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.
Another observation, the reason people are so miserable in the economy is the same reason people are miserable in nature. Civilization was a means to escape nature, but we have recreated nature in a completely different domain on top of abstractions. The economy, Capitalism, is nature that's recreated. That's also why people want Socialism and Communism, to escape from this new brutal "nature" again.
An economy does not work without the creation of a collective fiction. Its rules, its laws, and especially the concept of value simply do not exist. It is faith in the system, that same faith we all accept when we look numbers on screens and find that as an acceptable way of determining ones wealth.
Economies are religion. If there is no confidence or faith, then we have effectively killed something that never existed in the first place
It is possible for an alliance to form between large mining pools, and then what do we have?
I'm no bitcoin expert, so I just googled some random words and found this which claims the 5 largest pools mine 57.5% of all blocks in the past 6 months.
Also, the idea that "anyone can contribute" could do with a few qualifiers: anyone with access to a computer, electricity, and the internet - and all the associated infrastructure required to support running those.
Bitcoin also has carbon emission externalities
To the people and institutions who currently hold power, that's not a feature, that's a bug.
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.
I addressed exactly what is wrong.
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.
If I'm on the right track, an example of institutional legitimacy might be, "Banks can be trusted to hold your money" (vs stuffing it under your mattress), and FDIC insurance might be an example of an action to support or create that legitimacy.
Banks, at least as depositories for money, seem worth having...
A good example would be, "MSNBC utterly failed to fact check 2016".
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.
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.
A couple of points:
1. negative externalities make necessary laws and regulations if you want an efficient market.
2. Keynesian economics (presumably what you referring to) has nothing to do with restricting free trade, but deals with the boom-bust cycle and how a government can manage it.
Yeah, I'm now reading Benjamin Constant (I've read guys like Jean-Baptiste Say and Jeremy Bentham before) and there was is close to no mention in their works about the government having the intrinsic need to "manage" anything.
Which brings me to my second question: who has empowered the Government to actively manage economic cycles? And assuming it has acquired these powers all by itself, based on which premises/presumptions does it accomplish its economics-related actions?
It's funny reading Constant and how he warns about the perils of moral hazard associated to the active involvement of Government in the economy. 200 years have passed and we still make the same mistakes.
> based on which premises/presumptions does it accomplish its economics-related actions?
Find causal relationships -> create causes for effects that you would like to see
> the perils of moral hazard associated to the active involvement of Government
Maybe the 18th century governments overstepped their boundaries when, dunno, they stopped slave labor of 8-year olds in coal mines. Today, the term applies almost exclusively to private industry. Mostly financial.
Why do we need a government at all? Why not live in anarchy?
Because we, as a country/people/nation who give our Government at least some sort of legitimacy, desire a large institution to protect us. Historically, the only kind of protection we desired was from external foes who would wage war and enjoy the spoils thereof, but there's general agreement that we also need a government to protect us from ourselves, whether that's from petty criminality or to enforce our contracts, along with establishing standards which make those contracts of generally mutually agreeable meaning and enforceability.
So why is it illegitimate for the government to protect us from the boom/bust cycle? Keeping in mind that whether this is possible to begin with is a different question from whether it is moral and ethical for a government, which we instituted to protect us, should also protect us from a downfall seemingly built into the Laws of Nature.
Are you a charismatic amoral-yet-benevolent despot with a knack for turning violent tuggs into loyal enforcers? Anarchy sounds so great, but keep in mind that other, less enlightened, despot wannabes are going to come after you and yours, so keep at all times enough resources for the defense of your turf.
Not really interested? I am not surprised.
But if you bear with me, you can stretch the "violence" argument a long way.
If you have a no government at all, you have this "Mad Max" scenario. The strong take from the weak until the only way to survive is to pledge allegancy to one Warband or another.
If you have a government that only concerns itself with protection against foreight invasion, you will have the semblance of order and institutional life, but underneth the organized crime will rule. They will not limit themselves to illegal business like drugs (though they will exploit it in a monopolistic way), but will quickly develop extensive protection rackets that will be a burden to the whole economy.
Then, if you have a government that only concerns itself with foreight defense and internal defense or property rights, you will have the robber barons scenario. The rich will do as they may, and anyone that opposes their interest will face a weaponized law enforcement at their doorsteps. That, or will be victim of paramilitary groups like the pinkertons, who enjoy the unofficial protection of law enforcement.
