“You simply can’t run an economy as complicated as ours on ideology alone.” -- Jared Bernstein, senior economist, Economic Policy InstituteYes, you can. Just badly.
Peter Goodman, in this morning's New York Times, asks whether belief in the "unfailingly" wise unfettered free market is, in fact, a false idol.
. . . the invisible hand is being asked to account for what it has wrought. In this country, many economic complaints — from the widening gap between rich and poor to the expense of higher education — are being dusted for its fingerprints.Some "fervent proponents of unfettered market forces have lately come to embrace regulation," Goodman observes.
Free market fundamentalists have for years approached the market with something resembling the unquestioning ardor of their religious fellow travelers.
Religious fundamentalists (especially, charismatics) sometimes display magical thinking when applying their theology. The Bible is perfect and inerrant, so their reasoning goes. Thus, verses containing "God's promises" are vows which God must, by his ever-truthful nature, keep. Recite the incantation with the appropriate reverence, goes the syllogism, and mere humans can make the creator of the universe jump on command. Crank in Bible verse, out pops God like Jack from his box.
If the magic fails, the fault lies not in God or in the Bible, but in oneself.
"Did you plead the blood, brother?" I heard a believer ask of a friend who complained a prayer had gone unanswered. "You've got to plead the blood."
If the magic doesn't work, you didn't do the spell right. The true believer never questions his theology. It, too, is perfection.
So it is with free-market fundamentalists from Milton Friedman's Chicago school of economics, Naomi Klein observes in "The Shock Doctrine." Market forces act like unchanging forces of nature:
In the truly free market imagined in Chicago classes and texts, these forcesAs true to life as the Ptolemaic and Copernican models of the universe, but with more profit potential.
exitedexisted in perfect equilibrium, supply communicating with demand the way the moon pulls the tides. If economies suffered from high inflation, it was, according to Friedman's strict theory of monatarism, invariably because misguided policy makers had allowed too much money to enter the system, rather than letting the market find its balance.
[. . .]
According to the Harvard sociologist, Daniel Bell, this love of an idealized system is the defining quality of radical free-market economics. Capitalism is envisaged as "a jeweled set of movements" or a "celestial clockwork . . ."
Like all fundamentalist faiths, Chicago School, economics is, for its true believers, a closed loop. The starting premise is that the free market is a perfect scientific system, one in which individuals, acting on their own self-interested desires, create the maximum benefits for all. It follows ineluctably that if something is wrong within the free-market economy -- high inflation or soaring unemployment -- it has to be because the market is not truly free.Faith and pseudoscience: both unfalsifiable. Like tax cuts, as Slate's William Saletan observed in 2004 (emphasis mine):
In 1999, George W. Bush said we needed to cut taxes because the economy was doing so well that the U.S. Treasury was taking in too much money, and we could afford to give some back to the people who earned it. In 2001, Bush said we needed the same tax cuts because the economy was doing poorly, and we had to return the money so that people would spend and invest it.Keep flying, Yossarian:
Bush's arguments made the wisdom of cutting taxes unfalsifiable. In good times, tax cuts were affordable. In bad times, they were necessary. Whatever happened proved that tax cuts were good policy. When Congress approved the tax cuts, Bush said they would revive the economy. You'd know that the tax cuts had worked, because more people would be working. Three years later, more people aren't working. But in Bush's view, that, too, proves he was right. If more people aren't working, we just need more tax cuts.
Let me see if I've got this straight: in order to be grounded, I've got to be crazy and I must be crazy to keep flying. But if I ask to be grounded, that means I'm not crazy any more and I have to keep flying.Exactly.