Economists (and most scientists) generally assume (unreflectively) that the market for ideas is pretty efficient. One consequence of this attitude is that the serious study of history of economics has been systematically erased from the graduate curriculum. Philosophical ideas are partly to blame for this because talk of Kuhnian paradigms has, perversely, encouraged the idea that *science* can do and does fine with mythic history (or no history) in its curriculum. The MIT economist (and Nobel laureate), Paul Samuelson, and the Chicago economist, (Nobel Laureate), George Stigler, who both maintained a life-long fascination for the history of their own discipline and helped shape the professionalization of post wwII economics, have played a significant, active role in encouraging this outlook. Stigler developed Kuhnian views before Kuhn published *Structure* (as he proudly told Kuhn in their unpublished correspondence), and probably helped (in a small way) to get *Structure* published at the UofC Press (Stigler was on the publisher's board).(I return to this below.)
One crucial element in the unfolding financial crisis is the financial and intellectual corruption caused by the legaly enforced reliance on rating agencies. When the current system was set up during the Great Depression this was predicted by a fascinating character, Melchior Palyi. It is easy to think of Palyi as a right wing crank: there are still websites devoted to him as an advocate of the gold standard and his stringent attacks on socialized medicine. But Palyi, a refugee from Hitler Germany (where he had been lead economist at Deutsche Bank), wrote an early criticism of the role of rating agencies. This prompted a major Federal study, but it was flawed from the start because the Government and the rating agencies could not disentangle the interests of all the participants. Strikingly, in the final report Palyi's warnings got effaced from the record and Palyi forgotten from the discipline's memory. The story is told by two fantastic historians of economics (who have nourished my interest in the discipline for over a decade), David M. Levy and Sandra J. Peart.
Palyi is more than a lucky crank; he got another huge idea right way back when he warned that asset prices should not be ignored in thinking about inflation. (He had lived through German hyperinflation.) Turns out...Palyi was Max Weber's "last student." And after he fled the Nazis he landed at The University of Chicago (long enough to teach Rose Director, later famous as Rose Friedman-Director)! Together with Frank Knight, the Godfather of Chicago economics, he was, thus, one of the principle mediators of Weberian ideas in the mainstream of economics profession. These have had (as I have documented) a surprising afterlife in George Stigler's and Milton Friedman's work. As I have noted elsewhere, Stigler and Kuhn share a kind of Weberian outlook; I had long thought this was due to the shared influence of Talcott Parsons and Merton. Max Weber's Ghost hangs heavy over disciplines that refuse to notice it.