And so it goes...
I agree it comes to a point where giving more responsibilities to government causes more problems that it solves, but to despise every and all regulatory oversight in the name of liberalism and (idealized) anarchy is an oversimplified model.
Unfortunately this approach generally fails with anything more complex than a tiny village of 1-200 people at most. There's no particularly system with which hierarchical/authoritarian structures can easily be replaced (observe the tendency of most religions to end up concentrating temporal power even where said power is doctrinally discounted) and attempts to replace fallible human agency in the hierarchy with an incorruptible technical solution typically veer into absolutism and tyranny, whether by institutional capture or simple inertia.
The basic problem (it seems to me) is that we don't have a good theory of government by which we can measure institutional health and reliability. Anarchists and libertarians are excellent at pointing out the shortcomings of government, but as you point out their response to this is basically dismantle it, which seems to be about as sensible as saying the cells in your body will enjoy greater freedom if one would only commit suicide. Governments exist for the same reason that complex multicellular life exists.
The hyperinflation and political humiliation suffered by the Weimar republic led to it being assailed by both the extreme left and the extreme right, until you know who, in the febrile political climate, grabbed the reigns of power.
Human nature craves security and will turn desperately to anyone who looks like they can deliver it. Better the devil you know (a democratic functioning state), then a despotic one.
Because we know what that looks like. It's called a "failed state", and there are too many of those now. See Somalia. In practice, it usually means rule by local warlords, which sucks.
If government can protect us from big evils (warlords), why not small evils (insider trading).
The common good. Economic uncertainty, like political uncertainty, makes it hard for a society to plan, budget and invest.
A stable currency, low inflation, enforcement of property / contract law and political stability enable commercial activity.
Constant was a man of his time and the Reign of Terror - the despotic abuse of power - was a tragedy. How this is relavent to modern economic management and why Constant should be relevant today (he advocated a monarchical republic, a monarchy? today?) in such very different times would be interesting to hear.
The US has become a "de facto" monarchical republic: the powers of Congress have been much diminished compared to what the Founding Fathers presumably had in mind, the Supreme Court actually acts like a monarch's Privy council (it's a non-elected entity and its members depend on the good-will of the so-called "president" to reach its ranks).
If Hillary had been elected the US would have continued the hereditary tradition which had started with the Bushes (or with Bob Kennedy, had he not been shot). There are lots of people on the Democratic-side of things who have lately suggested for Michelle Obama to run for presidency in 4 years' time. So I'd say Constant is still spot-on on lots of things (I've read a collection of Hannah Arendt's essays this summer and on lots of things she has just copied Constant's discourse. I'd say Hannah Arendt is pretty much part of today's conversation). So is Bentham, so is Burke, so is Thomas Paine.
And the Supreme Court was always an appointed position, even in the time of the Founding Fathers. Having judges be elected is a terrible, terrible idea.
The President's entire executive branch has been sent home without pay (yes, they got back pay eventually but contractors often didn't) a few years back by Congress. His appointee to the Supreme Court was blocked very effectively by that same body. His trade deal (TPP) is likely not going to be approved thanks again to Congress.
Also, while the justices need the President's help to get onto the bench, they do not need it in order to stay there. This is an important distinction.
Only thanks to the US's Electoral College system, otherwise she would have been President. The matter of fact is that more Americans have voted for Hillary than for Trump.
And going back to the US President's powers, as far as I know the last few wars in which the US has been involved happened without the preliminary Congress approval. Starting a war without the Congress's/Parliament's approval is a royal prerogative since at least the Middle Ages.
> Russia is a de facto monarchy,
Russia is a light-ish dictatorship (people are not sent to the Gulag, yet) which might turn into a tyrant regime (assuming Putin keeps his power and goes crazier), I wouldn't call it a traditional monarchy.
> the United States is a Republic in every way that matters
The Roman Senate survived until at least 400CE (or around that time), meaning 4 and a half centuries after the "de facto" disappearance of the Roman Republic (even more if you go back to Sulla). Thus means that the fact that the US Congress is still around and from time to time likes to play contrarian games doesn't actually mean that the US Republic hasn't lost its original "status" (not an English native speaker, maybe I'm wrong on this word).
Otherwise I can't understand how Obamacare has stood up against the Republican Congress's will.
