Thursday, July 8, 2010

Wishful Thinking and Wishful Thinkers

Megan McArdle points to an interesting feature of our arguments about fiscal policy (my emphasis):
“Wading through the online debates, I note that opinions on stimulus are nearly 100% correlated with the composition of that stimulus, and the opinionator's prior view of that activity. So when Democrats are in power and stimulus is mostly spending, liberals think that the stimulus is an issue of fierce moral urgency stymied by venal greed and rank idiocy, while conservatives develop deep qualms about budget deficits. When Republicans are in power, and stimulus consists mostly of tax cuts, Democrats get all vaporish about deficits and the income deficit, while Republicans suddenly realize that the normal rules don't apply in an emergency. When out of power, both sides will grudgingly concede that some small amount of highly temporary stimulus might be all right, but note (correctly) that the other side seems to be trying to make permanent as much of this "stimulus" as possible.”
Assume that McArdle’s right. What explains the strength of the correlation between views about the ethical value of public spending and beliefs about its macro-economic effects?  As far as I can see, there’s nothing illogical about believing in limited government as a matter of political morality and taking a neo-Keynesian view of macro-economics. Nor does it seem illogical to subscribe to an egalitarian notion of distributive justice that depends on an activist state for its realization and the proposition that traditionally liberal techniques of redistributing social benefits and burdens are often self-defeating because of their deleterious supply-side effects.

Yet virtually nobody seems to uphold either set of ideologically incongruous beliefs. Moreover, most ideologues manage to persuade themselves that the correlation McArdle points to discredits their political opponents’ ideology, but not their own. When you step back from the ideological barricades and take a deep breath, that looks like a spectacular exhibition of wishful thinking.

To her credit, McArdle’s determined not to cut herself that slack:
“For me, then, [debate about fiscal stimulus] mostly ends up as a proxy war over the level of government spending, a war I'd rather fight honestly on value grounds rather than attempting to disguise my preferences with a shoddy veneer of ‘scientific’ logic.”
But that’s not really an adequate response either. The reasonableness of one’s preferences about public spending is a function of having both defensible political values and a sound empirical conception of how the political economy works. It doesn’t do us any good to pretend that if we have one we can do without the other.

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