Economists, Government, and Economic Policymaking in Israel: From “Crawling Peg” to “Cold Turkey”

Abstract

For decades, Israeli academic economists ventured for limited periods of time out of the ivory tower and became economic advisers to top policymakers. Some of those economists were Eitan Berglas, Michael Bruno, Ezra Sadan, Pinhas Zusman, and one of the authors of the present essay (Plessner). How academic economists perform as advisers to policymakers should be a legitimate public choice question, at least as long as one believes that people act largely in their own best interests (the possibility of some degree of altruism should always be admitted). More concretely, suppose that the economy is in State A and that the problem of getting it to State B arises. The question then is, asked how to get the economy from A to B, would an academic economist respond to the challenge identically whether she is asked by a student or by a politician who employs her? Put differently, should one expect economic advisers who hail from academia to come up with different economic-policy options than they would have come up with in the classroom? While Bruno Frey (1983, 260–86) did address the topic of economic advising within the context of the democratic process, he did not explicitly consider the possibility of a split personality. Moreover, while the possibility of “cognitive dissonance” among economists has recently been examined (Darity and Young 2000), the issue of incentive structure facing economists as economic advisers has not been dealt with nor have