Scott Sumner with an outstanding blog post. One of the best I’ve ever read.
Let’s assume Krugman was correct [about everything – DW]. Why wouldn’t the left gradually win the vigorous debate among intellectuals? Why wouldn’t the gradual accumulation of facts tend to discredit one model and support the other? Isn’t the intellectual debate in the blogosphere a sort of Darwinian struggle?
Krugman’s answer is that the right is dishonest.
Scott figures they’re both partly right.
…If I’m right that both sides are partly correct, then you’d expect the most successful countries on Earth to embody ideas from both sides of the spectrum, and they do.
Another point I’d make is that whereas left wing pundits are right about some issues, and right wing pundits are right about other issues, the markets are always right. Now that’s a pretty bold assertion, so let me qualify it. I don’t mean the market have perfect foresight, and can predict the future. And I am restricting this claim to policies about efficiency, supply-side and demand-side policies, not egalitarian policies. My claim is that the markets are left-wing on the need for adequate AD, and right-wing on the need for sound pro-growth supply-side policies. The markets believe that each side of the ideological debate has a sort of blind spot—the left underestimates the importance of incentives, and the right underestimates the damage done by demand shortfalls.
Scott could easily have mentioned Robin Hanson and prediction markets. The problem here is that the left and right have a BIAS, which they are unable to break free from. Markets help to overcome this bias