Does Academic Research Advance Human Welfare? Not Always.

One of the stronger arguments for public support of universities is that the creation of new knowledge improves the quality of our lives. In the early 1950s, a researcher at the University of Pittsburgh, Jonas Salk, discovered a vaccine that within a few years essentially ended a ghastly disease that maimed large numbers—polio. The quality of our lives has been importantly improved because of similar advances originating in university offices and laboratories.

But a lot of academic research has been far less beneficial, arguably even harmful. Partly this reflects the recently revealed epidemic of fraudulent “research” published by journals to advance the careers of scholars. Not all reported “discoveries” are genuine. But beyond that, there is a lot of published work considered of great importance that in the long run has been shown to have caused more harm than good. And nowhere is that more apparent than in my own field of economics.

A revolution in economic thinking began in earnest in the 1930s. John Maynard Keynes posited a new theory that suggested collective action could dramatically reduce the menace of high unemployment and economic downturns. The stimulation of “aggregate demand,” for example, could lower unemployment. Simultaneously, a new generation of young university economists were using mathematical techniques and statistical methods to add a more “scientific” gloss to a profession going back to Adam Smith (1776), if not the ancient Greeks.

Three economic problems have received much attention. First, how do we maintain “full” employment, eliminati ng large numbers of people without jobs? Second, how can we let our economy grow at a high rate over time, advancing the material welfare of the population? Third, how can we maintain roughly stable prices so the ravages of inflation do not destroy the wages and savings of workers and investors, or others on fixed incomes, and also disrupt trade?

I looked at our success in dealing with these three problems for two time periods. First, I looked at the American experience from 1900 through 1929, the first three decades of the last century when economics was emerging as a major field of study, before the revolutionary modern “advances” of Keynes and his followers, before we even talked about something called “macroeconomics,” or extensively used statistical methods (“econometrics”) and math to analyze economic phenomena. Then I compared that with the first two decades of this century, 2000 through 2019, after the revolution in economic theory and methodology, on each of the three critical indicators of economic performance outlined above.

Total Output

Using the widely used estimates of Angus Maddison (official U.S. government statistics were not yet collected), from 1900 to 1929 output (real GDP) rose an average of 3.46 percent a year. Walt Rostow said we had entered our “age of mass consumption.” This was when many Americans got their first car, went to their first movie and major league baseball game, bought their first radio, and, for many, got electricity, central heating, and indoor plumbing. By contrast, in the later period, growth was nearly 40 percent lower, only 2.10 percent annually.

Unemployment

The major issue to Keynes and the new generation of American economists generally was the scourge of high unemployment. The average annual unem ployment rate in the early period was 4.70 percent a year, well below the 5.89 percent rate for the modern period. In the early period, in six years (20 percent) the annual unemployment rate was 6.0 percent or more; in the modern era, it was above six percent in seven years (35 percent of the time).

Inflation

On this measure, the two eras were essentially tied. The Consumer Price Index rose 2.23 percent annually over the 1900 to 1929 period, very slightly above the 2.10 percent increase in the later period. Half of the earlier period, however, was before we even had a central bank ostensibly charged with maintaining price stability (the Federal Reserve); moreover, the observed inflation of the earlier era was virtually entirely due to a major world war, while the later period had none.

Prominent Yale economist Arthur Okun once spoke of a “misery index”—the sum of the unemployment and inflation rates. It averaged 6.93 in the earlier period, well below the 7.99 in the modern era. The era of activism by academic economists is associated with greater misery, not less, at least as so defined.

Kamala Harris’s Army of Nobel Prize Economists

It is no wonder that the American public does not seem overawed by the wisdom of Nobel Prize winners in economics, presumably the best and brightest of the profession. Kamala Harris demonstrated that vividly when she constantly noted that 17 noted economists had endorsed her economic plan. It is uncertain whether that won or lost her votes.

Concluding Thoughts

There is a lot more, of course, that can be said. One might argue, for example, that what is important for economic w elfare is per capita GDP growth, not total growth, and that population growth slowed down considerably over time. Quite true, and GDP growth per capita did not show a serious slowdown. But one might argue that the reduction in population growth itself is a sign of declining economic vitality—immigration was a lessening factor in the latter period, for example, and large in-migration is a strong indicator of economic vitality.

One might argue the increase in unemployment did not have huge adverse consequences because of the rise in the welfare state with its income security provisions. Others might suggest other important determinants of economic welfare need consideration, such as income distribution. Still, others supporting the basic argument would argue the modern massive national debt arising from Keynesian economic thinking and political actions has endangered the nation’s future and the standard of living for our children and grandchildren.

I suspect the welfare-impeding dimensions of academic research might be found in other academic fields as well, such as in the growing threats to the very existence of the human race associated with extraordinary increases in our ability to kill people because of nuclear and other means of mass destruction, developed partly in university laboratories. Also, I think the factually dubious rewriting of American history by woke academics to promote progressive narratives has certainly been harmful. Economics is far from the only example of how some academic research has not benefited humanity. The net positive spillover effects of academic research are at least debatable.