Chapter 2.2: In 1965 we were "All Keynesians Now", in 2014 ....

Earth to Talking Heads: Cutting through the punditry on economics

(formerly: Pundit's Guide to Economics)

TABLE OF CONTENTS

[Continued from Chapter 2:  Don’t Take These Guys Too Seriously]

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Analysis and prediction that does not stray too far from the norm keep the economist in the company of his peers and give him a seat at the table. The conventional view has changed from time to time, but the sociological norm of staying with the pack remained. Prior to the 1930s, a version quite similar to that of the market fundamentalists of today dominated Academia and policy. The Depression brought a transition, however, and through World War II and in the two decades after World War II economics was dominated by a liberal view. Dwight Eisenhower, for example, posted Democrat Arthur Burns as his chief economist, for want of credible candidates affiliated with his own party.

GUIDEPOST

The comfort of business leaders and political interests is a comfort to their economists. The insecurity of operating in a constantly changing environment leads the professional economist to caution. These are also concerns of the professional pundit, because she herself is subject to the same forces. The unconventional is often not the best route forward for one’s career. The following is a guide to the understanding, not to the public utterances of the pundit.

 

It is a necessary if unfortunate recognition we must make that the economists who didn’t see it coming, who didn’t think it possible, who engineered it without knowing what they were doing, who doggedly continue under the banner “recovery is just around the corner” are the economists who are still in charge. The economics that failed is that which continues to be practiced. “The inability of even great events to affect settled patterns of thought is remarkable,” as James K. Galbraith has observed. 

This is both a problem and an opportunity for the careful pundit. It is a problem if he worries too much that to be a science, economics needs clear hypotheses, testing by facts and revision. It is an opportunity in that the pundit may introduce in support for his own position the phrase “economists contend…,” or “economists have said….” It will be true. As the old economists joke has it, Any three economists will have at least five different opinions.”

Now here the reader may object. On one hand, the Guide describes a monoculture, a Neoclassical or orthodox lock-step uniformity, and on the other, he finds an economist for every opinion. Both are true. This is aside from the tendency of economics like other sciences to splinter into specialization and obscurity. Business, labor and nonprofit groups each have their own economists. Each political arm of Congress has its own. The financial sector has many and for many purposes. So every political faction has an economist of some merit with analysis at the ready. At the same time, as noted earlier, virtually all of these missed the greatest economic event of the post-war period because they were all reading from the same text – a mathematical certainty of equilibrium, a version of money creation that ignores banking, and a view of credit that makes debt benign. These fallacies still command allegiance, for the reason that these are what the economists learned in school and they know the world only through these frames.