I’m one of those people who believes strongly that you can’t solve a problem until you’re willing to admit what you do and do not know about it. On top of that, I’m always nervous about society’s over-reliance and willingness to cede responsibility to a group of people who are just sort of supposed to know what to do, whether it’s the military, or in this case, economists. Not surprisingly, then, I found this to be an oddly compelling argument :
If booms or recessions are really based in coordinated psychological changes, then why should we think that monetary or fiscal policy is the most relevant policy lever? If the thoughts and feelings of the population are the issue, then maybe the real problem is that the mass media are unduly scaring people. Wouldn’t it follow, then, that good economic policy would have at least as much to do with controlling the media as controlling the money supply? If the problem with handing Maria Bartiromo a script of state-mandated talking points is that it wouldn’t work, how do we know that?
It would be pretty interesting if it turned out that manipulating the money supply is what an efficient state turns to when it can’t more directly manipulate “animal spirits” through propaganda. If the problem with turning the entire media into a servant of state macroeconomic engineering is not that it wouldn’t work, but that it’s repulsively illiberal, then we ought to face up to it. Maybe we focus so much on certain not-very-effective policy instruments because those are the ones we consider within the state’s legitimate power. We think it’s okay that the state attempt to manipulate our thoughts and feeling by printing money, nationalizing banks, and building highly-publicized public works, but we don’t think it’s okay to do it by intervening in the media in the way the state very much did do during the Great Depression and WWII.
Emphasis added by me, to highlight a particularly salient action point. Finally…
Alright, but then why do we think we can draw policy lessons from those earlier periods when, for moral reasons, we’ve taken some of our state’s formerly favorite tools of economic policy — outright propaganda and control over media — off the table? If you think we’ve taken these tools off the table for practical reasons, who was it that showed us that they don’t work?
Read the whole thing. Sorry for the excessive quoting, but it’s really interesting and, for a self-described “rant”, extremely logical and well composed. Maybe he has an editor. I should get one of those.
(via Andrew Sullivan)