The world has clearly changed since 1980. I reproduce below an ad from the current Job Openings for Economists, the Craigslist for academic positions in economics:
The Department of Economics at the University of Texas at Austin invites applications from distinguished senior scholars for the tenured position of the Murray S. Johnson Chair in Economics. Applicants should be an authority on the American free enterprise system. Preference will be given to scholars focusing on conservative economic philosophy. The position will be available in Fall 2012.
I don’t recall politics being so openly for sale before 1980; but maybe I am being naïve. After all, the Volker Fund paid for Friedrich Hayek’s chair at the University of Chicago in 1950.
When such deals were exposed in the media, the thought collective produced various talking heads suggesting that the Koch deals were no different than George Soros funding INET to alter the economics profession. This, of course, was a bit of agnotological intervention in itself. Soros, whatever his faults, has restrained himself from direct intervention in INET; and indeed, one of the striking things about that organization is the substantial representation of noteworthy neoliberals in its meetings and, to a certain extent, its educational programs. The major difference between Soros and the Kochs is that the latter have an entire half-century of doctrinal development of the thought collective to finely discriminate what should count as “sanctioned” knowledge. As Representative Brad Sherman of California so memorably complained, “The public is very angry at Wall Street. But they are told by all the respected voices that if we don’t protect and preserve the institutions on Wall Street, we’ll be fighting for rat meat in the streets.” The role of economists, in the view of the Kochtopus (a term coined by disillusioned right-wing intellectuals), seemed to be to cheer on the big established forces intent on maintaining the status quo ante from before the crisis. Soros, from my limited perspective, is not very clear about what “New Economics” could conceivably be; if anything his financial persona seems at odds with his intellectual pretensions.163
One thing you have to concede to the Kochs: they know what they want to buy, and they go after it single-mindedly.
5
The Shock of the New: Have Neoclassical Economists
Learned Anything at All from the Crisis?
Picking Up the TINA Pieces
I can sympathize with those who feel that the last thing they want to do in the aftermath of the current crisis is revisit the corpus of ideas emanating from the neoclassical orthodoxy. Picking over the bones of the decrepit doctrines that inspired one misstep after another would seem the very height of bathos, if not specious distraction. In any event, serious foraging would teeter on the edge of yet another stripped-down history of orthodox macroeconomics, a massive undertaking better conducted by others.1 Here we aim at something different. Given our ultimate objective is to understand the unreasonable resilience of the neoliberal Weltanschauung, and the role of the economists in fortifying it, I propose to concentrate on aspects of economics that have confused or otherwise obscured specific components of economic knowledge in the heat of the crisis and thereafter. In this, we further explore the phenomenon of “agnotology” raised in the previous chapter, growing out of the fundamental internal contradiction between trusting the economists to point the way out of the crisis, and trusting the markets to right themselves. Of course, in the midst of global crisis and upheaval, some economists might have become disoriented, and say some things that they might regret in quieter times. We have already raised the specter of cognitive dissonance and the Festinger effect; henceforth we just take it for granted that a substantial proportion of true believers would opt for a state of denial. A certain modicum of sympathetic indulgence (or at least, impartial spectatorship) is indispensable, or else the intellectual history of the crisis would degenerate into a serious of pointless “gotcha” exercises.
In that spirit, we might divide the reactions of the economics profession to the crisis into three broad categories: one, the orthodoxy was right all along and nothing that has transpired in recent events impugns the fundamental soundness of basic theory; two, the orthodox have made some unfortunate conceptual choices in the recent past, but the crisis has sobered us up, and we are working hard to rectify them, while maintaining fealty to all that was legitimate, timeless and dependable in neoclassical economics; and three, the best response would be to renounce neoclassical economics altogether, and start anew with some other tradition of economic thought. The first response was primarily dealt with in chapter 4. The second response is more difficult to characterize through any brief summary, and is the topic of the present chapter. The third response is the project of which this volume serves as preamble: it derives from a conclusion that renunciation of neoclassical economics is the only serious way forward to oppose the zombie fortification of modern neoliberalism. Precisely because the third option is such a disparaged minority position, we first have more work to do to improve its appeal.
To prepare the ground, we shall have to deal with the contemporary majority view that opposition to neoliberalism does not require throwing out baby with bathwater; that there is every reasonable expectation that neoclassical macroeconomics can be “fixed,” and continuity with the current orthodox economics profession can be maintained. This is the conviction of many figures on the left, as currently constituted: it is the opinion of John Quiggin (sketched in chapter 1), as well as Joseph Stiglitz, Simon Johnson, Paul Krugman, and, perhaps more incongruously, the bulk of the participants in attendance at INET. This opinion should be expected to have been grounded in very detailed aspects of current economic theory, as one would anticipate from such illustrious adherents, and has assumed multiple formats.
