A "tacit understanding" is an assumption

Rated L for Language

Scott Sumner:

In 1981, 364 British economists signed a petition warning that Thatcher's polices would fail. But, by the 1990s, there was a sort of tacit understanding among policy-oriented economists that when countries get into trouble, market reforms are the only real option.

... there was a sort of tacit understanding among policy-oriented economists ...

"Tacit" means unstated. A "tacit understanding" is not the same as a well-developed theory. It is more like a well-developed assumption.

Note that a well-developed assumption is not necessarily correct.

According to Sumner, the idea that market reforms solve all problems is based not on economic theory but on a tacit understanding: This is what we did and it seemed to work. And by the 1990s, those rudderless economists were sitting around the "market reforms" campfire, building on each other's stories. But there was from the start a lack of clearness and of generality in the premisses.

The tacit understanding, the assumption of which Sumner writes, is nothing but an observation of outcome: Things turned out well. Set aside objectionables like the "great" recession, peak inequality, and the massive Federal debt, and things turned out well. "My view here is obviously somewhat subjective," Sumner says... Things turned out well.

There's no fuckin theory. It's all bullshit. They don't have a clue. They complicate their stories with numbers (364 economists on the head of a pin in 1981). They make shit up.

"The neoliberal policy revolution ... began in the late 1970s," Sumner says, and it "might be the most important recent event in world history." Singing songs 'round the campfire, and patting selves on back.

Where is the analysis of the problem? This whole neoliberal neoplasm that Sumner tirelessly, tiresomely celebrates is nothing but an observation of outcome: GDP continued to grow, so we must have done something right. But they are changing everything. And nothing they do solves the problem.

They deny it, of course. But they've been fixing things for forty years now. And they're still fixing things, because they still have not fixed the right thing. They still have not solved the problem of excessive private debt.

They say only that private debt doesn't matter. What they mean is, they're not even going to think about it. And then you get people like Sumner telling you forget about debt:

Forget about debt and focus on NGDP. It’s NGDP instability that creates problems, not debt surges.

Economics by proclamation: Forget about debt. It’s NGDP instability that creates problems, says Sumner, not debt.

Well, maybe. But it's debt that creates NGDP instability:

Excessive Private Debt --> NGDP Instability --> Problems

Dick.