Wonks and Activists

Marcy took on the excellent Jonathan Cohn’s piece on wonks vs. activists here, but I want to pile on. Wonks only get heard if politicians want to hear them, and even then, they aren’t always right.

Paul Krugman has written many laudatory pieces about Obamacare in both his blog and his column, but it is not working to the level the policy wonks promised. Enrollment levels are turning up lower than anticipated. Insurance company profits are up, leading to mergers and a loss of competition. And, of course, there are too many who have policies under Obamacare who can’t use them because of the costs.

In other posts I wrote about how Paul Krugman, a genuine expert, was completely wrong about the impact of trade treaties, especially NAFTA. Larry Summers, a genuine expert with a lot of real-world experience, has been disastrously wrong on a number of occasions, not least of which was his loud endorsement of financial deregulation, even after the Long Term Capital Management debacle. Summers was one of the people who quashed the efforts of Brooksley Born to regulate derivatives.

In each of these cases, there were plenty of people warning of disaster ahead. In each case, the liberal experts rejected the warnings. Krugman insulted the trade union leaders and the economists who supported them. Many people think the attacks on Brooksley Born were personal, or even sexist, but she had a proven track record of being right, while her opponents, who included Alan Greenspan and Robert Rubin along with Summers, don’t.

It’s important to note that unlike their conservative counterparts, who are always wrong, liberal experts are frequently right. For example, Krugman has been the loudest voice calling for use of fiscal policy to confront the current economic situation. From the outset of the crisis in 2008, he called for a bigger stimulus, and has done so steadily ever with increasing vigor and with some signs of anger. He is one of the few prominent economists to look at the failures of the discipline in the wake of the Great Crash.

Even so, the fact remains that wonks don’t have the greatest batting average. And there are several reasons for this.

1. Economists and most wonks use models for the bulk of their work, but the models are inherently limited. All models are based on data from the past, and operate on the principle that the past is reasonably predictive. The point of activism is to change the future so that it isn’t like the past. Activists can see the past clearly, and many leftish activists can see that the past was dominated by the rich who arranged things solely in their own interest. The work of the activist is directed at changing things so that the future doesn’t look like the past.

2. Models are inherently utopian. Krugman has written extensively about his views of the importance of models. there are inherent problems with models, as Krugman said himself:

Few economists saw our current crisis coming, but this predictive failure was the least of the field’s problems. More important was the profession’s blindness to the very possibility of catastrophic failures in a market economy. During the golden years, financial economists came to believe that markets were inherently stable — indeed, that stocks and other assets were always priced just right. There was nothing in the prevailing models suggesting the possibility of the kind of collapse that happened last year.

To make a model, you make assumptions about the economy, and what can safely be left out of the unending complexity of the real world so that the math and piles of data can be run through a computer. Most of the real world is left out of models and we can assume that important things are missing. For example, as Joseph Stiglitz says here, there are banks in the real world, but not in the models. The linked article gives a great example of the problems created by this choice.

But it’s actually worse. Markets are assumed to be stable, and people are assumed to be rational agents. That means that the models also do not incorporate fraud, which is a real problem in the US. They also don’t include corruption, in the form of legislative favors, regulatory capture, a politicized judiciary, and wimpy to non-existent criminal and civil law enforcement. It also means that markets are assumed to be competitive, which they aren’t. In other words, these models are utopian, and the people who rely on them to inform their punditry are bound to be wrong.

3. Obamacare rests on the idea that the solution had to be based on markets. Health insurance markets are primitive, so we have to make better ones. The competitors in these new markets are health insurance companies. But these new markets required insurance companies to compete, and that’s not the goal of insurance companies. Their sole interest is their profits. Competition drives down profits. They want to merge and eliminate competition so they can make all the profits possible market by market. How could the healthcare wonks fix that problem? They had to assume that other parts of government would enforce antitrust laws. That didn’t happen. So Aetna merged with Cigna and there will be more.

Here’s the ugly reality. If politicians like the liberal argument, the liberals get to be heard, to the exact extent the politicians like. The health policy wonks didn’t get to do anything beyond what Obama wanted. Krugman was heard on trade, because Bill Clinton wanted to hear NAFTA would be fine. If politicians don’t like the argument, they get new wonks who agree with them. Liberal wonks don’t get to argue for the public option or single payer because politicians don’t want to hear it. Krugman doesn’t get to be heard on fiscal stimulus, because politicians don’t want to hear it.

The point of activism is to exchange one set of politicians for others who agree with the activists. Then liberal wonks can get to work and do something useful.

Notre Dame undergrad (math); JD, Indiana University at Bloomington; 1st Lieutenant, US Army.; private practice in corporate and securities law; Assistant AG in Tennessee for consumer protection and securities; Blue Sky Securities Commissioner, Tennessee; private practice, bankruptcy and corporate law.

