
The hole at the heart of economics: the consent of the governed - noir-york
http://www.economist.com/blogs/freeexchange/2016/11/consent-governed
======
nkurz
I thought this paragraph was particularly insightful:

 _And yet, with the benefit of hindsight, we can see that the crucial question
regarding whether or not to use fiscal stimulus was a completely different
one—which is more corrosive to the legitimacy of the institutions which make
the prosperity of a liberal, global economy possible: a long economic slump,
or a short-term stimulus so large that it inevitably leads to spending on low-
return projects or lines the pockets of government-friendly firms? We were all
tying ourselves in knots working out whether the multiplier on infrastructure
spending was 0.7 or 1.2 or 2.5, when what we ought to have been asking was:
what course of action is most likely to avert a crisis of institutional
legitimacy that will leave everyone much worse off._

~~~
jsprogrammer
Reactionaries are trying to keep a grip on their beloved institutions.

Institutions failed, as they are wont. If any course of action can lead to a
crises of 'legitimacy', it was already time to break out.

~~~
anigbrowl
Your post exemplifies our problems: instead of addressing what you see as
wrong with said institutions (many of which actually work rather well) you
literally launch an _ad hominem_ attack from your very first word,
characterizing your opponents without bothering to build an argument.
Incoherent and inchoate nonsense like that which you've posted here just adds
to the existing political noise and is itself an obstacle to any progress
(which I define as a sustained increase in the median household's real income
for short).

~~~
jsprogrammer
"Your" vs "reactionaries" and I'm the one engaging in ad hominem?

Hilarious.

I addressed exactly what is wrong.

~~~
CountSessine
_" Your" vs "reactionaries" and I'm the one engaging in ad hominem?_

[https://en.wikipedia.org/wiki/Ad_hominem](https://en.wikipedia.org/wiki/Ad_hominem)

------
ap22213
Many years ago I used to play a lot of D&D. I found that there were generally
four types of players: social players, creative players, analytic players and
competitive players.

The social players liked to hang out and socialize. The creative players took
their role playing very seriously. The analytic players would focus on tactics
and strategy and solving puzzles. All three of these player types could work
together well.

But, when a competitive player joined, things would often become tense.

The tension had little to do with the competitive aspect. In fact, all of the
other player types would sometimes dabble in competition. The issue was that
the competitive players usually broke the intent of the game or scenario. They
would focus on the contract of the game (the rules) and seek out loopholes or
ways to bend the rules to create superior advantage. These players were
pejoratively called min-maxers or game lawyers. Basically, they were playing a
different game than the rest.

I often find that these archetypes fit in real life. Most people get along
fine. They understand the social rules and the basic laws. They understand the
intent of things rather than the wording of the contracts. They understand
that contracts aren't perfect and that there is a lot of room for personal
judgement.

But, some people take the rules as an optimization problem. They seek to use
them to both maximize their position as well as to justify their behavior.
And, the rest of the people are constantly trying to keep up - trying to
expand laws, regulations and social rules so that their actions are
constrained. It's like a never ending arms race.

Unfortunately, these are the people who now rule the world. But, it causes
ripples where we all now have to assume those behaviors to keep up. The
orginal intent of the game has been lost, and now the rules are the game.

~~~
Theodores
That is a very good analysis/extrapolation. Two more characters to add to your
way of seeing: those with chronic narcissism and poseurs. The way the world
works is that the narcissist politician/'competitive game player' is that one
step ahead, it takes you time to prove they have cheated. The biggest obstacle
to you is believing they did cheat. Your brain is wired up to imagine such a
thing as unimaginable. However these guys don't have the ability to empathise,
that is something they pretend because they do not have the wiring to the
frontal cortex that you have. You give them credit as equals yet a huge chunk
of their brain function is missing. They game the system as they have no shame
doing so.

The poseurs are those with all the gear but no idea. It takes them time to be
accepted by your game playing clique, you may even put them through some
hazing and initiation before they are accepted. They want to play the game but
do not know the ins and outs. Therefore they become easy prey to believing
what your narcissist game player tells them.

In politics the electorate is essentially entirely poseur. Most employees have
no idea how to run a company even the one they work for, even if they have
worked there for decades. So, why on election day does the uninformed,
propagandized to masses get to have a say?

Invariably yet another narcissist gets into office, regardless of their
political colours.

------
paganel
I'm curious at which point did the science of "economics" changed from "let's
see which laws govern the free commercial exchanges between private citizens"
into "let's see how we can govern people by imposing laws and regulations
related to the commercial exchanges between them". I'm guessing this dates
from Keynes's time.

