There Will Be Politics

UPDATE: Henry Farrell and Dan Nexon have taken their shots at me, at least partly deserved, but I didn't say the things I said. A more fleshed out version of my thought is here.

Paul Krugman thinks that democratic politics does not exist:

Well, what I’ve been hearing with growing frequency from members of the policy elite — self-appointed wise men, officials, and pundits in good standing — is the claim that it’s mostly the public’s fault. The idea is that we got into this mess because voters wanted something for nothing, and weak-minded politicians catered to the electorate’s foolishness.

So this seems like a good time to point out that this blame-the-public view isn’t just self-serving, it’s dead wrong.

The fact is that what we’re experiencing right now is a top-down disaster. The policies that got us into this mess weren’t responses to public demand. They were, with few exceptions, policies championed by small groups of influential people — in many cases, the same people now lecturing the rest of us on the need to get serious. And by trying to shift the blame to the general populace, elites are ducking some much-needed reflection on their own catastrophic mistakes.

If Greenspan's "with notably rare exceptions" deserves internet infamy, and it does, then surely Krugman's less notable exceptions should too. As Drezner notes, Krugman's examples -- the Bush tax cuts and the Iraq war, mainly -- were supported by majorities of the population. Bush campaigned on a platform of tax cuts too, so it's not as if he tricked the public once elected.

What interests me about this isn't that Krugman is playing fast and loose with his factual claims, or even stacking the deck in a blatantly partisan way. That's par for his course. It's that he thinks that a simple political explanation is just not feasible. Instead, some moral lesson is needed. If something bad happens, it must be because bad people are doing it. This is the political sophistication of a six year old. The specific bad people in this case -- "self-appointed wise men, officials, and pundits in good standing" -- are less interesting than his usual coterie of sado-masochists, mythical creatures, and conspirators, but at least this time Krugman manages to indict a category of people that includes himself.

Occam's Razor can help us here. If there are tax cuts, maybe it's because people wanted tax cuts. If there is Medicare Part D, maybe it's because people wanted Medicare Part D. If there is a housing bubble, maybe it's because public policy was skewed in ways that home ownership attractive, because that's what people want*. This might not work all the time, but as a first approximation this sort of thinking holds up fairly well. In the examples Krugman gives, it's batting 1.000**. Saying that democratic polities have problems with time inconsistency and preference aggregation isn't exactly a new insight.

Krugman closes with this:

But the larger answer, I’d argue, is that by making up stories about our current predicament that absolve the people who put us here there, we cut off any chance to learn from the crisis. We need to place the blame where it belongs, to chasten our policy elites. Otherwise, they’ll do even more damage in the years ahead.

Amen, I suppose, but there's plenty of blame to go around. We all played a role in this crisis. Not an equal role of course, but a part nonetheless. Might as well own up to it.

*Mortgage interest tax deductions, subsidized subprime (and prime) loans, lower capital requirements for MBS, etc.

**Drezner wonders about public support for financial deregulation. I challenge Krugman to name the deregulatory act that led to the financial crisis. If he can't, and he hasn't, then his example fails and Drezner doesn't have to worry about it.