The Dark Ages

I wish I knew enough about economics to judge the accuracy of this (via Atrios), but I’ve seen others say the same thing, in any case. Apologies for the overly long excerpt, you should read the whole thing:

I’ve always considered monetarism to be, in effect, an attempt to assuage conservative political prejudices without denying macroeconomic realities. What Friedman was saying was, in effect, yes, we need policy to stabilize the economy – but we can make that policy technical and largely mechanical, we can cordon it off from everything else. Just tell the central bank to stabilize M2, and aside from that, let freedom ring!

When monetarism failed – fighting words, but you know, it really did — it was replaced by the cult of the independent central bank. Put a bunch of bankerly men in charge of the monetary base, insulate them from political pressure, and let them deal with the business cycle; meanwhile, everything else can be conducted on free-market principles.

And this worked for a while – roughly speaking from 1985 to 2007, the era of the Great Moderation. It worked in part because the political insulation of central banks also gave them more than a bit of intellectual insulation, too. If we’re living in a Dark Age of macroeconomics, central banks have been its monasteries, hoarding and studying the ancient texts lost to the rest of the world. Even as the real business cycle people took over the professional journals, to the point where it became very hard to publish models in which monetary policy, let alone fiscal policy, matters, the research departments of the Fed system continued to study counter-cyclical policy in a relatively realistic way.

But this, too, was unstable. For one thing, there was bound to be a shock, sooner or later, too big for the central bankers to handle without help from broader fiscal policy. Also, sooner or later the barbarians were going to go after the monasteries too; and as the current furor over quantitative easing shows, the invading hordes have arrived.

Maybe it’s wrong to speak in such generality, but it strikes me that this is the story of much of recent American political history: conservatives took over many important institutions and replaced empirical, pragmatic policies with ideologically based ones. A foreign policy establishment that once emphasized realism now wants philosophically-based wars all over the world, a church that once emphasized helping the poor now wages an endless jihad against same sex marriage and reproductive rights. There are many other examples, too.






42 replies
  1. 1

    Utopian versus scientific conservatism.
    [Forgive me, Frederick.]

    Conservatives have abandoned the mode of checking to see what actually works and have totally immersed themselves and the rest of us in what should work, at least theoretically.

    And this is supposed to lead us to A Better Day, with Plenty For All and Unfettered Freedom, etc.

    Utopian.

  2. 2
    S. cerevisiae says:

    It’s magical thinking, just like they use to deny climate change or peak oil – all sides of the same coin.

  3. 3
    James E. Powell says:

    conservatives took over many important institutions and replaced empirical, pragmatic policies with ideologically based ones.

    I do not believe the policies were at all ideological, nor were the people who worked those policies. The ideology is the just the bullshit stories used to sell the policies to whichever audiences might object. (e.g., “tax cuts to the wealthiest creates jobs. You’re not against jobs are you?”)

    The people who benefit from these policies are, not coincidentally, the same people who funded the think tanks that produced and promoted the people who put out the ideology. They are the same people who funded campaigns to elect politicians who would do what they wanted, and to get rid of politicians who would not. They are the same people whose share of the national wealth and income has increased dramatically.

    What would you call such people if not pragmatic.

  4. 4
    Phoebe says:

    I read the whole thing and liked it. I don’t know enough about economics either [let’s ask Megan McArdle!], but it seems to describe the sort of ideological shoehorning of facts to fit theory that is not unique to the modern conservative gang. I’m not saying that “the left is the same!” because today that is clearly not true on the whole, at all. But they can be, and certainly have been in other parts of the world.

    In fact, I know it’s useful shorthand and all, but left and right are almost arbitrary and temporary team colors to me now. The ongoing historical dividing line is between emotionally-driven and curiosity-driven approaches to problem solving. The latter is more reliable as it isn’t steering toward a particular answer almost before it asks the question.

  5. 5
    WyldPirate says:

    I dunno about this post, DougJ. It just seems like you could have said the same thing with fewer words.

