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.

Mitt and GOP Offer Voodoo Economics Again

From “What the war over ‘didn’t build that’ is really about,” Greg Sargent, The Plum Line:

“As it happens, mainstream economic consensus is closer to Obama than to Romney on the broader questions here.  Many economists believe the stimulus worked (albeit not as well as we’d like); that tax cuts for the wealthy won’t magically create enough growth to pay for themselves; that more spending now would indeed create jobs; and that more austerity now could make things worse. The public’s views on these matters are not nearly as clear cut.  But on the question of the relationship between government spending and job creation, Romney’s positions are at odds with mainstream economic opinion. ‘The debate in Washington has become completely unmoored from this consensus,’ Betsey Stevenson and Justin Wolfers write today.  ‘Republicans have pushed their representatives to adopt positions that are at odds with the best of modern economic thinking.’

Romney does not have a plan to fix the short term crisis, in the sense that he’d be proposing exactly the same things if the economy were doing great.  But the politics of the presidential race are such that Romney needs to promise that electing him would fix the crisis.  To make this case, he has to sell the American people on the idea that government — and Obama’s hostility towards individual initiative and American free enterprise — are to blame for holding back the recovery, and that shoving both of those things ‘out of the way’ will reignite the economy.  That’s why Romney continues to falsely claim that stimulus spending only succeeded in growing government and didn’t help the private sector at all. That’s why he continues to falsely claim that Obama ‘demeans success.’  That’s why he continues to falsely claim that Obama thinks only government, and not individual initiative, creates jobs — and that this is why you’re suffering.

“These ideas are essential to Romney’s entire argument. Without them, he doesn’t have one.”  Italics in original; emphasis added.

The austerity the GOP wants to push in this country is failing in Britain.  The latest numbers there show a double-dip recession.  That’s what Mitt offers. 

I think the question for this election isn’t so much “Are you better off now than you were four years ago?” (although clearly we are, because the economy was losing 750,000 jobs a month then), but “Could you be much worse off four years from now?”