Paving The Road to Derpdom

[peristaltor.livejournal.com]

I don't care who writes a nation's laws . . .
if I can write its economics textbooks.

—Paul Samuelson

When last I wrote, I noted that a notorious crank who published questionable economics treatises and strange but lofty philosophical works has been today largely glorified as a visionary. Even more interesting, the Alpha Dog economist with whom this crank sparred early in his career, John Maynard Keynes, has been systematically dismantled in our history and economics texts, even though quite a bit of his work stands the test of empirical scrutiny.

But Keynes' writings and theories lacked what that crank Hayek's had; simplistic clarity, for one, and most importantly, a formula for protecting amassed fortunes from redistribution from below.

Before I wade too far into the reeds, it's important to clarify a very simple point: what we today call "economics" is not just a new "science," it is a new term. For decades, it was called "political economics," and for very obvious reasons. To cite one example, Fredrick Soddy said, "It ought never to be forgotten that Victorian economics was essentially class economics, in which only gradually and tardily the actual producers of wealth as distinct from employers and property owners were considered at all." (Soddy, THE ROLE OF MONEY, GEORGE ROUTLEDGE AND SONS, LTD., 1934, p. 10.) It turns out this logic can be applied to every school of economics ever considered. Each attempts to mentally and mathematically model the entirety of human exchange into a more digestible heuristic that might have some predictive value.

So, the very early political economists known as the French Physiocrats regarded land as the ultimate producer of wealth; their philosophy fairly neatly became "mercantilism." Next, Adam Smith and John Stuart Mill, amongst others, branched out a bit and became the Classical economists, who emphasized the role of labor in creating value. The last of this line according (to Steve Keen) was Karl Marx. From here we have the rise of the Neo-Classical economists and the various off-shoots (like the Austrians) which have become dominant today. From the neo-classical perspective, capital is the dominant lynch pin to economic modeling.



Here we can start to appreciate why the various schools of economic thought might have been embraced and by whom. The landed gentry could nicely appreciate the Physiocrats' elevation of land as the creator of wealth, since they owned it all. Likewise, Marx's emphasis on labor appealed to laborers and those who would elevate the role of the worker in society. Finally, under a neo-classical heuristic, there can be no wealth without the capital to build the factories that employ the workers in the first place.

I don't want to focus here on which of these philosophies is right, simply because I believe that they are all (in their own unique-as-snowflake ways) wrong. I'm curious more about what factors trumped the arguments found in the "losers" of this philosophical debate to create the dominant economic theorizing profession we know today. I here maintain that it was less the force of the individual arguments and more the subtle change from "political economics" to simple "economics" that gave the dominant philosophy more weight in the public's eye.

And from here, we really need to consider the Big Dog award for economics, the so-called Nobel Prize in Economics.

---

Notice I called it the "so-called" prize? That's because Alfred Nobel didn't create it. He did create a few prizes:

The five real Nobel Prizes—physics, chemistry, literature, peace, and medicine/physiology—were set up in the will left by the dynamite magnate when he died in 1895. The economics prize is a bit different. It was created by Sweden’s Central Bank in 1969, nearly 75 years later. The award’s real name is the “Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel.” It was not established by Nobel, but supposedly in memory of Nobel. It’s a ruse and a PR trick, and I mean that literally. And it was done completely against the wishes of the Nobel family.

Sweden’s Central Bank quietly snuck it in with all the other Nobel Prizes to give free-market economics for the 1% credibility.

For a few years, the prize was doled out to some pretty mainstream economic thinkers. That changed in 1974 when that now-notorious crank Friedrich Hayek won it. Two years later, Milton Friedman won. Why? For that, you must consider why the prize was created by the Swedish Central Bank in the first place.

Around the time the prize was created, Sweden’s banking and business interests were busy trying to ram through various so-called "free-market" economic reforms. Their big objective at the time was to loosen political oversight and control over the country’s central bank. . . .

Both Hayek and Friedman were huge supporters of the political independence of central banks. In fact, they built their careers on bashing government intervention in economic matters.

The Faux-belle Prize changed the fortunes of both men. Hayek went from being "considered a quack and fraud by contemporary economists" to a career traveling, lecturing and even publishing on Charles Koch's dime. Koch even dedicated his 1974 foundation to Hayek's now-not-so-quacky philosophy. (The Charles Koch Foundation's name was changed to The Cato Institute in 1977.)

Not surprisingly, one of the first books Mr. Koch allowed Hayek to publish bashed that Alpha Dog economist with whom he had sparred so many decades ago, now unable to defend himself: A Tiger by the Tail: The Keynesian Legacy of Inflation.

