Economic Denialism

Much though I am skeptical of any application of economic thinking to planning the long term, I am convinced that there are some people with substantial economic knowledge about how the year-to-year process works, and that Paul Krugman is one of them.

Unfortunately, like so many other people nowadays, he has to cope with denialsm:

Back to the evidence versus the orthodoxy. I can, in a way, understand refusing to believe in global warming — that’s a noisy process, with lots of local variation, and the overall measures are devised by pointy-headed intellectuals who probably vote Democratic. I can even more easily understand refusing to believe in evolution. But the failure of predicted inflation to materialize is happening in real time, right in front of our eyes; people who kept believing in inflation just around the corner lost a lot of money. Yet the denial remains total.

Welcome to the club.

On the other hand, I predicted inflation too. :>} Where did I go wrong, I wonder?

Comments:

  1. Yes, that's the clearest bit of refutation I've seen recently (and the FRED data is awesomely accessible), though Krugman's been doing the same day in day out for years: "you say x about economics? Here's the evidence and here's the macro 101 that we've known for decades that says y."

    This is excellent: "it’s not often that you see an economic theory fail so utterly and completely. Yet that theory’s grip on the GOP has only strengthened as its failure becomes ever more undeniable."

    Krugman's work - and the post you highlight here is a fantastic exemplar of that - illustrates what's wrong with another recent take on `economic denialism' (I wonder what you think of this?) by Aditya Chakrabortty. From this point of view, all neoclassical economists (Krugman's one; my PhD uses his core-periphery model extensively for spare parts) are merely "high priests" blessing existing power structures with their otherwise meaningless mathematical incantations.

    Which, if it were true, actually matches what Krugman's accusing Republicans of. As Phillip Ball puts it, it's all “citadels of crystalline mathematical perfection that would shatter if touched by the harsh rays of reality” (Ball 2007 p.647). This Krugman post is a nice illustration that's not true of all economists - and I think the difference isn't in the models, it's in the modellers' understanding of their uses and meaning. In that respect, it's quite different to, say, climate modelling (I think). (Nice Marshall quote on that: "economic laws and reasonings in fact are merely a part of the material of which conscience and common-sense have to make use in solving practical problems, and in laying down rules which may be a guide to life.” Marshall 1895.)

    Which is not to deny there's a definite relationship between power structures and a particular, brittle set of economic concepts - Krugman himself acknowledges this when he explains why he pursued a general equilibrium form for the core-periphery model as a way to entice others in his field to consider geography: "mainstream economics isn’t going away: like it or not, the White House has a Council of Economic Advisers, not a Council of Geographical Advisers, the World Bank hires lots of economists and not many geographers." (The New Economic Geography, Now Middle Aged, 2010, PDF.)

    So yeah - we're looking at much the same process that I mentioned standing out so clearly in the Boston Globe's coverage of Willie Soon. Economics, climate... doesn't matter. Evidence seems to end up like a butterfly in a gale when it approaches power centres.

    The obvious answer seems to be to remove the influence of money in politics - but to get that via any current democratic route, you'd need politicians to vote for who eschew major donations. They would lose. Or you would need politicians to vote for imposing, say, modest but even state-funded campaigns - and again, of course, if they're already on the money, how will that happen?

  2. "On the other hand, I predicted inflation too. :>} Where did I go wrong, I wonder?"

    Have you read Krugman's End this depression now? It's explained really well - I think I understand it, but not quite enough to attempt to paraphrase and make an idiot of myself... Maybe I'll go re-read it now and nail it down a bit more. If you do get a copy, it'd be interesting to compare notes.

  3. As to why no inflation -- here's a great video from Ray Dalio:

    http://youtu.be/PHe0bXAIuk0

    In the large cycle of credit, on the debt downswing (which lasts for years) there simply isn't enough demand for borrowing, even at practically 0% interest, for inflation to begin. Unless the central bank overprints the money supply like crazy (Germany, 1930). The other term for the debt downswing is 'deleveraging.'

  4. It is good that his absurd vendetta against Mike Mann was one of the things contributing to Cuccinelli's narrow defeat, and I have to say I prefer to work within the system than to try to start over. But this doesn't mean that Virginia (a coal mining state) will have a vigorous or timely climate policy by any means. And that a man like that could come within about 2% of victory is terrifying.


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