I have had a lifelong interest in economics. For most of my career, that interest was practical, focused on the problems in front of me. Lately I have been more interested in economics as a theory, especially its impact on the lives of people like those I met in my bankruptcy practice, and on the politics of money in the US. I also enjoy reading philosophers, starting in college and steadily expanding my reading ever since. I wrote at FireDogLake for a number of years.

Generally, I think the problem facing the US is the dominance of neoliberal discourse. I think it clouds the vision, and limits the kinds of problems that can be identified and solved. For example, the existence and danger of climate change can easily be identified in a scientific discussion. However, the problem does not fit the neoliberal discourse because science insists that the pursuit of individual and corporate self-interest will lead to devastation. In neoliberal discourse, the pursuit of self-interest always leads to Eden.

The neoliberal project has two prongs. One is the police function of crushing dissent and alternative views. The police function is provided by government agencies and private and institutional actors. The counterpart is the economic system , which is operated by government and by private and institutional actors. Some of these actors operate in both spheres. I focus on the second prong.

10 replies
  1. CK says:

    I like this site but statements like “It’s important to note that unlike their conservative counterparts, who are always wrong, liberal experts are frequently right.” wont win you any converts from the other side, at the very least leave that for the end of the article after your point is made.

  2. earlofhuntingdon says:

    Models can also be relied upon to deliver what the client expects. The problems of American health care delivery system are complex. Riddled as it is with so many profit-driven players, it should come as no surprise that insurance, drugs and care in America are so expensive. Those profits will have to give if health care delivery is the goal; so far, they keep going up. That will require govt intervention; none of these players would voluntarily forego a bent dime in profits.

    You might also make more of the anti-competitive nature of these industries. Insurers, for example, often have local monopolies. They share great gobs of information, such as on doctor performance and malpractice claims, with each other but not with the people they insure. I guess having skin in the game is well and good for a would be patient, but it’s not so good for her to have information about her health care provider. Hospital systems, too, often local monopolies and price accordingly. Medical doctors have a far stronger union than the UAW, Teamsters or mineworkers. As professionals, their lobbying in DC is considered acceptable, unlike that of more traditional unions.

    Shaking things up will require sustained, concerted, informed effort. Thanks to Ed and Marcy for their contributions to it.

  3. Lambert Strether says:

    “Markets are assumed to be stable, and people are assumed to be rational agents. That means that the models also do not incorporate fraud, which is a real problem in the US.”

    See Akerlof and Shiller’s concept of a “phishing equillibrium,” which does incorporate fraud, amazingly enough.

  4. blueba says:

    This article, like so many others fails to recognize the utter bankruptcy of and existential crisis facing the field of economics.

    Economists from across the spectrum of theories, views and ideology, have been wrong and disastrously wrong in the case of the biggest crash in modern capitalist history and the policies proposed and implemented after it.

    Of course, there were a few lonely voices crying out about it but by and large the entire field proved to be completely incapable of predicting the crisis and equally incapable of implementing effective policy after. This includes all the so called progressive economists, Krugman especially, but Stiglitz was dead wrong along with the rest of the “progressives”. The Chicago school just said oh so what a crash and we didn’t see it but that’s not our job we have theories and they are unassailable.

    There are so many false assumptions in economics it is astonishing anyone believes anything they say any more. The field is completely corrupted by money and power with a sizeable fraction writing papers designed to curry favor with the elite and receive hansom payment for it.

    But the problems with the field of economics go far beyond just simple corruption, they present the world with charts and graphs and models based on assumptions and input which do not reflect the real world. Economics claims to be a science a hard science!! And the false narrative if economic begins with that obvious false assertion.

    Economics is voodoo, religion, a fairy tail it is not based on genuine understanding of the real world it is an exercise in justifying capitalism, and protecting dynastic wealth. ON all sides of the profession Stiglitz, Krugman and all the so called “progressives” especially including Piketty do nothing more than justify capitalism and protect great wealth from scrutiny. (All we need is some changes in the tax code and all will be well.)

    Yet, even here at emptywheel we get these articles quoting economists as if none of the above has been reveled or understood and gives authority and credibility to economists such as Krugman who have shown themselves to be little more than handmaidens to power.

    Just a note sense Krugman claims to be a Keynesian. That particular ideology calls for stimulus to increase demand to get out of a “recession” — well, that stimulus has been injected in the global economy to the tune of 4+ trillion dollars in the form of low oil prices – see any increase in your income? Feel better off because you’re paying half the price to fill up your car? Has economic growth taken off form all that stimulus?

    But you know markets are just free free free and everyone will prosper – some day.

    Nothing can change if everyone ignores the core issues and failures of economics.

    A particular irritation of economics is that there is no place in their calculations for the effects of great wealth, especially now that the biggest fortunes are vast global mini-empires. They just ignore great wealth and refuse to recognize what ALWAYS happens, pass a bunch of laws, raise taxes on the rich – then in the blink of an eye they use their power and money to eliminate or get around the laws and taxes and its business as usual.

