The Red Flag of Hubris

Never, ever, listen to or hire someone who speaks like this:

It turns out we know more about economic policy than we think we do. Much (certainly not all) of contemporary economics has a pretty good idea of how the system works and fails. Scholars understand the hydraulics, as it were, of both the macroeconomy and critical subsystems such as health care. It’s true that we often fail to apply what we know — in part because of political interference, in part because we’ve unlearned key lessons from the past, leading to mistakes such as premature deficit reduction or inadequate financial-market oversight.

But the lesson of the recovery is this: In crucial areas of the economy, we have the historical knowledge to diagnose what went wrong, and when we undertake the prescribed policy responses, they work like they’re supposed to. Conversely, when we fail to apply what we know, we hurt the economy.

….But now that the page has turned, let’s not forget what we’ve read. We know more than we think we do about how the economy should work. We just have to put our knowledge to good use.

If you haven’t guessed, this is Jared Bernstein, crowing in the Washington Post. I left out this part at the beginning:

The Recovery Act, the financial and auto bailouts, Federal Reserve policy, and Obamacare are examples of applying the known hydraulics to achieve the intended effects. Today’s economic revival was, in the end, a victory of the technocrats.

Honestly, I’m staggered at Bernstein’s lack of perspective and resultant lack of humility (which came first?). Such broad claims should be discredited simply by their broadness.

Can it really be true that having short rates stuck at the zero-bound for 5 years is simply a victory of technocracy? On what basis, precisely, were the auto bailouts a success?  Has Bernstein utterly missed that his earlier foreboding projections of the results of ‘austerity’ were completely wrong? That he and 350 other technocrats “who know how the economy works” signed a letter suggesting that sequestration would lead to a recession? That the post-crisis era makes a poor case for Keynesianism?  That healthcare spending is still rising?  He offers no counterfactuals, and certainly has no control cases.  One doesn’t have to agree 100% with these detractors to simply see that he should be more equivocal in his claims.

Even if his narrower claims were indisputable, his broader conclusion that technocracy is justified is frightening. I don’t want people like this in power. Arnold Kling is equally appalled.

I am reminded of Hayek’s Nobel acceptance speech:

If man is not to do more harm than good in his efforts to improve the social order, he will have to learn that in this, as in all other fields where essential complexity of an organized kind prevails, he cannot acquire the full knowledge which would make mastery of the events possible. He will therefore have to use what knowledge he can achieve, not to shape the results as the craftsman shapes his handiwork, but rather to cultivate a growth by providing the appropriate environment, in the manner in which the gardener does this for his plants. There is danger in the exuberant feeling of ever growing power which the advance of the physical sciences has engendered and which tempts man to try, “dizzy with success”, to use a characteristic phrase of early communism, to subject not only our natural but also our human environment to the control of a human will. The recognition of the insuperable limits to his knowledge ought indeed to teach the student of society a lesson of humility which should guard him against becoming an accomplice in men’s fatal striving to control society – a striving which makes him not only a tyrant over his fellows, but which may well make him the destroyer of a civilization which no brain has designed but which has grown from the free efforts of millions of individuals.


When it comes to planning, I prefer to buy local:

Hayek and the Knowledge Problem from Lynne Kiesling on Vimeo.

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