spilled milk

last september introduced a lot of prefab rhetoric into political and economic discussions. it's common these days to hear people talk about the hubris of mathematicizing risk, for instance, or the (apparently unexpected) danger of deregulation. even as i write that, though, i'm aware that policymakers have paid the issue of oversight almost no mind. still, for the rest of us it's more or less common wisdom, again.

another theme that i see emerging is the economics profession's mea culpa. as usual, there are dissenters; men like mankiw and, oh, the entire neoclassical wing of the chicago school, don't believe that anything went wrong with macro at all. but whodunnits and whyitduns sell well in gloomy times, and it's the economists who beat their chests the loudest that get the most attention. even non-economists like richard posner have jumped on the bandwagon, loudly proclaiming the failure of capitalism, the wailing of doomsday, fire, brimstone, etc.

the race is on to write the history books. paul krugman, with this piece in the times, appears in the lead. for the most part, it's an institutional history of the economics profession since the Second World War. there's some interesting terminology there--the distinction between 'freshwater' and 'saltwater' economists, referring to individuals tenured at inland and coastal universities--but it's really the first page that counts. in the opening section of his article, entitled "I. Mistaking Beauty For Truth," krugman trots out what is now the standard line among reformist economists: economists like math, or, more specifically, static, two-dimensional math, too much.

now, you've heard this same criticism from me since we started this thing up, so i've no beef with it. my problem with that line is that it's an economist's way of thinking. it masks the effect of individual personalities by assuming everyone's behavior to be more-or-less identical and consistent. no single people become any more responsible for the propagation of silly general equilibrium models than anyone else. my eleventh-grade economics teacher is just as culpable as john cochrane. krugman is a bit better than this. he, at least, lists the sides in the debate, tags their world views, and lets you know what their take on the last thirty years of economic history is. still, other than dropping a few names next to telling quotes, his piece, like all others, focuses on a generalized, systemic problem. personality is largely absent.

the wrong kind of math is the problem. it is somehow the belief of economists that because a large part of what they deal with is quantified under a price system, they are closer to physics than to other social sciences. we all know why that is stupid, and it is stupid, and it is good to know that there will be a literature born out of this fiasco of a year that makes that plain. to forget the key players in the debate is, however, to commit what i like to call the network news fallacy. this is the supposition that all issues must have two sides, or else coverage of them won't be objective. if you leave the people involved untouched, ascribing no fault to them or their actions, then you imply that their views, however much they have inspired economic crisis, are still to be respected. blame the message, not the messenger, etc. what the wrongheaded individuals take away from that is that there is no punishment for their wrongheaded actions. they'll continue to flog their line as if it deserved as much respect as anyone else's. and, indeed, the chicago school has proved unrelenting in this regard; there hasn't been so much as a peep of regret or an admission of failure on their part. for a department that has largely set the tone for the modern economic discipline--a department that, in other words, taught everybody that deregulation was best, that markets are perfect, that public services are wasteful and evil--that is a display of truly remarkable, and dangerous, dogmatism. and unless someone within the profession takes them head on, this opportunity will go to waste, and within no time at all as the loudest voices in the debate, they'll be leading it again.