> His trade deal (TPP) is likely not going to be approved thanks again to Congress.
Had Trump been pro-TPP (or pro-foreign trade in general) I'm 99% sure TPP would have been voted in.
The popular vote is frankly irrelevant because no one was campaigning for it. It would be a totally different game, from the primaries through the general election, if the presidency was decided by popular vote. Republicans would campaign heavily in California and New York. Democrats would campaign heavily in Texas. Drawing any conclusions from the popular vote when it doesn't matter is futile.
Google the word "filibuster" and you'll have your answer. The Republican Congress didn't have the votes to change policy, so they weren't able to. Whether they do now is actually a matter of some debate.
> Had Trump been pro-TPP (or pro-foreign trade in general) I'm 99% sure TPP would have been voted in.
I disagree, but that's beside the point. It would only get voted in if the Congress decided to do so. That's the crux of my argument; policy gets made by Congress and enforced by the President. Trade deals get negotiated by the President and then approved by the Congress. That's the design, and also how it actually functions.
For the federal government, a mix of the authors and later amenders of the Constitution, by way of a variety of Constitutional powers by which that function is effected, and the voters of nearly every election in the history of the US who have elected members of Congress and Presidents largely based on their stated intent to actively manage the economy in various ways.
The same is generally true for state governments, though with reference to the crafters of the respective State constitutions rather than the federal one.
The people who alternately vote on and/or protest existing economic conditions and demand representation for their views. It sounds very much as if you are limiting tyour reading to authors who will reinforc the views you already hold. It must have required considerable effort on your part to filter out any awareness of labor movements through history and related demands for economic security, regardless of whether individual policies were well- or ill-founded.
Market forces can be massively disruptive to people's lives and when people's lives are disrupted by forces beyond their control (whether by natural or economic disasters) people generally petition their government to Do Something About It. I'm having a hard time believing that you're ignorant of really basic historical trends like governments losing legitimacy and being overthrown due to famine or similar adverse economic conditions.
Trust me, I've read more Marx than 95% of the Marxists out there: I've read his "Capital I" (Capital II+III are on a bookshelf which right now stands behind me), his German Ideology and other works from his younger years. I genuinely think of him as one of the most brilliant minds of the 19th century and one of history's best when it comes to human sciences, it's just that when it came to economics he was so very wrong. You don't have to trust me on this, you don't have to trust your logic or anything else of that matter (which would suffice were you to read a writer like Say in parallel with Marx, let's say) you just have to look at the economic history of the last 150 years or so. Marx's view on economics proved to be utterly wrong.
> Market forces can be massively disruptive to people's lives and when people's lives are disrupted by forces beyond their control (whether by natural or economic disasters) people generally petition their government to Do Something About It. I'm having a hard time believing that you're ignorant of really basic historical trends like governments losing legitimacy and being overthrown due to famine or similar adverse economic conditions.
And suppose a famine is around, what should a Government do? Invent food out of thin air, like in Star Trek? No, it can't do that, because we live in real life not in science fiction. The matter of fact is that looking back at history the most effective ways of dealing against famine involved less Government meddling, meaning less taxes on transport, less taxes on sales/purchases of food. That's one of the first signs telling you when a Government has started losing the grip on its constituents, i.e. when it starts lowering taxes on food because of its own volition (for a recent example look at Sisi's Egypt).
Right. When everyone from Marxists to Keynesians to neo liberals agree that there is such a thing as a business cycle (even if they may not agree on the causes or how to manage the cycle), then I guess you may be using a definition that is different to everyone elses.
(I like how they've quoted 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.”)
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.
if you had to explain to an alien what happens when you go to a store and exchange a piece of paper for a candy bar and get some paper and metal back, you'd be there for a long time and have to explain much of human history and civilization.
'which laws govern' i.e. are naturally imposed and who is 'imposing [somehow unnatural] laws and regulations', seems to be largely in the eye of the beholder.
the idea any of this happens in a state of nature seems naive.
No you wouldn't. It's screamingly obvious that barter is an inefficient system since the chance that your desires exactly coincide with my output are low. The notion of using an abstraction as a medium of exchange is ancient; the advent of paper money, credit and so on is simply the consequence of institutional awareness eclipsing physical instantiation, ie accepting the idea of a bank as a persistent and reliable entity as opposed to shaving gold coins and hoping the next recipient doesn't notice.
