by A swedish kind of death
Sat Nov 3rd, 2012 at 06:50:53 AM EST
I recently came across John Kenneth Galbraith's The Affluent Society where he (afaik) introduces the concept of Conventional Wisdom. Since we are seeing a clash between the Conventional Wisdom in the Economics of today and what Galbraith calls circumstances having a look at what it is might be beneficial.
front-paged by afew
What is the Conventional Wisdom then?
Galbraith's Conventional Wisdom is the very persistent system of ideas upon which debates can be held over details but the great mass of ideas remain unchanged. Experts are called experts because they can easily and eloquently relate what happens to the Conventional Wisdom and explain it in terms of the Conventional Wisdom. Galbraith is primarily interested in the Conventional Wisdom of economics but also takes examples from military doctrine.
How does the Conventional Wisdom change?
Galbraith has a well expressed opinion on this: "Ideas are inherently conservative. They yield not to the attack of other ideas but to the massive onslaugth of circumstances with which they cannot contend." Sums it up. Yet here we are and so far the Conventional Wisdom appears to hold despite all the circumstances aligned against it. So lets dig deeper.
Why is a Conventional Wisdom needed?
Galbraith's view is that since Economics does not render itself easily to empiric testing, we need the Conventional Wisdom to fill the gaps. And why do we need that? Galbraith: "[O]ne must have an explanation or interpretention of economic behaviour. Neither man's curiosity nor his inherent ego allows him to remain contentedly oblivious to anything that is so close to his life." Eloquently put, but hides a class bias. There are lots of people that view the highs and lows of the economy as something to be suffered through rather then understood. Same as the weather.
But who exactly needs the Conventional Wisdom?
Leaving Galbraith and just asking who needs this persistent system of ideas on just how things really work that fills in the gaps, I think it is pretty obvious. It is most critically needed by the government and more so the higher up in government. If the ruler pulls policy lever A: what will happen? If his advisors can not tell him, they are no good. If he himself admits that he does not know the consequences of this actions, then what good is having a ruler? Wheter it is God or market that rewards the faithful, wheter history is run by Great men or the forces of production, there needs to be some way to estimate what will happen.
Revisiting how Conventional Wisdom changes
So if it is the rulers needs that are served, the Conventional Wisdom breaks when it is so assaulted by circumstances that it no longer serves its function to inform the rulers. This can of course rarely be admitted by the current rulers so we have to look for signs from those stepping down.
In an exasperated outburst, just before he left the presidency of the European Central Bank, Jean-Claude Trichet complained that, "as a policymaker during the crisis, I found the available [economic and financial] models of limited help. In fact, I would go further: in the face of the crisis, we felt abandoned by conventional tools."
To which Krugman answers:
So standard economics told him that austerity would depress economies; he chose not to believe that, and go with the confidence fairy; and he was wrong, wrong, wrong. How is that a problem with the inadequacy of economics?
But of course, Trichet does not mean the same as Krugman with the word "economics" and what we are interested in here is not economics as understood by Krugman, but as understood by Trichet. So Trichet being abandoned by economics is a good thing. So is the debates on the usefulness of economics.
How do you establish a new Conventional Wisdom?
Simple, you get the rulers ear, convince him that you know what is what and go on to be hired as economic advisor. Or wait, that is not easy at all. Maybe you write a book, like Galbraith did. Ok, this is the tricky and Galbraith being Galbraith only leaves clues to what you do once you already have a pulpit and the ears of the Serious People.
A note on Paradgims, Conventional Wisdom and Science
A final note, because this is something that is frustrating to many. Is Conventional Wisdom just Paradigms in Social Science? I think not, I think the main difference is how it treats unexplored territory. For there to be Science we need to accept areas that are not yet explored and also deconstruction of how previous explorations functioned. These are accepted within the construction of paradigms, but are largely unacceptable for the uses of Conventional Wisdom. So in order to inform the high and mighty and secure career paths in the bureacracy a Science that accepts the mantle of Conventional Wisdom must to an extent stop being a science and put what is politically acceptable before other considerations. Maybe we should be glad that it is Economics this happened to, think what would have happened had Physics been elevated to the Theology of the day.
(All quotes are from The Affluent Society, Chapter 2)