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Zombie Ideas Live On Even Though They’re Wrong

Bloomberg View Economy Memo Pad

Zombie Ideas Live On Even Though They’re Wrong

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Oct. 20 (Bloomberg View) — We are in the business of making mistakes. The only difference between the winners and the losers is that the winners make small mistakes, while the losers make big mistakes. –Ned Davis

I began my career in finance on a trading desk. You learn some things very early on in that sort of situation. One of the most important things is that while it’s OK to be wrong, it can be fatal to stay wrong.

Unfortunately, that standard doesn’t apply to people whose work isn’t evaluated on a daily and objective basis via their profit and loss results. In many fields, such as politics and policy making, there are lots of shades of gray when it comes to being right or wrong.

And quite bluntly, that is a shame. As a society and a nation, we would all be better off if the people who are consistently wrong paid some sort of price for those errors. Unfortunately, that doesn’t happen enough these days.

Some bad policy decisions will lead to the occasional elected official being turned out of office. That — unfortunately — is the exception, not the rule. I doubt history will rank George W. Bush and Barack Obama among our great presidents, but both were re-elected despite being unpopular. Between gerrymandered congressional districts and apathetic voters, even the most incompetent elected official has almost lifetime tenure.

What underlies all of this nonrecourse bad policy? It is much more than corporate lobbying and partisan politics. The worst of today’s political malfeasance is being driven by failed ideologies. Zombie ideas that refuse to die have become enshrined in our collective intellectual legacy. The people behind these have been insulated from the economic costs they impose.

Blame the billionaires.

They are ones who fund the think tanks. These think tanks in turn consider it their jobs to promote the ideology of their benefactors, regardless of its intrinsic value or demonstrable worth.

This theme keeps coming up again and again. About a year ago, I reminded people of a letter written to the Federal Reserve in 2010 warning that the central bank’s asset purchases risk “currency debasement and inflation,” none of which occurred. That meme propagated, leading to a series of articles across the blogosphere and mainstream media. Most recently, Bloomberg News tracked down the signatories to that letter, to see if they were willing to acknowledge that they were wrong. Not a one was willing to admit error. Perhaps the lack of contrition is best summed up by this New York magazine headline, “If Being Wrong About the Economy Is Wrong, I Don’t Wanna Be Right.”

These errors have a persistence that shouldn’t continue once the invalidity of the underlying belief system is demonstrated. But they continue on, as zombie ideas that refuse to die. Consider the following short list of disproven ideas, all based on concepts that originated from or were widely dispersed by think tanks or their benefactors:

• Homo economicus (profit maximizing economic actors)

• Austerity as a virtuous policy during recessions

• The efficient-market hypothesis

• Tax cuts pay for themselves (supply-side economics)

• Self-regulating markets

• Shareholder value

• Rational Investors

Some of the bad ideas that come out of the think-tank world eventually acknowledge that they are untrue by slowly morphing into a new shape.

Let’s consider a few of these bad ideas. The pushback against anthropogenic climate change, or manmade global warming, has gone through a three-step process: First, there were the simple denials: It doesn’t exist, temperatures aren’t rising, etc. The next step was: OK, climate change exists, but it’s a natural phenomenon, not manmade and is caused by sunspots or the end of the Ice Age from 10,000 years ago. The last phase is simply to say, regardless of the cause, it costs too much to do anything about anyway. Grist provides a thorough debunking of denialism in all its forms; if you want a more scholarly approach, try The Oxford Handbook of Climate Change and Society.

We saw a similar progression during the financial crisis, including many attempts to negate the role radical deregulation of financial markets had as an underlying cause of the crisis. American Enterprise Institute’s Peter Wallison and Edward Pinto were the leading proponents of the anything-but-deregulation causation. First, they blamed the Community Reinvestment Act — the anti-redlining legislation that had nothing to do with subprime lending. Next, it was the Department of Housing and Urban Development and the Federal Housing Administration. When that didn’t hold up, they blamed Fannie Mae and Freddie Mac. When most of the subprime loans that went bust were shown to be from private lenders that didn’t follow Fannie or Freddie guidelines, they quietly changed the subject.

As we have noted before, there simply is no penalty for pundits who keep getting it wrong.

As investors, we suffer greatly when we make an error that we fail to reverse. That was what Bridgewater Associates founder Ray Dalio was referring to when he said “More than anything else, what differentiates people who live up to their potential from those who don’t is a willingness to look at themselves and others objectively.” But it’s as true about our society as it is our P&L. The sooner we recognize that, the better off the country will be.

AFP Photo/Timothy A. Clary

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51 Comments

  1. bobnstuff October 21, 2014

    Once a myth gets legs they are hard to kill. It’s even worse if the myth reinforces a political view. Truth is fleeting, myths live for ever.

