James Kwak of Baseline Scenario Blog points to this once famous and now highly infamous article. It built this hype over a committee comprising Alan Greenspan, Robert Rubin and Larry Summers which could save the economic world from catastrophe. It was written in 1999 and in a classic turnaround of fortunes same committee is now being blamed for the crisis of 2008.
You know that famous Time cover featuring Rubin, Greenspan, and Summers, calling them “The Committee to Save the World”? I was reading theaccompanying article, which I had never read before, and it’s an absolutely precious example of the nonsense people said at the time. Like this:
Rubin, Greenspan and Summers have outgrown ideology. Their faith is in the markets and in their own ability to analyze them. … This pragmatism is a faith that recalls nothing so much as the objectivist philosophy of the novelist and social critic Ayn Rand (The Fountainhead, Atlas Shrugged), which Greenspan has studied intently. During long nights at Rand’s apartment and through her articles and letters, Greenspan found in objectivism a sense that markets are an expression of the deepest truths about human nature and that, as a result, they will ultimately be correct. … They all agree that trying to defy global market forces is in the end futile. That imposes a limit on how much they will permit ideology to intrude on their actions.
I realize this is written by a journalist, not by one of the three men themselves. But could you come up with a better example of an ideology?
This is what Hayek warned us beautifully against – Pretense of Knowledge. Economic wisdom barely lies in a few hands and is dispersed across many people.
Societies, according to Hayek, were not to be studied as we studied physical matter or phenomenon, but that did not mean that we could not know or investigate anything at all about social matters. We had to create suitable tools and methods for the social sciences, and it is here where Hayek made significant contributions, along with other economists and philosophers in the Austrian tradition.
It was the same theme of humility that echoed in Hayek’s speech when he won the noble prize in 1974. He concluded the speech with this note of caution—
“If man is not to do more harm than good in his efforts to improve the social order, he will have to learn that in this, as in all other fields where essential complexity of an organized kind prevails, he cannot acquire the full knowledge which would make mastery of the events possible. He will therefore have to use what knowledge he can achieve, not to shape the results as the craftsman shapes his handiwork, but rather to cultivate a growth by providing the appropriate environment, in the manner in which the gardener does this for his plants.“
We can thus create only the environment that can allow people to prosper, but we cannot dictate or chart the course of prosperity itself.
If there is one thing that plagues the social sciences today—it is the lack of humility. It would be good for the social sciences, and for each of us personally as individuals, to adopt the quality of humility that was so central to Hayek and his work. That would be a fitting tribute to the man on his birthday.
How often we make these mistakes across countries. Few people were outlined for 1991 changes in India but were seen behind the 2011-14 problems.We are amidst building similar hype over certain individuals again. Will we ever learn?