10/29/2010 12:16 pm ET | Updated May 25, 2011

Politics and economic truths

I hear there's an election next week. How do I know? Every media outlet this side of the Vladivostok Daily Bugle ( can't shut up about it. The Tea Party. Yammer yammer yammer. Feckless Democrats. Yammer yammer yammer. Odd behavior. Yammer. Odder ideas. Yammer yammer. Palin. Driscoll. Angle. Paladino. Yowza! As far as I can tell, there hasn't been a new thought on this affair for months. Obama's paying for the recession, for stubborn unemployment, for bailouts, for his brains, slim physique and anti-colonialist forebears. Bailouts were payoffs. The crisis was not a crisis, but a fantasy conjured up by Wall Street. Obama is a socialist dictator to the right and Clintonian triangulater to the left. And Obama's not even technically running.

In some ways it's been a relief to dip into the pink pages of the Financial Times, which has spent the week cogitating on the election in its op-ed pages. It's a relief for two reasons: First, the FT takes a welcome break from its endless discussion of the grim British austerity budget. Second, the view from abroad lacks the tendentiousness of American commentators, who have long ago dug into their partisan bunkers (The New York Times is bad, but The Wall Street Journal is so unrelievedly dogmatic that it makes you cry for the old days of kindly Robert Bartley). The high point was Wednesday, when Simon Schama and Martin Wolf weighed in. You could feel the cool breezes of reason stirring again. Historian Schama offered the overview, making the argument that historians (like, well, Schama) judge presidents differently from grubby politicians or voters, which is no great scholarly conclusion, though he did get off a few good lines.

"It was never going to be easy," he writes. "[Obama] grossly underestimated the need of Americans to cling to their childish versions of what had befallen them; recite puerile readings of the Constitution that bear no relation to the determination of Founders such as Hamilton to create a strong federal government, quite as much as to warn against its engrossing power. ... But Mr. Obama is not dealing with an informed reading of history, he is dealing with a comical-sinister version narrated by Glenn Beck who fancies himself a professor."

Still, the prize for cool analysis, as always, goes to Wolf, who assumes his usual magisterial stance. He sorts through the two years of Obama like a fruit vendor, testing and weighing. TARP good. Stimulus, necessary but inadequate to the task. He argues the obvious, but rarely discussed truth, that this was a financial crisis, which tend to "do long-lasting damage," not some ordinary cyclical recession. Indeed, it's even worse than that: a global financial crisis. Writes Wolf, "The Republicans have convinced many voters that intervention by the Democrats, not the catastrophe George W. Bush bequeathed, explains the malaise. This is a propaganda coup."

Propaganda coup! For Wolf, this is like waving the bloody shirt. Behind much of this talk of propaganda and misinformed readings is the always-perilous position of economics in the public square. It's true that economics has taken some serious knocks after the financial crisis -- some well deserved. Its pretensions as a predictive science have been punctured. Its pomposity as an ideology have been scattered to the winds. That said, economics still offers some broad and compelling truths backed by a tremendous amount of empirical validity. And yet these realities are dismissed, much like the evidence for evolution, as if they were some illicit product of conspiring pointy-headed libertines. Paul Krugman, in fact, wrote about this tendency in two Clinton-era books, "Peddling Prosperity: Economic Sense and Nonsense in an Age of Diminished Expectations" in 1994, which took off after myths about Reagan-era policies like supply side and deregulation, and, in 1997, his now mostly forgotten, if fascinating "Pop Internationalism," where he dismantled prevailing notions of competitiveness and trade (not to say big names of the day like Lester Thurow, Robert Reich, Ira Magaziner, Jeffrey Garten and Clyde Prestowitz). Looking back at it now, you can see the full rationale behind Krugman's swerve from obscure MIT (now Princeton) economist to public intellectual in his quite masterful introduction to "Pop Internationalism." Whose fault is it, Krugman asks, that so much "ersatz economics" was going on? Krugman targets popular economic thinkers, like Thurow and Reich, for publishing books that pander to a simplistic mercantilist zero-sum-game view of international trade.

"In other words, all of the things that have been painfully learned through a couple of centuries of hard thinking about and careful study of the international economy -- that tradition that reaches back to David Hume's essay, 'On the balance of trade' -- have been swept out of the public discourse. The place has been taken by a glib rhetoric that appeals to those who want to sound sophisticated without engaging in hard thinking; and this rhetoric has come to dominate popular discussions so completely that someone who wanted to learn about world trade without reading a textbook would probably never realize that there is anything better."

Krugman blamed himself and his academic colleagues as well, for not making the attempt to present "real" economics to a general audience. And so he set out to write "clear, effective and even entertaining" essays for noneconomists, ending up as a Times op-ed columnist who himself often wanders from economics into politics. (One question Krugman does not obviously ask in 1997, but should today: What effect has writing popular commentary had on his own presentation of economics? Is he immune to "pop internationalism" and to the perils of popularization or partisanship?) That said, and whether you like the guy or not, Krugman's introduction speaks clearly to our current condition. Alas, efforts by Krugman and a host of economic bloggers, left and right, have not been able to turn back the tide of popular, if sketchy, economic notions, from supply-side economics to the belief that the financial crisis would have passed like a summer storm if the government hadn't stepped in. These views are resistant to evidence. They are views, like mercantilism, that are hostage to bad metaphors (Krugman demolishes the notion of the nation as a corporation in "Pop Internationalism") or self-interested perspectives. They resemble a kind of economic creationism: plausible, and appealing, only because they're untestable.

But here's a question that Krugman, earnestly hoping to save humanity from superstition and cant like a latter-day Voltaire, does not ask in that introduction: Why is economics so prone to such distortions and glib sophistries? Well, a few things are obvious. As Krugman himself admits in "Peddling Prosperity," "The economy can't be put in a box." It's not physics because it involves human beings. It suffers from the fact that individual interests may not align with the interests of markets, nations or the world. It is replete with ambiguity and paradoxes -- of which John Maynard Keynes' Paradox of Thrift is the most famous -- that uneasily fits into political struggles that break down to black and white, Party A or Party B. It is an inquiry into uncertainty that wants to make policy. Krugman's confidence in "Pop Internationalism" is a perfect example. He argues that economic truths do exist, though he admits this is an irony since he was something of a renegade in his own field of trade theory -- a renegade who now has a Nobel Prize for his efforts. But as we know, the Keynesian notion of uncertainty, which is rooted in the fact that economics simply studies the aggregated behavior of many individuals, who can be crazy as bats, permeates the profession. Nowhere is this uncertainty greater than in politics, which is the secret, or not so secret (see Larry Summers) sin of academic economists.

And yet Krugman's own confident tone and his air of omniscience, displayed several times a week, belies this uncertainty. All this is not to criticize Krugman for his descent into the public square; like the stimulus, how much nuttier would we be if he and economists like Wolf do not labor to provide some reason to an often bizarre discourse? But it is to suggest just how very difficult it is to dispel fear, anxiety, insecurity, self-interest and irrationalism in matters that usually reside most comfortably in a textbook. Those cool breezes can't really compete with the steady blasts of hot air.

Robert Teitelman is editor in chief of The Deal.