How many times do I have to be right?

19:20 (h/t Susie Madrak)

Ben Bernanke, Hippie


Published: February 28, 2013

We’re just a few weeks away from a milestone I suspect most of Washington would like to forget: the start of the Iraq war. What I remember from that time is the utter impenetrability of the elite prowar consensus. If you tried to point out that the Bush administration was obviously cooking up a bogus case for war, one that didn’t bear even casual scrutiny; if you pointed out that the risks and likely costs of war were huge; well, you were dismissed as ignorant and irresponsible.

It didn’t seem to matter what evidence critics of the rush to war presented: Anyone who opposed the war was, by definition, a foolish hippie. Remarkably, that judgment didn’t change even after everything the war’s critics predicted came true. Those who cheered on this disastrous venture continued to be regarded as “credible” on national security (why is John McCain still a fixture of the Sunday talk shows?), while those who opposed it remained suspect.

And, even more remarkably, a very similar story has played out over the past three years, this time about economic policy. Back then, all the important people decided that an unrelated war was an appropriate response to a terrorist attack; three years ago, they all decided that fiscal austerity was the appropriate response to an economic crisis caused by runaway bankers, with the supposedly imminent danger from budget deficits playing the role once played by Saddam’s alleged weapons of mass destruction.

Now, as then, this consensus has seemed impenetrable to counterarguments, no matter how well grounded in evidence. And now, as then, leaders of the consensus continue to be regarded as credible even though they’ve been wrong about everything (why do people keep treating Alan Simpson as a wise man?), while critics of the consensus are regarded as foolish hippies even though all their predictions – about interest rates, about inflation, about the dire effects of austerity – have come true.

Incestuous Amplification, Economics Edition

Paul Krugman, The New York Times

January 29, 2013, 5:44 pm

Back during the early days of the Iraq debacle, I learned that the military has a term for how highly dubious ideas become not just accepted, but viewed as certainties. “Incestuous amplification” happen when a closed group of people repeat the same things to each other – and when accepting the group’s preconceptions itself becomes a necessary ticket to being in the in-group. A fundamentally flawed notion – say, that the Germans can’t possibly attack though the Ardennes – becomes part of what everyone knows, where “everyone” means by definition only people who accept the flawed notion.

We saw that in the run-up to Iraq, where perfectly obvious propositions – the case for invading is very weak, the occupation may well be a nightmare – weren’t so much rejected as ruled out of discussion altogether; if you even considered those possibilities, you weren’t a serious person, no matter what your credentials.

Which brings me to the fiscal debate, characterized by the particular form of incestuous amplification Greg Sargent calls the Beltway Deficit Feedback Loop. I’ve already blogged about my Morning Joe appearance and Scarborough’s reaction, which was to insist that almost no mainstream economists share my view that deficit fear is vastly overblown. As Joe Weisenthal points out, the reality is that among those who have expressed views very similar to mine are the chief economist of Goldman Sachs; the former Treasury secretary and head of the National Economic Council; the former deputy chairman of the Federal Reserve; and the economics editor of the Financial Times. The point isn’t that these people are necessarily right (although they are), it is that Scarborough’s attempt at argument through authority is easily refuted by even a casual stroll through recent economic punditry.

But these people aren’t part of the in-group, and if they do make it into the in-group’s conversation at all, it’s only by blurring their message sufficiently that the in-group doesn’t understand it.

And at this point, of course, all the Very Serious People have committed their reputations so thoroughly to the official doctrine that they almost literally can’t hear any contrary evidence.

Disastrous Predictions and Predictable Disasters

Paul Krugman, The New York Times

March 1, 2013, 9:53 am

Joe Weisenthal is wrong. He writes that the unfolding economic disaster in Europe is what everyone predicted. Not so. It’s what he predicted, it’s what I predicted, but it’s not at all what many people were predicting. And the people who got it completely wrong happen to be the people still running European economic policy.

Readers sometimes complain about my frequent references to the things my friends and I got right, and others got wrong. But look, it’s not ego (or anyway it’s not just ego). Predictions are how you judge between models. If the world delivers results that are very much at odds with what your framework says should have happened, you’re supposed to reconsider your framework – as I did, for example, after I was wrong about interest rates in 2003.

And the fact is that a more or less Keynesian framework – a framework that says that austerity in a depressed economy is a terrible idea – has yielded pretty good predictions through the crisis, while the anti-Keynesian stories that became the conventional wisdom in Brussels and Frankfurt have delivered an awesome record of predictive failure.

1 comment

  1. ek hornbeck

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