A little over a year ago I wrote an article discussing the extent to which human intelligence is noticeably limited. (Watch Out For Rule By The "Smart") The amount that any one person can figure out in a lifetime is very small. Meanwhile, what are seemingly the "smartest" people not only don't figure out important things, but regularly get taken in by some of the most preposterous scams and fallacies. Worse, they come up with bad solutions to perceived societal problems and in their hubris (because they are so "smart") they seek to impose those solutions through coercion on everyone else. The particular focus of last year's article was the so-called "Risky Business Coalition," consisting of Mike Bloomberg, Hank Paulson, and Tom Steyer, falling for the climate hoax and then seeking to have the government force everybody else to drastically cut carbon emissions (while for themselves, of course, they continue to move among multiple homes in fleets of private jets).
For today's example, consider Friday's column from Official Manhattan Contrarian Worst Economics Writer Paul Krugman. The title is "The M.I.T. Gang." Krugman points out that a remarkable number of the Grand Pooh-Bahs in the top economic policy positions in the world today were contemporaries of his in the economics Ph.D. program at M.I.T. in the late 1970s. Ph.D. in economics from M.I.T. -- now there's "smart"! And today these brainiacs are running the world! Surely we can trust them to come up with good policies. Right?
Name a few names, Paul:
It’s actually surprising how little media attention has been given to the dominance of M.I.T.-trained economists in policy positions and policy discourse. But it’s quite remarkable. Ben Bernanke has an M.I.T. Ph.D.; so do Mario Draghi, the president of the European Central Bank, and Olivier Blanchard, the enormously influential chief economist of the International Monetary Fund. Mr. Blanchard is retiring, but his replacement, Maurice Obstfeld, is another M.I.T. guy — and another student of Stanley Fischer, who taught at M.I.T. for many years and is now the Fed’s vice chairman.
And yes, I’m part of the same gang.
I like that part about Blanchard being the "enormously influential chief economist of the International Monetary Fund." This is the guy who has spent the last seven years -- otherwise known as the period since the financial crisis -- advising governments in trouble because of overspending to never, ever cut government spending under any circumstances. All of the European countries with government spending at 50% of GDP or more languish with stagnant economies, and Blanchard is so mesmerized by his Keynesian models that he can't recognize overspending as the problem. Worse, he so completely believes the fake statistics that count government spending -- no matter how wasteful -- at 100 cents on the dollar in GDP, that he doesn't realize that these big spenders actually have declining economies.
Don't believe me? Try this: When France (government spending 56% of GDP) had an economic contraction in 2013, here's what Blanchard had to say:
France's growth is forecast to be slightly negative in 2013, reflecting a combination of fiscal consolidation, poor export performance, and increasingly, so, low confidence.
"Fiscal consolidation," for those not among the cognoscenti, is IMF/MIT Ph.D.-speak for some combination of cutting government spending and raising taxes. So if economic contraction is to be blamed on "fiscal consolidation," then the correct economic policy for a government is to borrow absolutely as much money as you can get your hands on and waste it as fast as possible. These people actually believe that. They are really, really, really "smart."
But don't worry, Blanchard is about to retire. His replacement is Obstfeld, another M.I.T. Ph.D. guy from the same era. Here is what Tyler Cowen has to say about the appointment of Obstfeld:
Overall I would say this reflects the continuing preeminence of MIT-style macroeconomics in the current policy community, his MIT Ph.d. is from 1979 and his work has been very much in that vein.
I don't know why Tyler is being so circumspect in his verbiage. As far as I know, saying that someone's "work has been very much in the vein" of an "M.I.T. Ph.D. . . . from 1979" is saying that he believes that the best economic policy for any country is borrowing as much as you can and wasting it as fast as possible. So that's going to continue to be the official advice that the IMF offers to any country in financial trouble for the next God-knows-how-many years.
Here is Krugman's take on Blanchard's tenure at the IMF:
The I.M.F.’s research department, under Mr. Blanchard’s leadership, has done authoritative work on the effects of fiscal policy, demonstrating beyond any reasonable doubt that slashing spending in a depressed economy is a terrible mistake, and that attempts to reduce high levels of debt via austerity are self-defeating. But European politicians have slashed spending and demanded crippling austerity from debtors anyway.
Yes, Blanchard's "definitive work" proves that borrowing as much as you can and wasting it as fast as possible is the best policy. It's "beyond a reasonable doubt." So who is the Manhattan Contrarian to be questioning these great M.I.T. Ph.D.s? (Has anybody looked into whether it is all just an artifact of counting wasteful government spending at 100 cents on the dollar in GDP? Not Blanchard or Obstfeld or Krugman. They're too "smart" to have that kind of self-doubt.)