Saturday, March 27

Froth Is Stranger Than Friction

[Hey, as long as we're all here, was ours the only household in the aethersphere which spent roughly 48 hours unable to connect to anything Blogger related? I got nothin'. Couldn't connect here, to Roy's, e.g., or Blogger Status, and when it finally returned there's not one word of a problem. I'd ask 'em directly, but as I recall it finding an email addy which is answered by a human is the equivalent of two Easter eggs.]

David Brooks,
"The Return of History". March 25

AH, the dubious joys of one of those Brooks columns which eschew, or "eschew", politics for some community college socio-economic survey course lecture designed to show us Brooks as Fair-Minded Conservative Intellectual, and wind up actually showing us Brooks, the mildly, if unfathomably, successful operator of New York's largest George Eff Will's Gentlemen's Neckwear franchise.

(Brooks seems to imagine, with his career serving as evidence, I suppose, that this sort of thing functions like a few good body blows in the early rounds, softening up his opponent for the headshot knockout in the 8th. Brooks, in case we haven't pointed this out before, is no pugilist.)
Some brilliant scholar has to write a comprehensive history of modern economics because the evolution of this field is clearly one of the most consequential things happening in the world today.

Well, shit, Dave; McDonald's new menu is one of the most consequential things happening in the restaurant business today, too. Doesn't mean I wanna watch someone eating that slop.
Act I in this history would be set in the era of economic scientism: the period when economists based their work on a crude vision of human nature (the perfectly rational, utility-maximizing autonomous individual) and then built elaborate models based on that creature.

Says the guy whose life-changing event was a lecture by a guy who won a freakin' Nobel for saying that all human freedom could be assigned a dollar amount.

Look, if I learned anything at all in college it's this: do not trust the man who claims that before his glorious ratiocination took its present shape all thinking was done by well-intentioned bumpkins. Do not take the word of some guy who glanced at the illustration before telling you that Lamarck thought giraffe necks stretched with the food supply, or Pollock splashed paint around because he was an inferior draftsman. Consider carefully whether your floatation device to that desert island should be the crude pastoral Das Kapital or Free to Choose: A Personal Statement.
Act II would occur over the past few decades, as a few brave economists tried to move beyond this stick-figure view of humanity. Herbert Simon pointed out that people aren’t perfectly rational. Gary Becker analyzed behaviors that don’t seem to be the product of narrow self-interest, like having children and behaving altruistically. Amos Tversky and Daniel Kahneman pointed out that people seem to have common biases when they try to make objective decisions.

This part of the history would be the story of gradually growing sophistication and of splintering.

Then somebody explain why I thought I was at a regional dinner-theatre production of Rhinoceros.

And listen: no offense to people I will never read, and who, no doubt, are being subjected to the same sort of easy analysis the stock characters of Act I got from Visiting Professor Brooks, but is this really what Economics has been up to? Fighting over which scientificalist model best predicted the slumber party's opinion of Allyson Kidwell's new crush? It's worse than even I imagined.

There really comes a point in thinking about almost any human endeavor where you have to ask yourself whether the whole thing isn't just a leg-pull devised by three bored sophomores. And we are well beyond that point.
Then the story would come to Act III, the economic crisis of 2008 and 2009. This act is a climax of sorts because it exposed the shortcomings of the whole field. Economists and financiers spent decades building ever more sophisticated models to anticipate market behavior, yet these models did not predict the financial crisis as it approached. In fact, cutting-edge financial models contributed to it by getting behavior so wrong — helping to wipe out $50 trillion in global wealth and causing untold human suffering.

Funny thing: every one of those Burke weekends Brooks attends spends an hour on how Liberalism Believes In The Perfectibility of Man, while Conservatives See Accurately Into His Dirty Jungle Nature and Take Heed. And who kept pushing for us to turn the prison keys over to the descendants of Astor, Vanderbilt, and Morgan. Go fucking figure.

Nobody saw it coming! Like fun, they didn't. Nobody sounded the alarm is an entirely different matter.
This would bring the historian to Act IV, the period of soul-searching that we are living through now. More than a year after the event, there is no consensus on what caused the crisis. Economists are fundamentally re-evaluating their field.

