Over time, the better ideas of creative thinkers frequently win out, take hold, and make the world a better place in the process...right? Mmmm, maybe not so much - by no means is progress as automatic as it may seem! For instance, in the seventies, thousands of innovative energy related endeavors were put on the back burner, indefinitely. Many of those imaginative and creative projects were sold to corporations which would turn around and bury the idea, so that products more capable of making money for the long run would win the day. If the primary object was simply to grow GDP by any means perhaps this could be called a "win". However, the fact that centralized solutions too often "win" can eventually backfire on any society which utilizes those solutions exclusively, as it slowly becomes more difficult to redistribute the gains of centralization over time.
Also, as far as the spread of ideas goes: ego and its first cousin, revenge, sometimes get involved in the proceedings. At Digitopoly, Joshua Gans wonders if revenge might keep the kernel of some ideas from remaining readily apparent, on some of the more obscure Wikipedia entries. And of course one of the more recent battles amongst economists has been slow to fade away, amongst all participants of the Paul Krugman dust-up with Reinhart-Rogoff. When the progress of ideas sometimes slows to a crawl, one can be forgiven for wondering how progress ever takes place beyond the "one funeral at a time," as is often noted.
Robin Hanson at Overcoming Bias has touched on this subject over the years as well, noting that the further one is from the mainstream, the less likely his or her ideas are to ever see the light of day. Another related discussion at Overcoming Bias over the years is that of "near" and "far" thinking, which I would like to touch on in this post as well. Most recently at Kottke.org, (HT Farnam Street), three kinds of specialists were described in the book "Bluebeard" written by Kurt Vonnegut. The quoted passages from "Bluebeard" noted just how difficult it is for someone with few social ties, to ever have a true audience for their ideas.Without the help of those who can not only readily relate to the public but explain ideas at length, often there is little chance of such proposed measures ever taking hold, in society.
Sometimes we have to untangle ideas for potential solutions by first wresting away earlier concepts from dominant groups and political parties, who may be reluctant to abandon those previous concepts even when they no longer work. This is also why - even though Bernanke knew that a drop in nominal targeting worsened the Great Depression, he has not been able to convince others that nominal targeting could overcome the impasse that is now a fixation on practically non existent inflation. What's more, the monetary background of the Great Depression was different from that of the present, in that the gold standard was still a preferred means of monetary policy. Even though the limitations of a gold standard have been clear for decades, some still imagine a return to a gold standard as desirable. And even though inflation was brought under control prior to the Great Moderation, inflation fears still lurk in the minds of many a central banker, in spite of the fact that inflation has long since ceased to be a real problem in many developed nations.
Oddly enough, the reluctance to budge from earlier monetary policies seems to have put something of a "far" spin, in Hansonian terms, on the ideal of nominal targeting. Nominal targeting allows a focus on greater transparency and balance in economic activity in general. Yet one still has to speak of it in future terms which then have to be contrasted with suboptimal - and somewhat different patterns of economic activity now. It's bad enough that Market Monetarists find themselves "settling" for QE. What's even worse is having their efforts for continued monetary stimulus claimed as victory for the "opposing team" which had no desire for monetary stimulus in the first place.
What's more, the idea of QE as an appropriate measure is lackluster at best, even though it is better than nothing in the face of austerity which neither political parties of the left or right are able to come to grips with. The problems of ego have meant some are unfortunately willing to settle for austerity for no better reason than their preferred methodology is not being used. Overcoming austerity at this point in time also means being able to unpack the idea of nominal targeting and making it a real tool - "far" though it may still seem - while there is still time to preserve the resources and skills which continue to be so abundant in the present. The bridge between near and far needs to be built while the banks on the other side remain as they are now.
Update: My apologies to Shane Greenstein who wrote the referenced Digitopoly post - not Joshua Gans.
No comments:
Post a Comment