In a recent article, just published by the New York Times magazine, Nobel laureate economist Paul Krugman relates how main-stream contemporary economic theory has, for many years now, been based on the wrong assumption that beauty equals truth.
According to Krugman, contemporary economics is based on the “romanticized and sanitized vision” that markets are perfect and that humans, under perfect market conditions, behave always “rationally.” Based on that “vision,” warns Krugman, neo-classical economists (we, in Latin America, prefer the term “neo-liberal”), many of them from a well-known Mid-Western powerhouse school: The University of Chicago’s School of Economics, have:
turned a blind eye to the limitations of human rationality that often lead to bubbles and busts; to the problems of institutions that run amok; to the imperfections of markets — especially financial markets — that can cause the economy’s operating system to undergo sudden, unpredictable crashes; and to the dangers created when regulators don’t believe in regulation.
Of course, Krugman doesn’t stop there. He goes on describing the way how this “vision” has dominated academia to the point that alternative theories were put aside, mainly Keynesian economics, setting up the conditions for our current Global financial crisis.
Now, I have no intention to comment more here on all the details of Krugman’s article–some of those details being very technical in nature and specific to his profession. Instead, I will recommend to my invisible friends to read the article. I promise, it’s worth the time you may spend on it.
What caught my attention about Krugman’s piece is the spirit of his criticism. The fact that for so many years, so many people in the academia and elsewhere have reverently accepted the neo-classical’s vision of perfect markets and rational agents, and mainly because many of their formulations were “elegant, convenient and lucrative.” In other words, economists ended up confounding “beauty” with “truth.” Neo-classical economics looked good in theory, was mathematically robust and elegant, and, most importantly, helped many people make lots of money. (And here, I should confess that I was one of those “confounded” creatures, during a brief period of time in the late 1990s) Thence, what could be wrong with it? Go figure… we know the answer now.
But again, that’s not what I want to talk about. What strikes me hard is the fact that sometimes people can fall deep for the illusion that a beautiful and elegant set of premises are necessarily true because of their being “beautiful.” This idea of mistaking beauty for truth is not new–so, Krugman is far from being original on that matter. However, it is certainly true. And a good example is the attitude of certain left-wing American intellectuals–many of them in academia–toward Hugo Chávez‘s revolution in Venezuela. Although, I could say: toward any pretended revolution in Latin America.
I must confess that–sometimes–I find hard coping with such an attitude. In some cases, it is simply the outcome of some “romanticized” vision of us–and with us I mean “Latin America” as a whole (and here I should bring back some of Krugman’s arguments on romanticized visions of reality).
Fellow Venezuelan writer, Carlos Rangel (and yes, I know some people will denounce me as a neo-liberal, just for quoting him), did a great job once, summarizing the whole idea of a romantic vision of Latin American and us, los latinoamericanos, with two phrases: “el buen salvage” and “el buen revolucionario.” He even wrote a book, first published by Monte Ávila in 1976, with the title: Del Buen Salvaje al Buen Revolucionario.
Of course, I don’t agree with all of Rangel’s ideas. And yes, I know that, later on, the same book was used by Latin American neo-liberals in justifying much of their agenda of “exuberant” irrationality in our local economies. However, I do believe he is right on one thing: recognizing the big and deep abyss that exists between our “ser latinoamericanos” (the vision we have of ourselves) and what other people outside our own neighborhood believe we are–what “ser latinoamericano” actually means to them.
And, here is where I find Krugman’s arguments on neo-classical “irrationality” so compelling. The fact is that Americans’ vision of us–and I should say of Chávez and Castro as archetypes of good revolutionaries–is so beautiful and romantic that it hides the whole truth about the fact that both are inept and autocratic rulers. And yes, I agree: both Chávez and Castro (whatever first name you want to use: Fidel or Raúl) are very intelligent and smart political agents. They have plenty of good intentions and lots of political capital to spend. However, I doubt and refute the premise that they both are rational political agents (always) and that their regimes are perfect just for being, or for pretending to be, socialist. The idea that both regimes are beyond criticism and/or reproach just for being revolutionary is, simply put, stupid. As stupid as pretending that markets are perfect systems and economic agents act always rationally. It makes sound good and looks beautiful on paper (books, poems, songs, etc. etc.) but in reality is as false as neo-classical panglossianism (see Krugman’s article).
So, many fellow Latin Americans are right when they question the honesty (and common-sense) behind the enthusiasm that so many American intellectuals and celebrities show for our revolutions and revolutionaries. They can’t help thinking about the fact that so many of those same intellectuals (and celebrities) supported a moderate third-way democrat like Barack Obama, well known for her soothing speeches and motivational style, while at the same time they have sponsored Chávez’s confrontational ramblings and autocratic style. And yes, many of my fellow Latin-Americans are right: it is a double-standard. That’s why it is unacceptable to have a self-righteous neo-con telling the whole world: “You’re either with us, or against us,” but, at the same time, it is OK to have a self-righteous pink-leftist telling a whole country (What a surprise!) the same threatening words:”El que no esté con [quién Chávez diga] no está con Chávez, está contra Chávez.” Again, just another good example of mistaking beauty for truth.