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Quotation of the Day…

… is from the best blog post that you’re likely to read this week: Bob Higgs’s “Thinking Is Research, Too!“:

I continue to believe that the importance of regime uncertainty should be manifest to economists even as I have presented it. They need only think about it. They need only inform themselves well of prevailing political and economic conditions, whether during 1935-40 or during 2008-2013, and put themselves imaginatively in the place of a large investor. Does it really stand to reason that such an investor would regard the regime uncertainty manifest in these two episodes as so trivial a consideration that he would choose to disregard it in making his choice to invest or not to invest, especially in long-term projects? To me, the answer is obvious. Even someone completely untutored in economic theory or history should be able to understand that when the predictability of the future security of one’s private property rights becomes extremely difficult, with far more margins being “up for grabs” than before, more investors would choose to forgo commitments to long-term projects and to park their money in short-term investments in whose payoff security one can reasonably place relatively greater confidence, simply by virtue of the short terms to maturity. To repeat, all one has to do is think about what’s going on and how such current and prospective events almost certainly affect investors’ thinking.

Yet, mainstream economists appreciate that one earns no professional plaudits for thinking in this way, and, sad to say, one usually incurs no professional disdain or other punishment by disregarding such commonsense thinking altogether. The mainstream profession rewards most highly the “clever guys, the ones who wheel and deal with analytical apparatuses that even many economists do not understand well and cannot themselves employ. At Harvard, Yale, Chicago, Berkeley, Stanford, and similar leading departments of economics, one’s publications in top economics journals—and hence one’s tenure, pay, promotion, and professional reputation—gain little or nothing from mere thinking, regardless of how much common sense one embeds in it. The name of the game is pyrotechnics, professional showing off, to impress one’s colleagues. Small wonder that mainstream economics has become so disconnected from economic reality over the five or six decades in which such expectations have set the standard for succeeding generations of young economists, each new hotshot being hell-bent on doing something even “cleverer” than what his grad school mentors and their contemporaries have done.