Doesn't Anybody Know How to Play This Game?

The Economist answers--no:

THE BBC’s “Today” programme is the main current-affairs show on British radio. Last year it recruited a new presenter, Evan Davis, who is also an economist. An amusing pattern has since developed. Quizzed about the credit crunch, a politician delivers some carefully memorised remark about, say, quantitative easing. Then the guest experiences an audible moment of existential horror, as Mr Davis ungallantly presses him for details.

The tide has gone out and, with a very few exceptions, Britain is swimming naked: almost nobody appears to know what he is talking about. The havoc of the financial crisis has stretched and outstripped even most economists. The British political class is befogged. Ordinary people are overwhelmed. And just as the interaction between banking and economic woes is proving poisonous, so the interplay of public and political ignorance is damaging the country’s prospects.

Start with the government, whose ministers are still oscillating between prophesying economic Armageddon and gamely predicting the best of all possible recoveries. Gordon Brown is learned in economic history—indeed, he is at his most animated and endearing when discussing it. But the prime minister’s grip on the history he is living through is less masterful. The government’s implicit strategy is to try something and, when that does not work, try something else: the approach modestly outlined by Barack Obama, but rather less honest. ...

The truth is that hardly any MPs in any party have more than a rudimentary grasp of the crisis; indeed, their inability to track the City’s baroque excesses helped to foment it. (The intellectual background of MPs, few of whom have much training in economics or commerce, may contribute to this deficiency.) ...

Meanwhile, the bodies and advisers appointed by the politicians to do the understanding for them have been largely discredited. The Bank of England obsessed about monetary policy and neglected financial stability. Sir James Crosby quit as deputy head of the Financial Services Authority (FSA) amid embarrassing questions about risk-taking at the bank he used to run. The involvement of Glen Moreno—chairman of Pearson, which part-owns The Economist—in UK Financial Investments, which manages the government’s new stakes in Britain’s banks, has been undermined by his association with secretive Liechtenstein. ...

Change a few proper nouns and this could be the United States. High-grade macro is way above my pay grade, but it makes my hair stand on end to listen to the schoolboy howlers you hear from public figures even when (if ever?) they are trying to tell the truth?

One reason, I think: difficult and sophisticated as it may be, macro still remains one of those "sciences" closest to phrenology--nothing anything close to agreement among the adepts on any but the most elementary principles. Part of the problem may be that (this is not original with me) it is hard to think of any "social science" more dependent on the self-fulfilling prophecy and kindred feedback loops. Keynesian stimulus "worked," (if it did work) the first time because it came as a surprise. But as Wittgenstein says, once you know it's a game, it isn't a game any longer: just about everybody recognizes that the massive, convoluted (and, I suspect, largely ineffectual) effort at "stimulus" is just a desperate effort to try to find something, anything, that might work (search "hail Mary pass" at Google blogs and I think you might come up with a piece that makes the point better than I do). This time, sadly, we may all be wise fools, too smart for our own good, able to decode and discount the trees without any notion how to conceptualize the forest.

For the clip, HT Joel again.