In a piece at Project Syndicate John H. Cochrane declaims that the Russian-Ukraine War has marked the end of a number of “illusions”:
Coming after a year of high inflation, Russia’s war in Ukraine is forcing a reckoning for policymakers and commentators everywhere. New macroeconomic realities show that the days of mindless demand stimulus, guaranteed bailouts, and activist climate policies must now be put behind us.
Here is a partial list of the beliefs he pronounced ended:
- printed or borrowed money can be deployed at will to resolve any problem
- stimulus spending for its own stake
- bailouts
- the “secular stagnation” debate—whether declines in economic growth are due to inadequate demand or inadequate supply
- “counterproductive energy and climate policies”
concluding:
The era of wishful thinking is over. Those who come to grips with that fact now will look a lot less foolish in the future.
He’s wrong. The beliefs he declares ended are too seductive ever to be abandoned. False, discredit, or not they will resurge again and again and again. The implications of abandoning them are far too painful.
Add central planning. The belief that wise and benevolent planners can manage an economy more efficiently and more benignly than markets will never go away. That the very act of doing that obscures the price signals necessary for the efficiency its advocates envision can never be acknowledged. There is also no known way of ensuring that the planners remain sufficiently wise or benevolent. Plus it’s so good for the planners.
