In the Great Depression, the great economist John Maynard Keynes noted, “Practical men, who believe themselves to be quite exempt from intellectual influences, are usually the slaves of some defunct economist.” Perhaps difficult economic times unleash the power of long-discredited ideas into general circulation.
Today, three bad intellectual influences merit noting—one from the political right, one bipartisan folly and one from the left.
First, the notion that the Federal Reserve, big banks and the government conspire in some grand, secretive venture to undermine the Constitution or some other end animates more than a few folks. Of course, this is sheer madness for a variety of reasons, the simplest of which is that the U.S. government cannot long keep a secret.
I don’t know the full genesis of this belief, but I’d imagine that the marginal complexity of financial markets mesmerizes some folks, much like the Aztecs were wowed by the use of gunpowder.
The second wholly discredited intellectual influence is mercantilism. Alive and well among many Americans is the recurring belief that our economic woes can be cured by throwing up laws that boost exports and cut imports. Among those who’ve clobbered that bad idea are Adam Smith in 1775 and Paul Krugman in 1994. Its zombie-like resurrection plagues business lobbyists and trade unionists alike.
The most insidious idea confronting our politics views world affairs through the prism of large competing interests. The meme goes like this: Large banks conspire with wealthy interests to depress wages and keep down the honest working folk. This narrative flows directly from Marxist thought. Some version of this story is easy to teach. It provides lurid and entertaining tales, which, in the right hands, can be entertaining and chock full of emotional anecdote. Of course, it wilts under even modest scrutiny.
None of this suggests that men are angels. Democratic governments are not free from conspiracy, trade barriers help a few, and clashes between labor and capital erupt. But as tools for explaining how the world works, they explain nothing more than random anomaly.
Together, these myths crowd out so much serious discussion of our challenges. We are sidelined from a serious chat about the limits of the Federal Reserve system because conspiracy theorists must be answered. We cannot advance free trade that would boost the lives of billions because a few businesses and workers would lose their monopoly protections. We cannot see past the rhetoric that capital and labor are at war to recognize that it is quite the opposite.
Ideas continue to matter, perhaps now more than ever.•
Hicks is director of the Center for Business and Economic Research at Ball State University. His column appears weekly. He can be reached at firstname.lastname@example.org.