    Those who oppose the entrenched power of Neoliberalism – of which Krugman is simply an apparatchik – should at least try to identify the core issues. NO economist can be trusted, they has shown as clearly as anyone should need that they are both corrupt and wrong.

    No better example than Piketty – after extensive research on materials not previously available he showed for the 1001st time that capitalism is incapable of doing anything but concentrating wealth if a very few hands, and each incidence in history shows this. Yet after introducing his book he immediately refuted his very own rigorous research and is calling for a few tweaks of the tax code and all will be well. From before and after and of course as well as FDR at every turn tax laws are completely ineffective because the great fortunes are left in place and in the blink of an eye wipe away any impediments to their power and the growth of their fortunes.

    What is needed are people to think about how to dismantle the great fortunes and neutralize their power – it is the existence of great fortunes which distort economies and create inequity as long as they exist the global economy will continue its modern form of feudalism.

    People who want to get down in the weeds with economists and argue about the number of angels dancing on the head of a pin (if they would just stay still it would be easier) and go on and on about stimulus and tax policy are failing to grasp the depth of the problem.

    A totally new economics needs to be discussed, one which does not justify capitalism and make false claims about “free markets” which are anything but.

    Lots of talk these days about “disruption” and “creative destruction” those are concepts which might be effective for economists – the current status quo and entrenched power of phony mythology about capitalism which results in the care and feeding of dynastic wealth needs to be disrupted and destroyed, not sighted as an authority on anything.

    • bevin says:

      To give Keynes credit he did call for “euthanasia of the rentier.”

      But you are right to point out the basic failure of reformist critics of capitalism which is, despite centuries of experience demonstrating the contrary, they persist in believing (or affect to believe) that the disease of capitalism can be curbed without killing it.
      RH Tawney-no extremist- told the Fabian Society in 1950 or thereabouts that it was folly to believe that so long as capitalism retained its powers to corrupt the political process and the social discourse it could be controlled “You cannot tame a tiger, claw by claw.”
      The history of western societies since 1945 has demonstrated precisely this: despite reducing the power of capitalists by dirigisme and nationalisations, by taking control, in Bevan’s phrase, of the commanding heights of the economy. Despite death duties to break up fortunes, currency controls over the flow of capital and marginal income taxes verging upon confiscations, there was enough life left in the system that, by dint of concentrating its resources in ideological battles and carefully choosing its ground it returned in the formof neo-liberalism.
      Which is to classical liberalism as the Atom bomb is to a bundle of TNT.

  5. Denis says:

    #1
    A gross generalization like “Models are inherently utopian” rankles
    rationality. Counter-example: A cursory review of the wild, alarmist
    models of climate change can hardly be considered “utopian.” Check
    out Alan Longhurst’s “Doubt and Certainty in Climate Change” for some
    well-informed push-back on BS alarmists like James Hansen.
    .
    But I take your point about the limitations of model assumptions, and
    agree 100%. GIGO. Many will recall Carl Sagan’s promotion of the
    “Nuclear Winter” model — an anti-nuke scare tactic in the 1990’s. It sounded
    on the surface entirely reasonable, but if you dug into the assumptions
    of the model it didn’t take long to see what bullshit it was.
    .
    #2
    “The point of activism is to exchange one set of politicians for others
    who agree with the activists. Then liberal wonks can get to work and do
    something useful.”
    .
    Whoa, dude! This 2-part assertion makes sense only if the outgoing
    politicians are conservatives, which Obama, allegedly, is not. Liberals
    don’t have a monopoly on activism; Tea Party wackos are as much
    “activists” as the Sanders wackos, and there are conservative wonks
    waiting to “get to work,” too.

    • bevin says:

      “… This 2-part assertion makes sense only if the outgoing
      politicians are conservatives, which Obama, allegedly, is not.”

      By any reasonable metric he is profoundly conservative, indeed reactionary.

      • earlofhuntingdon says:

        Reactionary indeed. One of Mr. Obama’s defining characteristics is his obsessive need to institutionalize the current expressions of the most powerful, regardless of how novel, of their questionable legality, of their impact on others in society. His refrain is that not to do so would distract from his agenda and waste his political resources on utopian dreams. Dr. King might well ask what those priorities could be, just as he would admire neither Mr. Obama’s analysis nor his priorities.

        • bevin says:

          “His refrain is that not to do so would distract from his agenda and waste his political resources on utopian dreams.”

          Any distraction from his agenda would be very welcome. It really is one of the great con tricks of American History that Obama has managed to persuade anyone, after eight years of unrelieved assaults on the living standards of the poor at home and abroad, beginning with Gaza and bulking up the banks with the mites of millions of the homeless, that he is a ‘liberal.’

          The sad truth is that the culture is so marinated in racism that the effect of the KK bigots presuming that, because the guy is black he must be red, is simply to reinforce the same idiotic conclusion on the ‘left’ where identity politics long ago burned out brains.

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