~~~
pjc50
Economics _started out_ being called "political economy", and regulation of
commercial exchange goes back to the Romans. Regulation of coinage and weights
and measures is a statutory feature of any society which has such things.
There is no libertarian Avalon from which we have been expelled.

(I like how they've quoted
[https://twitter.com/dsquareddigest](https://twitter.com/dsquareddigest) \-
he's an excellent person to follow for common-sense politics/economics with
minor snark. And he's right that “‘it just isn’t done’ is basically the
central organising constitutional principle of the UK.”)

~~~
anigbrowl
_There is no libertarian Avalon from which we have been expelled._

As an aside, I'm struck by how often theorists of both left and right
unconsciously recapitulate the Garden of Eden narrative when attempting to
articulate their basic premises. I'm starting to think there's a correlation
between clinging to such unsupportable premises and hostility to the notion
that humans are just particularly successful animals whose basic behavioral
patterns are widely observable in the animal kingdom.

~~~
ubernostrum
This is why people should read Thomas Hobbes. His critique of "state of
nature" thought experiments -- in which bright-eyed optimists somehow managed
to convince themselves that people are naturally respectful of others and
would only need to form extremely limited libertarian-style governments, and
then only to deal with the tiny fraction of a fraction of people who wouldn't
respect "natural" rights to life, property, etc. -- is devastatingly on point,
showing exactly what such a "state of nature", if it ever existed, would look
like and why a powerful centralized government would arise as the answer.

~~~
pjc50
Hobbes vs Locke vs Rousseau, if I remember rightly? Three very different views
of this topic.

------
arca_vorago
Mainly for the neocons, but also for neolibs, I trace much of the willingness
to disregard the consent of the governed to Leo Strauss. I have been saying it
for a while, but essentially what is going on is the people in positions of
power have decided that we the public are just so stupid we couldnt possibly
comprehend the realpolitik things that need to be done, so they say one thing
in public, and then a completely different thing once behind closed doors,
usually at some think tank or institute or another.

I think I have finally found the root of this problem though, in that any
person who is currently in government and has taken the oath to the
constitution and signed the required affidavit, that advocates the position
that the people do not deserve or need to be informed because they are "too
dumb", are technically in violation of their oath of office and therefor
should be subject to removal from office and confinement or a fine, as is
prescribed by law.

The constitution is the supreme law of the land in the United States, created
to protect, _not to establish_ , our natural rights, and the entirety of it's
power comes from the governed, the people. Any attempt to subvert that or
casually dismiss that by any means other than constitutional is a violation of
law.

Of course the people with the power to decide to prosecute are mostly
compromised so it's unlikely to happen at the current moment, but with a sea
change in public opinion and involvement with justice through it's elected
officials, this might not always be the case.

I think a key point is to start getting rid of incumbents across the board.

------
aaronhoffman
With regard to the $1T platinum coin, sounds like more people should read
"Man, Economy, and State" [https://mises.org/library/man-economy-and-state-
power-and-ma...](https://mises.org/library/man-economy-and-state-power-and-
market)

There is a lack of understanding around money and currency, and how they come
to exist in an economy.

