Chicago School (economics) - Criticisms

Criticisms

The Chicago school's methodology has historically produced conclusions that favor free market policies and little government intervention (albeit within a strict, government-defined monetary regime). These policies came under attack in the wake of the financial crisis of 2007–2010. The school has been blamed for growing income inequality in the United States. Economist Brad DeLong of the University of California, Berkeley says the Chicago School has experienced an "intellectual collapse", while Nobel laureate Paul Krugman of Princeton University, says that recent comments from Chicago school economists are "the product of a Dark Age of macroeconomics in which hard-won knowledge has been forgotten." Critics have also charged that the school's belief in human rationality contributed to bubbles such as the recent financial crisis, and that the school's trust in markets to self-regulate has offered no aid to the economy in the wake of the crisis. In response, Chicago economists such as James Heckman have conceded that there were excesses in the use of Chicago school theory by politicians and public commentators, but that this represented a small fraction of the contributions of Chicago school economics. In particular, Heckman points out that the alleged failures or misapplications of efficient market hypothesis is a fault of Chicago's contributions to financial economics, which are conceptually distinct from its widely praised contributions to microeconomics and macroeconomics.