Organizations, whether it be a club or a profession or a department, too often over time develop a sort of intellectual inertia, a bureaucratic mindset that tends to perpetuate and validate a certain view of the world amongst its members, particularly if they share other elements in background and world view.
This works to its advantage when they are right, and when the scope of the tasks which they must address are limited to largely operational concerns, without significant risk in the classic sense of the term.
But when the situation becomes different, the environment changes, this organizational mindset not only stifles innovation and adaptation, it can literally reach out and strangle it, well beyond its members, using the entrenched power of its tenure. We see this tendency clearly in organizations that have enjoyed long periods of organizational growth under the leadership of strong personalities, such as the FBI under Hoover, and the Federal Reserve under Greenspan.
We can see this same tendency on a micro level in our daily life on chatboards, in clubs, in our company departments, in civic organizations. It is a tribalistic instinct, that urges the adoption of a consensus view, often influenced and promoted by articulate and single minded individuals, which then musters and focuses the energy and vitality of the group in the execution of its mission.
When it is right, it brings success. But when it goes wrong, when it feeds on itself, becomes defensive and inwardly focused, when perpetuation of the group view overtakes all other considerations, when tribal loyalty and sameness is valued over results, it leads to a cult like behaviour, inbred thinking, that may be inimical to the best intentions of the group, and the sort of behavioural anomalies which we have seen in the tragedies of Watergate, the latter stage Hoover FBI, and even Jonestown.
Economics is in the grips of such a period in its development. One of the primary causes of this problem has been the rise of a few well funded think tanks, universities, and of course the Federal Reserve, that have become powerful influencers, and guardians, dogmatisers of the status quo. The petty sniping among the schools notwithstanding, the current debate of stimulus versus austerity serves to show how anemic, how self referential, how predictable the discussion has become.
The US politicians and economists are doing the same things over and over, expecting a different outcome. For the past twenty years the world has been lurching forward in a series of increasingly destructive asset bubbles, supported by the corruption of thought, and the transfer of wealth from the many to the few, as a direct result of fiscal and monetary policy fomented by relatively small number of powerful people, the monied interests. At some point this will change, and the grip of the status quo will be broken. How much energy will be released, and in what directions, only time can tell.
Janet Yellen: “…has had thirty six opportunities to vote on monetary policy at the FOMC, and she has voted ‘aye,’ yes, thirty six times. Thirty six for thirty six. Has the Fed been right thirty six consecutive times? No. A well credentialed, consensus hugging economist straight out of the Fed HR department. She is ideal from the point of view of the Fed bureaucracy. She will make not one ripple.”
Peter Diamond and Sarah Bloom Raskin: “Diamond is a formidable academic, and Raskin is a formidable regulator, but neither is a formidable thinker about the nature of money, or about the history of money, or about how the Fed might paradoxically make things worse by doing what it does, trying to make things better, which I think is the great question. These are people who I think are unlikely to propose novel solutions to our fundamental monetary dilemma which is that the US dollar is a faith based currency of no intrinsic value that is manipulated by the Fed, and the consequences of the manipulation are often quite distinct, different from what was intended. That’s the problem.”