Thu Dec 29th, 2011 at 03:45:31 AM EST
I've been ranting in the physical world for more than a week or two about the "Learned Helplessness" of our leaders and the dominant economic consensus. Now it's finally inspired a rambling diary...
Today, it seems Krugman is channelling me:
The Defeatism of Depression - NYTimes.com
The Defeatism of Depression
A number of people have asked me to weigh in on David Brooks's piece today. Sorry, not gonna do a tit-for-tat. Let me instead just make a more general point.
All around, right now, there are people declaring that our best days are behind us, that the economy has suffered a general loss of dynamism, that it's unrealistic to expect a quick return to anything like full employment. There were people saying the same thing in the 1930s! Then came the approach of World War II, which finally induced an adequate-sized fiscal stimulus -- and suddenly there were enough jobs, and all those unneeded and useless workers turned out to be quite productive, thank you.
There is nothing -- nothing -- in what we see suggesting that this current depression is more than a problem of inadequate demand. This could be turned around in months with the right policies. Our problem isn't, ultimately, economic; it's political, brought on by an elite that would rather cling to its prejudices than turn the nation around.
front-paged by afew
We're drowning our economic lives because we've allowed ourselves to be propagandised into thinking of the economy as some kind of weather event - beyond all our actions.
I look at all this and I'm angry and I don't know how to explain it. But then I stumbled across this Tedx talk and it gave me a little glimmer of understanding. It's a good talk as a whole, but for me the mini-epiphany is found in the first 5 mins (and for the ultra-impatient, you can probably just watch from 4:00 to 5:00.)
One of the crucial failures in both the practice of financial regulation and the discussions about fixing it is the insistence on a small, strange duet of options. Either:
a) A perfect set of regulations that involves no human judgement is developed to do the job.
b) Nothing useful can be done to prevent anything, so we should just leave it as it is.
I'm inclined to call this the most effective right-wing frame of our times. But I'm starting to wonder if it's bigger than that, since it seems that this type of thinking has overtaken many minds on the left too.
So now those who watched the video are asking "what does this have to do with water pipes in Africa..?" If you didn't, I urge you again to watch it.
Simply, I think the same frame is at work and I'd generalise it further:
We've become conditioned to seek solutions that are composed entirely of structures. They might be algorithmic (regulation rules) or physical (water pipes) but it is the common wisdom that all any problem is some one-off building work. And if that doesn't work - well you know, life is hard and some problems cannot be solved.
The description in the video - the simple fact that aid projects are very happy to spend money on wells and water pipes, but never on the salary of anyone to maintain the system... it's so contrary to how our prosperity was built... but we seem to have forgotten.
In the past, great works of engineering were undertaken, but it was understood also that organisations had to be established to maintain everything that had been built.
The frame of learned helplessness began with cost-cutting measures, with attempts to save money by cutting back on running costs... but somewhere it became a dogmatic belief that any system that requires maintenance is too flawed to be useful.
ATinNM noticed me in an open thread, expressing disappointment and depression at how a number of thinkers in "complexity studies" seem to have lost the plot. This frame, I realise, is how they've lost the plot.
The right answer to how you regulate a complex financial system has been laid out well by JakeS a number of times here, I hope he'll forgive me for a very short (and potentially inaccurate) summary:
Get some sensible rules of thumb. Put them in the hands of regulators who are knowledgable and prepared to act to regulate new activities when they look dangerous, and respond flexibly to new circumstances.
But for many (Paul Ormerod springs to mind) this is impossible and unworkable. I never really understood the fullness of the objections, but it seems clear to me now, it's all about the frame. They want an autonomous system (because they've been taught that the market is an autonomous, self-regulating system?) and if there isn't one and instead the proposal is for a system that is maintained by humans - then well, it's just not worth it. Humans are not up to the job. There's too much unknowability to do anything but surrender to the winds of the market.
Yet it seems to me that every step human society has made from the proverbial "monkeys coming down from the trees" has been to deal with complexity and unknowability, not only through rules and physical structures, but by tasking people to maintain and when necessary refashion those things.
How did our culture get to a point where we'd rather be tossed by storms than trust someone to inspect a roof now and then?