Big Ideas and the Concentration of Wealth

Why did we economists squander the opportunity for a new paradigm of thought? Not because there's so much information on the web. It is, at least in part, because the concentration of wealth and power blocked the new ideas from a fair hearing.
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There's a piece in Sunday's New York Times about the death of ideas: where are the big thinkers today -- paradigm shifters like Keynes, Einstein, Friedan?

The author -- Neal Gabler -- has a point. The big thinkers in my field are basically arguing over Keynes vs. Hayek... not that there's anything wrong with that. Since the Great Depression, Keynesian economics has never been so important... nor so poorly understood. But if the point is that we're stuck in old boxes, I think he's right.

But, at least in the realm of political economy, I think he misdiagnoses the cause. Gabler stresses information overload. There's so many bytes of info at are fingertips that we no longer think in ways that foment and nurture ideas... we just know stuff.

That may be true in some fields but in my field, I think the concentration of wealth and its handmaiden -- power -- are implicated. Let me explain by way of example.

The financial crash of the 2000s revealed a confluence of many powerful and socially disruptive forces: levels of income inequality not seen since the dawn of the Great Depression, stagnant middle-class living standards amidst strong productivity growth, solid evidence that deregulated markets were driving a damaging bubble and bust cycle, deep repudiation of supply-side economics, and most importantly, even deeper repudiation of the dominant, Greenspanian paradigm that markets will self-correct.

We may not, in my lifetime, witness another historical moment where these destructive forces are so clearly revealed. What's more, there were economic thinkers arguing for a new paradigm (I hesitate to list them because I know I'll leave someone out, but Stiglitz comes to mind as particularly visionary in those days; George Soros had a great little book, Jamie Galbraith, Dean Baker, Krugman come to mind -- my book All Together Now: Common Sense for a Fair Economy took a stab as well)

And yet, at least from where I sit today, we let the moment pass. Far from a debate over a new paradigm, our national political economy discussion is bereft of ideas, leaving us mired in recession as we self-inflict one economic wound after another. Forget new ideas -- we can't seem to correctly apply the old ones!

Why did we squander the opportunity? Not because there's so much information on the web. It is, at least in part, because the concentration of wealth and power blocked the new ideas from a fair hearing.

Deregulated markets, "rational market" theories, eroded labor standards, the retreat of unions, regressive taxation, financial engineering, global arbitrage, low rates of job growth, growth that eluded the middle-class and the poor... all have contributed to almost unprecedented levels of wealth concentration.

Such dynamics are self-reinforcing. The narrow slice of winners, enriched beyond imagination by these forces, use their wealth to insulate themselves from new ideas that threaten their position by purchasing not just political power but even "ideas," through bogus think tanks and media operations.

They and their representatives ensured that when history provided a unique, crystallized moment of clarity as to their fundamentally corrupt paradigm, too few would see it clearly and when those who did sounded the alarm, no one would listen.

And now we're arguing about debt ceilings, budget cuts, and super-committees, not to mention whether evolution and climate change are real or conspiratorial notions of the left.

I know this is a dark vision of reality but before you get too deeply bummed out by it, let me say that I'm by no means alone in this analysis of the problem, and I've begun to see some hints that more and more of us are getting the picture. And that has the potential to create a welcoming climate for new ideas that challenge this paradigm, ideas that have been sorely missing for too long.

This post originally appeared at Jared Bernstein's On The Economy blog.

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