Friday, March 25, 2011

Saltwater, Freshwater, and Economic Policy: a reaction to a Brad Delong interview

[Welcome, visitors from Paul Krugman's blog.  Your comments are welcome, but this is an old post—auto-moderation kicks in. I will release your comments when I see them or you can comment on the new post here.]

The interview was conducted by Jay Ackroyd of Virtually Speaking, you can listen to it here (audio at link) or download it from iTunes as a podcast, and I hope you will do one or the other--in my opinion it is the best discussion I've heard of the personalities and politics involved in the recent and on-going economic meltdown.

My understanding of part of what was said was that Prof Delong and the other saltwater economists for a long time believed that they were engaged in an intellectual dispute with the moderate conservatives. The freshwater economists, however, believed that they had The Truth, and that Keynsianism would fall as surely as the Soviet Union did; that analogy may even have figured in their thinking. They believed that they were wise adults willing to face hard truths, the saltwater economists were foolish, weak children, and events would prove them right. Delong's description of what what Prof. Robert Lucas thought of Prof. Christine Romer's support of the stimulus was chilling in its contempt for Romer: by Delong's account Lucas believed Romer was lying when she supported the stimulus.

I wonder if the thought processes of the freshwater school were not an elevated version of those the hardcore tea partiers: a threatened sense of privilege and contempt for the weakness of their opponents. It is hard for me not to see this as fitting into a pattern of threatened male privilege, though in some cases sexism was not the core of the belief.

The freshwater economists are now faced with incontrovertible proof that they were wrong and the saltwater school was right. Their reactions, it seems to me, are no different than what anyone wedded to an inflated idea of their self-worth. Not only were they wrong, they have lost the argument to people they feel are their intellectual inferiors and to women. They are angry and denying, denying, denying.

The saltwater school, on the other hand, is having to reevaluate a great many of their ideas, not the least about collegiality and scientific epistemology. The recognition of the contempt in which their colleagues held them has to be a shock to many; I think I detect traces of it in Delong's writing, and in Prof. Krugman's. Likewise, the recognition that many freshwater economists were not thinking scientifically at all, but rather bound by prejudice and intellectual rigidity seems to have come as a shock. It is very much to Prof. Delong's credit that he is willing to consider these realities.

There is also a practical problem, if economics as a discipline is to survive. There is a huge amount of junk in the peer-reviewed economics literature--the reviewing process is no protection when the reviewers themselves are prejudiced. A comparison that comes to mind is the collapse of "scientific" eugenics. There were vast amounts of that written, and now it is only read as an object example of the capture of a social science by prejudice and authoritarianism. For economists, meantime, there is a huge task ahead: the garbage must be taken out; removed from the field's teaching, textbooks, and policy advice. It will be a generation at least before this is set right, if indeed it can be set right at all.


Unknown said...

It may require a generation to set this right, but in a generation people will have forgotten the hard won lessons learned and will be vulnerable to capture by well funded interests. We already learned these lessons in the 40s, and forgot them in the 80s.

The only real answer is that the freshwater school has been fully captured by people who want justifications and not answers.(Which explains why they've suddenly about-faced now that we're facing the so-called "fiscal cliff")

Barry DeCicco said...

" It will be a generation at least before this is set right, if indeed it can be set right at all. "

My guess is that the Planck theory applies. It will require a new generation of economists who have no respect for the Lucases, Prescotts, Cochranes and Mulligans of this world. People who lived through the Crash, and watched Chicago fail and Krugman be right.

Roger Lindsley said...

Tea Party congresspersons are blocking fiscal policy that would vindicate Krugman and DeLong. If 2014 brings a Democrat majority to the house, they will have the opportunity to show that indeed the Republicans wasted 7 years of America's GDP potential in a cynical, failed power grab. In the end if this happens it could be ruinous to the Republican Party and demonstrate the rightness of countercyclical Keynesian policies.

neroden@gmail said...

I have suspected it will require a renaming of the field. The "science of eugenics" is dead, dead, dead, and people who study genetic diseases consider themselves to be in a differently named subject.

The same may be the fate of "economics", irredemably toxic. I believe "political economy" is still respectable and available.

Raven Onthill said...

Neroden, that's an excellent point. Astronomy was named to distinguish it from astrology, so this is a very old tradition.

Barry, very possibly. Roger, the Democrats, including Obama, are heavily influenced by their conservatives; I've been writing about the possibility of a new party moving in on the left for some time, now that the Republican party is failing, see here for instance.

Unknown, I don't think the freshwater school was captured; it was never free to begin with, despite all its talk of freedom. Keynesian macroeconomics, which perhaps ought to just be called macroeconomics by now, since all alternative schools have failed, is still a very young discipline, barely 75 years old. We may look towards political forms and institutions which integrate its insights, as—so far as I know—no current political system does. Once that is done, Keynesian macroeconomics will be defended by institutional memory.

Jay Ackroyd (@jayackroyd) said...

Hey! Belated thanks for posting this. I thought that was a particularly interesting Virtually Speaking session.