Comment of the Day: Lee A. Arnold: Thurday Musings on Macroeconomic Policy and "The Right": "Brad: '...not political in this sort of partisan sense: it is, rather, that the prosperity of fiscal expansion is a false prosperity'...

...I think that is the heart of the matter, or rather, what is underneath it, is the heart of the matter. The foundation of this is the widespread belief that there should be a hierarchy of personal merit. (As a consequence, government spending and debt distort it, and make people less individualistic and weak, and/or even more corrupt.) This is a social psychology framework straight out of early modernism, and most economists accept it too. Which ought to be ironic, since it is essentially a voluntary preference to believe this (though the belief is held by human, with very few exceptions), and economists should remember that preferences are exogenous, not least the preferences inculcated by their teachings.

Of course, need for personal merit is an explicit complaint on the right. They always promote a hierarchy to validate a meritocracy -- divinity; monarchy; market 'order'.

BUT the left though 'levelers' are entranced by merit too.

This may be a big reason why the left is confused, and has developed no coherent intellectual framework to explain the need for government spending and debt, except by calling upon the theory of market failure, while others blame the ills of society on the greed of the rich (i.e. undue merit), or perhaps on the somehow venal metaphysics of 'capitalism' (which is becoming evermore stupid though it always obtains adolescent adherents).

Remarkably, and not only that but amazingly, we have entered the era when the validity of the hierarchy of personal merit is being undermined by the market itself. Inexorable undermined. Observe two data points:

  1. Technological change (and its functional near-analogue, globalization) is remanding larger numbers of the already-developed people -- both labor and small entrepreneurs -- into occupations which do not admit of productivity improvements, and thus will not allow real incomes growth. Yes the technology is improving underneath us, alongside us and in our houses, but you can work your butt off, and get no-where else.

  2. At the same time, we've committed to make the system run in some way, any way: via promises, debt, bubbles, crashes, and bailouts. So, some people lose those houses, while we recently bailed out the bankers bigtime; and only yesterday we merely slapped them on the wrists for more scandalous betrayals of the honest system. Golly, do you think it's stopped?

Meanwhile, economists are wishing, like, 'If we could just get everybody going with more education, to step-up to advanced forms of technological productivity,' -- and everybody else is going, like, 'Are you out of your f---ing minds? It's all changing too fast, and pretty soon algorithms are going to start searching for basic theoretical discoveries. We are going to have to mow each others' lawns.'

In short, everybody really ought to 'fess up: At this point, the system is no longer rewarding merit, nor can it.

It may take a little while longer for some to see it; after all, some signs were here already, a century ago, but world wars and technological change diverted the attention, and kept merit useful. And now yet again, we may see a spurt of growth (or will we?) coming out of the Great Recession, to divert our attentions once more. But this time it may only be a little ways. The problem appears to be accelerating; computers are going to disemploy almost 1/2 the current white-collar jobs in a big 15-year swoop (a recent research prediction); and discontent and anger is no longer valved-down by nostrums force-fed through exclusive media.

Let's be clear, the prosperity isn't false, whether it's private or public fisc. But the idea that it is linked to merit is TOTALLY BOGUS.