---

The Swedish Central Bank and Charles Koch were hardly alone in lionizing and promoting thinkers whose work, once accepted as mainstream and implemented as policy, enriched the coffers of those with capital. The list of luminaries must include Richard Mellon Scaiffe, Paul Weyrich, and especially Rupert Murdoch. All of these men and many, many others have worked to shift Joe Overton's Window of political possibility a bit to the right.



Lewis F. Powell, Jr. deserves special mention for his now-famous memorandum to the United States Chamber of Commerce in 1971. He opens his memo by noting that the free-enterprise system is under attack:

We are not dealing with sporadic or isolated attacks from a relatively few extremists or even from the minority socialist cadre. Rather, the assault on the enterprise system is broadly based and consistently pursued.

As a defense, he suggests businessmen fund front operations (like the Chamber of Commerce) to turn the tide of this war, starting with the Campus, where "the Chamber should consider establishing a staff of highly qualified scholars in the social sciences who do believe in the system." Supplementing these scholars, the Chamber should establish "a staff of speakers of the highest competency" to spread the work of the scholars and "a Speaker's Bureau which should include the ablest and most effective advocates from the top echelons of American business." These people should "evaluate social science textbooks, especially in economics, political science and sociology" as part of a "continuing program." (I underlined for emphasis.)

We must consider this last bit:

It is especially important for the Chamber's "faculty of scholars" to publish. One of the keys to the success of the liberal and leftist faculty members has been their passion for "publication" and "lecturing." A similar passion must exist among the Chamber's scholars.

Incentives might be devised to induce more "publishing" by independent scholars who do believe in the system.

(Again, I emphasized.)

To clarify that last sentence, those "independent" scholars should be well paid.

---

As one might suspect, the machinations of wealth shifting the very argument of what to do continue to this day. It simply proves too profitable a strategy to ignore. Pay someone to promote an idea, even if that idea has very little merit; pay others to review that idea and treat it as credible; buy advertising and use the economic pressure that brings to prevent actual news outlets from criticizing the promoted ideas; and pretty soon it becomes difficult to discern the credible ideas from the incredible. Slowly but surely, the incredible become Policy.

And as the Overton Window suggests, the more these incredible ideas are publicly promoted, the closer to them actual policy shifts. For example, following a bunch of links I stumbled upon this interesting article attacking Paul Krugman. It's interesting because Krugman confirmed my conclusions about hyperinflation that I raised earlier, that "the 1923 hyperinflation didn’t bring Hitler to power; it was the Brüning deflation and depression."

The article didn't bother to school Krugman on any detailed refutation, but rather stated simply, "For anyone who has studied history and the effects of inflation, the primary questions that should be asked of Krugman: would he have liked even more money printing in the Weimar Republic?" That's a Straw Man argument with no real value, since (as I noted) the money printing hyperinflation ended with the US loans, not with the later Brüning austerity. Why would someone bother to write such a bland critique?

Here things get interesting. The article came from some silly outlet called The Economic Collapse News. Philip Pilkington points out that this outlet advertises for paid writing positions:



Pilkington notes: "The reader can peruse the advertisement themselves but I would highlight three dog whistle notes for the would-be writer to be sure to hit."

1. Libertarian political orientation, “aligned” with the Austrian School.
   
2. Invocation of certain sources (Schiff, Von Mises Institute etc.).
   
3. Recommendation of only the Austrian “solution” to the current crisis.

In other words, as Pilkington says, framing the articles to invoke only the far-right-wackaloon philosophies requires "that the potential writer should think in a very specific way" and "tow the Party Line." In this case, the Economic Collapse News seems to advocate hoarding gold (pegging money to a gold supply is part of the "sound money" platform Hayek, Mises and other maintain is critical to avoiding "worthless" currencies).

The idea of outlets dedicated to promoting narrow philosophical interpretations of current events that benefit the founders of the outlets, however, fits nicely with all that the Faux-belle Prize committee, The Cato Institute, the Chicago School of Economics and Faux News have achieved. Through endless repetition, they have strewn kernels of "wisdom," however weak and unsupported the seed, which has taken root in the public subconscious, allowing it to influence public policy (much to the chagrin of our economic systems, which have collapsed due to flaws and blind spots inherent in these seeded kernels). Furthermore, even on not-for-profit discussion sites, we find people who have nurtured these weak seeds and defended the Austerian Right, dismissing cogent analysis and obfuscating the debate into a riotous Jello wrestling match.

Of course, defending Hayek and his dottering crankdom might be somewhat profitable, even on-line. I just haven't found the pertinent Craigslist ad yet.