~~~
notahacker
To be honest, lack of understanding about money and currency isn't
particularly likely to be alleviated by reading a polemical tome by an
anarcho-capitalist gold bug, unless it's a small subset of the reading you do
with the objective of understanding how some of today's monetary systems most
ardent opponents feel about it (probably paired with David Graeber for an
equally extreme critical view of the monetary system from a different
perspective and entirely different history of how currency came to exist...)

~~~
mercer
I can highly recommend Graeber (been working my way through 'Debt'). Not
because he's right - I can't tell - but rather because his view interesting
and quite different from what I'd heard before.

------
rhodri
drawing attention to a deep and abiding ideology here: economics often
presents itself as a science describing a universal and indeed physical
phenomenon. remember that "the market" as we it is not only an ideal model but
a very limited one that vehemently does not apply to most of the world, both
inside and outside of California.

"Institutions are organisations or patterns of behaviour built by societies to
help solve social or economic problems which the law or private markets cannot
fully address."

institutions have existed long before the rule of law, or the existence of
private markets.

what he does get right is the fallacy of "ceteris paribus" or "all else
remaining equal" that is used in most economic arguments with their limited
scope.

~~~
anigbrowl
Calling _ceteris paribus_ a fallacy is like objecting to the notion of
integers because nature often presents quantitative problems involving things
that are neither uniform not discrete; you may as well object to someone
counting on their fingers because 'in reality they're all attached to the same
hand, man.'

 _Ceteris paribus_ is a technique for decomposing complex problems into
simpler elementary ones, not an assertion about underlying economic realities.
It's employed most commonly in microeconomics, which works fabulously, in much
the same way as classical mechanics continues to work fabulously for the vast
majority of earthbound practical problems. _Macroeconomics_ is beset by
problems because our understanding of social and organizations structures is
seriously incomplete, in much the same fashion as ants probably have extreme
difficulty in forming ideas about the collective behavior of ant colonies.

------
yosito
Wait, what does this have to do with the consent of the governed?

~~~
quantumhobbit
The point was that instead of focusing on maximizing utility across the whole
economy, economists should have considered policies, that while not globally
optimal, preserved the consent of the governed.

The recent wave of populism, Brexit, Trump, etc., can be interpreted as a
revocation of that consent. The implication is that now populists might impose
much worse economic policy than a moderate consent-preserving policy
beforehand.

------
guard-of-terra
This is main objection to e.g. negative returns on deposits. "it just isn't
done". You do that, people will have zero faith in banking system. Tell you,
living in society where nobody has faith in institutions is very unfun.

------
rconti
_One can mount a perfectly sensible economic defence of big bonuses paid to
workers at banks that lose massive amounts of money and require state support,
and one can also argue that the public should be smart enough to understand
such payments and not let them stick in its collective craw. But they’re going
to stick; that’s how people work. And that effect on macroinstitutions,
whatever they are, ought to be considered in some way._

------
irq-1
The author confuses "it just isn't done" with both tradition and the social
constraints of polite society.

~~~
pmyteh
It's not clear to me that there's a confusion. These seem like related
categories (and, as a UK political scientist) his analysis of the British
constitution seems both funny and broadly accurate.

------
stcredzero
If anyone listened to or listens to "The History of Rome" podcast, or is
otherwise familiar with Roman history, you'll note that the violation of "It
just isn't done" precipitated a lot of stuff in Roman history -- much of it
directly leading to totalitarianism.

------
pastProlog
> It seems reasonable to argue that bail-outs for banks amid broad woes for
> workers led to a loss of confidence in the system.

Well that's one thing. We were told abolishing Glass-Steagall needed to be
done because it was only something liberals who like big government wanted and
was a 66 year old relic of the New Deal. Then the bankers come to the
taxpayers 9 years later and demand to be bailed out because they're now "too
big to fail" and if they're not handed a fortune of the taxpayers money
quickly with little debate, the world economy would collapse.