    Reply
  2. tranz2deep October 21, 2014

    Ronald Reagan was backing away from Reaganomics when it proved to not be sustainable.
    Unfortunately, his incipient Alzheimer’s and the personnel issues he had distracted him and the nation from this, or we might not have gotten the legs under the myths to begin with.

    Reply
    1. Whatmeworry October 21, 2014

      Reagan had Alzheimer’s what’s Barak excuse for continuing to support Socialism??

      Reply
      1. LotusJoan October 22, 2014

        What is your excuse for being ill informed, Alzheimer’s? President Obama is not a socialist, I would like him better if he were.

        Reply
        1. Whatmeworry is Dan M Ketter October 22, 2014

          birth defect. was dropped on his head.

          Reply
          1. Wayneo October 22, 2014

            Another zombie lie!!

            Reply
        2. Whatmeworry October 22, 2014

          Really?? Barak is and has been and still is a card carrying member since the 1990s

          Reply
          1. LotusJoan October 23, 2014

            Do you have a reputable source for that?, no, I thought not.

            Reply
          2. BillP October 23, 2014

            These trolls never have a reliable source or provable facts. They just attach a label and repeat it over and over, believing that this makes it true.

            Reply
          3. Whatmeworry October 23, 2014

            being intellectually lazy is the tell of a left wing nut

            Reply
          4. Whatmeworry is Dan M Ketter October 24, 2014

            but danielle’s unintellectual lazy is the tell of a wannabe right wing nut

            Reply
          5. BillP October 24, 2014

            Wow I’m blown way by the depth of your reply. Your comment on President Obama being a Socialist is so laughable, how come you trolls never provide any proof to your baseless comments?

            Reply
          6. Whatmeworry October 26, 2014

            You only have to google new socialist party to find him

            Reply
          7. LotusJoan October 30, 2014

            No, there is no New Socialist Party in the US. On line research is my profession I have tried very hard to vet your post – but you are a liar.
            For anyone who is not sure – if there was a website he would have provided a link or address by now.

            Reply
          8. Whatmeworry October 30, 2014

            Don’t quit your day job…. Barak joined Jan 11, 1996 when he was running for the 13th Legislative District

            Reply
          9. LotusJoan October 31, 2014

            Proved my point!

            Reply
          10. Whatmeworry October 31, 2014

            HUH??? You FAILED miserably

            Reply
          11. Whatmeworry October 23, 2014

            The new sodalist party website. It clearly shows him as a dues paying member

            Reply
          12. Whatmeworry is Dan M Ketter October 24, 2014

            daniel must have found that website during his nightly porn surfing

            Reply
          13. BillP October 27, 2014

            you are probably right. I responded to his bs comment. The new socialist party website doesn’t list members.

            Reply
          14. LotusJoan October 24, 2014

            http://socialistparty-usa.net/ the website does not contain a list of members. Frank Llewellyn, national director of the Democratic Socialists of America in 2010 said “… clearly President Obama is not
            one of us.”//www.cnn.com/2010/POLITICS/04/14/Obama.socialist. Many, Many socialist party leaders have publicly stated that President Obama is not a socialist and in fact they characterized him as “He’s the president whose main goal is to protect the wealth of the richest 5 percent of Americans.” This is a direct quote from Bill Wharton co- chair of the Socialist Party USA.

            Unlike you I do check sources.

            Reply
          15. Whatmeworry October 26, 2014

            He belongs to he NEW SOCIALIST Party

            Reply
          16. LotusJoan October 27, 2014

            Senator Obama may have been a member or merely endorsed by the New Party of Illinois which had
            socialist leanings in 1996. That group has been defunct since 1999. There is no web site. Just as there is no web site for The New Socialist Party, U.S. So how that would make him a card carrying member of the Socialist Party in 2014 is a right wing
            lunatic’s guess.
            I can not express how much I dislike people who lie!

            Reply
          17. Whatmeworry October 29, 2014

            He wasn’t a Senator he was on the Dole

            Reply
          18. BillP October 30, 2014

            Joan the only New Socialist Party I can find reference to is an Italian Socialist Party. This troll can’t offer any real proof of his imaginary claims. Unfortunately there are too many trolls like him on this site.

            Reply
          19. BillP October 27, 2014

            I looked at the new socialist party website and no members are listed, so you are either misinformed or just lying. What supposed website did you find this info on? Please don’t list breitbart, wnd or other right wing websites.

            Reply
          20. Whatmeworry October 29, 2014

            Nonsense

            Reply
          21. Whatmeworry is Dan M Ketter October 30, 2014

            Nonsense is Dan M Ketter

            Reply
          22. BillP October 30, 2014

            I find this typical of trolls who make a claim and then are challenged to provide the source(s) of such claims. Your one word answer shows you to be one of those who make ludicrous statements then can’t offer a source. Either you are misinformed or a liar. I’m going with the latter. Here are 2 sites – The Socialist Party ” socialistparty-usa.org/” members names are not listed on this site. The other is the Chicago Socialist Party link ” http://chicagosocialistparty.org/. No member names are listed on this site. The new Socialist Party you list is an Italian Socialist party and the president is not a member of it. You alias is appropriate as you are as knowledgeable as Alfred E. Neuman. Keep up the bad work.

