Confessional Economics.

• Author: Calabria, Mark
• Position: For the Record

It was with both delight and sadness that I read Ahmad Faruqui's "Confessions of an Energy Economist" (Winter 2022-2023). The delight was in, as they say, "feeling seen." Much of my own career, primarily in financial regulation and real estate economics, mirrored many of Faruqui's experiences. The sadness was also in the fact that many of my experiences mirrored his.

In addition to having served in a high-level economics position at the White House (as chief economist to Vice President Mike Pence), I also served as chief economist for the U.S. Senate Committee on Banking, Housing, and Urban Affairs under Sen. Richard Shelby. My time on the Banking Committee staff coincided with the years leading up to the 2008 financial crisis.

Despite the occasional claim that Chicago school economics caused the financial crisis, my seven years on the committee witnessed an almost complete lack of any real input by economists. I regularly raised issues of moral hazard in both the mortgage market and financial regulation in general, and I uniformly saw such concerns dismissed. What drove policymaking on the Senate Banking Committee was essentially two forces. The first was inter-industry competition: how banks can gain at the expense of insurance companies, for instance. The second was the desire to use the financial system to redistribute income or wealth via hidden or cross-subsidies. There were rarely any discussions of externalities specifically or market failures in general.

As Harvard economist Jason Furman noted in a Foreign Affairs essay ("The Quants in the Room," July/August 2022), which Faruqui used to open his article, much of the American political left's critique of the influence of economists in policymaking is ill-informed. In my experience, economists, as internal policy advisers, have almost always pushed back against rent-seeking attempts by industry. In fact, the economists in the room were often the only ones pushing back against rent-seeking. I would suggest, despite their general lack of influence, that if economists were not involved in the policymaking process, we would have a lot more industry rent-seeking, not less.

I was fortunate to work for some senators who did take an interest in economics, among them Shelby and previous Banking Committee chair Phil Gramm, a Ph.D. economist. I also regularly worked to place academic economists as witnesses at hearings before the Banking Committee. However, though these witnesses occasionally...