Faith Based Economics

William K BlackLast week, I discussed how ideology blinds conservative thinking to the full range of possible economic solutions to problems. In particular, I was talking about Milton Friedman and how his insistence on avoiding Keynesian solutions caused him to come up with some very clever economic tools—even if we have since found that those tools have limited usefulness and must be an addition to Keynesian tools, not their replacement. Yesterday, William K Black published a great article over at OpEd News, Rajan Calls Krugman “Paranoid” for Criticizing Reinhart and Rogoff’s Research. It is a rundown of recent economic history of the disintegration of the austerity economics coming out of the IMF. But more to the point: it discusses this issue of ideological blindness in economics.

The two major players in this story are Raghuram Rajan and Ken Rogoff. These are both guys who are first and foremost political ideologues. Then they are economists. And that means that their economic skills (unquestionably great) are used as weapons in persuit of their ideological goals. Again: this is not how science works! Although both men pretend to be regular economists, their actual job titles should be Conservative Apologist. Both men are laser focused on keeping inflation down at all costs. As I’ve discussed before, higher inflation would have been a good think over the past many years. It would only have been a bad thing for the rich who are sitting on piles of cash. So Rajan, who has been appointed the next Governor of the Reserve Bank of India, can be depended upon not to do what is best for the broad interests of the people, but rather just what is in the interests of the rich.

Black points out conservative economists have managed to miss major problems in the real economy by defining the issues away in their models:

By assuming finance and money away they implicitly assumed away fraud and the essential regulatory cops on the beat. Theoclassical economists pushed to eviscerate the institutional protections such as effective financial regulation…

In other words: “There can be no corruption because it doesn’t exist in my model. And because there can be no corruption, we don’t need any regulation!” And it just so happens that the people who make these models start with an ideology that says that regulation is bad. Funny that!

This also goes along with the whole theme of Black’s article. The conservatives have claimed that people like Krugman and Stiglitz are meanies who make personal attacks. But the truth is quite the opposite. The conservative attacks have been almost entirely personal. And there is a good reason for that: the conservative economic arguments have been weak from the start and are now basically nonexistent. That basically leaves, “You’re a potty head!” And, “All the real economists think just what I do!”

Black has coined a term for these people: theoclassical. As best as I can tell, these are economists who believe in classical economics as a matter of faith. It seems related to the Confidence Fairy. She was a creation of Paul Krugman to explain why conservatives thought that cutting spending would improve a weak economy. The Confidence Fairy is like the Great Pumpkin: if the government cuts social spending, she will magically appear to reward the good policy makers. It’s silly but this is in fact what conservatives claim. “Theoclassical economics” is a more serious notion: conservatives really do not have reasons for what they believe regarding the economy. It is all faith based: they start with the truth that they just know and try to come up with economic theories to justify the truth that cannot be questioned.

So maybe the Republican constituency isn’t so strange after all: it is faith based social conservatives on one side and faith base economic conservatives on the other. They are bound by their resistance to facts.

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About Frank Moraes

Frank Moraes is a freelance writer and editor online and in print. He is educated as a scientist with a PhD in Atmospheric Physics. He has worked in climate science, remote sensing, throughout the computer industry, and as a college physics instructor. Find out more at About Frank Moraes.

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