Delusion is a big word. It's the kind of word that lends itself to abuse when one is seeking to abuse one's opponents. In the case of the construct of economic thought, it's use is warranted given the narrow field of it's vision on the operating system of the universe. Economists have the ears of national leaders all over the world, their academics represent an enormous chunk of the resources which go into the study of phenomena that make up society, and they have an inordinately large voice in the modern world's mythos. The accuracy and viability of their art/science is a mental foundation we've all come to depend on.
If economists have something wrong with their conceptualization of the universe, it follows that we all have a stake in the consequences. Especially if it's at the foundation of economic activity, where the economy intersects with the natural world. When we pull stuff out of the ground, turn it into something, which is then represented by money, used by someone, and thrown away, we have the phenomena of interest to economists. When there is a problem at the beginning of this chain, problems occur all along the rest of the chain. Call this the physical input stage, the point at which all economic activity begins. What happens before that? Who can say? It's just stuff that's there.
Physical scientists actually have something to say about it. I've said before in so many words that economists inhabit a small space, an isolated realm that is prominently placed is the social hierarchy. Naturally they try to defend that territory. A recent dust-up between Paul Krugman and one of my Dark Green Tribal members Richard Heinberg serves as a great illustration of the point I'm making. The dust-up reveals Krugman to be an economist willing to defend his territory. By doing so he also reveals how dismissive he is to arguments he doesn't understand or fit his models. He is firmly entrenched in the tower of his own ego.
In a blog post from September 18, Krugman calls out the Post Carbon Institute on the impossibility of infinite, or even further, economic growth. In the same breath he couples the Post Carbon Institute with the Koch Brothers and other climate change deniers because of PCI's position that economic growth is incompatible with either combating climate change or living sustainably on the planet. The ever thoughtful Heinberg responded to him with this missive on his own website, pointing out the many ways Krugman was wrong.
Krugman, in another post, reiterated his assertion that the "anti-growth" movement was in an "unholy alliance" with right wing climate deniers. The blog post was in response to this article from Bloomberg attacking economists on the limits to growth issue. Heinberg responded with what I think is the best summation of why economies will stop growing because of the limits to the natural resource base and energetic limits.
Paul Krugman and the Limits to Hubris
I'm a little surprised by how sloppy Krugman's writing is on his blog, especially compared to Heinberg. I haven't read Krugman's blog for a while and it's been at least five years since I read "Conscience of a Liberal" but it feels more like a screed than anything else. But anyway.
The back and forth since the original "Limits to Growth" was published in 1972 has been between economists and environmentalists and the cost has come mainly at the expense of the environmentalist movement. The general view is that the economists won against the environmentalists because the scary predictions made at the time by environmentalists were proven wrong. But that was the public relations and policy side of it, which environmentalists definitely lost. But the "Limits to Growth" projections were over a much larger time frame than people acknowledge. The Club of Rome study did not say the limits would be reached in the seventies, but sometime after about 2030. Economics and financial markets don't think far into the future because of the nature of what they study. To use the weather analogy, the conditions on which they base their predictions and analysis change constantly. You can say general things about it, but the "weather" of the economy is in constant flux. A physicist looking at the economy is more analogous to how a climatologist looks at the weather. Climatology is not the weather. It is the study of the conditions in which the weather plays out. Krugman is a weatherman.
By attacking physical scientists Krugman shows his territorial markings. He is unwilling to view his own position in a context that is greater than the one he normally deals in. To use Krugman's own logic against him, he is siding with creationists and climate deniers by attacking the knowledge and insights of the physical sciences. Now that he is in bed with these folks, I guess we can fix our attitude against anything he says. Or, we can be reasonable, which is a very scientific thing to be.
Now, some headlines meant to terrify.
BIS warns on "violent" reversal of global markets
All is not well in the Kingdom
A frighteningly real "exogenous" event.
2 comments:
Unfortunately, the thoughts of mainstream economists like Krugman matter. There's a reason that early economists such as Adam Smith were engaged in what was they called political economy. The decisions of how to structure an economy, especially in the modern era of mass democracy, are inherently political.
I'm not sure what it will take for economists to recognize the biophysical underpinnings of the economy. As we move further into the long descent, we'll probably see prices for natural resources fluctuate but within an increasingly narrow band with a lower ceiling due to consumer unaffordability and a higher floor due to rising production costs. The overall effect should be rising prices as a percentage of disposable income but the perception of increasing scarcity might be masked by various financial and geopolitical events . There may never be agreement amongst the opinion elite about the causes of the long descent. Hopefully, some mainstream economist voices (like Galbraith in his new book) will begin injecting biophysical realities into their economic modeling.
I think the conclusion that economic growth is impossible or undesirable will come from places outside the field of economics. As Heinberg alluded to, the various groups that Krugman posited as being in league with each other are drawing similar conclusions independently. Imagine a Pentagon study that looks at climate change and possible responses to it done absent a political agenda. Or scientists come out in force on climate with an biophysical argument. Continued failure in the economy, or a worsening of climate disasters could cause a more serious inquiry. But then, that's depending on a crisis to serve as the change agent. And even then, people wouldn't necessarily agree and confuse proximate cause with ultimate cause. Economists will choose to see debt as the ultimate cause when really it is a symptom with it's own feedbacks. Climate change is a symptom but people like Krugman see it simply as a problem. Most people see it that way.
It looks like with Bullard apparently on board with continuing QE that the Fed will decide to start it up again. They may have seen enough of what happens without it.
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