And Willie Sutton is fundamentally re-evaluating where the money is.
In The Wall Street Journal, Russ Roberts of George Mason University wondered why economics is even considered a science. Real sciences make progress. But in economics, old thinkers cycle in and out of fashion. In real sciences, evidence solves problems. Roberts asked his colleagues if they could think of any econometric study so well done that it had definitively settled a dispute. Nobody could think of one.

Okay; the little irony here, that Brooks is busy doing the same thing with his Liberal's Favorite 'Conservative' sinecure that Economics has done with Mathematics, or modern Psychobabble with Linguistics: attach itself to some harder science and assume its mantle for the Class picture, is killing me.

Rules For Using The Sciences (aka the "Real" Sciences) As A Metaphor For Your Little Enterprise

1) You recognize you are using them as a metaphor.
2) You don't say they "progress".
3) In fact, you avoid treating them as factories of any sort, particularly when treating the cosmos like a really enormous factory, and all your co-beings on this little part of it as furnace stokers, is your general stock in trade.
4) You maybe learn something about them first.

Maybe pure mathematics behaves this way; it is the human condition that we don't even agree on that much, and certainly can't know for sure. The hard sciences emphatically do not work that way. Their workers continually add to the store of human knowledge, not always for the good; anyone claiming they continually "progress" isn't paying attention. The principal distinction between "real" scientists and economists is that the former generally temper their declarations.

So I'm not sure who, aside from economists themselves and the willfully credulous, thought economics was a science in the first place, but what's been damned sure all along was that the pretension of expertise was more valuable than expertise itself.

Thirty years after the Keynesians averted total disaster in the Great Depression your boy Friedman decided they didn't really deserve the credit; the Reagan administration was still in power when the Theory of Incontinently Tax Cutting Your Way To Fiscal Heaven was discredited in the most direct way possible, but it still enjoyed a reverse-Renaissance of sorts in the Bush administration. Real science does not do this sort of thing.
“The bottom line is that we should expect less of economists,” Roberts wrote.

Okay, I'll try.
In Act IV, in other words, economists are taking baby steps into the world of emotion, social relationships, imagination, love and virtue. In Act V, I predict, they will blow up their whole field.

Finally, something we call all get behind.
At the end of Act V, economics will be realistic, but it will be an art, not a science.

Good. 'Cause then we can begin the process of creating another mega-disaster, so y'all can learn that the people who were claiming it as a science, and now pretend to embrace Art, are the ones we should have hung in the first place. Real science is all about efficiency, y'know.


D5r.BDH said...

And no matter how many Acts Bobo writes, his output will still be hackery, not art.

Scott C. said...

I've learned (and unlike Brooks, remembered) the one hard and fast rule about reading Riley: don't attempt to do so while consuming liquids. However, this:

Then somebody explain why I thought I was at a regional dinner-theatre production of Rhinoceros

lead directly to a sort of chortling-induced hypoxia. So while my keyboard and monitor are fine, you owe me about two cubic liters of oxygen.

ckc (not kc) said...

I'll give you a couple of square liters - you'll have to cube them yourself

satch said...

I've always loved how conservatives are the ones who recognize Mankind's "dirty jungle nature" and, in the very next breath, blatt on about how markets should be left to regulate themselves. So... if every actor in the marketplace is inherently evil, does all that evil cancel itself out, or what?

heydave said...

I especially like the ever-dwindling scale of Bobo's Acts. Soon, one will be able to fit trillions of Acts into a single Friedman!

JDCorley said...

"I'll try" is the unheralded hero of this piece.

Anonymous said...

Can I be completely simple-minded for a sec, and say that anybody who thinks that a bubble won't eventually burst, or that what goes up won't come down, is either an idiot, or - for whatever reason - being irrational?

I've done the latter myself, many times, and suffered the consequences. God knows that's human. But I'm damned if I can grasp how anyone looking *as a professional* at the history of human economic behavior could believe that there really could be a fan that no shit would ever touch.

Li'l Innocent

Kathy said...

Everyone knew the real estate bubble would burst, they literally bet that THEY would escape with the Loot before the crash, or rather, the POP! heard 'round the world.

I remember in the 60's, I think, hearing the phrase "Enlightened Self Interest" thrown about. A hypothesis that people will do the Right Thing (like Public Option or jsut helping the poor) because they *know* it will also benefit them in the long run.

But how many people are enlightened?