In a parallel universe, I scored!

So the economists are now saying that even if you made testable predictions and they came true it doesn’t mean you’re right because of, you know, quantum and catallaxy and hey What the Bleep?! Do We Know. There’s an infinity of possible universes in which I might be right, and averaging over the Gaussian copula, therefore I’m considerably richer than yow:

Simon Wren-Lewis and Paul Krugman dispose of the intellectual rubbish, but there’s a better gut point here as follows.

All right, you’re committed to radical scepticism, are you? You’re unwilling to move without a solid evidence base of randomised-controlled trials? So where was this scepticism when everything from public housing to the interior design of buses became part of a war on the Keynesian legacy? Where was this scepticism in 2006? In 1978? In 1992?

Few people have ever been as sure of the truth of their ideas as economists have been. They didn’t just believe that they were logically consistent, or borne out by empirical evidence, or representative of a greater moral truth – they believed all three at the same time. It was economic rationalism. There was no alternative. It was built on microfoundations arising from sheer mathematics. It was literally equivalent to democracy itself. If you disagreed you were a Stalinist or you were trying to deny economic development to the poor.

Steve Levitt’s now celebrated attempt to give advice to the prime minister is a case in point. Noah Smith points out that Levitt didn’t have an alternative or even a sensible criticism to offer, but that didn’t detract for a moment from his superb certainty. But in fact it’s worse than that. What strikes me about the Levitt/Cameron story is Levitt’s utter incuriosity.

He trotted out his little parable but never paused to wonder if, in fact, the British actually do use infinite amounts of medicine. It is fairly well known that the US healthcare system is really expensive compared to any European country’s. This is the sort of thing any newspaper reader ought to be aware of, and if you reflect on the fact for a moment, it’s obvious that demand cannot therefore be roaring out of control due to the unpriced nature of the NHS. Despite all his talk about natural experiments and questioning everything, in practice, he completely ignored a huge natural experiment and questioned nothing. He evidently didn’t feel facts would inform his thinking in any way. The shocking thing is the incuriosity.

The whole thing reminds me, most of all, of the old German general staff. Nobody doubted, or doubts, that they were smart, deeply smart. They possessed a wealth of professional competence. They made a number of major methodological achievements that are still used today. They were as respectable as it was possible to be. But they got it wrong; repeatedly, desperately, disastrously wrong. And they blamed everyone else and proceeded to do it all over again. Interestingly, their institutional history is closely similar to the emergence of the classic executive career path.

It’s just not good enough to discover scepticism now. The whining now only highlights the swagger of the past. After all:

And (I think I’m making my own position clear here) I think this is why Friedmanism fails. Because actually, the buck does have to stop somewhere, and pretending that you can manage a complex system via a simple rule is basically impossible (it falls foul of Stafford Beer’s Principle Of Sufficient Variability). In practice, in a system based on a Taylor Rule, an Evans Rule or even an NGDP target, the buck stops with whoever it is that is responsible for maintaining the model which generates the forecasts of the control parameter. And this person is always going to deny that he’s making activist policy and claim that he’s a technocrat who simply goes where the data takes him. Friedmanism in economic policy, in the general sense I’m talking about here, is nothing more nor less than a distributed responsibility avoidance system.

But, y’know, pass the bong, we can’t, we…uhh…can’t really know anything…right…?