Saturday, May 31, 2014

Why Are Our Elites so Stupid, Take II

To repeat the closing line from my last post, if recent events have not done much for my faith in democracy and the common people, they have done even less for my confidence in purportedly enlightened elites.

I have long been aware of many of the capital flaws of elites (enlightened or not) -- their tendency to confuse their own interests with the common good, their stubbornness in protecting their own privileges and status, their gross overreaction to even the slightest challenge to their domination.  But I don't think it was until this last decade that I became aware of another capital flaw of elites -- their incredible denseness.  I had no idea that elites were so utterly unwilling to learn the lessons of evidence that was staring them in the face.

My first clue to that was with the Iraq War.  Public and elite opinion are both at fault here -- both foolishly allowed themselves to be stampeded into it.  (Although to what extent public opinion was driven by elite opinion is a different question).  But at least the public was willing to learn something from the debacle.  The general public seems to have learned that making open-ended military commitments to reshape countries on the far side of the world in our image is not a good idea.  Elite opinion does not seem to be so quick on the uptake. Reading the Economist in 2002 urging war in Iraq without giving any coherent reason for it was bad enough. Reading it now explaining that just because military intervention went badly in Iraq, Afghanistan, Libya, etc. is no reason not to try it in latest confrontation they have cooked up.  Elite opinion on foreign intervention is sounding very much like that famous definition of insanity -- to continually keep doing the same thing while expecting a different result.

But public opinion is running a fair record of overruling elite opinion on starting foreign wars.  More dangerous is the matter of economic policy.  What is really dangerous here is that elite opinion and public opinion share the same basic, but mistaken, intuitions.  People's basic gut-level intuition tells us that if everyone else is cutting back, government should cut back too; that no one should get an unfair break; that inflation is particularly noxious under conditions of stagnant wages, and that falling currencies are something to get upset about.  The problem is that these gut-level intuitions are wrong, at least under current economic conditions.  When everyone else is cutting back, someone needs to spend more to keep the total economy from shrinking.  When the economy is shrinking, everyone needs a break, fair or unfair.  When the debt burden becomes crushing, inflation is just what we need to shrink it.  And when an economy becomes stressed, a falling currency is therapeutic.  Furthermore, it is not true that a common failing of democracy is that it prevents government from taking painful but necessary measures because the public is just not willing to make the sacrifice.  Quite the contrary, in times of crisis, the public is willing and eager to make material sacrifices.  What the the public (and the elite as well) refuse to sacrifice is its basic intuition of what should be done.  Thus I would say that the difficulty in selling fiscal conservatism in good times is not that it is unpleasant or that people are unwilling to make the sacrifice, but that it is counter-intuitive.  People just don't feel the need for sacrifice when all is going well.  It is proving equally difficult to persuade the public not to make sacrifices in bad times because basic intuition says those sacrifices are called for.

But if public opinion and elite opinion are essentially the same in their moral intuitions, and equally wrong, elite opinion his been the more harmful.  When conditions get bad enough, the public will ultimately try anything, even violating its intuitions.  Elites pigheadedly stick to the old formulas that have been so ruinous before.  I can think of several reasons why this might be so.  One is that the public is not all that well informed on what actual government policy is at any time, but is mostly just aware of results.  Thus during Franklin Delano Roosevelt's day, Keynesian economics could persistently poll badly, the public could persistently say it was worried about deficits and wanted Roosevelt to cut spending -- and Roosevelt could persistently be wildly popular and be reelected by a landslide and only see his popularity fade when he actually cut spending and returned to recession.  In the end, policies did not matter as much as results.  Elites, on the other hand, are more closely informed about what government is actually doing,  while relatively shielded from the actual consequences of what they are inflicting on the public.

Yet they are not shielded altogether.  Various lefties come up with various far-fetched theories about how really a depressed economy is in the elite's interest and that is why they resist any cure.  I find such arguments unconvincing.  John Kenneth Galbraith once caustically commented that our financial elites preferred Hoover over Roosevelt even though Hoover caused greater losses to capital than anyone since Lenin.  And with all due discount for exaggeration, he has a point.  For stocks to lose as much as 90% of their value cannot possibly be in the interests of our plutocrats.  So why did they hate Roosevelt so much, just because he imposed more taxes and regulations in return for saving the economy?  And why do they so hysterically overreact to the tiniest criticism from Obama?  And why do they persist in demanding such disastrous policies in Europe?  I do not think it is too glib to say that it is because our elites are dense -- and that giving up their denseness would mean giving up their authority.

I saw a fascinating article somewhere arguing that one of the reasons Paul Krugman is so hated, and so often criticized as elitist is that his prescriptions violate people's intuitions -- that to be told no, your intuitions are wrong, trust the economists whose specialized knowledge means they know better is deeply offensive to most people.  But it is less offensive to general public, who hear this sort of thing all the time from a lot of experts, that it is to our business leaders who specifically consider themselves experts on how an economy works and resent being told that some ivory tower professor who has never run a business knows more than they do.  And that, I suspect, is what really lies at the heart of elite resentment toward the FDR's, the Krugmans, and all the other people who would revive the economy without seriously changing the underlying economic order or distribution of wealth, but in a manner that violates basic elite intuition about what should be done.  Part of it is simply the usual elite hypersensitivity about the slightest infringement on their power and privilege.  But part of it is that it threatens not so much their existing wealth and power, but the basic source of legitimacy of that wealth and power -- their ability to run an economy.  A serious economic downturn inherently calls that ability into question and elicits a defensive reaction from our economic elites to begin with.  But a proposed remedy that violates elite intuition looks like a frontal attack.  Even if it does not directly threaten the existing distribution of wealth and power, merely to suggest that people who hold wealth and power might not know best how to use it is perceived as an existential challenge to their hegemony.

So I suppose maybe the maddening denseness of purportedly enlightened elites is closely linked to their defensiveness of their wealth and privilege and overreaction to the tiniest infringement against it.  For elites to admit that they might be wrong is to call their whole claim to power into question.

All of which closely ties in the the topic of my next intended post -- the elections to European parliament.

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