How To Spot Groupthink Among Economists
As GMO’s James Montier says in his latest white paper today “it seems one can hardly open a financial newspaper or read a blog these days without tripping over some academic-cum-central banker talking about the once arcane notion of the equilibrium real interest rate.”
Sure enough, it is the laughable concept of the equilibrium real interest rate (laugable because if it can be quantified and put into an equation, it becomes tangible and central banks are convinced they can recreate it, perfect it and implement it to “fix the economy”… usually with disastrous results) that is the topic of his latest must read piece “The Idolatry of Interest Rates Part I: Chasing Will-o’-the-Wisp“, which not only makes a mockery of central planners but also the intellectual conceits they all hold so dear, and which they will all hold dear all the way until the now inevitable collapse of “New Keynesian” economics.
And while there is much to discuss in his full 13 page paper, the following excerpt discussing how to spot groupthink in crowds (of economists) is what we found most relevant and amusing, perhaps because the entire world is now caught in a groupthink mode, and what’s worse, a groupthink that is peddling the wrong solution to the worldwide problem that can be summarized as simply as “$200 trillion in debt.”
From Jim Montier:
Wisdom of crowds or groupthink extraordinaire?One could take the view that so many bright individuals all coalescing around a single framework was evidence of the wisdom of crowds. However, rather than representing the power of consensus, it appears to me to be evidence of extreme groupthink – it is very telling that not one of the aforementioned luminaries has questioned the framework itself.
…click on the above link to read the rest of the article…
