of Appelbaum’s post mortem on the financial crisis, he fails to mention Fannie Mae and Freddie Mac, their housing goals, or any of the other social engineering that pushed people into buying homes they could not afford and goosed the homeownership rate to an unsustainable level.

Appelbaum casually describes the federal government’s massive interventions to shore up the financial sector: “The government had tried to support the banks by purchasing bonds in the open market, but the market had collapsed, so the government decided to save the financial system by taking ownership stakes in the largest financial firms.” Yet again, he cites no supporting facts that this particular intervention is what brought the financial system back from the edge.

Many progressives believe that the Federal Reserve was too accommodating to the wishes of financial institutions in providing easy money and massive, opaque bailouts. Appelbaum is not one of them. Instead, he elevates an emerging breed of economists presumably for a new, interventionist era:

Almost the only policy makers willing to persist in efforts to revive growth were the small coterie of former economics professors who ran the Federal Reserve. In November 2010, with the unemployment rate still at 9.8 percent, the Fed ended four decades of single-minded focus on inflation and launched a campaign to stimulate job growth.

He cites this intervention as the death knell for the Economists’ hour:

The Economists’ hour did not survive the Great Recession…. In the depths of the Great Recession, only the most foolhardy purists continued to insist that markets should be left to their own devices.

Conclusion / Appelbaum’s book is engaging and well researched, but it is not for everyone. If readers tend to agree with the limited-government perspective, they will have doubts about — and strong arguments against — his theories of economics. Those who believe that government should strive to reduce income inequality, provide universal health care, bolster the minimum wage, “build a more generous social safety net,” and “extend protection to the less fortunate” will appreciate his conclusion that Friedman has been public enemy number one, as evidenced by the recent history of economic policy.