The Dangerous Cult of Dumb Economists

From “When Prophecy Fails,” Paul Krugman, NYT:

“Back in the 1950s three social psychologists joined a cult that was predicting the imminent end of the world. Their purpose was to observe the cultists’ response when the world did not, in fact, end on schedule. What they discovered, and described in their classic book, ‘When Prophecy Fails,’ is that the irrefutable failure of a prophecy does not cause true believers — people who have committed themselves to a belief both emotionally and by their life choices — to reconsider. On the contrary, they become even more fervent, and proselytize even harder.

“This insight seems highly relevant as 2012 draws to a close. After all, a lot of people came to believe that we were on the brink of catastrophe — and these views were given extraordinary reach by the mass media. As it turned out, of course, the predicted catastrophe failed to materialize. But we can be sure that the cultists won’t admit to having been wrong. No, the people who told us that a fiscal crisis was imminent will just keep at it, more convinced than ever.

“Oh, wait a second — did you think I was talking about the Mayan calendar thing?

“Seriously, at every stage of our ongoing economic crisis — and in particular, every time anyone has suggested actually trying to do something about mass unemployment — a chorus of voices has warned that unless we bring down budget deficits now now now, financial markets will turn on America, driving interest rates sky-high. And these prophecies of doom have had a powerful effect on our economic discourse.

“Regular readers know that I and other economists argued from the beginning that these dire warnings of fiscal catastrophe were all wrong, that budget deficits won’t cause soaring interest rates as long as the economy is depressed — and that the biggest risk to the economy is that we might try to slash the deficit too soon.  And surely that point of view has been strongly validated by events.

“The key thing we need to understand, however, is that the prophets of fiscal disaster, no matter how respectable they may seem, are at this point effectively members of a doomsday cult.  They are emotionally and professionally committed to the belief that fiscal crisis lurks just around the corner, and they will hold to their belief no matter how many corners we turn without encountering that crisis.

So we cannot and will not persuade these people to reconsider their views in the light of the evidence.  All we can do is stop paying attention.  It’s going to be difficult, because many members of the deficit cult seem highly respectable.  But they’ve been hugely, absurdly wrong for years on end, and it’s time to stop taking them seriously.”  Emphasis added.