Why have authorities across the world made such a mess of the current inflation crisis? They didn’t see it coming, and when it came, they completely misunderstood its nature. Furthermore, when inflation eventually returns to single figures, I’m pretty confident they’re going to screw up post-inflation policies too.
They seem to think inflation is like a morning mist – something that eventually evaporates leaving everything just as it was. In reality, inflation isn’t neutral, it fundamentally damages the structure of an economy. Or, to use a different metaphor, if you’ve been smoking 40 a day, your lungs don’t return to rude health on the day you quit.
So why have the authorities done so badly? I think a major factor is their ignorance of the important work in economic theory that came in response to the great inflations of the twentieth century. As a result, we’re probably going to witness a painful reinvention of the wheel.
What explains this ignorance? In my view, one of the principal culprits is the increasing displacement of reasoned argument by smear tactics.
I was brought up in a strongly anti-Marxist household. More accurately, in a household that was strongly against what they imagined Marx’s doctrines to be. I say “imagined” because they sure as hell hadn’t read any Marx. So far as they were concerned, there was no need: why engage with the ideas of an arch-villain?
Smearing those we disagree with is primitive and anti-rational
This, of course, intrigued me. Why was Marx the intellectual equivalent of Long John Silver? Apparently, he was a waster who never did a day’s work in his life. Instead, he sponged off his wealthy, factory-owning friend and then had the unbelievable cheek to call the factory-owning class “lazy sponges who live off other people’s labour.” More than that, he seduced the maid right under the very roof where his wife and family lived… and got her pregnant. Yes, he was an odious immoral hypocrite who didn’t practise what he preached.
No point in bothering with his ideas then!
This is the pernicious trick I want to identify. Smears give people the tacit permission to be ignorant; permission to not engage with the arguments of the “wrong” kind of person. But remember, reasoned argument is impossible if you don’t know what it is you’re arguing against.
Furthermore, what counts as the wrong kind of person is in the eye of the beholder. It may be based on politics, race, sexual preference, gender, age, nationality, etc.
Interestingly, while it’s easy to catch our opponents using such a cheap shot, we’re often blind to our own uses of it. For example, a couple of nights ago, I went to a talk by the profoundly impressive author, Bill Browder. During the talk, he pointed out how the American right often deploy precisely this sort of smear tactic. As he said, the jibe “Biden’s too old” permits detractors to write off his political ideas without any consideration. However, Browder then went on to give himself permission not to engage with the claims of several people he disagreed with simply by dismissing them as “Russian assets”.
This was disappointing. How difficult it is to be as tough on our own practices as we are on those of our opponents.
Smearing those we disagree with – instead of attacking their ideas – can feel good, but it’s primitive and anti-rational. Unfortunately, smear tactics are highly effective, and have acquired a veneer of legitimacy. They’ve even begun to contaminate serious academic work.
One egregious example I came across recently was in a supposedly academic study of the work of Milton Friedman. The author spent his first chapter attempting to assassinate Friedman’s character. Apparently, Friedman’s autobiography, written when he was in his late 80s, was riddled with factual errors. Ergo, we can ignore his economic theory. This is of course nonsense, but it’s working.
Friedman produced what is probably the most important work on inflation – work that is now largely unread. Because it’s been superseded? No. Because Friedman’s political views have made him persona non grata, and he is merely one example.
We seem to have descended into an era in which too many people are content to be blinkered. They think it quite rational to disregard any argument (or indeed data) that isn’t compatible with their existing views. This is incredibly dangerous. It is never legitimate to dismiss an argument you aren’t familiar with. Furthermore, if you allow someone else to determine the ideas you do – or do not – engage with, you have thrown away your freedom of thought.
Peter Lawlor is the Principal Economic Advisor to 7Ridge Capital and an adviser to senior Wall St figures. These are strictly his own views
