The Power of Ideas
November 4, 2010 Leave a comment
I am interested in this quote from the book Great Transformations: Economic Ideas and Institutional Change in the Twentieth Century, by Mark Blyth (Cambridge University Press, 2002), as follows:
“Ideas matter because they can actually alter people’s conception of their own self-interest.” (p. vii)
“This led me to the idea that so long as something about the economy is believed by a large enough group of people, then because they believe it, it becomes true.” (p. viii)
Thus people believe that the economic stimulus package didn’t work (even though it may have worked, but not as much as expected, or it was poorly managed or designed).
People believe that we are being overwhelmed by government spending and debt (although the spending is for social security, medicare, medicaid and war, mainly; and the debt is mainly from the fall in government income because of the economic recession).
What if these beliefs lead us to cut spending (not that likely) and cut taxes (more likely), and nothing happens to the economy, or worse, the economy declines, because of the minimal impact of both measures.
We are truly living in interesting times and we will see a great experiment.