"Predictions and Prejudice" among that cohort of right-wing hacks posing as social scientists

Krugman @ NYT on the shame - or should I say "shamelessness" - of too many in his profession:

The 2008 crisis and its aftermath have been a testing time for economists — and the tests have been moral as well as intellectual. After all, economists made very different predictions about the effects of the various policy responses to the crisis; inevitably, some of those predictions would prove deeply wrong. So how would those who were wrong react?

The results have not been encouraging.

Brad DeLong reads Allan Meltzer in the Wall Street Journal, issuing dire warnings about the inflation to come. Newcomers to this debate may not be fully aware of the history here, so let’s recap. Meltzer began banging the inflation drum five full years ago, predicting that the Fed’s expansion of its balance sheet would cause runaway price increases; meanwhile, some of us pointed both to the theory of the liquidity trap and Japan’s experience to say that this was not going to happen. The actual track record to date:

Tests in economics don’t get more decisive; this is where you’re supposed to say, “OK, I was wrong, and here’s why”.

Not a chance. And the thing is, Meltzer isn’t alone. Can you think of any prominent figure on that side of the debate who has been willing to modify his beliefs in the face of overwhelming evidence?

Now, you may say that it’s always like this — but it isn’t. Consider the somewhat similar debate in the 1970s over the “accelerationist” hypothesis on inflation — the claim by Friedman and Phelps that any sustained increase in inflation would cause the unemployment-inflation relationship to worsen, so that there was no long-run tradeoff. The emergence of stagflation appeared to vindicate that hypothesis — and the great majority of Keynesians accepted that conclusion, modifying their models accordingly.

So this time is different — and these people are different. And I think we need to try to understand why. Were the freshwater guys always just pretending to do something like science, when it was always politics? Is there simply too much money and too much vested interest behind their point of view?

Karl Polyani Explains It All

Robert Kuttner has an excellent appreciation of the great critic of free market fundamentalism, Karl Polyani and his essential book, The Great Transformation, @ American Prospect:

The Great Transformation, written for a broad audience, is witty and passionate

as well as erudite. The prose is lyrical, despite the fact that English was Polanyi’s third language after Hungarian and German.

Contrary to libertarian economists from Adam Smith to Hayek, Polanyi argued, there was nothing “natural” about the free market. Primitive economies were built on social obligations. Modern commercial society depended on “deliberate State action” by and for elites. “Laissez-faire” he writes, savoring the oxymoron, “was planned.”

Libertarian economists, who treat the market as universal—disengaged from local cultures and historic time—are fanatics whose ideas end in tragedy. Their prescription means “no less than the running of society as an adjunct to the market. Instead of economy being embedded in social relations, social relations are embedded in the economic system.”

Like Marx, Polanyi begins in England, the first fully capitalist nation. In Polanyi’s telling, the slow shift from a post-feudal to a capitalist economic system accelerated in the 18th century, when the enclosure movement (“a revolution of the rich against the poor”) deprived the rural people of historic rights to supplement incomes by grazing domestic animals on common land, and the industrial revolution began to undermine craft occupations.