It is astounding for a discipline so obsessed with exhibiting consensus over orthodoxy that genuflection to continuity in macroeconomics itself so rapidly unravels:
Simon Wren-Lewis argues against the many people insisting that the crisis means that we must rebuild macroeconomics from the ground up; he argues, on the contrary, that the crisis doesn’t require a fundamental rethink of macro. And I am very much in agreement there. Basic sensible macro—what we learned from Keynes and Hicks—has actually held up very well in the crisis. To the extent that we have a crisis in macroeconomics as practiced, it comes from the way many economists chose to reject sensible macro. The crisis should (but won’t) kill fresh-water, equilibrium macroeconomics; but IS-LM is looking pretty good.
. . . But macro as I understand it isn’t what Wren-Lewis is describing when he talks about “the intertemporal optimising framework that is the heart of modern macro.”
Um, it’s not at the heart of MY macro. Or maybe I should say, it’s not at the HEART of my macro. I’m willing to do models with intertemporal optimization, but the optimization is never the core of the story. Instead, it’s just a gadget.2
In the heat of crisis, one man’s gadget turns out to be another’s dogma. Hence, by contrast with much of the rest of this volume, we will be brought into intimate confrontation with a few specifics of recent ideas about macroeconomics. The reason this may be significant for a larger audience outside of the cognoscenti of the economics profession is that, after the crash, very few economists have been willing to seriously entertain and evaluate the prospect that the dominant macroeconomic theory helped cause the crisis, by masking the buildup of instabilities before the crisis, and frustrating repair activity afterward.3 This underappreciated phenomenon has been then further confounded when journalists have been prompted to repeat a fair number of fallacies about the current state of economics, under the tutelage of a select coterie of informants. The shape of things is rarely as solid as they have been there portrayed, and this, too, has direct bearing upon the Nine Lives of Neoliberalism.
The mantra that “There Is No Alternative” (colloquially, TINA) has been a very powerful incantation in the neoliberal rucksack; as we have already suggested in chapter 2, the role of ignorance looms qu
ite large in formal neoliberal theory. Although there exist an infinite number of potential ways to revise and repair neoclassical economics (since there are an uncountable infinity of flaws), what has been striking about the crisis is the relatively small number of such revisions that have dominated the discourse concerning “what is to be done” about economics (outside of stubborn denial). Furthermore, one might imagine that, as the profession responded, the roster of proposed conceptual revisions to orthodoxy would have broadened and expanded with the passage of time; but this has not happened. Hence, there is something intriguing and very significant about the “version two” option that itself needs explanation: Why has the movement to “repair” orthodox economics been so ineffectual since the crash?
There are at least two immediate responses to this question: first, one might posit that there are aspects of the neoclassical intellectual tradition that are intrinsically incompatible with serious confrontation with the shape of the current crisis, such that engagement with the real causes is blocked; and second, that much of the profession suffers a “trained incapacity” to come up with really novel theoretical departures. Both of these propositions will be accorded attention in the rest of this chapter. However valid they might seem, these two particular explanations do not have much directly relevant to say about the particular role of the economics profession in fortification of the defenses of neoliberalism. That opens up the possibility that there is, furthermore, a third contributing explanation of the feeble success in the contemporary reconstruction of orthodox macroeconomics, which owes a debt to a long-standing subterranean affiliation with the Neoliberal Thought Collective.
The hypothesis I propose is to pursue a possibility raised in the previous chapter, that there have surfaced in the crisis some relatively systematic attempts to pump doubt and confusion into public discourse; in other words, some “explanations” of manifestations of the crisis and its aftermath have been launched as trial balloons not so much for purposes of further test and elaboration by sanctioned professional economists, but rather as calculated interventions in public discourse in order to buy time and frustrate any shared impressions of clearly delineated positions on a contentious issue. In other words, I am suggesting that the economics profession adopted a page from the neoliberal playbook, widely promoting the notion that intrepid economists were busy gestating all sorts of “new economic theory” to explain the crisis, when in fact they had mostly dug themselves into a defensive crouch where nothing about the orthodoxy was being sloughed off, and no errors would be freely conceded.