    I think “Conservatives are crazy fucking loons who are totally detached from reality” would have worked.

  6. 6

    Lysenkoism. It’s not just for Communists anymore.

  7. 7
    David Hunt says:

    Doug,

    I’ve got a bachelor’s degree in Economics, but I graduated in 1990 and I figure that I’m a product of the very Dark Age that he’s talking about. Also, I’ve never really used the degree. I’m an accountant now, and most of it’s a little fuzzy, 20 years gone. Still, Krugman’s arguments makes sense to me here (as they often do).

  8. 8
    liberal says:

    A foreign policy establishment that once emphasized realism…

    Hmm…that wouldn’t seem to be true.

    IIRC, at some point there was some kind of border skirmish between the USSR and Red China, and the foreign policy establishment here (or at least a good chunk of it) assumed it was all for show, to confuse us—the Reds of course had no nationalistic tendencies and were united.

    Edit: not sure you mean “realism,” the school of foreign policy, or “realism,” as in “reality.”

  9. 9
    Alwhite says:

    DougJ, thanks for the line about theological morans taking the ‘conservative’ approach to religion and diplomatic ones taking belief ahead of results. It throws into sharp relief how much all the strains of anti-evidence based ‘conservatism’ flow together. I don’t see it as a single, grand conspiracy but more as one hand washing the other in the belief that their hand will win & own both soon enough.

  10. 10
    boatboy_srq says:

    @James E. Powell: The problem with that perspective is the very small group that perpetuates the misinformation, and the very large unlettered following that believes it without question. The last election cycle was proof of this disconnect, in terms of candidates as well as voting results.

    The last time we had a minuscule informed intelligensia presiding over a mass of ill-educated citizenry, we had things like the burning of the library in Alexandria as a repository of heresy, witch hunts and the Inquisition. We’re starting to see the economic version of the same pattern. People forget that the Renaissance and the Enlightenment weren’t the result of Europe suddenly getting smarter – they were the predictable result of the public having better access to information. If the scholarship is choked off in the way Krugman, Benen et al describe then we shouldn’t be at all surprised when the public fails to grasp the mechanics of the problem and ascribes some mythical basis for the developments.

    Just as Catholicism rewrote much of the philosophy and practices of Christianity to suit Europe of the first millenium, so too is the fundie-wingnut set reinterpreting scripture to suit its own ends. The difference this time around is that we have at least the pretense of representative government, and adherents to the idiocy are presented as viable candidates for public office. If the leaders and shapers of modern economic and social philosophy are pragmatists that’s fine for them, but it says nothing about the adherents who smile and nod and don’t do their own thinking.

  11. 11
    gnomedad says:

    @Roger Moore:

    Lysenkoism. It’s not just for Communists anymore.

    Excellent. Stealing this. kthxbye

  12. 12
    MattF says:

    I don’t think that talking about Policy X vs. Policy Y really captures the bloodthirsty nihilism of today’s right wing. Really, it’s about power, and going down in flames, if that’s what it takes.

  13. 13
    Villago Delenda Est says:

    The “conservatives” are not conservative. They are nihilists. They need to be given the annihilation that they crave.

  14. 14
    Kat says:

    @James E. Powell
    The ideology is just the bullshit stories used to sell the policies to whichever audiences might object. (e.g., “tax cuts to the wealthiest creates jobs. You’re not against jobs are you?”)

    This.

    Dougj, would more caffeine help you to look behind the curtain (to see what’s passing for the ‘wizard’ of Oz) more often?

    If not, what’s it gonna to take?

    Perhaps, a re-reading of Orwell’s 1984, and BJ’s readers compiling a new-speak glossary for you?

    Here, I’ll start…

    Trickle-down economic theory = golden showers, i.e. the masses being pissed on economically, for 30 years straight.

  15. 15

    @James E. Powell:

    I do not believe the policies were at all ideological, nor were the people who worked those policies.

