Quote: (02-03-2015 09:04 PM)Porfirio Rubirosa Wrote:
Quote: (02-03-2015 08:11 PM)Easy_C Wrote:
It's hardly a meme. Keynesian theory (key word, "theory) has that reputation for a reason. It's been used numerous times to justify leftist government overreach in the name of "stimulus".
The use of stimulus packages is not exclusive to the left-wing. Only Austrian School economists reject the use of economics stimulus in its totality.
How exactly does the use of stimulatory policies (both fiscal and monetary) form part of government overreach?
If you asked Nassim Taleb this question, his answer would be: because it's naive interventionism, in a corresponding domain as the idea of invading Iraq in order to topple an Evil Dictator™. It is to intervene and distort the normal operation of commerce without a real appreciation for what the unintended consequences will be.
We have a tendency, because of a good 2.5 thousand years or so of worshipping Aristotle's epiphenomenonology and ignoring the heuristic-based philosophies of people like Seneca or Thales of Miletus, to believe that we have greater control over complex systems than we actually do. Coupled with that is that we believe our effect on a complex system is vastly more predictable than it actually is.
In particular epiphenomenology -- the focus on past events, past phenomenon, to explain and predict the future -- has had an inherent blind spot in it, namely that by looking only to past events as a predictor of what calamities may occur in future, we tend to not contemplate even
worse scenarios than have occurred in history. And thus are unprepared when those scenarios and unexpected consequences come to pass.
In military circles epiphenomenology's blind spot has a name, a phenomenon of its own: when a nation is
preparing to fight the last war. I suspect it is the real reason the French were more or less overrun by Germany in World War II, because they were predicting that if it came to hostilities again with Germany, that it would be a re-run of World War One and trench warfare would dominate, thus they built the Maginot Line and made it the centre of their defence strategy. It is
also the reason thinkers like William Lind keep saying the US Navy is outdated at best and irrelevant at worst, because it is essentially structured to face another Japanese fleet sailing on Pearl Harbour, and hasn't quite learned the lesson from the Falklands crisis where a about nine British ships were sent to the bottom of the South Atlantic by a bunch of Exocet missiles in quite an attractive cost/benefit analysis for Argentina.
When the government intervenes to stimulate an economy, it's basically doing the equivalent of pumping painkillers into an injured body. The error is that the government thinks the painkillers reducing the person's pain means the underlying injury has been cured. This is not the case, and indeed the underlying painkillers themselves go on (via inflation, eventually) to further injure the body -- what in medicine is called
iatrogenics, harm caused by a medical intervention, and something the fools in medical academies have only recently started to understand and acknowledge despite being in business for a good two thousand years or more.
What makes this metaphor worse is that
introducing the painkillers doesn't even assist the injury to heal, it just makes the injury last longer and keeps the body from healing. You will see this with treating children's fevers: while letting a kid's fever rise to above 40 degrees is bad news and needs intervention, throwing anti-fever medications like Paracetamol at a mild fever often doesn't help, because it brings the body temperature down ... ignoring that the reason the body's temperature rises is because that's the way the body works to kill off the organisms attacking it, in many cases the organisms can't survive that temperature. So bringing the temperature down via painkillers actually keeps the body from doing its own healing work. As with all antifragile systems, this has limits -- as said, if your kid's temperature starts soaring past 40 degrees, get to a doctor ASAP -- but the phenomenon is actually much the same in economic terms. When you pump money into the system, you are not allowing the system to break down and repair itself as it can and as it eventually must.
Taleb targets Krugman and Stiglitz in particular as offenders of the worst kind in this area. Krugman doesn't understand risk management, and Stiglitz has the worst form of 20/20 hindsight imaginable: he believes he predicted the 2008 credit crisis, but he identified one area of risk, not the crisis itself, when you look at his prognostications from before the subprime crisis hit.
Remissas, discite, vivet.
God save us from people who mean well. -storm
