In the 1980’s, one of the great puzzles for conservatives was how left-wing economists could not bring themselves to acknowledge the obvious. The Soviet economic model was a failure in absolute terms, as well as relative terms. Even long after the Soviets collapsed, guys like Paul Krugman remained puzzled by the inability of the communist system to keep pace with the West. His answer was that the Soviets either lost their will or lacked the moral fiber to make revolutionary socialism work.
As Greg Cochran has pointed out, the failings of socialism were obvious to anyone willing to look at what was happening. Once the Soviet Empire fell, it was undeniable, but economics never paid a price for being so wrong. In fact, the status of the field went up after the Cold War. Nobel Prize–winning economist Joseph Stiglitz became a shaman to the ruling class, despite a miserable track record. He is another guy who thinks the morality of socialism should make it work.
Now, part of this is something that John Derbyshire pointed out in his infamous review of Kevin McDonald’s book, The Culture of Critique. “Jews are awfully good at creating pseudoscience—elaborate, plausible, and intellectually very challenging systems that do not, in fact, have any truth content.” In fairness to John, he was summarizing what McDonald had written, but he largely agreed with the assertion. There is a fair bit of this in economics, where smart Jews conjure alternative reality.
That is a fun point to make, but that is not the reason for economists to be wildly wrong about so much, yet immune from criticism. By now, someone in the field should have pointed out that Joseph Stiglitz is a crank. Someone like Christine Romer, who was Obama’s top economist, was completely wrong about the effects of his stimulus plan, yet she was rewarded with a plum job in the academy. In most every field, even astrology, being that wrong is disqualifying.
Now, it is fun to mock economics, but it really should be a useful field and play a positive role in public policy debates. There are useful observations that come from the field, with regards to how people respond to various economic policies. In theory, the economics shop should provide objective analysis of government performance, policy proposals and basic data about the state of the economy. Government is about trade-offs and economics should provide the details of those trade-offs.
Of course, there are reasons for the field being a mess. One reason is that economics is not science. It is a basic set of immutable truths swimming in a sea of pointless analysis, clever models that mean nothing, and wishful thinking. Then there is the fact that there is money to be made in putting your stamp on the polices. When Christine Romer was selected by Obama, it was the golden ticket to elite of the New Keynesian Economics cult. She and her husband are now senior clerics.
There is something else that can be teased out of this phenomenon and that is the corrosive effect of democracy on objectivity. Democratic forms of government lack legitimacy, because they start with the assumption that anyone can hold any office within the system. No one is going to respect the office of legislator if the job can be won and held by anyone. Even in a republican form of government the assumption is that anyone can enter the process.
Unlike other forms of government that can rely on the blessing of the religious authority, democracy inevitably obliterates any threat to itself. Christians like to believe that the decline in faith corresponds with the rise in public corruption, but it is the reverse. The spread of democracy is what drives the decline in faith. Everywhere democracy becomes ascendant, religion moves into decline. This is an observation Muslims have made, which is why they oppose democracy.
That need for moral authority is still there, so inevitably democratic system evolves a civic religion and before long a civic clerisy. This intellectual elite, supported by the political elite that control the democratic institutions give their blessing to the whims of the office holders. The role of economist is that of the court astrologer in Persia or Merlin in the court of King Arthur. They appear to be consulting hidden knowledge, but they always end up endorsing whatever their patron desires.
The other side of this coin is there is no reason for the political class to attack their court magicians, even when they are completely wrong, because they will need them to bless the next set of policies. Romer is the worst case. Her and her husband have lifetime positions at an elite university. Stiglitz gets treated like the senior shaman by all sides of the political elite, because someone must fill that role. It is a lot like how the Catholic Church handles pedophile priests, when you think about it.