    Are you suggesting that the designers of these policies set out on purpose to destroy the country’s economic system in order to further enrich themselves?

    I’m not trying to disagree with you but I want to make sure I understand what you’re saying.

    That would, of course, be treason.

  16. 16
    FlipYrWhig says:

    conservatives took over many important institutions and replaced empirical, pragmatic policies with ideologically based ones.

    This has also resulted in almost all “technocrats” becoming de facto Democrats. Caring about “what works” has become itself an ideological position, because the countervailing force is flaming conservative dogma–see the “facts have a well-known liberal bias” jibe.

  17. 17
    Kat says:

    @ Villago Delenda Est
    The “conservatives” are not conservative. They are nihilists. They need to be given the annihilation that they crave.

    Maybe wooden stakes and silver bullets would do the trick.

  18. 18
    bleh says:

    @James E. Powell has it exactly right.

    And yes @ Linda Featheringill, you might as well call it treason.

    The financial industry is a cancer. Some of its cells serve a very useful — indeed vital — function. But it has grown wildly out of control, to the point that it has nearly killed the organism. We can’t take it out completely — you can’t function without a vital organ, and they’ll “take us all down with them” — but we need to cut it back sharply and control it harshly. And the same might be said of big parts of the defense-industrial complex. Together the two of them have nearly destroyed the country, and until the political class comes to grips with that, and starts controlling them instead of being controlled by them, we’re going to continue the roller-coaster ride until we run off the rails.

  19. 19
    lacp says:

    @Villago Delenda Est: I think that depends on which group you’re calling “conservative.” The folks pulling the strings from the top aren’t nihilists – they’re oligarchs, who very much want to keep a society in which they can enjoy their privileges. As for their followers lower on the food chain, they seem to be more brownshirt/blackshirt material, which isn’t actually nihilist (see The Big Lebowski for academic references).

  20. 20
    James E. Powell says:

    The ongoing historical dividing line is between emotionally-driven and curiosity-driven approaches to problem solving. The latter is more reliable as it isn’t steering toward a particular answer almost before it asks the question.

    But everyone who is in the game, so to speak, is working for someone else. And that someone else doesn’t want to know the truth, he wants to know how to he can benefit, how he can win.

    One doesn’t acquire status and wealth by telling the truth, but rather by helping those in a position to dispense status and wealth to maintain and improve that position.

    Whether driven by curiosity or emotion, the desired result is known as soon as one is hired.

  21. 21
    MTiffany says:

    @James E. Powell:

    What would you call such people if not pragmatic.

    Predatory.

  22. 22

    @James E. Powell:

    Whether driven by curiosity or emotion, the desired result is known as soon as one is hired.

    Then we lose some amount of free will at that moment?

  23. 23
    rootless_e says:

    Kind of a bogus story. The same people who are bitching about QE had zero trouble with Greenspan’s strenous efforts to float the economy and W past the 2004 elections.

  24. 24
    James E. Powell says:

    @Linda Featheringill:

    Are you suggesting that the designers of these policies set out on purpose to destroy the country’s economic system in order to further enrich themselves?

    They did not set out to destroy the system and they did not destroy the system. They created the debt-fueled bubble, cashed in before it popped, and after it popped, they used their control of the government to protect against any serious losses. While they may have to endure a period of decline in the value of their holdings, their share of the total holdings goes up.

  25. 25
    Judas Escargot says:

    @MTiffany:

    “Parasitic” might be more accurate: The financial sector (as currently organized), produces nothing on its own.

  26. 26
    James E. Powell says:

    @Linda Featheringill:

    Then we lose some amount of free will at that moment?

    Absolutely. An employee, and nearly all of us are that and nothing more, works for the boss. If he doesn’t, it’s “you’re out Tom.” It almost never comes to that because we are all socialized to make the rationalizations we need to keep doing the job.

  27. 27
    Mike E says:

    @Linda Featheringill:

    That would, of course, be treason.