            Reply
          23. Whatmeworry October 30, 2014

            Try GOOGLE

            Reply
          24. Whatmeworry is Dan M Ketter October 31, 2014

            Try DANNN KETTER

            Reply
          25. BillP October 31, 2014

            Again you deflect from answering my question, name the website you found that listed President Obama as a dues paying member. I looked at a number of Socialist Party websites listed on Google and listed 2, which is ,well, 2 more than you have. As usual trolls like yourself can’t provide proof of their unfounded statements. I do appreciate your brevity even though it answers nothing.

            Reply
          26. Daniel Max Ketter October 12, 2015

            I believe in abortion

            Reply
          27. ericlipps October 23, 2014

            See the above about your use of the term “card-carrying member.”

            Now on the off chance that you don’t mean to call the President an outright Communist but merely some sort of socialist, again, where’s your evidence? I mean real evidence, not just that you don’t like him.

            And who are you to talk, anyway? From your posts, you sound practically like a socialist yourself. The national kind.

            Reply
          28. Whatmeworry October 23, 2014

            try the New Socialist Party web site. where is your intellectual curiosity?? rather than defending your messiah an adult would verify their facts but then again no one has ever accused you of being an adult.
            From your posts it obvious that your a lead member of the 47% who don’t pay income taxes and live like a leech off of others

            Reply
      2. Whatmeworry is Dan M Ketter October 22, 2014

        airman dannno fought against socialism during his 2-year desk clerk position in the air national guard….all the way from Texas

        Reply
      3. ericlipps October 22, 2014

        This from Alfred E. Neumann? I can’t take anything seriously from someone whose alias is the signature line of Mad magazine’s doofus cartoon mascot.

        Reply
        1. Whatmeworry October 22, 2014

          The fact that he’s been a card carrying member since the 90’s and your whining about mad magazine

          Reply
          1. Whatmeworry is Dan M Ketter October 23, 2014

            dannyboy carries a iblowrushlimbaugh card in his wallet

            Reply
          2. ericlipps October 23, 2014

            Whatever you say, Mr. Neumann.

            Seriously, “card-carrying member”? Of what? You can’t seriously believe Obama is a “card-carrying member of the Communist Party,” as they used to say. Or if so, where’s your documentation? Have you seen this card, other than in your dreams? Or do you just assume he’s a communist because he’s black, or a Democrat, or both? It can’t be because he’s (the horror! the horror!) liberal–he’s simply not that liberal. Even his health care plan was cribbed from a Republican original largely derived from a policy study of the Heritage Foundation. I’m sure it would be news to the HF that it’s a Communist propaganda machine.

            And it’s “you’re” and “Mad” (capitalized), semiliterate one, and you’re the one whining. Want to be taken seriously? First step: pick a better alias to hide behind. Next, take your lithium. Or, on second thought, take your meds first.

            Reply
          3. Whatmeworry October 23, 2014

            OF the socialist party If you weren’t so intellectually lazy you would checked before responding with your drivel.
            Want to be taken as if your an adult start by removing your grandfathers picture. And then do some research before you post lib nonsense

            Reply
          4. Whatmeworry is Dan M Ketter October 24, 2014

            danielle is trying to impress us with his blind patriotism

            Reply
          5. Kenneth Ketter December 4, 2015

            BWHAHAHAHA DANnnnyboy KETTER IS WILLIAMSBURGS VILLAGE MORON

            Reply
          6. Whatmeworry is Dan M Ketter October 24, 2014

            danielle carries a fascist card

            Reply
          7. Daniel Max Ketter October 12, 2015

            The fact that my wifey Linda Rae Ketter is a ugly old hag, and is so brutally ugly that her face is on birth control devices

            Reply
          8. Kenneth Ketter December 4, 2015

            LINDA RAE KETTER→THE BRIDE OF FRANKENSTEIN???

            Reply
      4. Kenneth Ketter December 4, 2015

        YES I AM DAN M KETTER AND IM A MORON

        Reply
      5. Staci K Whatmeworry December 9, 2015

        Daddy, why lie to your grandkids about you being a military veteran. You dodged the draft then became a desk clerk for Ford Motors.

        Shame shame shame

        Reply
  3. Daley Butler October 21, 2014

    Let’s not forget the radio and T V personalities who keep driving these zombie ideas. It’s not just in the financial fields, it’s also in our social lives and we keep making those idiots rich while being dummied down by them.

    Reply
  4. 1standlastword October 21, 2014

    I’m 1standlastword and I endorse this message!

    Reply
  5. Ellen Ripley October 24, 2014

    The ideology of liberalism is fundamentally incompatible with our Constitution and our Bill of Rights.

    Reply

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