Economy

Paul Krugman: Here's a New One—Faith-Based Economic Denialism

And similar to other science denialism, it is impervious to facts or evidence.

Photo Credit: via youtube

Paul Krugman makes it abundantly clear in Monday's column that denialism about factual things like climate change, evolution and plain facts about monetary policy are not so much a problem of ignorance, but more akin to religious dogma.

After all, these denialists are often highly educated people: "The problem, in other words, isn’t ignorance; it’s wishful thinking," Krugman writes. "Confronted with a conflict between evidence and what they want to believe for political and/or religious reasons, many people reject the evidence. And knowing more about the issues widens the divide, because the well informed have a clearer view of which evidence they need to reject to sustain their belief system."

If you think that we've never been here before, alas, we have. Krugman informs that there is a historical precedent to the economic denialism of the right-wing.

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On the eve of the Great Recession, many conservative pundits and commentators — and quite a few economists — had a worldview that combined faith in free markets with disdain for government. Such people were briefly rocked back on their heels by the revelation that the “bubbleheads” who warned about housing were right, and the further revelation that unregulated financial markets are dangerously unstable. But they quickly rallied, declaring that the financial crisis was somehow the fault of liberals — and that the great danger now facing the economy came not from the crisis but from the efforts of policy makers to limit the damage.

Above all, there were many dire warnings about the evils of “printing money.” For example, in May 2009 an editorial in The Wall Street Journal warned that both interest rates and inflation were set to surge “now that Congress and the Federal Reserve have flooded the world with dollars.” In 2010 a virtual Who’s Who of conservative economists and pundits sent an open letter to Ben Bernanke warning that his policies risked “currency debasement and inflation.” Prominent politicians like Representative Paul Ryan joined the chorus.

Well, Mr. Ryan, et al, here's the rub: Reality declined to cooperate. (Don't you hate when that happens!) Inflation stayed low. Mostly, the money piled up in bank accounts and cash reserves. "Needless to say, it’s not the first time a politically appealing economic doctrine has been proved wrong by events," Krugman writes. "So those who got it wrong went back to the drawing board, right? Hahahahaha."

(Krugman is really losing it with these guys. Can you blame him?)

No, instead of admitting they were wrong about runaway inflation, some have offered lame excuses; and some even more desperate, "have gone down the conspiracy-theory rabbit hole," Krugman writes, "claiming that we really do have soaring inflation, but the government is lying about the numbers (and by the way, we’re not talking about random bloggers or something; we’re talking about famous Harvard professors). Mainly, though, the currency-debasement crowd just keeps repeating the same lines, ignoring its utter failure in prognostication."

Krugman, a rational man, concludes that money has become a theological issue, an unshakable belief system, impervious to evidence and new information. He concludes:

Many on the right are hostile to any kind of government activism, seeing it as the thin edge of the wedge — if you concede that the Fed can sometimes help the economy by creating “fiat money,” the next thing you know liberals will confiscate your wealth and give it to the 47 percent. Also, let’s not forget that quite a few influential conservatives, including Mr. Ryan, draw their inspiration from Ayn Rand novels in which the gold standard takes on essentially sacred status.

And if you look at the internal dynamics of the Republican Party, it’s obvious that the currency-debasement, return-to-gold faction has been gaining strength even as its predictions keep failing.

Is there any hope? A few conservative intellectuals are trying to convince their ilk that monetary activism has its place. But they are increasingly marginalized.

So, no. Not a lot of hope that evidence will hold sway with the deniers.