    [touches nose]

  28. 28
    Bruce Baugh says:

    It’s not magical thinking. It’s managerial thinking: the certain conviction that someone else will fix whatever’s broken, and someone else will take the blame.

    (There are of course countless good managers who don’t think that. But managers who go bad are very, very likely to go bad in this particular way.)

  29. 29
    The Bearded Blogger says:

    @Linda Featheringill: It has to do with Manicheism; non-conservatism is evil, therefore it should not be heeded. When reality is not conservative, it, too, goes unheeded

    @Roger Moore: Ding ding ding!

  30. 30
    Nylund says:

    I just wrote and erased a very long and detailed post about this. Going through the history of macroeconomic thought and describing how we got to where we are and why it is flawed involves too many technicalities for lay people to understand.

    I will say that Krugman overlooks many of the reasons that justify why we ended up where we now in terms of macro modeling. Modeling an entire economy is incredibly difficult. Once you understand the difficulties and the critiques of various attempts, one understands how we ended up down the strange path we did. Krugman makes it seem like it was all stupid from the beginning, but there is a reason macro evolved as it did (that his explanation conveniently ignores). But, I do agree that where we have ended up is deeply flawed and so flawed on a fundamental level its hard to see how we change course, especially given the fact that there are now so many generations of economists who only know how to work within the modern framework.

    In essence, the problem is very complex. Unjustifiable simplifications have been made to the problem in order to even be capable of arriving at an answer. Its easy to critique things based on that, but its hard to really prove that the flawed answers are worse than no answers, especially since some of the answers really are quite good and make a lot of sense. To fix the flaws, you probably have to throw out the good parts of macro along with the bad as everything is intertwined.

    Unfortunately, some of the “answers” models give are very ideologically appealing to some people (ie, taxes are bad, gov’t meddling is bad, etc.) which only further decreases the chances that people will be motivated to abandon everything. Some people like the answers (even if they are wrong!) because it validates a world view they already hold.

    I really don’t see how we fix the state of macro. I agree with Krugman that its in a bad place, but where he sees only the bath water and wants to throw it out, I can see the baby as well.

  31. 31
    The Bearded Blogger says:

    @James E. Powell: Yeah, but a wrong model of reality collides with reality at some point. Whatever lies or half-truths work for some particular are damaging if adopted by the whole of society.

  32. 32
    The Bearded Blogger says:

    @Nylund: Would you say it’s time for a change of paradigm in economics? It seems the problems with the discipline are not of applying certain tools and axioms better, but rather of revising tools and axioms. Keynesianism is broadly ignored nowadays, is there a valid theoretical reason to do so? Or is it just because it doesn’t fit in with the dogma?

  33. 33
    schrodinger's cat says:

    The present state of economics is worrying but hardly surprising. If you start your models with laughably absurd assumptions, rational agents who know the future, to give just one example, it is not surprising that you end up with models that are close to useless in analyzing real economic systems.
    Garbage in, Garbage out.

  34. 34
    Phoebe says:

    @James E. Powell:

    Whether driven by curiosity or emotion, the desired result is known as soon as one is hired.

    I was talking about things like whether global warming is real, or supply side economics works. With the first one, an emotionally-driven approach is [though they never put it this way] “does this mean I may someday have to use public transit? It’s a commie hoax!” A curiosity-driven approach doesn’t have those obstacles. It might not get the right answer for other reasons, but it’s not burdened by whether the outcome is desired, or the discovery is contradicted by a literal interpretation of the bible, or “objectivism” or “the free market” or whatever religion lifts your luggage.

    What is your occupation, if you don’t mind saying? You seem oppressed by your boss.

  35. 35
    boatboy_srq says:

    @Nylund:

    Going through the history of macroeconomic thought and describing how we got to where we are and why it is flawed involves too many technicalities for lay people to understand.

    So without submitting to the awkwardness of actually agreeing with Krugman, you’ve made his point rather succinctly.

