Madmen in Authority

Practical men who believe themselves to be quite exempt from any intellectual influence, are usually the slaves of some defunct economist. Madmen in authority, who hear voices in the air, are distilling their frenzy from some academic scribbler of a few years back.

---JM Keynes

This is perhaps my favorite quote from Keynes. What I like about it is that it highlights the extremely powerful role of wrong ideas in screwing things up. It's not just that political actors have constrained choices or make mistakes--it's that they believe in wrong ideas, particularly wrong economic ideas, and systematically follow those ideas with predictably terrible results.

One big theme of my book, The Optimistic Leftist, is that getting Western capitalism on a better growth path is not that mysterious. We more or less know how to do it. But so many politicians are "slaves of some defunct economist" (in this case Milton Friedman and allied economists of the 1970's market fundamentalist revolution) that it makes it very difficult to avoid serial policy errors that fail to solve economic problems or even make them worse.

Along these lines, I recommend an article Robert Skidelsky has just published on "The Advanced Economies' Lost Decade". He does a great job summarizing the various strands of economic thought that have led us astray since 2008 and the heavy real-world consequences we have suffered as policymakers serially embraced one bad idea after another.

Ideas matter!

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The Advanced Economies’ Lost Decade, by Robert Skidelsky

A review of the policy debates of the post-crisis years suggests that flawed macroeconomic theories were given too much weight for too long. The result has…

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