Brad Delong’s Apologeia

I am really tired of economists trying to excuse themselves for the way in which they continue steering the car into the ditch. Brad Delong’s latest attempt at special pleading cum mea culpa really set my teeth on edge. It is worth reading the whole thing.

But my Whiskey Tango Foxtrot moment came when he makes an amazing claim near the end:

Here it is worth stressing that these intellectual commitments are not the result of being hypnotized by the princes of Wall Street. They are the result of disciplined and concentrated analysis of the historical patterns of asset prices and returns. They are the result of confidence in the intellectual power of the discipline of monetary economics as applied through the policy instrumentality of the Federal Reserve. And they are the result of the economists’ insight that whenever there is an area of economic activity that pays huge, outsized rewards the odds are that we need more of it done. [my emphasis]

And this is really the central conceit of both Wall Street and the economists that they have captured: outsized economic rewards are ipso facto good. As one commentator (Bill Murray) on Brad’s piece noted:

Doesn’t this imply that we need more drug running and illegal arms sales? Those are certainly said to pay huge, outsized rewards. [Indeed]

And this is where economics parts ways with politics. For politics as we learn in Civics 101 is the use of power to do the greatest good for the greatest number, not just for Number 1. What Delong’s Apologeia says is: what we needed more of in the run up to the Great Recession was more NINJA loans peddled by unscrupulous mortgage ‘originators’, what we need now is more foreclosures, what we need now is more QE2 money creating asset bubbles in foreign economies via the carry trade…

What we need now, in short, is whatever the princes of Wall Street (and other people in the know) deem will pay outsized rewards. OMG