  36. 36
    LanceThruster says:

    I few days ago I watched Naomi Klein’s documentary “The Shock Doctrine: The Rise of Disaster Capitalism” from the book of the same name. It made a point of showing how the policy ideas of Milton Friedman and his Chicago School of Economics trashed many South American nations with violence and instability that paved the way for Freidman’s ideas to “come to the rescue.” It seems the proponents of these policicies welcome instability, not try to avoid it. Robber barons are free to clean up during the bust cycle on most everything while the masses have a hard time worrying about swamp while they’re up to their necks in alligators.

  37. 37
    Bill Murray says:

    @Nylund:

    Unjustifiable simplifications have been made to the problem in order to even be capable of arriving at an answer. Its easy to critique things based on that, but its hard to really prove that the flawed answers are worse than no answers, especially since some of the answers really are quite good and make a lot of sense. To fix the flaws, you probably have to throw out the good parts of macro along with the bad as everything is intertwined.

    The problem being is that it certainly appears that the macro-pushers have a tendency to forget that they made unjustified simplifications and treat the answer as a commandment from the Bible. Flawed answers that are taken to be fully correct are not better than no answers. Although I suppose I can’t prove that anymore than you can your statement.

    And as far as throwing out the good parts, if they are actually good why wouldn’t they be recaptured in the new, correct macro?

  38. 38
    someguy says:

    I agree with Atrios. Only by putting the central bank in the hands of government – and only government run by the Democrats – can we put it in a place where it doesn’t get conformed to the whims of the bankers and right wing partisans. That place happens to be the fucking twighlight zone, but hey, we haven’t tried (and failed) with that yet, so let’s give it the old college try in 2012.

    As for solutions… until you put the scared, barely sentien farm animals that pass for the American people into actual farms and feed them swill from buckets and wipe up when they shit in the aisles – I think WalMart actually does this with some commercial success BTW – then you’re going to be stuck with an irrationally behaving economy. I’ve given up on the idea that it can be managed because you’re trying to manage people who don’t respond to stimuli in a rational manner. In lieu of that I’ll settle for much higher taxes, much higher government meddling and regulation, and much lower upside.

  39. 39
    VidaLoca says:

    Nylund,

    I remember, long long ago when I was but a young pup, listening to bourgeois economists (that is, nominal experts/priests in bourgeois economics) say that socialism is inherently naive because there’s no way that any kind of central planning could work amongst the myriad individual consumer decisions that go on every day to make up the wonderful free market we live in blah-blah-blah.

    Now what you’re saying sounds a lot like “bourgeois economics: how the fuck does it work?”

    Not to dump on you personally (since I have no idea what your position on this all is, I’m just going off the fact that your comment sounded knowledgeable), but, is this really still defended as a science these days?

  40. 40
    Sly says:

    @Roger Moore:
    Inherited vernalization cannot fail, only we can fail inherited vernalization.

  41. 41
    DougW says:

    A whole lot of our ability to to grow from 1992 to 2006 was based on increased production by the average worker. As companies increased “lean” production profiles, of course they became more profitable. However, there is only so much that you can do.

    Sadly, under George W Bush, the Robber Barons were exporting jobs overseas at a rate unparalleled in our recent history. Under “W”, the entire rare earths production equipment was bought by China (who now have a virtual monopoly).

    Other industries have been sold by the wayside to countries that once were our competitors.

    Chinese companies are our competition. Selling out to them is not the solution. Their labor costs are a lot lower by state fiat, however that doesn’t mean that we can’t retaliate.

    We need a much more nuanced policy for trade with China, and a more reality based trade policy from our Congress Critters.

  42. 42
    DPirate says:

    Here’s my genereality:

    Rich folks first implemented an eminently abuseable monetary system, then proceeded to abuse it. Some styled themselves Conservative, while some styled themselves Liberal; all they really were was Rich.

Comments are closed.