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Are Economists Going the Way of the Dinosaur?

In Eswar S. Prasad’s The Doom Loop, he attempts to defend a profession that failed to foresee the crisis of the post-liberal world.

For 70 years, a PhD in economics was the ticket to a comfortable and often prestigious career. Universities kept up a steady hiring pace to meet the robust student demand. Corporate offices looked to the profession for pricing and profit strategies. Governments depended on trained economists to guide policy and imbue US leadership with scientific authority, embodied in the president’s powerful Council of Economic Advisers (CEA). For decades, economics worked like a sextant for navigating the murky waters of world commerce, whose mysteries could be charted if only one had the right models. If there was a figure who personified the American Century, it was not the statesman or the industrial worker but the economist.

The Doom Loop: Why the World Economic Order Is Spiraling Into Disorder

No longer, though. Last July, The New York Times ran a puzzled look into the unhappy fate of the professional economist. Student interest in the field is down as federal funding cuts slash university budgets. A fintech-filled corporate sector obsessed with so-called artificial intelligence sees the economist’s highly quantitative skill set as redundant. The Trump administration has laid off government economists as part of its austerity push, while its former CEA chair (and current Federal Reserve Board member), Stephen Miran, is best known as the face of Trump’s unorthodox tariffs regime. (A newly minted PhD featured in the Times story was unable to get a job in flyover country even after his mother intervened on his behalf.) To put it in the profession’s terms, economists are facing a big negative shock to their demand curve.

A similarly downcast beat thrums through Eswar S. Prasad’s new book, The Doom Loop: Why the World Economic Order Is Spiraling Into Disorder. Economists of his ilk (i.e., elite, credentialed ones, in his case as a professor at Cornell) have long hailed global trade and its political adjunct, liberal democracy, as the tickets to an era of prosperity. Deregulation would unshackle businesses as job creators; opening up local and underdeveloped economies to foreign investment would spur growth, raising incomes for the majority; digital technologies would power an unprecedented wave of efficiency; and democratic institutions would wrap it all up in a nice package of clear, legitimate rules. Economists would continue to serve as a priestly caste for liberal civilization.

Now the old daydreams are smashed to smithereens, like the White House East Wing, demolished to make room for Donald Trump’s neo-Victorian ballroom. In Doom Loop, Prasad attempts to answer a riddle: Why did greater economic competition, long thought to be one of globalization’s biggest benefits, lead instead to our current era of conflict and chaos? How did liberal democracy go from being the uncontested winner of the Cold War to a hapless doormat for reality-TV stars and know-nothing podcasters? Why did it all turn out so different from the way that the experts—including, as Prasad puts it, his own “tribe of economists”—thought it would?

As a former International Monetary Fund researcher and head of the IMF’s China Division, Prasad schmoozed with the elect at the World Economic Forum and cruised around the world’s capitals in limousines. His specialty in trade has given him a cosmopolitan point of view on the economist’s perennial goal: stable growth. Once upon a time, the ability of economists to help deliver that goal with quasi-scientific policy advice earned them respected seats in the inner circles of government. Now, not so much. As free markets are discredited in favor of a personalized, haphazard rule by fiat that flouts the very notion of laws, reality grows less tractable to the economist’s tool kit. The intellectual world of economics is itself destabilized.

Thus the liberal policy elite struggles to understand reality, never mind to effectively act on it. To add insult to injury, it finds itself spurned by the MAGA regime, which couldn’t care less about the niceties of macroeconomics. Prasad’s charge in Doom Loop is not only to guide the reader to an understanding of this dangerous new era but also to offer a theodicy for a field indicted by history.

So how does he approach this task? Like any good economist, Prasad takes competition as an article of faith. “My tribe of economists believes that competition is a positive force in practically every realm,” he explains, “certainly better than unchecked monopoly power. Competition spurs efficiency, discipline, and innovation.” Conveniently equating markets with democracy, Prasad observes that the diffusion of power into the hands of many, rather than one or a few, is a........

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