The problem is politics.

. . . does anyone think that pants-wetting op-eds by Presidents and Nobel Prize-winning economists can perpetuate or deepen a downturn? Yes! For example, people like the President or Nobel Prize-winning economist Paul Krugman who believe that countercyclical macroeconomic policy works largely by manipulating consumer and investor psychology. If you don’t think Obama and Krugman’s confidence-destroying disaster forecasts hurt, then you probably shouldn’t accept confidence-restoration theories of stimulus, either.

We are ruled by morons. Our system has degenerated to the point that it is only open to morons. Government is far too big. The problem isn't only that it's a poor way to operate a society, the least effective method, it is also that such power attracts bad people just as a carcass on the plains draws carrion eaters. The larger the carcass the more vicious the carrion eaters it attracts. . . and we are the rotting carcass.

We really need to move past this nasty patch where we think that politics is important. It's important for being important, not for any realistic reason. It's a star system - like in Hollywood or postmodern academia - that elevates actors that can't act, academics who can't think and politicians who can't govern. It's a bubble that really, really needs to burst.

Update: political madness

When I think about the history of democracy in the past century, and think about its greatest achievements of domestic policy, the areas of real moral progress, I think of civil rights, women’s equality, and the halting fight against a class society. With respect, classical liberals were in the rearguard in every one of these struggles. And for a simple reason: in each case, the struggle depended on a willingness to fight against inequality, subordination, exclusion through political means, through the dread state. With respect, classical liberals were in the rearguard in every one of these struggles. And for a simple reason: in each case, the struggle depended on a willingness to fight against inequality, subordination, exclusion through political means, through the dread state. And if you mix your classical liberal values with the classically conservative predisposition to think that politics is at best futile, at bad perverse, at worst risks what is most fundamental, then you will always celebrate these gains when the fight is over:

It almost makes sense until you grasp that the problems were caused by the political efforts of previous generations. It is faint praise indeed to claim that the best that politics can do is to partially correct political problems.

Update: The Collapse of Climate Policy

If you think that the current consensus on climate politics rests on a foundation called the scientific consensus, you might see signs of weakening in the political consensus as prima facie evidence that the scientific consensus must be itself weakening, or if you’d prefer, that people are making it look to be weakening, regardless of the reality. Thus, like the apocryphal Hans Brinker (pictured above), the politically active climate scientists are actively trying to plug holes in the dike, as the skeptics try to poke more holes. The climate scientists (and their willing allies) have taken their battle to the arenas of politics, waging a scorched earth campaign of bullying, name calling, threats, and obnoxiously absurd appeals to authority. The skeptics participate in similar fashion, and the result is an all out brawl that we see escalating still before our eyes. The skeptics think they are unraveling a mythical scientific consensus imposed by an evil elite, while the climate scientists think they are waging an all out battle of righteousness against know-nothing hordes. They are both wrong.

Politics is not reality. I don't mean that politics can't do egregious harm, I mean that it must collapse in time because it is ungrounded.