Sunday, November 2, 2014

Entropy, the Business Cycle, and the New Mediocre

Vanessa Frieden, New York Times fashion critic, has an essay in the paper drawing on comments by Christine Lagarde, director of the IMF, on what Lagarde calls the "new mediocre." I think Frieden doesn't quite get the point.

Thomas Kuhn, the philosopher of science, coined the term "paradigm shift." Later, after it became a buzzterm with many meanings and little force, he regretted that, critically brilliant though it was. I wonder whether Christine Lagarde might feel something like that with the "new mediocre."

Lagarde means something specifically economic (as Vanessa Frieden acknowledges). Still, Friedman may be onto more than she realizes. The "meritocracy" that the privileged rave about (think executive pay, elite universities, charter schools, privatization of government functions, etc.) is mostly a myth. The great people of merit have proved to be stunningly mediocre (even incompetent, even criminal) — Lloyd Blankfein, Jamie Dimon, about 90% of Congress and the executive, even the Supreme Court. Economic theorizing (including about meritocracy) has failed like very few sciences have ever failed. (A whole science — that's impressive.) Meritocracy was a cover story invented after the fact.

But the irony is in what Frieden and Lagarde still buy into: Growth must go on — the old thinking. "No prosperity without growth." People must buy more. Throw out the old — or even the new, useful or not. Buy newer, needed or not. Get a new cell phone each year. New clothing each season. Frieden's real quibble seems to be with the pace, not the irrational cycle.

Here's another law of physics: Entropy increases. Disorder increases. In time, things fall apart. Irrationality will accelerate that.

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