Did I mention that one of David Brooks' favorite economics blogger is Megan McArdle?
The establishment — and yes, this week there really is such a thing — is saying we have to pass [Bush's bank bailout] even if it’s ugly. The greater risk is inaction, not bad action. I happen to agree with this position, for what it’s worth, influenced by the brilliant economic blogger Megan McArdle, who points out that given how bad the Great Depression was, it’s probably worth taking heroic measures to prevent another.
The elite say we have to give tax-payer money to the banks so we must do what they say. But our elite economists were wrong. But that's not their fault because economics is an art, not a science, and now our elite say economics is broken. But our elite will figure out the solution. All they have to do is look back to earlier elites, who will tell the present elites what to do, so they can tell David Brooks, who can then tell us.
This amounts to rediscovering the humility of an earlier time. After all, Adam Smith was a moral philosopher, Friedrich von Hayek built his philosophy on an awareness of our own ignorance, and John Maynard Keynes “was not prepared to sacrifice realism to mathematics,” as the biographer Robert Skidelsky put it. Economics is a “moral science,” Keynes wrote. It deals with “motives, expectations, psychological uncertainties. One has to be constantly on guard against treating the material as constant and homogenous.”
In Act IV, in other words, economists are taking baby steps into the world of emotion, social relationships, imagination, love and virtue. In Act V, I predict, they will blow up their whole field.
Economics achieved coherence as a science by amputating most of human nature. Now economists are starting with those parts of emotional life that they can count and model (the activities that make them economists). But once they’re in this terrain, they’ll surely find that the processes that make up the inner life are not amenable to the methodologies of social science. The moral and social yearnings of fully realized human beings are not reducible to universal laws and cannot be studied like physics.
Sociologists and theologians might disagree, but Brooks is busy creating a new reality here, and the old reality will just have to suck it up.
Once this is accepted, economics would again become a subsection of history and moral philosophy. It will be a powerful language for analyzing certain sorts of activity. Economists will be able to describe how some people acted in some specific contexts. They will be able to draw out some suggestive lessons to keep in mind while thinking about other people and other contexts — just as historians, psychologists and novelists do.
At the end of Act V, economics will be realistic, but it will be an art, not a science.
That's one powerful assessment of failure there. Our economics didn't fail us, economics failed our economists-our elite. Who are never wrong, even when they are.