Last Friday, I wrote a diary, "The moral battle of our age", in which I discussed Paul Krugman's Jan 13 column, "A Tale of Two Moralities". In it, I raised a number of objections to how Krugman was framing things, and I also linked to a diary by Teacherken Dkos, which raised a somewhat different, but not unrelated set of concerns. What's significant, though, is that this column by Krugman was obviously part of a process of trying to think things through, which can be seen in a number of his blog posts as well, as he tries to grapple with how economic and moral visions are interacting with one another. Some of what he's writing seems in need of criticizing--as, indeed, Dean Baker ably criticized an earlier blog post (which I hope to write about soon). But just after the column I wrote about, Krugman did a short blog post that I think was particularly on target, and therefore worth focusing on. Here's the first two paragraphs:
Monetary Morality
A further thought inspired by the meditations that led me to today's column: I think I now understand the otherwise weird resurgence of paleomonetarism in the midst of a prolonged liquidity trap. It's not really about analysis, it's about morality.
You see, if you're the kind of person who views being taxed to pay for social insurance programs as tyranny, you're also going to be the kind of person who sees the printing of fiat money by a government-sponsored central bank as confiscation. You may try to produce evidence about the terrible things that happen under fiat currencies; you may insist that hyperinflation is just around the corner; but ultimately the facts don't matter, it's the immorality of activist monetary policy that you hate.
I think this is a very crucial insight, which doesn't just apply to attitudes towards current evidence. It also gets projected backwards into historical justifications. Indeed, I would argue that eggregious libertarian misreadings of Locke's social contract theory have essentially the same "moral" derivations: people with a simplistic, Randian, "what's mine is mine" mentality simply cannot see the social aspect to social contract theory, even though it's right there in the name.
I also think this connects directly with what Brad DeLong was looking for some time back, in trying to understand why commonsense measures to reduce unemployment were not being undertaken. In "The Retreat of Macroeconomic Policy" he wrote:
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Governments before World War I - and even more so before WWII - did not embrace the mission of minimizing unemployment during economic downturns. There were three reasons, all of which vanished by the end of WWII.
First, there was a hard-money lobby: a substantial number of rich, socially influential, and politically powerful people whose investments were overwhelmingly in bonds. They had little personally at stake in high capacity utilization and low unemployment, but a great deal at stake in stable prices. They wanted hard money above everything.
Second, the working classes that were hardest-hit by high unemployment generally did not have the vote....
Third, knowledge about the economy was in its adolescence. Knowledge of how different government policies could affect the overall level of spending was closely held. With the exception of the United States' free-silver movement, it was not the subject of general political and public intellectual discussion.
All three of these factors vanished between the world wars. At least, that is what I said when I lectured on economic history back in 2007. Today, we have next to no hard-money lobby, almost all investors have substantially diversified portfolios, and nearly everybody suffers mightily when unemployment is high and capacity utilization and spending are low.
I tried to argue--in "This is not a smackdown", for example--that it wasn't really necessary to have a hard money lobby to recreate those conditions, but it was only a bit of rather prefunctory handwaving. So now I think I should have a more serious go at it, based on the opening created by Krugman's comment. It's still handwaving, mind you, but a bit less prefunctory.
First off, we need to bolster Krugman's comment with some serious social science. A good place to start is systems justification theory, which Wikipedia describes thus:
System justification theory (SJT) is a scientific theory within social psychology that proposes people have a motivation to defend and bolster the status quo, that is, to see it as good, legitimate, and desirable.
According to system justification theory, people not only want to hold favorable attitudes about themselves (ego-justification) and their own groups (group-justification), but they also want to hold favorable attitudes about the overarching social order (system-justification). A consequence of this tendency is that existing social, economic, and political arrangements tend to be preferred, and alternatives to the status quo are disparaged.
A good meaty overview of SJT can be found in the 2004 paper "A Decade of System Justification Theory: Accumulated Evidence of Conscious and Unconscious Bolstering of the Status Quo", Jost, J.T., Banaji, M.R., & Nosek, B.A., Political Psychology, 25, 881-919. Obviously, a good deal has been learned since then, but it's a good comprehensive introduction. Here is an excerpt from the abstract:
Advocates of system justification theory argue that (a) there is a general ideological motive to justify the existing social order, (b) this motive is at least partially responsible for the internalization of inferiority among members of disadvantaged groups, (c) it is observed most readily at an implicit, nonconscious level of awareness and (d) paradoxically, it is sometimes strongest among those who are most harmed by the status quo. This article reviews and integrates 10 years of research on 20 hypotheses derived from a system justification perspective, focusing on the phenomenon of implicit outgroup favoritism among members of disadvantaged groups (including African Americans, the elderly, and gays/lesbians) and its relation to political ideology (especially liberalism-conservatism).
One obvious implication of this perspective is that it's not altogether that strange that a substantial number of the economically disadvantaged should not just accept but defend they system that oppresses them, and hence that mass voting--the second factor DeLong cited above--need not bring about such a strong demand to reduce unemployment. Armed with the insights of SJT, we would say that mass voting can produce such pressures under the right circumstances, and it can also fail to do so.
The same can be said about the other two factors as well. The question of the degree to which facts matter, which Krugman was highlighting, cannot be readily disentangled from the question of the degree to which facts can even be identified as such. And the more important that system justification becomes, the more difficult it may be to identify facts, particularly ones that call the existing order more or less into question. This impacts the role of macroeconomic understanding, as I have touched on in discussing the real world economics review paper, "Cognitive dissonance, the Global Financial Crisis and the discipline of economics" in my diary, "Cognitive dissonance in free market economists."
The increased salience of SJT--and the lack of powerful countervailing forces--can also have the effect of substituting for the lack of a traditional hard money lobby. To the extent that it becomes widely believed that the unemployed somehow deserve it, this (1) is deeply congruent with SJT and (2) works to dissuade interest in alleviating unemployment. While it's true in the abstract, as DeLong says, that an economy working at full capacity would benefit investors at the high end of the economy, too, the stronger the influence of SJT, the less this matters and the more it matters to punish the unworthy, even if it does result in less prosperity all around (which, of course, will also be denied--see the previous argument). Add to this the fact that upper-income individuals seem to be doing just fine as things stand, and there's less and less that needs explaining.
Krugman's short post has one more paragraph to it. It ends:
And this is also why politically conservative economists arguing for something like nominal GDP targeting, and pleading with their perceived political allies to stop talking nonsense, are going to be disappointed. If you're in the intellectual universe where monetary policy is to be evaluated by results, you're already out of the true believers' moral universe. At a fundamental level, Milton Friedman and John Maynard Keynes are on one side; Ron Paul is on the other. And it's not a debate in which evidence really matters.
Indeed, as I suggest in my argument above, this is only one facet of a much more sweeping situation. Increasingly, evidence and critical reason are not just beside the point--they are, for the purposes of system justification, the true enemies of "real Americans". This is what conservatives have been saying repeatedly for going on four or five decades now. |
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