The Mandarins

Kermit Gordon, James Tobin and Walter Heller with JFK, 1962

The "mandarins" refers to economists in government service, whether as temporary advisors or career civil servants.

From the very beginning of time, economists have served government and influenced policy-making.  Indeed, many of the earliest economists were precisely courtiers or bureaucrats writing on the affairs of their nation, espousing ideas about the doctrines and practices of government involvement in the economy, particularly active in the Mercantilist age, which they sometimes carried out themselves.  

In the 19th Century and early 20th Century, the role of the economist in government diminished somewhat.  In the age of laissez-faire capitalism, government policy was passive and thus more simple. Government did not ask for high economic theorists for assistance -- they could do well enough with a mix of liberalism and crude apologism.  This did not mean that economists had no policy influence -- see the Bullionist Controversies and the debates on trade and you will find some of the greatest economists of the 19th Century involved.  But as economics became a more professional, academic discipline, economists became increasingly  happy enough to sit in the ivory tower, pursuing their theories to such a point of abstraction that direct translation into policy applications was neither obvious nor operational.  Of course,  there were a variety of wide-eyed socialist, syndicalist and populist movements urging for particular government policies, but they were not distinctly "economists" and not particularly successful anyhow. There were exceptions, of course.  In the German Historical School, the French Historical School and among the Fabian Socialists, there were influential economists who still saw a active role for government in the economy. 

The state of affairs changed considerably between the 1920s and the 1950s.  World War I had destabilized the old 19th Century bourgeois liberal consensus and many looked to the State for direction. The post-1918 German and Austrian "socialization" experiments, the Bolshevik Revolution and the Five-Year Plans of Soviet Russia, the rise of Fascist corporatism in Western Europe, the Great Depression and the New Deal in the United States, the experience of  "command" economies during the World War II, the collapse of the Gold Standard and the search for a replacement, etc. had all helped put the economist back in the center of government policy-making.   However, even through all these changes, economic theory itself had little guidance to offer.  Most of what the policy economists recommended were practical measures which they came up with off-the-cuff.  

The golden age for the "Mandarin" economist was doubtlessly the post-war period.  Perhaps the most critical event in the government-economist relationship was the publication of John Maynard Keynes's General Theory in 1936.  The Keynesian Revolution found a theoretical role for interventionist, discretionary government policy in the economy.  

The new relationship was swiftly formalized  and governments enlisted legions of economists to help sort all this out.  Britain, France, Germany and much of the rest of Europe built up national accounts, set up welfare states, overhauled their fiscal codes, regulated or nationalized industries, coordinated trade unions and actively used their Treasuries and Central Banks for economy-wide stabilization policy.  In the United States, the New Deal merged into the Employment Act of 1946 and the setting up of the Council of Economic Advisors (CEA).  In Japan and, later on, in various East Asian nations, government took an even more active role, guiding capital and setting international trade policies that helped launch and guide their miraculous growth experiences.  Soviet planning was overhauled with the guidance of new techniques.  The emergence of newly independent  nations from the ashes of colonial empires, bent on development and not averse to planning, meant a whole new set of government clients for policy-oriented economists.  Multi-lateral government agencies, such as the United Nations, the World Bank and the International Monetary Fund, hired another army of economists.  

However, the economic disasters of the 1970s and early 1980s began to set the tide in reverse.  In the rising "neo-liberal" Reagan-Thatcher era, a new set of economists were needed -- particularly those that could justify the "supply-side" fiscal policies and Monetarist experiments of the conservative governments.  In the 1990s, with the wave of privatizations of state industries across the world and the collapse of socialist bloc, a whole generation of planning economists were made suddenly obsolete (albeit many reinvented themselves as "transition" specialists).  Central Banks, which have grown in importance in recent years, have remained perhaps the last bastion of government where economists and their opinions still matter.

Many of the more important government economists during the post-war era were academic economists, temporarily on loan to governments.  However, there were many civil servants in their own right who achieved a degree of prominence and influence, not only in policy-making but also in more general economic thinking of the age.  The following list of "mandarins" includes some of the most famous policy-oriented economists -- both of  the academic and non-academic variety.


 

 

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All rights reserved, Gonšalo L. Fonseca
 

 

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