You seem to imagine the state of nature is one of carefree mutualism or somesuch, which is self-evidently not the case. Eusocial animals (which I consider to include humankind) are if anything more competitive than lone or pack animals.
In a governed society, one generally does not face constant attacks against one's territory, and when those attacks do happen (much less often), one has recourse to automatic assistance in defending it, with the threat represented by that automatic assistance acting as an effective deterrent to attacks.
I don't understand this libertarian appeal to nature. Surely we can do better than the drunken walk of evolution that has led to present day "nature".
Territory is very different from property. Territory is something you defend. Property is something society agrees to defend for you.
(I guess I kinda missed the context of the post a bit further up, which suggests there isn't a possessory instinct in nature, which is obviously incorrect.)
As I mentioned elsewhere, I'm increasingly drawn to the conclusion that those who argue most intensely for certain ideological positions are the least comfortable with the idea that our social structures may be biologically determined or could be subject to biological analysis.
Who's talking about "possible"? Any ignorant position is "possible".
Our property laws grew from these exact ways of thinking. Property is natural.
Consider serfdom, slavery, guild systems, the Enclosure Act, private armies, strikebreakers, debter's prisons, workhouses, unequal pay for equal work, press-ganging... You can look all across history, and hardly find an example of free commercial exchanges at work.
What we have are markets that are designed to be safe, fast, easy, clear, and beneficial to society.
My point is that most of history's economic miracles were built either on the backs of theft, coerced labour, or government largess. There was no golden age when businessmen could be businessmen, and enterprise was free.
Free commerce might be ethically correct, but that's certainly not obvious to everyone and it does not appear to be a stable equilibrium for social organization.
This is normal, because the foundations of a given society are intensely political and have a huge impact on the nature of economic activities that exist (whether independent courts will enforce loan contracts, for example, is a political decision with major consequences for capital flows).
Recently, the public face of economics has been largely microeconomic modelling, which looks (from a distance) like an apolitical applied science. But the economic historians and the political economy people have always been part of the discipline as well, whether they be Marx or Milton Friedman.
That's not true at all, economics can predict many things. Here are some things that economics can accurately predict:
mv = pq is very well tested.
Economics can accurately predict that if you print too much money, you will get inflation. This has been verified over and over in many countries and at many times.
The idea that increasing demand for a product (without modifying supply) will increase the price of that product is predictive and well supported.
Price controls cause shortages: this happens over and over.
When someone says, "economics is useless from a predictive standpoint" they are showing their ignorance.
I presume you mean that m is usually positively correlated with p over some unspecified time horizon?
A problem I often find with economic truisms is that they tend to carefully ignore the time component. Over a short enough time horizon this is clearly untrue. Over a long enough one it's pretty much tautological. Market theory has a similar property.
> if you print too much money, you will get inflation
Again, usually. Hasn't really been happening over the last few years in the US and Europe. Presumably we just wait for some arbitrary long period until inflation starts to rise again? Does the theory tell us how long?
So it's not that economics can't make predictions. It's just that they're often not useful predictions. It is quite good at postdictions, of course. The utility of which is at least a tad suspect.
It's a bit of an aside, but I feel like I keep waiting for someone to finally invent a proper calculus of economics. Taking economics classes side-by-side electrical engineering classes in college the lack of time in most economics work seemed particularly jarring at that time. I kept wanting to convert economics to some semblance of electrical diagrams and investigate deeper the first and second derivatives of money with respect to time... (It's not the potential voltage (money) in an electrical diagram that is interesting, but differentials of voltage and current flow (and resistances to that), neither of which are well defined as concepts in any of the economics I saw in school.)
In fact, it reminds me a lot of my undergrad electrical engineering classes.
The reason you even have to ask this question is because you don't understand MV = PQ.
MV = PQ is true by definition. There is nothing to test about it because it's tautologically true.
Then again, people go astray all the time when they try to fill the equation with causal implications which can be tested.
For example, when people said "Increasing M will increase P" and predicted hyperinflationary mayhem as a consequence of quantitative easing. Those predictions have failed entirely, mostly because rather than change P or Q, the change in M simply changed V instead. (There is a plausible argument that quantitative easing has contributed to asset price inflation, but that doesn't have anything to do with MV = PQ either, because the P in that equation isn't about asset prices.)
Because of these failures, the value of MV = PQ for economics as a science is basically zero.
