fdr.thumbnail.jpgTime to kick in on the debate on ideology vs. pragmatism, with a harsh rejoinder: there is no pragmatism, there is only ideology.  It is impossible to think without beliefs as to what the world is like, about how things work, and those beliefs are part of ideology, broadly understood.

Ideology is both about how things work and about how things should work. It is, in two words, "world view". When decisions are made on pragmatic grounds about political and social actions, they always carry with them embedded ideological assumptions.  If you are a liberal Keynesian of the old school you have different assumptions about what makes an economy work, about what acceptable policies are, about how policies work in the real world and so on.  As a simple example, the creators of Rubinomics in the 90′s thought that financial deregulation would release firms to innovate (they were right) and that market mechanisms and self-interest would keep them from destroying themselves (they were wrong.)

Now one might say "Larry Summers et al have learned their lessons", and in a sense that’s right.  They now understand that some regulation is necessary, and are talking about putting it in place.  Yet, at the same time, none of them are talking about reinstating the majority of Glass-Steagall.  None of them are seriously talking about getting rid of the entire executive class of failed companies.   None of them are really seriously looking at the compensation of executives and saying "as long as they can make this much money in only a few years executives will have no incentive to stop creating bubbles, therefore we have to take away their ability to make that much money." 

Why not?  Because they believe that high taxes are bad for the economy, which is why they and Obama are going to drop taxes and not raise them on the rich.  This is an ideological belief on their part, there is evidence both for and against it (the 50′s and 60′s, when the US had the highest marginal tax rates were very good times for most people) and whether you believe in highly progressive taxation is an ideological decision.  

But it’s also a pragmatic question.  They believe it doesn’t work, classic Liberals believe it does work.

There are economic models that can be used to justify both beliefs, though the experience of the US during the tax cutting period certainly argues against the models that say trickle down economics work and high tax rates on the rich are bad.

Ideology in this sense is about having a coherent world view that fits together.  It is not just about morality, it is about a model of the world that tells you what works, and what doesn’t.  It is about pragmatism.  This is not airy fairy stuff, it’s because of ideology that people like me could say back when Glass-Steagall was repealed that it was bad, because we knew that markets can’t regulate themselves—that’s an ideological belief.  It’s because of ideology that people like me can say "taxing the rich is the right thing to do both pragmatically and morally". 

Ideology is how we think.  Even cold cost-benefit analyses have huge amounts of ideology in them.  After all, cost-benefit analyses were done on Credit Default Swaps, and mortgage backed securities and so on.  And they were all wrong, because they made the wrong assumptions.  A true classical liberal, who believes that financial markets are prone to bubbles and that business can’t be trusted to regulate itself; a liberal who believes that executives are self serving, would have known otherwise.  (When did it become we liberals who were the cynics who knew that you couldn’t give businessmen a license to steal and expect them not to do so?)

Your ends, your means and your cold hard cost-benefits analyses of actions all are heavily informed by ideology.  The worst fools in the world are those who think they don’t have an ideology.  Keynes once noted

“The ideas of economists and political philosophers, both when they are right and when they are wrong, are more powerful than is commonly understood. Indeed the world is ruled by little else. Practical men, who believe themselves to be quite exempt from any intellectual influence, are usually the slaves of some defunct economist.”

An ideology is never more powerfully held than when it is held by some fool who thinks they have no ideology.  As with psychological traumas and tics, if you won’t acknowledge your ideology, you will be ruled by it.  Only by knowing you have an ideology can you understand where and when your ideology doesn’t work.

Bringing this back to the current political situation, nothing is stupider than the current mantra that ideology doesn’t matter and that Obama is hiring for pragmatic competence.  The people he is hiring, with some exceptions, were wrong on the Iraq war, wrong on regulation and wrong on the housing bubble.  They were wrong because their ideology did not allow them to be right.  Even now, when they see their ideology has failed, unless they truly switch ideologies, they will have great difficulty in implementing the truly liberal policies the current situation requires, because they are not liberals and do not understand liberalism.

What their ideology is, then, is the ultimate pragmatic indicator of how successful they will be.  Having the wrong ideology, the wrong beliefs about what works and what doesn’t; about what is moral and immoral; about what ends are legitimate and illegitimate, will have significant pragmatic effects on the success of policies they implement.

(Daniel deGroot makes a similar but not identical point.  Highly recommended.)