Could the Maestro's pronouncements on deregulation have benefited from a more scientific approach?
RealClimate’s Eric Steig, an isotope chemist at the University of Washington, told an interesting story yesterday about an interaction between the Freudian psychoanalyst Wilhelm Reich and Albert Einstein. If you’re curious about the revolutionarily bogus thermodynamic principles of Reich’s “orgone accumulator,” it’s worth a read.
But I was intrigued by the sleight of hand that pulled Alan Greenspan into the discussion. Any blog post that can weave together climate change, Greenspan, Einstein and Wilhelm Reich is a blog post to savor (and imitate).
As has been widely publicized, Greenspan recently admitted to Congress that he made a “mistake” in assuming that deregulated financial institutions would properly look after their own affairs.
“Yes, I found a flaw,” Greenspan said in response to grilling from the House Committee on Oversight and Government Reform. “That is precisely the reason I was shocked because I’d been going for 40 years or more with very considerable evidence that it was working exceptionally well.”
Steig notes that he frequently receives missives from readers asserting that they have found some “fundamental flaw” in the theory that greenhouse gas emissions are responsible for climate change. Sometimes he engages, sometimes he doesn’t. But the difference between how Steig practices science and how some of his readers go about their business is that his work is subject to rigorous peer review. And that goes for Einstein too. Reich, not so much.
“But wait a minute,” you might say. “You guys at RealClimate are no Albert Einstein.” True enough. But like Einstein, we’re constantly subject to criticism from our fellow scientists. That’s what the process of peer review is all about. It’s not a perfect process, but it does provide an efficient means to separate ideas that have traction from ideas that are going nowhere. Greenspan’s pronouncements about the economy, on the other hand, were not subject to any such process. There might be a lesson in that.
Is there a lesson there? I’m not so sure. Greenspan’s declarations on the state of the economy to Congress may not have been subjected to formal peer review, but his ideas about deregulation were at the heart of thousands of economic papers that have received endless academic critiquing. And Ben Bernanke? He’s got it much worse.
Every move Bernanke makes is subject to immediate criticism, online, by scores of top-notch economists who incorporate it into their ongoing blogospheric dialogue about how to understand and manage the economy. This is not peer review as formally understood in an academic sense, but I think you can make the case that it is rapidly evolving into a potent public force.
Take the case of the bailout. From my amateur perspective, it was fascinating to watch economists of all political persuasions, left, right, center and libertarian, argue about the best way to address the financial crisis. Over time, and through much argument, a rough consensus emerged that recapitalizing the banks was ultimately the most likely approach to work. And sure enough, that’s what ended up happening. Now, there is no clear paper trail linking the econoblogosphere to Hank Paulson’s change of heart, but it would be foolish to argue that his or Ben Bernanke’s economic pronouncements did not receive withering peer review.
Perhaps what Alan Greenspan needed, back in the day, was a livelier Internet.
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