Not really. Hyperinflation it's normally associated to a supply problem, for instance the archetypical examples: the Weimar Republic and Zimbabwe (see http://bilbo.economicoutlook.net/blog/?p=3773 for a detailed explanation.)
Anyway, I agree that good economics it's useful and can explain and predict frequently.
Well, that's the definition of v.
First thing that needs to be modeled correctly is the government. Whats is it? Is it going to be authoritative or democratic. Now if it is authoritative, it servers a minority in power. If its democratic, shouldn't it be optimized for welfare of its citizens? Once that is defined, it becomes easy to model economy right. The right thing that should've been done is to let go of attitude "too big to fail" and let the market correct itself. Contracts were made between banks and investment banks. Those were valid contracts. Those who found themselves at the short end of the stick knew what they were getting into. It was the expert bankers who created those contracts. They didn't held their end of the deal. They basically caused a mess and got away scott free.
BUT: it seems there was a change around about the time of Keynes. Until then, economists talked mostly the general kind of systems that would produce prosperity.
Even Marx talked like that -- he might have believed in rational planning, but he wrote about how the capitalist system as whole (mis)functioned, and how the proletariat would "inevitably" seize control. He did not detail already existing "levers" that be used by governors to steer the economy.
- a few basic axioms, based on principles well understood at certain scales but not universally accepted to work in combination and on a bigger scale
- a lot of very messy empirical data, such that you need to be well versed in statistical techniques to understand whether it supports a hypothesis or not
- predictions that are on a small scale frequently wrong and little agreement on magnitudes, despite scientific consensus over the general direction of movement
- a lot of debate over whether proposed regulatory or technocratic solutions will actually do more good than harm and relatively little evidence of the size of the benefit they might bring that isn't contingent on trusting said imperfect prediction models. And a fair bit of inertia about doing the regulating because the companies that proposed to be regulated have a pretty good idea about what they stand to lose.
- a lot of arguments over whether it's all a big con, driven far more by politics than understanding of the subject matter
After these, a lot of power shifted from the people to the federal government. And then the government needed economists to tell them how to use this new power. And because there are dozens of federal agencies employing economists, they're never going to say "We shouldn't be here at all" but rather "Let's hold back a little bit on using our power here". They're going to adjust their message so that politicians are more likely to appoint them to positions of power.
Academia isn't any better: They crucially depend on government money, and the effort is always on more government influence(and money) even if a few professors write theoretical books saying otherwise.
In finance, I believe economics is still useful since you can make measurable predictions, and execute trades and deals off of them. But, economists at finance companies aren't nearly as noticeable as economists in the government and academia.
If you completely cut those items in the first paragraph, it would become nothing more than a moderately useful branch of philosophy.
That's the fault in this line of reasoning: the people never had the economic powers of a government. Government derives its power from being the solution to a collective action problem. Or, in other words, the people gained power by pooling their decision making process.
But you're quite right that the notion that 'the people' once had such power before being oppressed by the creation of collective government is an ahistorical idea, normally deriving from dubious state-of-nature theories.
You can spin it all kinds of ways, but the concept steal is not a fundamental one, but one that we invented and enforce through government, through coercive action.
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.
There is a lack of understanding around money and currency, and how they come to exist in an economy.
That book contains some policy prescriptions that you may or may not like, but regardless of that, it contains (a) a solid history of the development of money that is based more on actual history and sociology, rather than made-up stories, and (b) a solid and relatively plainly written introduction of how modern fiat money systems actually operate, without all the weaseling of terms you read elsewhere (e.g. "banks parking money in the central bank" is a pet peeve of mine).
"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.
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.
In democracies the rule is by institutions rather than by individuals, but the same principle applies: we can only have a liberal capitalist democracy for as long as enough people believe that liberal capitalist democracy is the right thing. Once enough people believe otherwise the government collapses and something else (probably a lot nastier) takes its place.
Therefore it is beholden on those who manage our liberal capitalist democracy to ensure that they maintain this consent. Economic and political policies should be fashioned, in part, around this principle.
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.
If you take moves that hurt trust in those institutions, people might no longer consent to being governed by them. Now, a world without courts is economically worse of, so take public trust into account when making decisions.
In other words, economists often have blinders on, concerning themselves only with Homo Economicus, while forgetting all about Homo Politicus.
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.