“There are some ideas so absurd that only an intellectual could believe them.”
Paul Krugman as ever had the right expression. An intellectual crackup. Just in the 1930s when it was becoming obvious that communism, if it was to liberate humanity was certainly going to do it via an extraordinary degree of brutality, so there were plenty of intellectuals doubling down on how great it was. Likewise as the US Republican party has disappeared into conspiracy, paranoia and creationism as it’s given itself over to cranks and wackos, there’s been lots of support for its basic ideas not just from academic hucksters like George Gilder but also from those at the highest levels of the academy.
New classical economics is the perfect preparation for this because it’s tricky to excel in its maths and while you’re doing it you might miss the fact that its micro-foundations are absurd. The new classical explanation for the Great Depression is that it was a spontaneous holiday taken by rational, forward looking utility maximising workers.
Anyway there’s a cast of oddballs with Nobel Prizes in economics who buy this stuff and last week John Cochrane who’s a leading, but not Nobel Prize winning light at Chicago let us know how we could
cure all known diseases massively expand the US economy by slashing regulation.
Anyway, Brad Delong made easy work of this and Cochrane offered a woeful response. Greg Mankiw likes to stay out of trouble, but couldn’t help himself from linking to Cochrane. And Noah Smith
Taylor delivers the coup de grace.
I particularly recommend Brad’s slides which you should be able to follow just by imagining what jargon like “out of sample” must mean.