As chapter 2 argued, the relation of the control of knowledge to political power has been a neoliberal specialty. Evidence that such attitudes had become ingrained in some precincts of the NTC was exemplified by a notorious quote extracted from a Bush administration official in the summer of 2002:
The aide said that guys like me were “in what we call the reality-based community,” which he defined as people who “believe that solutions emerge from your judicious study of discernable reality.” I nodded and murmured something about enlightenment principles and empiricism. He cut me off. “We’re an empire now, and when we act, we create our own reality. And while you’re studying that reality—judiciously, as you will—we’ll act again, creating other new realities, which you can study too, and that’s how things will sort out. We’re history’s actors . . . and you, all of you, will be left just to study what we do.”4
The creation of such alternate realities has by now become quite familiar in areas such as Iraqi “weapons of mass destruction” and in global-warming denialism. As the climate crisis worsens, the general populace appears to recoil from the worsening news, fleeing the facts, preferring to disdain the science rather than confront the crisis. In one instance, the Harris polling organization claimed that in 2007, 71 percent of Americans said they believed that continued combustion of fossil fuels resulted in climate change, whereas by June 2011 it had dropped to 41 percent. Further, Gordon Gauchat has demonstrated that the only group to express severely diminished trust in science in surveys from 1974 to 2010 were self-identified conservatives, with university-educated conservatives displaying the steeper decline. Gauchat points out, “the emergence of ‘neoliberal science’ as an alternative to regulatory regimes has coincided with increasing distrust of science among conservatives.”5
The stance adopted in this chapter is that if agnotological procedures can be found regularly deployed in politics and biology, then we should not think it beyond the pale that they can be found in economics as well.6 Indeed, given the neoliberal drift in the profession in the last three decades, it would be more surprising if the agnotological manufacture of doubt had somehow bypassed economists altogether. In particular, the elaborate staged debate between the true believers in good old neoclassical theory and the advocates of judicious macroeconomic revision provides us with yet another paradigm example of pointless dissention and manufactured doubt, which only serves the purpose of maintaining the larger populace in a state of suspended animation: the audience only grows further skeptical of the economics profession if it becomes apparent that (as they see it) the neoclassical orthodoxy does not speak with one voice concerning the crisis, and consequently, no particular reform policy can gain much in the way of activist traction. Economists fiddle with their models, Rome (and Athens) burns, and the Neoliberal Thought Collective just grows stronger.
I am not the first to suspect this. Even a few respected orthodox economists have sometimes entertained notions that “there is the possibility that moneyed interests could manufacture controversy through think tanks, as has happened with aspects of climate change debate.”7 Unfortunately, they then underestimate the extent to which the economics profession has become beholden to neoliberal institutions, and indeed, the possibility that garden-variety disagreement, which might happen under any other circumstances, gets amplified and phase-shifted to produce its real objective, the paralysis of serious reform of the economy. The beauty is that the economics profession as a corporate entity need not consciously will the resulting manufacture of doubt. Just add the reflex conservatism which kicks in with cognitive dissonance, and we have a perfect prescription for agnogenesis.
Agnotological fomentation of ignorance occurs on many different scales: incidents at the individual level are much easier to document and understand than those that happen at the scale of (let us say) the bulkier subset of the profession devoted to macroeconomic theory. For instance, take the individual case of Joseph Stiglitz having to undergo a bit of targeted agnotology. Big money cascaded into financial economics in order to defend the sector from threats of regulation of derivatives in 2010–11. Many think tanks and public relations firms produced “position papers” arguing that any attempt to reign in derivatives would be disastrous. One such contract research house issuing papers was Keybridge Associates. Their report drew attention because of some very high-profile names attached to the document as “advisors”: Prof. Stiglitz for one, David Laibson of Harvard for another. The only problem was that, when the report was brought to the attention of those worthies, they felt impelled to go on record as repudiating the report.8 What Keybridge had done was pay them a prior retainer for some other purposes, and then gone ahead and attached their names to documents that they would not normally endorse, without notifying them of its activities. Now, was Keybridge attempting to influence the positions of Joseph Stiglitz? No; rather, it was pursuing the standard agnotological procedure of the manufacture of ignorance and confusion over what Stiglitz stood for in the minds of the public. The fact that this was just one element of a full-service agnotological offensive is demonstrated by another concurrent parallel activity, the manufacture of an astroturfed letter campaign to the CFTC opposing rule changes to bank control of derivatives markets, which emanated from similar entities.9 These are all standard practices from the agnotological playbook, orchestrated by firms located somewhere “outside” the academic sphere but “inside” the Beltway. An
d, when it came to the regulation of derivatives, money talked, and never shut up.
There have been a plethora of similar agnotological initiatives over the past few years: the artificial brouhaha over whether spending austerity can produce economic growth, the trope that extension of unemployment benefits in the United States after the crash caused the persistently high unemployment rate, the meme that the TARP procedure was totally successful and cost the taxpayer not a penny, and so on. Rather than document a further ragbag sequence of micro-level agnotological interventions in the crisis, having little common denominator from one instance to the next, the aim of this chapter is to assay a more macro-level account of intellectual (in)activity. Clearly, there are two agendas to be satisfied in this chapter: (1) demonstration that the intellectual content of the proposed amendments to neoclassical macroeconomics in response to the crisis has been comparatively minimal, inconsequential, and ineffectual; and (2) evidence that the Potemkin dispute set up between the fundamentalist defenders of orthodoxy and the supposed reformers of orthodoxy has sported some connections to the neoliberal collective. Chapter 4 suggested that the economics profession has emerged from the crisis relatively unscathed in part thanks to its often subterranean neoliberal support system. Chapter 5 reverses the causal arrow: it will suggest that the paltry ineffectual intellectual amendments to neoclassical macroeconomics prompted by the crisis exist, in part, serve the agnotological purposes of the NTC.
Never Let a Serious Crisis Go to Waste Page 32