I found it kind of funny that the author's big conclusion was less state-directed action, leaning on the thought that somehow the economy will work out for everyone as long as we get out of its way well enough. A type of magical thinking.
Unfortunately economics is split between an evidence-based field that occasionally changes its mind when its wrong, and a proliferation of "schools" and "think-tanks" that provide a selection of justifications to do what you already wanted to do. The science of how governments should handle money is too important not to be made into a political football.
I think his conclusion is more subtle than that. It's not that getting out of the way of the economy means it will all work out—far from it. Rather, continuing to buy into the magical thinking of the current priest-kings (i.e. state-directed action) opens the doors to much nastier alt-priests (e.g. totalitarianism).
The specific process? Further buying into our current priest-kings puts pressure on them to make their magic work. Magical thinking eventually fails, inevitably. Then the historical process of succession of priests kicks in because "we need the eggs" (to use the article's phrasing), and the more we need the eggs, the more nasty the alt-priests we'll turn to in search of eggs.
Subtlety != non-magical. Confusing subtlety and depth with rigorous thinking -- or even worse, scientific thinking -- is a common confusion people fall into when engaging with economic theory. Both professionally and as a side interest, both on the left and on the right.
Existence of a large literature base, a big set of jargon, logically rigorous arguments, and mathematical models and theorems does not preclude fundamentally magical thinking.
If you disagree, go read some Christian Apologetics. Portions of the field are more rigorous and have far more subtlety than most economics. But sorry, it's still fundamentally rooted in (literally) magical thinking.
> priest-kings... alt-priests
So we've replaced magical thinking with jargon-y name calling. Progress...?
some would argue the current priests are the economists and the king is capital, and that this is a kind of totalitarianism. I'm not affirming it is so, but I cant help but think truth is not a flat as some try to make it
I'm reminded of Chinese dynasties. Eseentially very dynasty that wasn't toppled by someone else first (e.g. Mongols) finally crumbled when it failed to deal with a famine. Mass unrest combines with the collapse of 'divine right', and everything switches to war and chaos.
If magic thinking is unavoidable, then the best hope going is to relegate it to a category that can collapse and be rebuilt without destroying stability. The last thing you want is to tie your government to a condition that's guaranteed to fail eventually.
Indeed, one has to be careful with the term "magical thinking". Using it can easily deteriorate to name-calling, and I'd say that the author fails because of that.
I'm not a big fan of the prevailing belief in monetary policy as the go-to policy tool, but monetary policy itself isn't magical thinking at the same level as rubbing crocodile teeth to a banana tree. Unlike the true magic thinking of millenias past, there is an underlying transmission mechanism to monetary policy: raising interest rates can reduce the rate of investment in some sectors (probably mostly housing), and conversely, decreasing interest rates can increase the rate of investment.
This transmission mechanism may not always work. For example, when people have too much debt to begin with, decreasing interest rates isn't going to have a great effect. For another, changing interest rates is a very blunt tool without the possibility for fine-tuning (which means that relying on only monetary policy is a bad idea, see also the Eurozone).
Similarly, fiscal policy is far from magical thinking as the author wants us to believe. When the government buys things, that has clear and direct real-world effects. It's dishonest to put it at the same level as performing a rain dance.
One can and should criticize policy ideas, of course, but just painting with the broad brush of "magical thinking" isn't helping. It doesn't clarify or enlighten.
I really like your post and I think you're on to something, but I want to be pedantic about one point I think is important:
> Unlike the true magic thinking of millenias past, there is an underlying transmission mechanism
This doesn't distinguish it from magical thinking. Witches transmitted demons using magic... or whatever.
What distinguishes it from magical thinking is that the transmission mechanism is 1) based upon empirical observations; and 2) far more importantly, is a refutable theory. So even if we can't prove or disprove the theory with high statistical confidence using a single experiment, we can formulate specific hypotheses that test the veracity of the theory and then try to refute those hypotheses. Either in controlled but very small scale settings, or by finding naturally occurring data sets that prove or refute the theory.
Many economic theories are vaguely similar to evolution in this one respect[1]. The problem with theories of this variety is that if you know a priori what you want to be true, then you can amass evidence. So you have to be intellectually honest with yourself, or you're just hiding your magical thinking with a pile of complexity.
[1] But extremely different in many other ways... I mean for this comparison only to point out a single similarity -- that neither theory's complete set of claims can be directly tested experimentally, but we can still think about these theories scientifically. Of course the comparison between evolution and any particular economic theory more-or-less stops there...
> I found it kind of funny that the author's big conclusion was less state-directed action, leaning on the thought that somehow the economy will work out for everyone...
The original undirected market [that is: the natural environment, and evolutionary selection] seems to have regularly turned out OK results, even for sub-optimal organisms, for millions of years.
Now, do we have any guarantee that a similar system would work just as well in our economy? No -- but I read the point of the article as stating that the current system may claim such guarantees, but the housing crash and subsequent slow recovery can be read as proving the ineffectiveness of the "incantations" used by the government to direct the economy.
> ...proliferation of "schools" and "think-tanks" that provide a selection of justifications to do what you already wanted to do. The science of how governments should handle money is too important not to be made into a political football.
Given your description of economic policy markers as "justifications" rather than some manner of lever / control, why should we believe governments' monetary policy is based on science? If it is not, the author claims (and I am prone to agree) that abandoning this false belief in search of the truth will improve our lives far more than the comfort granted by it.
Unfortunately economics is split between an evidence-based field that occasionally changes its mind when its wrong, and a proliferation of "schools" and "think-tanks" that provide a selection of justifications to do what you already wanted to do. The science of how governments should handle money is too important not to be made into a political football.