Voters, activists, and political leaders of the present day are in the position of medieval doctors. They hold simple, prescientific theories about the workings of society and the causes of social problems, from which they derive a variety of remedies–almost all of which prove either ineffectual or harmful. Society is a complex mechanism whose repair, if possible at all, would require a precise and detailed understanding of a kind that no one today possesses. Unsatisfying as it may seem, the wisest course for political agents is often simply to stop trying to solve society’s problems.
Pointer from Bryan Caplan. Similarly, in my almost-finished book on macro, I write,
From my perspective, the conventional structure of aggregate demand and aggregate supply offers nothing but a set of just-so stories. It is the equivalent of the ancient Greek theory of medicine which holds that health is governed by the four humors of black bile, yellow bile, phelgm, and blood.
Except we know that it works. We know that raising interest rates like Volker did in the 80s can cause a recession, and lowering them can induce recovery. We know it causes problems when that can’t be done. Monetary non neutrality begs explanation, and claims it is ring false. AD falls somewhat flat in this regard as it does not incorporate money but we do know the direction of the effect of treatment. The illusion is there exists some neutral position of doing nothing when doing nothing also amounts to doing something.
What you call “recovery” I call the next bubble.
That is in fact what Krugman will be calling it in the near future if he isn’t already calling it that.
In fact he already called it that, although now he claims he was joking (conveniently) .
AND btw, I’m quite serious. And don’t take my word for it:
http://www.businessspectator.com.au/article/2013/11/26/economy/end-depression-never?
Krugman asks: “So how can you reconcile repeated bubbles with an economy showing no sign of inflationary pressures? Summers’ answer is that we may be an economy that needs bubbles just to achieve something near full employment – that in the absence of bubbles the economy has a negative natural rate of interest. And this hasn’t just been true since the 2008 financial crisis; it has arguably been true, although perhaps with increasing severity, since the 1980s.”
Now, to make up for something that they didn’t foresee and didn’t head off, they are pondering proposing bubbles as far as the eye can see.
Does this sound like a science, or does it sound more like bloodletting?
“They hold simple, prescientific theories about the workings of _____ and the causes of ____ problems, from which they derive a variety of remedies–almost all of which prove either ineffectual or harmful”
This is true of doctors today. Noone seems to believe this. I wonder if people live their lives in a notional fog where they assume other people operate on some perverse mental model of behavior (e.g. “doctors who I put my life in their hands really must know what they are doing”). The competency assumption is odd to me. Just for one example, I was considering a tonsillectomy. I’ve read the horror stories about adult tonsillectomy. One of the suggestions is to make sure the doctor will help you out with the pain meds. So, when I consulted the doctor I asked about that. He said he would not. I said “so, I get the same meds as a 90 pound woman?” and he answered “yes, because we don’t want to destroy your liver.” Odd, but makes some sense. I doubt they are that precise, but fine, whatever. So, I went home and did more research. The reason they could kill your liver is because the limiting factor in the pain med is the Tylenol. So, why couldn’t the doctor just give me some codeine minus the Tylenol? I’m sure he could. But it seemed like he didn’t know this in the first meeting and was certainly unwilling to discuss anything other than the single dose. I’m not sure exactly how the government is involved in the incentives but I’ve learned to assume that first. What I’ve learned not to assume is that they have some deep underlying reasoning that they simply don’t or can’t articulate.
I think you are insulting medieval doctors here. I am not being flippant or insulting macro.
Medieval medicine knew a lot of things. Medieval physicians could do amputations with a cautery, they could tip cataracts, they could sew up wounds and drain puss, set bones, and many other things that really worked. While they didn’t understand infection or the circulation of the blood, they recognized that extreme heat could kill puss and cauterization could stop bleeding. They had antiseptics, such as wine and primitive antibiotics, such as mercury and sulfur. They also collected case histories and performed dissection. They may have been pre scientific, but for most injuries you were better off under the treatment of a medieval physician than anyone else available at the time.
Tell me if macro is this advanced? Do we have macroeconomic knowledge that allows us to set a broken bone, reset a shoulder, or cauterize an arrow wound?
I am a geologist and in my own profession I would be happy to report we were at the level of the 18th century but really we are in the middle of the 17th and no geologist today has the knowledge of earth systems that William Harvey, the discoverer of the circulatory system, had of the human body in 1650.