On February 21, 2011, The Straddler met with Peter Temin at his office at MIT to seek his perspective on recent events and, more generally, the field of economics.

Temin is perhaps best known for his work on the Great Depression, but his work as an economic historian spans many eras and areas of inquiry. His recent books and papers have examined aspects of the ancient Roman economy; the decline of the bargaining power of American workers; the American health care system; and the problematic (as he sees it) rise to prominence of the general equilibrium theory of economics (a theory that, in layperson’s terms, amounts to an abiding commitment to the belief that, when left alone, the price is just about always right).

Temin, February 21, 2011
In my opinion, macroeconomics has lost its way. The kind of models that many people use—general equilibrium models—start from assumptions of perfect competition, omniscient consumers, and various like things which give rise to an efficient economy. As far as I know, there has never been an economy that actually looked like that—it’s an intellectual construct. But many people claim that the outcomes of that economy are natural outcomes. When you say “natural,” you already have an emotionally laden term. Deviations from the “natural”—say, like, minimum wage laws, or unions, or governments that give food stamps, or earned income tax credits—are interferences with the natural order and are therefore “unnatural."

[h/t Baseline Scenario]