Economic Elitism

Those on top like having things their way. They are willing to screw up their eyes and squint sideways in order to convince themselves that the world is they way they want it: with them on top.

Here is an excellent post by Paul Krugman on his NY Times blog pointing out that the blighted self-interested "interpretation" of economics continues despite the supposed lessons of the Great Depression. I've bolded key bits:

The Old Superstition

I picked up a copy of Lionel Robbins’s 1934 book The Great Depression in a used book shop in Norwich. It’s quite revealing: judicious in tone, full of tables and facts, clearly meant to be seen as the work of a wise observer – indeed, a Very Serious Person.

And utterly, utterly wrongheaded

“The first essential of any recovery from the position in which the world now finds itself is a return of business confidence,” declares Robbins. “But how is confidence to be restored?” He comes out against expansionary monetary policy, even to reverse the deflation of 1929-33 – he doesn’t really have any logical explanation, but having decided that the problem is “confidence”, he declares that monetary expansion would create “uncertainty” and therefore hurt confidence. He condemns exchange rate flexibility, again because it creates uncertainty and undermines confidence.

And after surveying the wreckage all around him, he declares that the cause of the depression was excessive government intervention, and the remedy, the thing needed to restore that all-essential confidence was … drum roll .. a return to the gold standard.

You can sort of see how this kind of policy analysis based on superstition might have seemed plausible in 1934, although even pre-General Theory Keynes could have explained just how wrong Robbins was (and did). But one would have hoped that we were past this sort of thing today.

The point, of course, is that we aren’t. The new BIS report is very much in the same vein as Robbins 1934, with much less excuse. Robbins suffered from the lack of a framework to make sense of events; the BIS, like so many economists, faced with exactly the economic syndrome Keynes analyzed, and for that matter even Milton Friedman would have seen as demanding strong action, has chosen to ignore that framework and play monetary Calvinball instead.

I was originally going to end this post by saying something about stupidity, but that’s not right: the people at the BIS aren’t stupid. What’s going on here is something different and worse: we’re seeing the desire for conventional respectability outweighing the lessons of history; we’re seeing vague prejudice (prejudice that just so happens to serve the interests of rentiers) trumping analysis.

History will not forgive these people.

As Upton Sinclair used to say: "It is difficult to get a man to understand something, when his salary depends upon his not understanding it!" The rich and the elite aren't interested in reviving the economy. They are interested in maintaining their great wealth. If that requires them to preach about "confidence" and "gold standard", they will. Rather than grow the economic pie and let everybody have more, they would rather shut it down and keep their gargantuan piece for themselves. That is what is behind the stupidity coming from these "economists" and politicians.